Category: Serbia

The Law on Archive Materials and Archiving Activities (“Official Gazette of the Republic of Serbia”, No. 6/2020, ) (“Law”) started to apply as of 2 February 2021, so after many years Serbia finally regulates the protection of archival material in one place and a comprehensive manner.

In general, the Law regulates the system of protection of archival material and documentary material, conditions and manner of use of archival material, organization, competence, and activity of archives in Serbia.

The Law defines archival material as documentary material that is permanently kept, is selected original, and in the absence of original, any reproduced form of document or record created by the work and activities of state bodies and organizations, bodies of territorial autonomy, and local governments, institutions, public companies, holders of public authority, companies, entrepreneurs, persons performing registered activities, religious communities, as well as other legal or natural persons, and are of permanent importance for culture, art, science, education and other social areas, regardless of when and where they were created, and whether they are located in institutions for the protection of cultural goods, and regardless of the form and medium of the record on which they are preserved.

On the other hand, the Law defines documentary material as a set of documents or records created or received by the activities and work of the above-mentioned subjects, in the original or reproduced form of the document, regardless of the form and format of recording, as well as prescribed records.

The creator of archival material and documentary material is a legal or natural person whose activities create archival material and documentary material and the holder of archival material and documentary material is the holder of rights to archival material and documentary material or any other (legal or natural) person who, in any way and on any basis, has possession over it.

The creator and holder of archival material and documentary material (“legal entities”) are obliged to conscientiously keep archival material and documentary material in an orderly and safe condition, in the form in which they were first created. In addition to the stated obligation, legal entities are obliged to:

• provide a responsible expert for the protection and handling of archival material and documentary material; In this regard, legal entities are obliged to check the professional competence of employees who manage archival material and documentary material;
• properly manage archival material and documentary material: to record, classify, archive, keep, keep the archive book on the prescribed form, as well as to regularly cooperate with the competent public archive in order to successfully implement all measures of document management and protection;
• submit the archive book, i.e. a transcript of the archive book to the competent archive no later than 30 April of the current year, for documents created in the previous year (archive book is a basic record of the entire archive material and documentary material created in the work of a legal entity);
• adopt (i) General Act on the manner of recording, classification, archiving, and storage of archival material and documentary material, (ii) List of categories of archival material and documentary material with storage deadlines and (iii) General Act on the Method of recording, protection, and use of electronic documents.

The competent public archive gives consent to the proposal of the List of categories of archival material and documentary material with storage deadlines (in which it is necessary to insert the legal storage period) and documentary material. After obtaining the previously mentioned consent and adoption of this List of categories, legal entities are able to classify documentary material, select archival material, but also extract worthless documentary material.

Additionally, the obligation of legal entities is to hand over the arranged and listed archival material to the competent public archive, after the expiration of 30 years from the day of its creation. On the other hand, according to the opinion of the officials of the Ministry of Culture and Information and the Archives of Serbia, Flat Rate Taxpayers are not obliged to keep and arrange archival and documentary material.

Finally, if legal entities violate or act contrary to the provisions of this Act, they will be liable for a misdemeanor in the amount of RSD 50,000.00 to 2,000,000.00, and RSD 5,000.00 to 150,000.00 for the responsible person in the legal entity.

Since the Law comes into force in February 2021, as well as the fact that there are no bylaws adopted based on this Law, there is a certain degree of uncertainty in regard to its scope and application, so it remains to be seen what practice will bring us.

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

By Kristina Pavlovic, Associate, and Katarina Askic, Junior Associate, Samardzic, Oreski & Grbovic

On the wave of the pandemic of the Covid-19 virus and electronic business, it turned out that 2020 was the key year for the issue of digitalization of assets and financial resources. Until then, the unregulated and mostly uneven actions of financial actors imposed as an imperative further digitalization and the necessity of monitoring and harmonizing global contemporary tendencies related to digital assets.

The Republic of Serbia has recognized the need to improve the business environment, to encourage the domestic IT sector, not only in the field of blockchain technologies, but also in the field of information and communication technologies. In accordance with international standards, the Republic of Serbia has responded to the challenge posed by the global capital market of the 21st century and for the first time introduced the institute of digital assets into its legislation, which includes any virtual assets, i.e. a digital record of value that can be digitally bought, sold, exchanged or transferred and that can be used as a medium of exchange or for investment purposes. With the adoption of the Law on Digital Assets (“Official Gazette of RS”, No. 153/2020; hereinafter “the Law”), the National Assembly defined the virtual currency and digital token as two relevant types of digital assets, but at the same time excluded from the definition of digital assets digital currency records that are legal means of payment, as well as other financial assets that are already regulated by existing / other regulations.

By enacting this Law, the Legislative Body of the Republic of Serbia created a regulatory framework for issuing, secondary trading, determining the supervisory authority in terms of competencies of the most invited institutions such as the National Bank of Serbia and the Securities Commission, establishing pledges and fiduciary rights, financing with investment tokens and digital assets related services.

When it comes to services related to digital assets, the legislator primarily has in mind the receipt, transfer and execution of orders relating to the purchase and sale of digital assets for the account of third parties, or for cash / funds in the account / electronic money, then services regarding replacement of digital assets, storage and administration of digital assets on behalf of users, keeping a register of liens on digital assets, managing the portfolio of digital assets and many others. In addition, stock exchanges and broker-dealer companies, as the most invited persons in the business of financial instruments, have been enabled to be part of the digital assets market.

By regulating the digital assets market, cryptocurrencies are finally regulated, and the possibility of further development and improvement of the capital market through digital technology is created, while abuses are minimized and criminal acts such as money laundering and terrorist financing are prevented. At the same time, the existence of a certain quality of service and increase of legal security of users / investors in service providers through “white paper” is guaranteed. Specifically, when issuing digital assets, a “white paper” is published, which is a document that contains information about the issuer, the assets, as well as the risks associated with digital assets.

The position of the legislator is clear that all data in the “white paper” must be accurate, complete, clear and must not lead to a wrong conclusion. As it is a document that is a condition for the initial offer of digital assets, the Law prescribes that “white paper” must be approved by the supervisory authority, and issued by the issuer of digital assets. It is obvious that the intention of the legislator in this case is to enable investors to make an informed investment decision and increase legal certainty.

In the wake of the initial offer, which represents the beginning of trade in digital assets, and having in mind one of the first jurisdictions in this area, i.e. Legislative solution of the Republic of Malta (Virtual Financial Assets Act), the legislator of the Republic of Serbia also regulated the conditions for obtaining a license for providers of services related to digital assets. At first glance, domestic conditions are set much more flexibly than Maltese, but certainly extremely important is the regulation by which service providers in order to obtain the permission of the supervisory authority are required to meet the statutory personnel, organizational and minimum capital requirements.

In parallel with the Law, the National Assembly amended the tax legislation, and prescribed the addition of digital assets as assets to be taxed. However, although the Law has excluded from its provisions the “mining” of digital assets as such, we note that any subsequent disposal of digital assets acquired through “mining” is both the subject of the Law and the subject of the above-mentioned tax amendments adopted subsequently, which makes the issue of “mining” even more interesting.

It seems that the Covid-19 crisis was crucial for us to reorient towards a more inclusive financial future, because what was considered a legal gap in this case proved to be an opportunity to bring the business of developed and developing countries closer and an opportunity to attract foreign investment. As the Law entered into force on December 29, 2020, and its implementation is scheduled for June 2021, it remains to be seen what challenges and potential issues may arise when interpreting and implementing the provisions in order to achieve financial stability in digital assets business.

By Nemanja Aleksic, Founding Partner, Aleksic & Associates

In December 2020, the French Data Protection Authority (Commission nationale de l’informatique et des libertés or the “CNIL”) imposed significant fines of EUR 60 million for Google LLC and EUR 40 million for Google Ireland Limited, as well as of EUR 35 million for Amazon Europe Core.

Google LLC and Google Ireland

The CNIL fined them due to: a) their negligence to obtain the consent of users of the French version of Google search engine (google.fr) before setting advertising cookies on users’ devices, b) the lack in providing users with adequate information about the use of cookies, and c) because of their alleged failure to implement a fully effective opt-out mechanism to enable users to refuse cookies. Precisely, the CNIL’s inspection of the google.fr website revealed that, when users visited that site, seven cookies were automatically set on their device. Four of these cookies were advertising cookies.

Google LLC argued that Google Ireland Limited is solely responsible for those operations because Google LLC is a processor. Following the CNIL’s investigation, the CNIL found that Google LLC exercises a decisive influence in those decision-making bodies and that Google LLC also participates in the determination of the means of processing (since Google LLC designs and builds the technology of cookies set on the European users’ devices). The CNIL concluded that Google LLC and Google Ireland Limited are joint controllers, and consequently, both Google LLC and Google Ireland Limited were deemed jointly responsible for the use of cookies as both were considered to exercise decision-making power in relation to data processing concerning users located in France.. 

Amazon Europe Core 

On the same date, the CNIL announced that the CNIL fined Amazon Europe Core under the same rules for its alleged failure to: a) obtain the consent of users of the amazon.fr site before setting advertising cookies on their devices, and b) provide adequate information about the use of cookies. Namely, the investigation revealed that, whenever users first visited the home page of the amazon.fr website or visited the site after they clicked on an ad published on another site, more than 40 advertising cookies were automatically set on their device. These cookies were not set with user consent and could not remove them entirely.

Amazon Europe Core tried to argue (among other arguments) the CNIL jurisdiction by pointing out that the competent authority should be Luxembourgian data protection authority, keeping in mind that the seat of Amazon Group in Europe is set in Luxemburg, which argument did not pass. 

Breach of the French Data Protection Act

According to the CNIL, the mentioned companies did not provide users with information regarding the cookies that were already set on their device. Furthermore, the CNIL found that: a) the information provided to users does not enable them to understand the type of content and ads that may be personalized based on their behavior, and b) Google and Amazon also failed to provide clear information about how the online trackers would be used, and how visitors to the French websites could refuse the cookies.

In both cases, the CNIL took into account the seriousness of the breaches of the French Data Protection Act and the high number of users affected by those breaches. Furthermore, the CNIL wanted to enforce their ruling by ordering a periodic penalty payment of EUR 100,000 for each day of delay in complying with the injection.

The mentioned companies have four months to appeal the respective decision before France’s highest administrative court. Hence, this legal battle is still ongoing.

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

By Katarina Zivkovic, Senior Associate, and Katarina Askic, Junior Associate, Samardzic, Oreski & Grbovic

Karanovic & Partners, working with lead counsel Clifford Chance, has advised Deutsche Private Equity on the local aspects of its acquisition of a majority stake in M-Sicherheitsbeteiligungen from Armira. CMS reportedly advised the seller.

Financial details of the transaction were not disclosed.

M-Sicherheitsbeteiligungen is a subsidiary of Mehler Vario System that manufactures ballistic vests, tactical equipment and clothing, and protection systems for vehicles. The company employs around 600 people in five locations in Germany, Slovenia, and Serbia and generates revenues of more than EUR 100 million.

Deutsche Private Equity primarily invests in small and medium enterprises in Germany, Austria, and Switzerland. DPE has invested in 30 companies since its foundation in 2007 and currently manages assets valued at EUR 2 billion.

Armira is an investment holding focused on investments in privately-held, medium-sized businesses in Germany, Austria, and Switzerland. The Armira Group companies currently employ over 8,000 people and generate annual sales of approximately EUR 1.5 billion.

Karanovic & Partners team included Partner Ivan Nonkovic and Associate Marko Culafic.

Editor’s note: After this article was published, CMS confirmed its involvement. The firm’s team was led by Frankfurt-based Partner Hendrik Hirsch and included Belgrade-based Partners Radivoje Petrikic and Marija Tesic and Attorneys-at-Law Jelena Djordjevic and Igor Djordjevic, as well as lawyers from CMS’s offices in Germany and Slovenia.

Former Senior Associates Dragoljub Sretenovic, Bisera Andrijasevic, and Tomislav Popovic have been promoted to Counsel at BDK Advokati. Sretenovic, who was already the Head of the Payment Services Practice, became Co-Head of Banking & Finance, while Popovic, who Heads the Tax Practice, became Head of Corporate & Commercial and Co-Head of Distressed Situations/Insolvency & Restructuring, and Andrijasevic will head the Life Sciences & Healthcare practice and co-head the firm’s Competition practice alongside Managing Partner Tijana Kojovic.

According to BDK Advokati, Sretenovic, who has been with the firm since 2012, “has eight years of experience advising banks and corporate borrowers on acquisition and project financing deals across all jurisdictions covered by BDK Advokati. He also has expertise in insurance, banking, and payment services regulations.” He has an LL.B. from the University of Belgrade’s Faculty of Law and an LL.M. from the Goethe University Institute for Law and Finance.

Andrijasevic is described by BDK Advokati as “an expert on competition and state aid law and pharma law and regulations, with ten years of relevant experience.” She  has an LL.B. from the Mediteran University Law School and a joint LL.M. from the Universities of Bologna, Hamburg, and Erasmus Rotterdam. Before joining BDK Advokati in 2015, she spent eight years with the European Movement in Montenegro.

According to BDK Advokati, Popovic specializes in corporate law, M&A, commercial law, capital markets, taxation, insolvency, and restructuring. He has an LL.B. from the University of Belgrade’s Faculty of Law and an LL.M, from Pallas, KU Nijmegen. Before joining BDK Advokati in 2017, he spent two and a half years with Deloitte and almost nine years with Wolf Theiss.

Additionally, Dijana Pejic Sinik, an independent attorney at law from Banja Luka working in cooperation with BDK Advokati, has been promoted to Senior Associate.

“I congratulate Dragoljub, Bisera, Tomislav, and Dijana on well-deserved promotions,” commented Managing Partner Tijana Kojovic. “They have been contributing to the firm’s success by making steady progress in their professional development and have demonstrated commitment to the firm.”

The Law on Amendments to the Law on Foreigners (Official Gazette of the RS No. 31/2019) (“Law”) entered into force on May 7, 2019, but the provisions relating to the submission of a joint application for temporary residence and work permit started to apply on December 1, 2020.

In regards to these amendments to the Law, the Minister of the Interior and the Minister of Labor, Employment, Veterans and Social Affairs passed the Rulebook on the Joint Application for Approval, i.e. Extension of Temporary Residence and Issuance of a Work Permit to a Foreigner, which entered into force on November 28, 2020.

This Rulebook prescribes the appearance and content of the bilingual form of the joint application for approval, i.e. extension of the temporary residence and issuance of the work permit for a foreigner, as well as the documentation that shall be submitted with the application.

When submitting an application for approval of temporary residence and issuance of a work permit, depending on the basis for approval, i.e. extension of temporary residence and work permit, appropriate documentation needs to be provided to the Ministry of Interior – Foreigners Department.

Therefore, in this way it is possible to obtain a temporary residence and work permit for foreigners in a twice shorter period, i.e. the procedure that previously lasted 60 days has now been shortened to 30 days, within which the competent authority is obliged to decide on the submitted application.

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 Jovana Milic, Senior Associate, PR Legal

The Assembly of the Serbian capital – City of Belgrade amended the latest version of the Decree on Determining the Construction Land Development Contribution (Infrastructure Contribution).

The amendments regulate the manner of the decrement of the Infrastructure Contribution in the cases of development in phases whereby the investor is participating in the construction of the infrastructure, collaterals for the Infrastructure Contribution and specify the types of warehouses which may be developed without paying the Infrastructure Contribution.

In the cases when the project consists of several phases and the investor reached the agreement with the public authority to develop some infrastructure itself, the Infrastructure Contribution may be decreased up to the amount of 60% of the Infrastructure Contribution for the whole project. Subject to some other limitation, the Infrastructure Contribution deduction for the whole project may, even, be used in full as the deduction by the investors in the first phase of the project. Such a structure encourages potential investors to participate in the development of the infrastructure for significant projects.

The Infrastructure Contribution for the initial phase of the project may be significantly decreased since the costs of development of the infrastructure for the entire project might be much higher than the costs of development of infrastructure for the initial phase of the project. In such a manner the investors are relieved in the initial phase(s) when there is no revenue from the project.

On the other hand in such cases, the City of Belgrade faces the risk that the investor relieved from the significant part of the Infrastructure Contribution in the first phase of the project abandons the project. In such a case, the decrement granted to such investors in the first phase would become groundless. Moreover, in such a case the infrastructure that should be developed by abandoning investors for the benefit of the City and other citizens would not be completed. Therefore, in the cases of the Infrastructure Contribution decrement due to the undertaking of the investor to develop the part of the infrastructure, the investor must provide adequate collateral for the amount of decrement. These solutions in the amendments of the Decree are good and stimulative for the significant project.

However, the investors that intend to develop their project in one single-phase and participate in the development of the infrastructure may be surprised. In single-phase projects, the investor must ensure that the infrastructure for his full project exists for obtaining the operating permit, otherwise it would not be able to utilize its project. Consequently, in a single-phase project the investor agreeing to develop the part of the infrastructure for its project is bound by the project requirements and shall, certainly, develop the infrastructure in order to finalize its investment.

This fact provides sufficient certainty to the City of Belgrade that the investor shall develop the infrastructure it needs for its single-phase project. Regardless of this, the investor with a single-phase project participating in the development of infrastructure has to provide the collaterals for the amount of the deduction of the Infrastructure Contribution.

The collaterals prescribed by the amendments of the Decree affect the creditability of the investor and may have an impact on the project financing. Finally, the last novelty of the amendments of this Decree aims to differentiate storage facilities and warehouses which are used for production purposes from the ones that are used for commercial purposes. The construction land development fee is now not calculated only for the storage facilities and warehouses which are used for production purposes, which is by provisions of Art. 97 of the Law on Spatial Planning and Construction, while in case of storage facilities and warehouses (and other facilities) which are used for commercial purposes the same fee may be reduced in different percentage depending on the surface of the facility.

By Ivan Petrovic, Partner, JPM Jankovic Popovic Mitic

Serbia’s JPM Jankovic, Popovic, Mitic has helped Xella implement GDPR best practices.

Xella is one of the world’s largest manufacturers of autoclaved aerated concrete and calcium silicate units.

JPM’s team was led by Partner Ivan Milosevic.

From January 1, 2021, the Business Registers Agency (“BRA“) starts to provide new services and keep a new register.

Issuance of excerpts and certificates from the Central Records of Ultimate Beneficial Owners

In accordance with Article 8 of the Law on Central Records of Ultimate Beneficial Owners, the BRA started to issue:

• Excerpts with data on ultimate beneficial owners of registered entities
• Certificates from Central Records with historical data on ultimate beneficial owners of registered entities (certificate for registered entity),
• Certificate that a natural person is/was registered as ultimate beneficial owner of a registered entity (certificate for natural person).

Request for excerpt or certificate can be submitted electronically, through the system for centralised applications of BRA users or in writing on special form available on BRA website.

Alike the excerpts from the Company Register, the excerpt with data on ultimate beneficial owners is obtained immediately if the application was submitted directly in BRA premises or its organisational units.

Transfer to entirely digital operation of the Financial Leasing Register

In addition to application for registering financial leasing agreements, all other types of registration applications can now be submitted electronically to the Financial Leasing Register.

Alike other electronic services provided by BRA, electronic registration in the Financial Leasing Register is done in the system for centralised application of BRA users. As announced by the APR, a service for takeover of data and documents has been created, including a service for the Ministry of Interior, which will enable electronic submission of authorisations for registration of vehicles purchased through financial leasing.

Register of Accounting Services Providers

In accordance with the Law on Accounting, the Register of Accounting Services Providers has been established as from January 1, 2021 as a single, central, electronic database on legal entities and entrepreneurs whose registered prevailing activity is provision of accounting services and who possess permit for provision of such services issued by the Chamber of Authorised Auditors.

Such register did not exist before, hence the providers of accounting services will have to meet special requirements in the future i.e. to possess permit for provision of accounting services issued by the Chamber of Authorised Auditors and to be entered into this register.

All entities that provide accounting services will be obliged to adjust their operation with the provisions of the law by January 1, 2023. Namely, they will have to obtain permit from the Chamber by the said date and to be entered into the Register of Accounting Services Providers.

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 Sara Necic, Senior Associate, PR Legal

The beginning of Q4 in Serbia is marked by the delayed formation of the new Government. Not much is expected to change in the political course as the ruling progressive party has strengthened its position and the Government will be led by the same Prime Minister. This means continuity and stability, although the new-old Government will not have an easy task, considering global developments with the pandemic.

So far, the economy has shown resilience to the corona-induced crisis and 2020 has been better than expected. Serbia entered the crisis after a period of strong GDP growth (4.2% in 2019) and following fiscal consolidation. In particular, our relatively large and diversified industrial sector has attracted considerable foreign direct investment in recent years. And, after the initial shock of the COVID-19 crisis, the recovery from May was faster than projected. The rating of Serbia was confirmed in September with a positive outlook and the Serbian authorities have revised their GDP growth projection for 2020 from -1.5% to -1%. Still, the pace of recovery will depend on the third wave of Covid-19 and the situation in Serbia’s main business partners.

One of the key aims for the Government is to return the public debt to a declining direction. Almost 95% of the planned state debt issuance in 2020 was exhausted, including a EUR 2 billion seven-year Eurobond in May. The Government claims to return to a downward trend in 2021, with no plan for taking on new debt from the IMF or other international institutions. This was also discussed in October with the IMF during the last semi-annual review of Serbia’s three-year economic program, which expires in January 2021.

Serbia’s banking sector encountered the pandemics well capitalized and with sound credit metrics. The National Bank of Serbia’s liquidity measures have helped lift the liquidity ratio and the EUR 2 billion state loan guarantee scheme supported the credit growth. The NPL ratio further declined in July to 3.6%, although weakening asset quality is likely from next year as the support measures expire. What we expect in the upcoming period is further NPL secondary market trading, and a wave of restructurings, especially among the local subsidiaries of global groups affected by the crisis. During the last six months, a lot of banking activities were linked to the two-stage moratoria, which reached a value of almost EUR 3 billion. The moratoria expired on September 30, 2020, bringing the threat of a hit of increased payments. This is particularly relevant for SMEs, which used moratoria at a high percentage. In parallel, the banking sector continues to consolidate. The privatization of the largest state-owned bank, Komercijalna Banka, by NLB, is ongoing, pending regulatory approvals. OTP continues with the merger of its group members following its recent expansion in the region. A number of smaller banks are up for sale, but with a notable lack of potential buyers.

Apart from Covid-19-related measures, regulatory changes generally slowed down, as did the EU accession process. A new boost is expected to come from the EUR 9 billion EU Economic and Investment Plan for the Western Balkans announced in October, which will be financed through a combination of IPA grants and favorable loans by the EIB, EBRD, and other IFIs. Generally, the increased activity of IFIs and development banks is notable in the region (and has comprised a substantial portion of our work lately).

Another interesting development is the arrival of the US International Development Finance Corporation, which opened its first overseas office in Belgrade in September. This follows the political agreement signed in Washington on September 4 regarding relations with Kosovo. Besides political aspects, the agreement contains an economic plan for several infrastructure projects, including, primarily, the “Peace Highway” between Nis and Pristina, worth EUR 3.7 billion. The support of the DFC should include a guarantee scheme for SMEs, as well as funding in the areas of energy, agriculture, logistic, and high-tech sectors, with likely active involvement of local banks. Despite global uncertainty, the Government has emphasized its determination to continue with capital investments, including the Belgrade subway project estimated at EUR 6 billion, which should begin by the end of 2021.

Otherwise, digitalization is expected to remain one of the Government’s top priorities, with local banks closely following the trend. In addition, the very first Serbian crowd-lending platform was launched in November, diversifying sources of finance, especially for SMEs. The Government also formed a special working group to prepare a new regulatory framework for blockchain and cryptocurrencies.

By Maja Jovancevic Setka, Partner, Karanovic & Partners

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.