Category: Serbia

Interview with Pablo Perez Laya of BDK Advokati, a Spanish Consultant at BDK Advokati in Belgrade.

CEELM: Run us through your background, and how you ended up in your current role with BDK Advokati in Serbia.

Pablo: After finishing my Law degree and obtaining an LL.M. in Spain, I spent seven years working in Madrid, first for Linklaters and then for SJ Berwin (King & Wood Mallesons now). My main area of expertise during these years was Real Estate law.

In 2015, I moved to the Netherlands and decided to make a radical change to my career. I obtained an LL.M in Law and Digital Technologies from Leiden University, worked for a couple of months in the Amsterdam office of Clifford Chance, and then moved to Serbia in 2017. 

Although I thought that for a Spanish lawyer to find a job out of the European Union would be an almost impossible task, I have to admit that I was very lucky to cross paths with BDK Advokati. After less than a month in the country, they offered me a position and, three years and a half later, I am still here. With BDK Advokati, I mainly advise on data protection and electronic communications law.

CEELM: Was it always your goal to work outside of Spain?

Pablo: Not at all. When I finished my studies, I had never considered working outside of Spain. It was not until 2010, when I spent three months in London, in the headquarters of my employer at the time, SJ Berwin, that I started considering this possibility.

I enjoyed the experience of living and working abroad so much that I decided that I wanted to repeat it, but this time for a longer period.

CEELM: So you moved to Serbia?

Pablo: That is right. It might seem an unusual decision, but it has an easy explanation. While we were living in Amsterdam, my wife was offered a good position in Belgrade. Serbia was totally unknown to us, so it took us some days to make the decision. But we decided to give it a try and I can assure you that neither of us regrets it. Now, two of our kids are born in Belgrade so I guess that we will always keep this special link with Serbia.

CEELM: Tell us briefly about your practice, and how you built it up over the years.       

Pablo: In Serbia, I have been specially focused on data protection and electronic communications law. Luckily for me, as a consequence of Serbia’s law being harmonized with the EU’s prior to a potential accession, the applicable legislation in both areas strongly mirrors the EU’s, which makes my previous experience and knowledge completely valid here, as well as in Montenegro and Bosnia & Herzegovina, where BDK Advokati also has offices.

In data protection, we help all sort of corporate clients to carry out their activities in compliance with applicable law. This entails a very varied type of work, although recently I have been strongly dedicated to assisting clients with the process of making their data processing practices compliant with the new requirements brought by the EU’s General Data Protection Regulation and Serbia’s new Data Protection Act, which pretty much reflects the GDPR.

As for electronic communications, a big part of our activity consists of analyzing the different scenarios proposed by our clients and assessing whether they are caught by the realm of electronic communications law. This is essential, because with electronic communications being a strongly regulated practice, a positive or negative answer creates a completely different scenario for the company. With operators of electronic communications, we provide the necessary assistance and help them to fulfill all the regulatory requirements with the least possible hassle.

CEELM: How would clients describe your style?

Pablo: I guess that different clients would point out at different things. But in a recent task, a client showed his appreciation for the commercial nature of my advice.

I have to say that that’s something I really liked and would like all clients to think of me. We lawyers might sometimes feel tempted to play it safe, by only pointing at the problems and stating what clients cannot do, instead of how they can do it. I think that it is important to go a step further, by presenting solutions to the risks and doing everything at hand so that the client can achieve his or her goals, while, at the same time, complying with the law in a smooth way, without the regulatory part becoming a source of constant headaches. This requires acquiring a thorough understanding of the business of the client, no matter how far it might be from your comfort zone.        

CEELM: There are obviously many differences between the Serbian and Spanish judicial systems and legal markets. What idiosyncrasies or differences stand out the most?

Pablo: I guess that most differences are in the judicial system, but not being a litigator myself, it is difficult for me to talk about them.

As for the legal system, they are actually not so different. Both countries have civil law legal systems and both countries follow the directives and regulations adopted at the EU level –Spain, as an EU Member State, and Serbia, as a country in the process of accessing to the EU. The main difference in this respect would be that the changes adopted in Brussels obviously take more time to arrive to Serbia, which is not subject to the legal implementation periods that the Member States are. That sometimes entails working with version of laws which are lacking the most recent updates implemented in the EU.

CEELM: How about the cultures? What differences strike you as most resonant and significant?

Pablo: To be honest, what struck me the most when I first came to Serbia was not any difference, but discovering how many things we have in common. I had never met Serbians before, but these years have helped me to perceive them as very similar, in character, to Spaniards. They are open, social, outgoing, and like to enjoy the little things.

Also, they have always been super welcoming to me and my family. I remember one year when we landed in Belgrade after some days in Spain. It was late in the evening, on the day of the Orthodox Christmas. On our way home, a friend who picked up us at the airport gave us a bunch of food from his Christmas lunch, so that we did not have to worry about dinner. When we got to our place, our kitchen table was also full of food, this time from our landlord. It was so much that I think that we did not have to cook the rest of the week!

CEELM: What particular value do you think a senior expatriate lawyer in your role adds – both to a firm and to its clients?

Pablo: I hope a big one! Seriously, I think that Spanish clients doing business for the first time in Serbia like the fact that their first interlocutor is also Spanish. Having someone with whom they share the language and the culture helps make the beginning of the relationship a little bit warmer.

For our clients, which are often global companies doing transactions across several countries, I believe that it gives a good impression to see that the firm that is advising them also has this international approach. Having foreign lawyers (or local ones which have studied abroad, as happens at BDK Advokati), guarantees that advice is given by people who know how things work in more than one jurisdiction and legal system, and thus can better understand and address the issues that might arise because of the international or cross-border components of the work.

Also, due to the EU accession process, Serbia and Montenegro – and to a somewhat lesser extent Bosnia and Herzegovina – are countries which follow closely the legal developments that occur in the EU and eventually, after some time, replicate them. The Serbian Acts governing data protection and electronic communications are two good examples of this, for they are closely aligned with the corresponding regulations and directives at the EU level. Therefore, having lawyers qualified in EU jurisdictions may add the value of having people with longer experience working with provisions that, locally, may still be recent.

CEELM: Do you have any plans to move back to Spain?

Pablo: I certainly will! Both my wife and I love Spain and have our families and a lot of friends there, so it is kind of natural for us to go back at some point. However, that is something that we are not planning yet. We are still enjoying the international experience and frequently remind each other that these are the years to live abroad, because when we move back to Spain, it will probably be for good.

CEELM: Outside of Serbia, which CEE country do you enjoy visiting the most, and why?

Pablo: There are still various CEE countries that I have not visited. But if I need to choose one that I have, I would probably say Slovenia. Its beautiful capital and breathtaking scenery makes me feel a bit nostalgic, because it reminds me of Galicia, the region of Spain where I come from, which is full of green landscapes where you want to get lost.

CEELM: What’s your favorite place to take visitors in Belgrade?

Pablo: Belgrade offers many more things to do than visitors often think. But a spot that I never miss is Kalemegdan. None of my visitors leave Belgrade without a photo of the view of the confluence of the Danube and Sava rivers taken from Kalemegdan.

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Third Energy Package and its solutions directed towards the enhancement of competition in and the development of electricity and natural gas markets became part of Serbian law by the adoption of the country’s Energy Law in 2014. The network codes that were adopted after the adoption of the Third Energy Package further contribute to competition and market development. The obligation of the Republic of Serbia to adopt these acts arises from the 2008 Agreement on Stabilization and Association with the EU and the 2006 Energy Community Treaty. Until these codes are implemented through amendments to the Serbian Energy Law, the principles, solutions, and tools contained within them can be implemented in the individual network codes of each transmission system operator via a public procedure set out by the Energy Law.

Existing natural gas transmission system operators have not yet amended yet their applicable network codes and consequently have not yet implemented the goals, principles, and requirements set out by the EU’s network codes. This delay has been justified by reference to the expected amendments to the Energy Law. However, the new transmission operator – Gastrans d.o.o. Novi Sad – has invested significant effort in implementing the solutions and tools envisaged by Capacity Allocation Mechanisms Network Code 2017 (CAM NC) into its network code, which was adopted in April 2020. Novelties introduced by Gastrans network code include, inter alia, an allocation methodology, an auctions schedule, and an algorithm, which are already widely applied in the EU. Additionally, the Gastrans network code makes the Hungarian Regional Booking Platform its capacity booking platform so that the users of Gastrans transmission system can book and trade with capacities in its pipeline.  The Hungarian Regional Booking Platform is one of few capacity booking platforms established in line with Article 37 of CAM NC.

The introduction of principles, solutions, and tools set out by CAM NC in Serbia represents an important mechanism for enhancing competition in and developing Serbia’s natural gas market. In particular, the operating mechanism ensures that all participants in Serbia’s natural gas market bid for pipeline capacity under the same terms and conditions in a simplified procedure and use an electronic platform which applies a prompt, accurate, and un-biased algorithm for allocating capacities and ensuring all the benefits of advanced digital tools to transmission system operators and users. Furthermore, the impartial and competition-supported approach is further guaranteed by entrusting the allocation of capacities to an independent third party. Harmonizing the auction schedule with the EU auction calendar allows the widest range of natural gas users to simultaneously book necessary capacities in all transmission systems of interest, while decreasing the risk for natural gas traders and consequently facilitating the natural gas trade and enabling the entry of new players on Serbia’s natural gas market. Additionally, pipeline users will be able to trade with natural gas capacities on the secondary market in an equally efficient, transparent, and economically beneficial manner using the Hungarian Regional Booking Platform as a one-stop shop.

The introduction of such novel operational tools has been part of the public procedure, which allows all current and future natural gas transmission users the opportunity to provide their comments and proposals to the proposed draft, with an equal right given to the Serbian energy regulator and Energy Community Secretariat. Both regulatory stakeholders supported the new provisions of the Gastrans network code.

It is expected that the solutions, principles, and tools introduced in the Gastrans network code will serve as a model for the other two existing transmission system operators in Serbia and the region when they amend their own network codes, resulting in the modernization of Serbia’s natural gas market and its further harmonization with EU requirements.

By Jelena Gazivoda, Senior Partner, and Nikola Dordevic, Partner, JPM Jankovic Popovic Mitic

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Serbian Bankruptcy Law allows only bankruptcy proceedings of legal entities; unlike in many European countries, natural persons, entrepreneurs, and farmers cannot be subject to a personal bankruptcy proceeding.

Currently, facilitating a natural person’s debtor position is achieved through protective mechanisms such as an interim delay of enforcement or prohibiting enforcement on the only property he or she owns, as natural persons settle disproportionately smaller claims arising from utilities. Enforcement delay is possible under certain conditions – upon request of the debtor, who may, one time during the proceedings, “for especially justified reasons,” request it from the public executor, upon a showing that enforcement could cause him or her to suffer irreparable harm or damages that are difficult to recover. However, delayed enforcement in one procedure does not prevent other creditors — or the same creditor – from initiating new enforcement procedures over the debtor’s property. In addition to procedural mechanisms, substantive law also protects the debtor – for example with the prohibition of anatocism (contracting compound interest), or the creation of a moratorium (allowing a delay in repayment, based on an agreement with the bank).

Natural persons with income and assets insufficient to settle claims increased by default interest, may, despite making partial debt repayments, remain in perpetual debt because of the rule of interest calculation, which prescribes that if the debtor owes interest and expenses in addition to the principal, calculation is made by payment of expenses first and then the interest and principal. In civil law there is no absolute statute of limitations, which significantly complicates debtors’ positions. It should be noted that even during a delay of enforcement, default interest continues to accrue, so debt which the debtor could not previously settle increases even more. For example, a debt of EUR 100,000 would increase to EUR 140,014.95 after five years of delay.

As a result, additional protection of these debtors is needed through the institute of personal bankruptcy, the essence of which is reprogramming and a partial release of debt, as well as avoiding the seizure of their personal property via enforcement procedure.

A comparison of the position of insolvent legal entities with the situation of over-indebted natural persons reveals the necessity of introducing personal bankruptcy in our legal system. Many legal consequences and mechanisms of bankruptcy proceedings, such as the prohibition of individual enforcement, cessation of interest calculation, and redefining of debt-creditor relations under a reorganization plan create a better position for legal entities, so denying the same benefits to natural persons is not justified.

The idea of a new financial start for over-indebted citizens with personal bankruptcy is morally and socially acceptable. This is achieved by releasing them from their remaining obligations. After the end of the bankruptcy proceedings, which last from three to five years, and during which, under the supervision of the commissioner, the debtor settles part of his or her obligations, the debtor is released from all remaining debts. Allowing consumers to declare personal bankruptcy would provide a better solution for the problem of natural persons who cannot regularly repay their debts, and those protective mechanisms would contribute to the humanization of their position. The extent of their problem under the current situation is also indicated by the fact that 4.48% of loans granted to citizens are classified as problematic, and that in 2017, public executors sold 3,736 apartments and houses.

When defining first-class and adequate collateral, rules governing bank operations enable a more favorable classification of receivables if the debtor (either an issuer of collateral or a mortgaged real estate owner) acts under an adopted reorganization plan in terms of Bankruptcy Law. Therefore, extending bankruptcy and bankruptcy reorganization rights to natural persons would provide significant financial resources to banks, due to the reduction of the required reserve for estimated losses – a deductible item from the share capital – which banks could use to increase lending activity in Serbia.

By Nemanja Aleksic, Founder and Managing Partner, Aleksic & Associates

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

As international arbitration should deliver some degree of certainty to the parties, many party representatives and arbitrators have asked arbitral institutions for information and guidance in light of the COVID-19 outbreak in March 2020.

The COVID-19 pandemic is a global health crisis that is unlikely to end in the near future. This pandemic has already strongly affected business operations though-out the world, negatively affecting both companies and their bottom lines. The long-term effects on global business operations in all industry sectors are yet to be seen, but it appears likely that there will be an increase in the number of commercial arbitrations in the near future.

In April 2020, a group of the most reputable international arbitration institutions issued a joint statement addressing parties and arbitrators, pointing out potential ways to resolve their problems in a constructive manner. They invited all participants living under COVID-19 pandemic measures to apply relevant institutional arbitration rules and adequate case management techniques, to permit their arbitrations to start or continue without undue delay.

The procedural rules of most arbitration institutions already allowed for the electronic submission of written statements, and, as a consequence of the pandemic, most arbitration institutions have decided to make this form mandatory, using either e-mail or, where available, an on-line filling system. This has led to the full adoption of electronic case management tools in the practice of many arbitration institutions.

Organizing and conducting oral hearings has been challenging during the COVID-19 pandemic. Most arbitration institutions have strongly encouraged arbitral tribunals and parties to proceed with fully virtual hearings in on-going arbitration cases. In order to facilitate that, the arbitration institutions developed virtual hearings guidelines addressing relevant issues for party representatives and members of the arbitration panels. In practice, a number of virtual hearings have been held in the past six months to make the arbitration proceedings more efficient. This leads to the question: Is the efficiency of arbitration proceeding more important than the principal of orality? Even more importantly, will the arbitral award be based on sufficiently examined witness statements, exhibits, and expert witness statements? Perhaps the arbitration institutions and arbitration panels should have taken a more reserved approach in regards to this issue, especially as virtual hearings could have some disadvantages to specific parties and party representatives. The arbitrators thus have an additional important task – to carefully and wisely determine whether a fully virtual approach is best suited for a particular case.

In the Balkan states, arbitration practitioners have, in general, accepted and adopted new procedural instructions from arbitration institutions and arbitration panels required by the pandemic. But in at least one recent and prominent case, due to the non-flexible position of the parties and their representatives, an arbitration panel had to organize an in-person hearing to examine two expert witnesses (of course making sure to follow all sanitary and health protection measures in the process). It appears sometimes parties and their representatives do not adapt easily to the new trends imposed by this situation.

To conclude, this pandemic has impacted the procedural aspects of commercial arbitrations, and the already-existing tools and mechanisms of arbitration institutions have been pushed forward to be applied in full force in a short period of time. In most cases parties are willing to be flexible and adapt to newly agreed procedures, as long as their rights are not significantly affected. Being flexible in terms of procedural rules, an important skill for any arbitrator, has become very important in light of COVID-19. In the future, once the pandemic is over, arbitration institutions and arbitration panels will have to decide whether to continue with the practice of applying these tools and mechanisms as standard practice or continue to follow the traditional approach of accepting hard copy written submissions and allowing standard oral hearings.

By Boris Baklaja, Partner, Baklaja Igric Tintor

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Genetic testing of biological materials reveals unique information about the physiology and health of a natural person. DNA determines to a large degree what a person will be like. The GDPR says that consent must be obtained from people who will be subjected to genetic research and/or genetic testing for health reasons.

In addition, obtaining informed (i.e., “medical”) consent for intervention (including research) in the health field is mandatory. The question is whether people must give both kinds of consent for additional processing of biological materials – i.e., further research for the purpose of promoting medical science, potentially leading to the improvement of mankind’s wellbeing.

Under the GDPR, the right to the protection of personal data is not absolute; it must be considered in relation to its function in society and be balanced against other fundamental rights. In this context, the GDPR allows genetic researchers to process personal data obtained for the purpose of genetic testing (for health or commercial purposes) or for specific genetic research for scientific purposes.

Further processing of personal data for scientific research is compatible with previous purposes. As purpose limitation and lawfulness are two separate and cumulative requirements, Article 5 of the GDPR and the Serbian Data Protection Act require genetics institutions to refer to either legal authorization or tasks carried out in the public interest. Genetic institutions seeking to process health and genetic personal data can refer to the substantial public interest in ensuring high standards of quality and safety of health care or necessity to process personal data for scientific purposes (under Article 9 (2) (i) and (j) of the GDPR and Article 17 (2) (9 and 10) of the Serbian Data Protection Act).

In such cases, under the minimization principle, genetic institutions must apply additional safeguards to protect personal data (for example by pseudonymizing or anonymizing personal data), and must obtain consent to do so. Under Articles 17 (2) (b) and 3 (d) and Article 30 (2) (2) and (5) (4) of the Serbian Data Protection Act, the right of those whose personal data is being used to withdraw this consent may be limited.

In addition, the Oviedo Convention says that for each additional form of genetic research or analysis of biological material, people must give “medical” consent.

The most important element of genetic research is the ethical component, meaning that participants in genetic studies must give “medical” consent and the research must be overseen by independent ethical committees. In addition, the Oviedo Convention allows people who granted “medical” consent for genetic testing/research purposes to withdraw it at any time. Therefore, the question is whether further analysis of biological samples without informed (i.e. “medical” consent”) is possible.

The only way to avoid having to obtain “medical” consent is to make biological material unlinked and anonymized, meaning that the material, either alone or in combination with associated data, does not allow, with reasonable effort, the identification of the persons concerned. In most cases unlinked anonymization is not sufficient for research in biobanks, which contain biological material and associated personal data that may include or be linked to genealogical, medical, and lifestyle data and which may be regularly updated.

The conclusion is that researchers must obtain “medical” consent for each new genetic research project involving previously obtained biological samples, unless the samples can be anonymized.

By Ivan Milosevic, Partner, JPM Jankovic Popovic Mitic

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Prominent Serbian attorneys provide an overview of the country’s prospects heading out of the recent election cycle and into an uncertain future.

Following a less-then-smooth election cycle, set against a backdrop of public protests amid a global pandemic, the incoming Serbian government – despite holding one of the strongest, most dominant parliamentary majorities in modern Serbian history – will have a lot on its plate to deal with … and soon.

There’s the imminent threat of an economic crisis – as COVID-19 is still very much present – that will force the government to pick and choose carefully how best to keep the country afloat while managing the local effects of a global pandemic. And the incessant issues with an overloaded judiciary, criticized for many years as being slow and subject to inappropriate political influence, leading to a lack of faith in the system and growing calls for reform.

Election Heat

The former Yugoslavian Republics of Croatia, North Macedonia, Montenegro, and Serbia all held parliamentary elections during the summer months of 2020 to elect their leaders for the next cycle.

In both Croatia and North Macedonia, the process went relatively smoothly, with new governments installed in both countries soon after the final votes were tabulated. Even Montenegro, where Milo Djukanovic’s DPS party lost control of the Parliament for the first time in 30 years, saw little disruption.

The fall-out from the Serbian elections, by contrast, was somewhat different.

In February of 2019 Serbia’s leading opposition parties had signed a so-called “Agreement with the People,” promising to boycott the next elections, should it be determined that those elections would be irregular in significant ways. In the lead-up to this summer’s elections most of them promised to follow through on that promise, alleging that the conditions within which the elections were to be held were undemocratic and unfair, and pointing in particular to the heavy support for the current regime in the country’s media.

However, in the weeks before the June 21st elections – which had been postponed from April due to the Covid-19 pandemic – some opposition parties abandoned the block and agreed to participate in the elections after all. This disharmony in the opposition strengthened the position of the ruling Serbian Progressive Party, SPP, led by Serbian President Aleksandar Vucic.

On election day, the coalition around SPP won a supermajority of 60.65% of the vote, translating to 188 seats in the 250-seat parliament. The Socialist Party of Serbia, part of the previous coalition government with SPP and led by Ivica Dacic, won 32 seats, and the new Serbian Patriotic Alliance, led by former water polo player Aleksandar Sapic, won 11 seats. If SPP were to again unite with the Socialists, the coalition would hold 220 seats of the nation’s legislative body with virtually no barriers to the implementation of its agenda.

Protests erupted following the elections, with Serbians taking to Belgrade’s streets and attempting to storm the National Parliament building before being turned away by police. Demonstrations continued for several days, eventually necessitating the use of tear gas and heavy vehicles by the police before eventually dying out.

The most likely cause for the protests, in addition to the wide-spread belief that the elections had not been conducted fairly, was the report that new Covid-19 cases had apparently doubled in the five days following June 21st, with the approximately 90 cases per day reported in the week leading up to the election exploding to between 250-300 just a week later. When President Vucic announced new lockdown measures, protestors accused him and the ruling party of having lied to the country about the extent of the danger in an effort to sway public opinion.

As of writing, the lockdown has not yet been implemented, and the protests have stopped. The new government remains unformed, even though Vucic, on several occasions, claimed that it would be by August 25. The legal limit within which a government must be formed following election day is 90 days – a deadline which is rapidly approaching at the time of writing.

An Economy Open to Investment from All Sides

Overall, Serbia’s economy seems to be doing well. “We’ve been lucky that we’re not too reliant on tourism and those services that the pandemic struck the hardest,” says Radivoje Petrikic, Partner at CMS Belgrade. “With a decent mix of production and services, the economy is not overly dependent on any one sector, which may allow Serbia to bounce back faster than other countries in the region.” He adds that, while the political situation leaves much to be desired, it at least has “some sort of continuity and predictability, which is what investors seek first and foremost – so that’s at least something.”

Igor Zivkovski, Partner at Zivkovic Samardzic, is optimistic that, at least for the rest of 2020, the economy will remain strong. “There are no landmark projects on the horizon right now, but investor interest has been on a good level and I think that Q3 and Q4 will be good.”

In the meantime, Zivkovski notes, the challenge the new government faces maintaining a strong economy in the middle of a public health crisis make big changes especially unlikely. “Keeping the market alive and mitigating the negative fallout in terms of public health will be a tall order,” he says, “which is why I don’t expect any significant changes in terms of the politics of the new government.”

Petrikic agrees. “Generally speaking, I don’t expect there to be any change of course once the new government is appointed.” He feels that the new government will reflect the same mix of “pro-Western and pro-Eastern” interests that the previous government pursued, making it “much like it has been so far.”

Thus, Petrikic says, Serbia will continue to encourage and welcome foreign investment from any and all sources. The country, he notes, is in the “rare position where, in addition to good ties with the West, it also has good infrastructural ties with both Russia and China. Even though that might irk some of the players in the West, this government has been doing a great balancing act so far, and I don’t think that they’ll have any incentive to change.”

Not everyone is so sure, however. Darija Ognjenovic, Partner at Prica & Partners, agrees that “with the election victory freshly won, the SPP has no reason to change their behavior in any way – as far as they’re concerned, they enjoy the trust of the people.” Still, she says, “maybe we’ll see a bit more of a pro-Western turn because the ruling coalition no longer needs to buy social goodwill by praising Russia and China.”

The Covid Context

Serbia experienced its second uptick of Covid-19 cases as the summer started, though by mid-September things had calked down, and the reported numbers of new cases that reached as high as 467 on July 27 had dropped to 36 on September 7. During the first wave of the virus, in March, the Serbian government initiated almost a full two-month lock-down of the country followed by comprehensive economic stimulus packages, but its approach has been more relaxed this time around, with fewer restrictions and less direct help to businesses. Many feel that, although the government’s tackling of the public health aspects deserves praise, its handling of the economy leaves much to be desired.

“We know a lot more about the virus itself now, what it does and how it spreads,” says Petrikic, explaining how the decrease in reported cases was achieved. “The second wave that hit us this summer was controlled much better, sans lockdown, but it remains to be seen what the situation will be come fall and the flu.” Either way, Petrikic has faith that people in Serbia are better prepared than they were in the beginning, and that “each new wave will be more manageable and less hurtful.”

Indeed, Petrikic says, it is of the “utmost importance” to have the people continue moving freely in order to keep the economy moving forward. “Without travel and getting people moving, the economy will grind to a slow halt,” he says.

Perhaps. Ognjenovic, by contrast, thinks that the methods applied by the government to tackle the ongoing effects of the pandemic were less than ideal, at least in the tax world. He contrasts the government’s recent introduction of a voluntary two-month stay on taxes with the three-month stay extended to taxpayers earlier in the year – with the option to pay those tax amounts over 24 months. “This time,” he says, “all they’re doing is postponing when the payments are due for a few months, which means that, come January, there will be a lot more to pay than there usually would.” Ognjenovic believes that this will be burdensome to many taxpayers, meaning that there may not be a “rush to apply for this program.”

Igor Zivkovski says that he hopes that the new government will continue its efforts to stimulate the economy, “especially tourism, transport, and logistics, as these sectors were hit the hardest.” He reports that “the government has issued an additional 60 thousand tourism vouchers to stimulate domestic tourism, on top of the 160 thousand that were issued earlier this year; the National Bank of Serbia has lowered the interest rate to 1.75% to stimulate loans and commercial activity; and an additional RSD 24 billion has been invested in infrastructure projects to stimulate the Serbia 2025 program.”

Reforming Serbia’s Courts

Not all challenges are now, or related to the pandemic. The government must also consider how best to pursue the long-await reform of its judicial system, particularly finding a way to ease the burden on the courts, which are notorious for being overwhelmed and having huge caseloads. Despite the pressing need, howevr, many experts believe that effective reform is unlikely to happen anytime soon.

“Unfortunately, this is an area where things have stalled,” Petrikic says, noting with a sigh that, “while there have been some improvements, it remains a problematic area in Serbia.”

Petrikic insists that the core problem in Serbia’s judicial system is not that there are no qualified judges, but rather that “the judiciary itself is not independent.” According to him, “political interventions are frequent, at least when it comes to non-commercial litigation. Commercial disputes have far fewer of these types of transgressions, but judges can get demotivated there,” he says, referring to low wages. As a result, he says, “there are a huge number of open cases; they take too long to close, and there isnt’t much motivation to do them properly.”

Still, Petrikic says, it’s not all bleak. He notes that access to courts in Serbia is easy and that initiating a legal claim is “inexpensive, compared to other countries,” although he worries that this “only leads to people being more trigger-happy when it comes to deciding to litigate.”

“I do not have a lot of faith in the system, to be honest,” Ognjenovic chimes in. She recognizes that “honorable professionals” exist, but says that they are not a majority. The problem, she notes, is not new. “For the 20-or-so years that I’ve been practicing law, the judicial system has been quite problematic, and I believe it was like that even before.” With obvious frustration, she reports that “the more things change the more they stay the same – every new government promises reforms and improvements, but nothing significant happens.”

Ognjenovic believes that what would help the system most is improving the training provided to judges. “The first thing that ought to be done is to spend more resources and time educating the judges,” she says. “Providing for a specialized, focused education for specific types of cases would present a major move forward.”

Wages, Ognjenovic says, echoing Petrikic, are a major issue as well. “If it’s more lucrative for a legal professional to pursue a career as a lawyer than as a judge – that’s a serious problem that supersedes the issue of not having expert judges.” According to her, “the judges are underpaid and this presents a strong problem. The system should be changed in a way to value the institutions and experts working there more than political parties and strong political personalities.” Until this is done, she says, “we’re going to be running in circles.”

Change, however, may be a tall order. Petrikic says that to efficiently improve the judicial system, a wider political reform must first occur. “The institutions of the country must be independent,” he says. “There must be a political will to create and maintain a system in which the institutions reign supreme – and in which they function properly.” According to him, “if politicians can intervene on every level, we will never have independent institutions.”

“You cannot build this up overnight,” Petrikic continues. “It must be a bottom-up change, people’s faith in the system and institutions must first be won.”

In the meantime, the many and well-known miscarriages of justice over the years in Serbia have led to an absence of faith in the judiciary overall. “It sometimes feels as if there are double standards in play,” Petrikic says. “If you have a situation in which somebody is let off the hook with house arrest following a car accident that resulted in a child’s death, while, on the other hand, folks are being evicted from their apartments for not paying their bills – you’ll never have citizens believing that the system is just and fair.”

Zivkovski agrees, overall, but emphasizes that some improvement has been made, recently – prompted by an unexpected development. “The pandemic forced the courts to be a bit more open-minded to digitalization,” he says. “During the lockdown, there was a lot of pressure to implement certain digital communication solutions to enable the courts to function. This has continued, with certain aspects of enforcement procedures being migrated to an online platform run by the Ministry of Justice.”

At the end of the day, he says, this may help release some of the burden on the country’s commercial courts. And, he says, “with it taking an average of four years to complete a court case in this area, any improvement is a leap forward that is welcomed with open arms.”

Whatever the eventual composition of Serbia’s new government, it will face tough knots to unravel across the board. A drowning judiciary, an unyielding virus, and the potential for an economic crash are sure to keep it busy until the next election cycle. Until then, the country bears watching.

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Dentons has advised Umweltbank Aktiengessellschaft, GLS Gemeinschaftsbank EG, and two investment funds managed by Triodos Investment Management on the acquisition of a majority stake in Opportunity Banka a.d. Novi Sad, a Serbian bank, from Opportunity Transformation Investments inc. Andric Law Office provided Serbian advice to the buyers, and Schoenherr reportedly advised Opportunity Transformation Investments.

Opportunity Banka Novi Sad specializes in microfinance, providing micro, rural, agro, and SME loans, and other financial services to Serbian customers who cannot ordinarily access financial services from traditional banks. Dentons reports that the bank is a part of Opportunity International, “a global non-profit committed to ending extreme poverty and promoting quality education for families in need.” According to the firm, “since 1971, Opportunity has helped millions of families work their way out of poverty by providing financial resources, training, and delivering ongoing support to start small businesses, earn living wages, and feed their families.”

Triodos Investment Management is global investor with over 750 investments in over 50 countries with EUR 4.9 billion in assets under management. It is a wholly-owned subsidiary of Triodos Bank NV, which was founded in 1980 and operates in sustainable banking. 

Dentons’ team in Budapest was led by Partner Rob Irving and included Associates Kamran Pirani and Sebastian Ishiguro.

Andric Law Office’s team was led by Managing Partner Luka Andric.

Editor’s note: After this article was published, Schoenherr announced that its team included Partners Matija Vojnovic and Vojimir Kurtic and Lawyer Dusan Obradovic.

Zivkovic Samardzic has been appointed the representative of SNAP Inc. under the Serbian Data Protection Act, following a decision by the Commissioner for Information of Public Importance and Personal Data Protection.

According to Zivkovic Samardzic, “similar to the Article 27 of the General Data Protection Regulation (EU) 2016/679 in the EU, Serbian Data Protection Act, in its Article 44, requires data controllers or processors processing personal data of Serbian citizens, if not established in Serbia, to designate representatives who should act on their behalf and may be addressed by Serbia’s supervisory authority, the Commissioner for Information of Public Importance and Personal Data Protection.”

Zivkovic Samardzic’s team includes Partner Slobodan Kremenjak.

The Tax Administration of the Republic of Serbia has recently published a call to natural persons who acquired income abroad in the past period to file tax applications, calculate and pay taxes and contributions for mandatory social insurance with relevant interest as soon as possible, in order to avoid offence liability.

This call followed after the Tax Administration had established incompatibilities between the data on natural persons’ income from abroad and the information on submitted applications and paid taxes by self-taxation, which will result in institution of tax control of such persons.

According to the Tax Administration, such incomes are acquired from provision of various services, most frequently software development, translation, foreign language teaching, promotion, graphic design etc. In addition, these incomes are also generated by natural persons through social networks as so-called “you-tubers” and “influencers”, through online betting and by leasing their own real estate for a period up to 30 days (so-called “short term”).

Taxpayer in such situations is a natural person acquiring income. However, when it comes to withholding taxes, the income payer shall be obliged, upon income payment, to calculate and pay appropriate taxes and contributions (“by withholding” from gross amount), so that the recipient of income receives net amount on his/her account. In this manner, the payer of income shall have the role of payer of taxes although he/she is not taxpayer, which ensures more efficient control of tax payment and less burden on natural persons – income recipients, considering that income payers are most often legal entities and entrepreneurs.

However, when income payer is a non-resident (with seat or residence abroad), such model of collection and control of tax collection is impossible. Therefore, the Law on Citizens Income Tax prescribes that taxpayer who acquires salary and other income from another state shall be obliged to calculate and pay withholding taxes under this law, which means that taxes shall be paid by self-taxation. The same applies in situations when payer of income is not a legal entity or entrepreneur.

Therefore, the persons who acquire income from abroad were obliged to file tax applications and to pay appropriate taxes and contributions for mandatory social insurance.

In relation thereto, it should be noted that the Law on Tax Procedure and Tax Administration (“LTPTA”) establishes that the right of Tax Administration to establish and collect taxes and auxiliary tax duties shall become obsolete five years after the first day of obsoleteness, whereas the obsoleteness shall start on the first day of the year following the year when taxes i.e. auxiliary tax duties should have been established. It is also important to say that the provisions of the LTPTA that regulate obsoleteness of the right to establishment and collection of taxes shall not apply to contributions for mandatory social insurance.

The LTPTA also prescribes misdemeanour fines ranging from RSD 5.000,00 to 150.000,00, which may be imposed to a natural person for several offences such as failure to file a tax application, refusal to participate in the procedure of tax control, failure to provide notices upon Tax Administration order etc. If a person fails to pay taxes it may be subject to fine amounting to 50% of the established taxes, but no less than RSD 5.000,00.

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

BDK Advokati, working alongside Sweden’s Gernandt & Danielsson Advokatbyra KB, has advised the Embracer Group AB on the acquisition of all issued shares of Mad Head Games d.o.o., a game development studio from Novi Sad, Serbia. Sunjka Law advised Mad Head Games shareholders Nenad Tomic, Uros Banjesevic, and Aleksa Todorovic on the deal.

According to BDK Advokati, “Embracer Group AB is a Swedish video game holding company listed on Nasdaq First North. Embracer Group has six operative groups as its direct subsidiaries: Amplifier Game Invest, Coffee Stain Holding, DECA Games, Koch Media, Saber Interactive, and THQ Nordic. It is well known for its games such as Saints Row, Goat Simulator, Dead Island, Darksiders, and many others.”

BDK Advokati’s team included Senior Partner Vladimir Dasic, Partner Bogdan Ivanisevic, Senior Associates Tomislav Popovic and Milica Basta, Associates Zorana Brujic and Marija Gligorevic, and Junior Associates Sanja Dedovic and Anja Gligorevic.

Sunjka Law’s team included Partner Tomislav Sunjka, Lawyers Velibor Repaja, Jelena Bajin, and Ivan Strbac, and Associate Andrea Fulture.