Category: Serbia

Current Law on Health Insurance (Official Gazette of RS no. 25/2019) has been applied since 11 April 2019. The Government of the Republic of Serbia prepared the amendments to this law which are currently in public debate, after which they will enter parliamentary procedure. The draft law stipulates several significant novelties that we will present in this article. If it is adopted, the application of the draft law amending the Law on Health Insurance (“the Law”) will start on 1 June 2021.

Changes in submission of notification on temporary inability to work

Currently, an employee or in case of severe illness – members of immediate family or other persons living in the same household, shall be obliged to submit to the employer notification from the selected physician containing the anticipated duration of inability to work, no later than three days after the onset of temporary inability to work.

However, the information on temporary inability to work will from now on be sent to the employer electronically and directly by the selected physician.

This is a significant novelty considering that the obligation to provide certificate by the employee has been regulated since 2001 under the Labour Law (Official Gazette of RS no. 70/2001 and 73/2001 – amend.), and subsequently by the Labour Law (Official Gazette of RS no. 24/05, 61/05, 54/09, 32/13, 75/14, 13/17 – CC, 113/17 and 95/18 – other regulation).

On the day the Law starts to apply, the provisions of the Labour law on notification about temporary inability to work shall cease to be valid, as well as related breach of working discipline – failure to submit the notification on temporary inability to work (Art. 103. and 179, para. 3, item 2).

Calculation of salary compensation will no longer be done by employers

Significant novelty has also been envisaged with regard to calculation of salary compensation paid via employer by the Republic Fund for Health Insurance (“RFZO”).

Namely, this calculation will no longer be done by employers but by RFZO, which used to control calculations, hence the new legal solution avoids double calculation.

RFZO will make calculations on basis of information on paid taxes and contributions that it will receive officially from Tax Administration. RFZO will pay salary contributions to employers within 15 days after the calculation, which is a shorter period compared to the current solution (30 days).

Payment of salary compensation to pregnant women whether health insurance contribution was paid or not

The law stipulates that insured persons in case of temporary inability to work due to illness or complications relating to pregnancy will exercise [all] rights from mandatory health insurance regardless of whether the due contribution was paid, including the right to salary compensation due to temporary inability to work.

According to the current solution, when due health insurance contributions were not paid, an insured person may only exercise only the right to health protection and right to compensation of transportation costs with regard to the use of health protection, under the Law on Health Protection.

Change with regard to institution of procedure for establishing the loss of working ability

In a situation where an insured person has been temporarily unable to work due to illness or injury and when conditions have been met for his/her working ability to be assessed by disability commission, the request to disability commission shall be submitted by the selected physician electronically, with the consent of the insured person.

According to the current legal solution, this request was submitted by the insured person or, in case of severe illness – members of immediate family or other persons living in the same household.

Change of base for calculating salary compensation

According to the current solution, the base for salary compensation that is paid from the funds for mandatory health insurance shall comprise of average salary earned by the insured person in the period of 12 months preceding the month of onset of the temporary inability to work.

However, the base will now include salary compensation earned by the insured person in the reference period as well.

Deletion of the provision on protection of employer’s rights

Article 165, para. 2 of the law prescribing that protection of rights before the relevant authority can also be sought by employer shall be deleted.

However, this does not mean that employers will lose the possibility to use relevant remedies under this law. On the contrary, Article 156 (Renewal of the procedure for assessment of temporary inability to work) and Article 157 (Expert opinion in the procedure for exercising the rights from mandatory health insurance) which regulate the authorisations of employers, shall remain in force and unchanged. Article 165, par. 2. of the law shall be deleted as obsolete.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.

By Ivana Ruzicic, Managing Partner, PR Legal

In this time of economic distress, many countries have suffered. Yet, reports Milos Gledovic, Partner at Samardzic, Oreski & Grbovic, Serbia has proven resilient. “The pandemic has not affected the number of transactions in our market, except in the industries directly affected by anti-COVID measures,” Gledovic says, describing the overall economic situation in Serbia as stable.

Gledovic reports that some sectors have even been on the rise recently – perhaps most notably real estate, where a boom in residential development continues and interest in logistics properties is higher than ever. Gledovic points to the sale by the Poseidon Group and Mitiska Reim of retail parks in the Serbian cities of Zajecar, Leskovac, Sombor, and Sabac to Austria’s Immofinanz AG (as reported by CEE Legal Matters on December 28, 2020), which, in his opinion, demonstrates that even the retail segment of the real estate market remained active.

Gledovic says that the high demand for real estate includes residential properties; a trend that is explained in part by the availability of affordable loans and, he says, an inevitable form of group-think. “A herd mentality is present in the sense that, seeing how the sector is very active, people are rushing to buy,” he says. However, not everything is sunshine and roses even in Serbia’s burgeoning real estate sector, and Gledovic suggests that some companies might resort to sale and subsequent lease of their office space in order to secure working capital.

Another fairly stable part of Serbia’s economy is its financial sector, which Gledovic says has registered several significant events, including the sale of Komercijalna Banka to Slovenia’s NLB (as reported by CEE Legal Matters on March 5, 2020). Gledovic reports that the recent establishment of the U.S. International Development Finance Corporation in Serbia represents a valuable addition to the country’s financial sector, and is expected to result in new investments in the market.

COVID-19 has changed so many things in our lives. Nothing has remained untouched, from social relations to business. Naturally, it has also heavily affected M&A activity in Serbia, just as across the entire SEE region.

At the very beginning, uncertainty fell on global markets and stock exchanges took a nosedive. While some certainty has since returned, things are still far from stable (especially in light of the new resurgence in numbers and new lockdowns, both in this region and across Europe). These fluctuations and recurring instability have obviously impacted all planned investments, including M&As.

The volume of transactions in Serbia decreased significantly. While most deals were not cancelled (although that happened as well by invoking material adverse change clauses (MAC), which regulate the ability of the buyer to terminate the contract due to significant change in business between signing and closing), they were either put on hold or continued at a much slower pace. Almost no deal was closed during the first wave of the pandemic, as contracting parties became increasingly cautious. However, a significant number resumed later.

Certain preventative measures introduced by the Serbian government have affected the implementation of transactions. A lot had to be done more flexibly and creatively – but also very often with delays. This was mostly because government and bank employees worked from home and communication with them took place exclusively by e-mail (which in many situations was not efficient and prompt) and even registered mail. However, some institutions adapted. For example, in Serbia the Registers Agency was able to continue to register corporate changes within the five-working-day deadline, even in the middle of the lockdown. In addition, the Registers Agency enabled electronic registration of entities during the crisis, which was great news.

The scope of due diligence of Serbian targets has also changed. Aside from the usual issues, the focus has somewhat shifted to risk management procedures, fiscal benefits & direct payments from the government, employment structures, protection from cyber-attacks, and so on. Diligence reports now also focus not only on the impact of COVID-19 on business, but also on various governmental measures.

As for the SPA, specific COVID-19-related clauses became mandatory. MAC clauses have seen a rebirth both in wording and significance, with special attention given to the scope and applicability of different force majeure events. Since the practice of Serbian courts cannot provide a general answer to the question of whether contracting parties are obliged to adhere to their obligations under a SPA due to the COVID-19 crisis, the specific wording of force majeure clauses has come into the spotlight of the transaction process, as have warranties on the non-existence or non-triggering of such clauses in the material contracts of the target.

While in the past we have seen both price adjustments and locked box mechanisms, price adjustments are not as common as they were before, which is unsurprising given the fact that in a world of uncertainty the buyers will try to avoid taking over the risks as of the signing.

Since negotiations are held predominantly online, the lack of face-to-face meetings is a significant challenge. Personal touch and coffee-break small-talk can break the ice and resolve many issues. On the other hand, negotiations have become increasingly efficient.

We also see changes in transaction structures, going from share to asset acquisition, with buyers trying to minimize risk and focus their investments on the most relevant part of the target.

At this moment, it is not possible to estimate what the consequences of the pandemic in Serbia will be, especially as the new wave is already at our door. However, what is indisputable is that this crisis has led Serbian legal advisors to fundamentally re-examine and reconside both future plans and past behaviors in the field of M&A transactions. 

By Ivan Nonkovic, Partner, and Bela Prendivoj, Associate, independent Attorneys at Law in cooperation with Karanovic & Partners

This Article was originally published in Issue 7.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Recently, in the second half of January 2021, a public debate was held with regards to the Draft of the Law on Amendments to the Bankruptcy Law (hereinafter: “the Amendments“). If all the changes proposed by the Amendments were to be summarized, what they altogether aim at in practice is to improve the efficiency and transparency of bankruptcy procedure as well as to reduce the costs of the entire process, which in practice has so far proved to be one of the largest problems for creditors and other interested parties in this procedure.

The most important changes proposed by the Amendments are presented below, with reference to the effects that such changes could have on the entire bankruptcy procedure and its participants.

Amendment to the principle of urgency of bankruptcy proceedings – The Amendments propose to change the article of the Bankruptcy Law which regulates this principle by adding a new paragraph which prescribes that the principle of urgency also applies to other proceedings before courts and other government bodies in which the bankruptcy debtor is a party.

In relation to the current solution presribed by the Bankruptcy Law, according to which the principle of urgency applies only to a specific bankruptcy procedure, this represents a positive change due to the fact that one of the main reasons for slowing down the bankruptcy procedure in practice – other unresolved proceedings in which the bankruptcy debtor is a party,  will now be eliminated for the most part- .

Publication of information in bankruptcy proceedings on the internet – The Amendments stipulate that publications, decisions and other acts of the court are to be published on the website of the Bankruptcy Supervision Agency (hereinafter “the Agency“), which is a very good solution that is not difficult to implement and in practice will contribute to a significantly higher level of transparency of the procedure because all stakeholders, especially creditors will be able to access relevant information about the bankruptcy proceedings at any time. This will have a positive impact on efficiency of the whole procedure. In addition, the obligations of publishing information / advertisements in e.g. high circulation daily newspapers is abolished and instead the obligation of publication on the Agency’s website is introduced.

Deadline for filing claims has been reduced – The proposed Amendments reduce the deadline for inviting creditors to file their claims. The decision to open bankruptcy proceedings, according to these changes, stipulates that creditors can file their claims within a period of not less than 15 days, nor longer than 60 days from the date of publication of the announcement of the opening of bankruptcy proceedings in the “Official Gazette of the Republic of Serbia”, which is twice as short as the deadline currently prescribed by the Bankruptcy Law (from 30 to 120 days starting from the day of publishing the announcement on the opening of bankruptcy proceedings in the “Official Gazette of the Republic of Serbia”).

Electronic sale of assets – Certainly one of the most important innovations proposed by the Amendments is the introduction of the possibility of electronic sale of assets of the bankruptcy debtor, i.e. legal entity. This is a new method of sale in bankruptcy proceedings. The electronic sale itself would take place through the internet portal of the Agency. If the sale is conducted by public bidding or public collection of bids, the bankruptcy administrator is obliged to announce the sale on the Agency’s website. So the novelty is to abolish the obligation to advertise in at least two high circulation daily newspapers distributed throughout the Republic of Serbia. Another novelty is that the announcement of sale, in addition to the previous obligatory elements, must also contain information on whether the sale is made electronically through the Agency’s internet portal or not.

Such a change would certainly be positive in many ways, because it would raise the level of efficiency and transparency of the sale process and at the same time would reduce the costs of the procedure but also prevent possible abuses which may happen in practice.

New elements of the reorganization plan and pre-prepared reorganization plan – The Amendments envisage new elements to the content of the reorganization plan and pre-prepared reorganization plan by introducing the obligation of an independent expert who will monitor the implementation of such plan and will inform the Agency and creditors about the implementation of that plan.

In addition, the same article contains another change that would authorize the creditors’ committee (if constituted) to monitor the implementation of the plan in the interest of all creditors as well as to supervise and control the work of an independent expert, all in order to ensure greater control of creditors over the entire process.

The Amendments also propose to shorten the deadline for scheduling a hearing to decide on a proposal to initiate bankruptcy proceedings in accordance with the pre-prepared reorganization plan and to vote on the plan from 90 days to 60 days, provided that it cannot be held before the expiration of the period of 45 days from the initiation of the procedure.

Conclusion

The proposed Amendments seek to provide conditions for creating a better business environment and more efficient conclusion of bankruptcy proceedings in the shortest possible time. At first glance, it seems that the proposed amendments could largely enable the solution of the problems identified in practice of the  application of the Bankruptcy Law, primarily the duration and non-transparency of the bankruptcy procedure. It remains to be seen whether and to what extent these amendments, if adopted, will contribute to the bankruptcy procedure fulfilling its goal, and that is certainly the most efficient and complete settlement of bankruptcy creditors with the lowest possible costs of the procedure itself.

By Boris Baklaja, Partner, and Marko Belic, Attorney at Law, Baklaja Igric Tintor

Karanovic & Partners has advised precious and base metals explorer Adriatic Metals on the acquisition of the remaining 90% of the shares in Ras Metals, which holds exploration licenses for former silver-zinc-lead mines Kizevak and Sastavci, from Bulgaria-based Cuprum LTD and an unidentified Serbian individual. NKO Partners advised the sellers on the deal.

Karanovic & Partners had advised Adriatic Metals last year on the acquisition by its Tethyan Resource Corp subsidiary if a 10% share in Ras Metals from Serbian geological company EFPP, which was advised by NKO Partners (as reported by CEE Legal Matters, on May 27, 2020)

Karanovic & Partners team included Partner Petar Mitrovic and Associate Katarina Tomic.

NKO Partners’s team was led by Partner Djuro Otasevic and Senior Associate Vojin Babovic.

Former Kinstellar lawyers Selma Mujezinovic and Ksenija Sorajic Bakovic have left the firm to establish KSEL Advokati in Belgrade, Serbia. The founders will be supported by former Kinstellar colleague Una Draganic Vukovic.

Selma Mujezinovic began her career in the private sector as Legal Advisor at ZIB in 1998. From 2001 to 2012 she worked in association with Clyde & Co, although in different formats – first at Clyde d.o.o, then at Baklaja Igric Mujezinovic, and finally at Law Office Mujezinovic. From 2012 to 2020, she was with Maric i Mujezinovic in cooperation with Kinstellar. She obtained her Bachelor of Laws degree at the University of Belgrade Faculty of Law.

Ksenija Sorajic Bakovic’s career followed a similar path. She joined Baklaja Igric Mujezinovic in 2010 and stayed with the firm through its several iterations until 2020. She obtained her Bachelor’s degree in Law and her Master’s degree in European Union Law at the University of Belgrade Faculty of Law in 2008 and 2012, respectively.

The crossroads upon which Serbia finds itself has always been a coveted trading route, and the cause of many conflicts throughout history. Being located at such an important junction, it is of the utmost importance to invest into a transportation network, to seek constant improvements in this field, and to keep up with modern European growth. The General Master Plan for Transport in Serbia was adopted in 2009. However, the original period the plan was designed to cover – until 2027 – has now been extended and divided into three phases: short term (2021), medium term (2027), and long term (2033). The General Master Plan still serves as the platform for both major future and ongoing transportation and transportation-related projects.

The COVID-19 pandemic caught the world off-guard, and tested humankind in way we have not been tested before. In Serbia, the impact of the pandemic has been felt the most by the health system and the economy, including the transportation sector.

A State of Emergency was declared in Serbia on March 15, 2020 and it remained in force until May 6, 2020. The State of Emergency had a huge effect on air traffic as commercial flights from Nikola Tesla Airport in Belgrade and Constantine the Great in Nis were cancelled. Road transportation was also heavily impacted as public transportation and intercity transportation were stopped as well, as both were identified as posing a high risk for potential contagion. Water (river) transport also saw a significant drop compared to the previous year.

According to data provided by the Statistical Office of the Republic of Serbia for the first six months of 2020 regarding the transportation of passengers and goods, there was a significant drop of transported passengers – in total 43%, with 42.1% in domestic transport and 56.4% in international transport compared to the same period of the previous year. Interestingly, the transport of goods in the first half of 2020 actually increased by 1.2%. Air, railway, and water (river) transport of goods all declined, while road and pipeline traffic saw growth.

Road transport of passengers was lower in 2020 than it was in the first half of 2019, with a drop in workload of 40%. Transport of goods by road increased by 6.2%.

Air transport saw a drop in the number of passengers, down by 57.3%, and the realized passenger kilometers dropped by 56.6%. The transport of goods showed a decrease in quantity of 29.8%.

The drop in the number of passengers transported by rail in the first half of 2020 was 45.3%. There was a decrease in the number of transported passengers in domestic traffic of 44.0%, while in international traffic the decrease was 74.7%. In the same period, the transport of goods decreased by 7.6%. Inland water traffic recorded a decrease in the quantity of transported goods of 15.7%.

Another high-profile topic when it comes to transportation and infrastructure in Belgrade is the long-planned and long-delayed construction of a metro system in the Serbian capital. Due to the decades of misfortune and dysfunction, the project has been humorously referred to as “Waiting for Metro,” which in Serbian rhymes with the title of Samuel Beckett’s play “Waiting for Godot,” in which the title character actually never arrives.

On January 22, 2021, the Serbian government signed a Memorandum of Understanding with representatives of Alstom and Egis, France, and PowerChina, to support the construction of a EUR 4.4 billion Belgrade Metro, work on which is due to begin later this year.

So far three subway lines have been announced. The first line should have 21 stations, be 21.3 kilometers long, and connect Mirijevo and Zeleznik. The second line should have 20 stops, be 19.2 kilometers long, and connect Mirijevo and Zemun, and the third line should connect the parts of Belgrade not previously connected by lines one and two with already-existing Belgrade railroad traffic.

With the construction of the Belgrade Waterfront underway, which will bring with it many residential and commercial buildings, the need for a subway has never been greater, as traffic jams and lack of parking spaces have a negative impact on the everyday life of Serbians. When it comes to Belgrade, the city infrastructure needs serious improvement, which we hope that the authorities will deliver.

By Igor Zivkovski, Partner, Zivkovic Samardzic Law Office

Andrejic & Partners has advised Eyemaxx International Holding & Consulting, a member of the Eyemaxx Real Estate AG group, on its restructuring in Serbia.

According to Andrejic & Partners, the restructuring consisted of an entire change of  management in Eyemaxx’s four Serbian entities, employee changes, and a change of the corporate seat of all four Serbian entities.

Andrejic & Partners’ team included Attorneys Aleksandar Andrejic and Dragana Rajkovic.

Andrejic & Partners has advised German listed company Eyemaxx Real Estate AG on providing collaterals and giving security for a EUR 10 million loan from Bank of China’s Frankfurt branch.

Serbia-based properties were provided as collateral. 

Eyemaxx Real Estate Group, which has been operating on the market for more than 20 years, focuses on the development of residential properties, micro and student apartments, hotels, and serviced apartments, and urban quarters, as well as retail and logistics properties. The Eyemaxx Real Estate Group holds selected real properties in its portfolio. 

Andrejic & Partners’ team was led by Attorney Aleksandar Andrejic.

At the beginning of February, Radovanovic Stojanovic & Partners opened its doors for business in Belgrade.

The firm is led by Partners Rasko Radovanovic, Sasa Stojanovic, Anja Tasic, and Nikola Cincovic.

Rasko Radovanovic moved over from CMS Reich-Rohrwig Hainz, where he spent the past 11 years. He co-leads the new firm’s German Desk with Sasa Stojanovic.

Stojanovic, a qualified lawyer in Austria, Greece, and Serbia, worked as an Associate with Wolf Theiss and as an Attorney-at-Law with Eisenberger + Herzog in Vienna. He joined BDK Advokati in 2018, making Partner in 2019 (as CEE Legal Matters reported on December 29, 2019). In addition to co-leading the new firm’s German Desk with Radovanovic, he leads the firm’s Greek Desk.

Just like Radovanovic, Tasic joined the new firm from CMS, which she joined in 2012. She heads the new firm’s Merger Control and State Aid practices.

Cincovic followed Stojanovic from BDK Advokati, where he had been since moving from Babic & Cosovic (EY Law) in 2019. He heads the Radovanovic Stojanovic & Partners Employment practice.

The new firm also includes Senior Attorney Srdjan Jankovic, joining from CMS, and Attorney-at-Law Djordje Vicic, joining from BDK.