Category: Serbia

Independent data protection authorities (“DPA”), such as Commissioner for Information of Public Importance and Personal Data Protection in the Republic of Serbia (“Commissioner”), have significant role and authorities in case of personal data breach.

Quis custodiet ipsos custodes? (Who watches the watchers?)

Since DPAs are also the controllers of certain personal data, breach of personal data may also refer to some data under their control.

This has recently happened to the Danish DPA – Datatilsynet. Namely, at the end of August, Datatilsynet published a notice on personal data breach on its premises which occurred when paper waste containing documents with confidential and sensitive information was not disposed by shredding but as regular paper waste (in integral form). It was established that such practice existed in the period from February until August 2020, with Datatilsynet staff working from home in the period from March until June which certainly reduced the scope of breach.

As it was indicated, the documentation contained information about employees and persons complaining against their personal data protection (name, subject of complaint, address etc.).

Considering the obligation of controllers from Art. 33 and 34 of GDPR, Datatilsynet reported the breach in the same manner as other controllers are bound to, however there was also an omission in this case because the prescribed 72-hour deadline for reporting was exceeded for additional 24 hours. Datatilsynet stated that the employee who missed this deadline was also reprimanded and that its internal procedures were revised, including those referring to the disposal of paper waste. At the same time, Datatilsynet notified the breach to the persons possibly at risk due to this breach.

What is the situation in the Republic of Serbia?

Under the Law on Personal Data Protection (“LPDP”), controller shall be obliged to undertake relevant technical, organisational and personnel measures to ensure that processing is done in accordance with law and to be able to notify this considering the nature, scope, circumstances and purpose of processing, as well as possibility of risk and the level of risk to the rights and freedoms of natural persons. Controller shall be obliged to examine and update these measures and to apply relevant internal acts on personal data protection when it corresponds to data processing.

Data processor shall also guarantee for application of relevant technical, organisational and personnel measures in such a manner so as to ensure that processing is done in accordance with LPDP provisions and that the protection of rights of data subjects is ensured.

Therefore, controllers and processors are primarily obliged to act preventively in order to avoid the breach.

What to do when breach nevertheless happens?

LPDP regulates this issue alike GDPR. Controller shall notify the Commissioner of the breach of personal data that may impose risk to rights and freedoms of natural persons without necessary delay and, if possible, within 72 hours after finding out about the breach, including the obligation to elaborate possible reasons for failure to act within the stated deadline.

This notice shall be submitted in the prescribed form, along with records of processing activities that the controller keeps in accordance with Article 47 of LPDP. The notice shall be submitted in writing, directly or by mail, while a scanned copy may be submitted to a specially designated e-mail address of the Commissioner.

Controller shall also be obliged to document any breach of personal data, including facts about the breach, its consequences and measures undertaken for their elimination.

On the other hand, if the breach occurred with the processor, the latter shall notify the controller thereof without unnecessary delay, and the controller shall undertake the prescribed measures.

If the personal data breach may generate high risk to the rights and freedoms of natural persons, controller shall also be obliged to notify the breach to the data subjects.

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

Karanovic & Partners has partnered up with Blocknify to launch an electronic signature technology called “k/signing.”

With k/signing, according to Karanovic & Partners, the firm aims to “facilitate the procedure of electronic execution of documents in a secure and transparent manner using blockchain.”

“The absolute need for remote execution of documents is now more evident than ever. This is why we have partnered with Blocknify, a startup which was found within our k://lab program and started our joint k/signing project,” commented Karanovic & Partner Senior Partner Rastko Petakovic. “We see a great future and potential in technology, and especially in legal tech since this is the area where we can fully provide our added value both from the client and expert perspective.”

Karanovic & Partners also stated that “electronic execution of documents is exactly what it sounds like, i.e., the signing of documents without the need to previously print them out and use wet ink. All electronic signatures (simple, advanced, and qualified ones) are generally recognized as legally binding throughout the jurisdictions we cover.”

The firms k://lab program is a “platform through which a network of our professionals and partners are supporting chosen start-ups in the SEE region,” Karanovic & Partners added. “One of the startups which were found within our k://lab program is Blocknify, which is developing multiple solutions for legal signing. K/signing is only first in a line of projects we have in the pipeline with Blocknify.” 

Mikijelj Jankovic & Bogdanovic has advised the Belgrade-based Nelt Grupa on its acquisition of baby food brand Bebi from Atlantic Grupa.

Financial aspects of the deal were not disclosed.

Nelt Grupa, which specializes in distribution and logistics services and food production, has over 4,000 employees and operates in 11 markets in Europe and Africa.

According to Atlantic Grupa, “Bebi’s wide portfolio of products for infants and children is primarily present on the markets of Russia and other CIS countries, where it has been present for more than 35 years.”

MJB did not reply to an inquiry about the deal.

 

Just as we entered the year of 2020, the Serbian Government enacted the new Regulation on Incentives to Investors for Production of Audio-visual Works in the Republic of Serbia (“Regulation”). The motives for enacting a new Regulation were the encouragement of investments and increasing employment in the field of audiovisual production, as well as the promotion of the potential of the Republic of Serbia in the said field.

In order to qualify for such incentives, the Regulation prescribed certain criteria in terms of funds allocated in the production budget with regards to each specific format. Namely, to be eligible for incentives which come in the form of state grants, the investors must meet the following thresholds: 

• for feature film and TV film: EUR 300,000;
• for TV series: EUR 300,000 per episode;
• for animated series: EUR 150,000 per episode;
• for an animated film, audio and/or visual postproduction of the audiovisual work: EUR 150,000;
• for special purpose film: EUR 300,000;
• for documentary film and documentary TV program: EUR 50,000.

However, the new Regulation prescribed that the thresholds for TV series and special purpose films will enter into effect on 31 August 2020, until which date the thresholds from the previous Regulation will remain applicable: 

• for TV series: EUR 300,000 in total with at least EUR 100,000 per episode, and
• for special purpose film: EUR 100,000.

What the Government failed to foresee is the unfortunate COVID-19 pandemic that would soon follow. The investors and producers were actively prevented from starting any projects during the postponement period, rendering the desired effects of the postponement moot.

Due to this reason, on 27 August 2020, the Government enacted Changes and Amendments of the Regulation in order to further delay the effective date of new thresholds until 1 January 2021.

To summarize, the investors for the production of TV series will be eligible for incentives if they allocate EUR 300,000 in total with at least EUR 100,000 per episode within the production budget, while special purpose film production investors will be eligible for incentives if they allocate EUR 100,000 within the production budget, until 1 January 2021. After that, the thresholds will be raised in accordance with the Regulation (see points 2) and 5) above).

The Government’s decision to further extend the period within which the lower thresholds will remain applicable is certainly a welcome one, as the investors will remain encouraged to produce TV series and special purpose films in Serbia during times when everyone is reluctant to start a new project due to the ongoing pandemic. 

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 Milan Samardzic, Partner, and Dragan Martin, Junior Associate, Samardzic, Oreski & Grbovic

On 10 August 2020, the Commissioner for Information of Public Importance and Personal Data Protection (the “Commissioner“) issued an official statement confirming that the recently annulled mechanism for the free transfer of personal data to the United States (better known as the “Privacy Shield Framework”) cannot be considered a lawful basis for the transfer of personal data anymore.

Namely, the Court of Justice of the European Union on 16 July 2020, rendered a historic decision declaring the Privacy Shield Framework invalid (you can find a more detailed analysis of this decision in our article here).

Considering the Act on Personal Data Protection of the Republic of Serbia prescribes that an appropriate level of personal data protection is provided in countries, in parts of their territories or in one or multiple sectors of specific activities in those states or international organizations as determined by the European Union, it follows that the annulled mechanism of personal data transfer to the United States of America cannot be considered valid on the territory of the Republic of Serbia as well.

Furthermore, the Decision of the Government of the Republic of Serbia on countries, the parts of their territories or one or multiple sectors of specific activities in those states or international organizations which are considered to provide an adequate level of personal data protection, specifically mentions the Privacy Shield Framework as the mechanism which provides an adequate level of personal data protection.

Having mentioned in mind, the Commissioner sent an official letter to the Government of the Republic of Serbia in which he emphasized the need for harmonization of the said Decision with the Act on Personal Data Protection and the caselaw of the Court of Justice of the European Union.

This initiative of the Commissioner came as a confirmation of what has already been determined by the said decision of the Court of Justice of the European Union. If you are processing personal data and have so far relied on the Privacy Shield Framework as the lawful basis for data transfers to the US, now would be the right time to comply with the newly established rules under which such transfer is permitted. 

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 Dragan Martin, Associate, Samardzic, Oreski & Grbovic

The Law on Consumer Protection (Official Gazette of RS no. 62/2014, 6/2016 – other law and 44/2018 – other law; “LCP 2014“) prescribes seller’s liability for non-conformity of goods that occurs within a period of two years after the transfer of risk to the consumer.

What is actually conformity of goods?

The term conformity was introduced into the domestic legal system in 2010, by adoption of the Law on Consumer Protection (Official Gazette of RS no. 73/2010, “LCP 2010“).

In general, conformity means that a consumer has been delivered goods with appropriate characteristics as to their use, hence this institute actually protects reasonable expectation of consumers that they will be able to use the purchased goods without any restriction in a certain period of time i.e. that the goods will not have defects to prevent such use.

Before the adoption of the LCP in 2010, consumer protection was legally guaranteed for a much shorter period. The Law on Consumer Protection (Official Gazette of RS no. 79/2005, “LCP 2005“) prescribed consumers’ right to complaint for shortcomings that appear within six months after purchase, whereas in case of Law on Consumer Protection (Official Gazette of RS no. 79/2002, “LCP 2002“) such period was 90 days. The two-year deadline was introduced only through the LCP 2010.

In addition, the LCP introduced another significant novelty, which was finally the elimination of all forms of legal entities and entrepreneurs from the definition of “consumer”. Today, consumer is only considered a natural person purchasing goods or services in the market that are not intended for business or other commercial activity.

This means that rights on basis of conformity are only allowed to and may only be exercised by natural persons who purchase goods and services for personal use.

Conformity of goods vs. guarantee for goods

Although the term “conformity” has appeared in regulations for more than 10 years, it seems that it has not been very much used in practice and that its subjects – consumers, do not sufficiently understand it.

In most cases this term is confused and mixed with the term “guarantee”. However, the LCP 2014, alike LCP 2010 before it, make a clear distinction between these two terms.

Guarantee is any statement whereby its giver makes promises relating to goods and it is legally binding under the terms given in the statement and in advertising of such goods. These are additional rights that are guaranteed to the consumer by default by manufacturer, importer or retailer, hence the guarantee does not exclude or affect the rights of consumers relating to conformity of goods with the contract.

Unlike the rights based on conformity whose realisation does not require a seller to issue any additional document, in case of warranty so-called warranty lists are issued that contain additional rights that may be exercised by consumers in a warranty period.

The LCP 2014 explicitly prohibits the abuse of term “guarantee” and prescribes that a seller shall refrain from the use of that and similar terms if based on sale agreement the consumer does not acquire more rights than under seller’s legal liability for nonconformity of goods.

Basically, these are two types of guarantees that have different legal bases – one is legal because it is based on the law, whereas the other one is contractual because it is based on purchase agreement and it is directly binding upon the guarantor against the consumer. We believe that the use of these or similar terms in domestic regulation would significantly simplify the understanding of rights and their practical application, particularly considering that similar terms are also used in the relevant EU Directive: “legal guarantee of conformity“ and “commercial guarantee”.

Deadlines

As stated above, under the LCP 2014 seller shall be liable for nonconformity of goods with the contract that occurs within a period of two years before the transfer of risk to the consumer.

If nonconformity disappears within six months after the transfer of risk to the consumer, it is assumed that the nonconformity existed at the moment of risk transfer, unless this is contrary to the nature of goods and nature of particular nonconformity.

In the case of sale of second-hand goods, a shorter deadline may be agreed for seller’s liability for nonconformity, whereas it cannot be shorter than one year.

With regard to goods whose shelf life is shorter than two years (e.g. batteries, chargers etc.), seller’s liability for nonconformity reasonably cannot last for two years. According to the ministry in charge of trade, in such cases sellers shall be obliged to notify consumers thereof before the conclusion of purchase agreement (“obligation of pre-contract notice“) because this is considered a significant feature of goods.

In any case, the stated deadlines are not running in the period used by seller to eliminate nonconformity.

The manner of complaint

In order to exercise the right based on conformity or guarantee, consumers needs to complain to the seller that sold them the goods.

Complaint can be addressed orally at a selling point where the goods were purchased or another place designated for complaints, by phone, in writing, electronically or via permanent record carrier.

Consumers need to provide a receipt or other proof of purchase (copy of receipt, slip etc.) along with complaint. Previous legal provisions contained in the LCP 2002 and LCP 2005 envisaged mandatory provision of receipts for the purchased goods.

The LCP 2014 explicitly prescribed that the inability of consumers to provide packaging of goods to the seller cannot be a condition for resolution of complaint or a reason for refusing to eliminate nonconformity, however in practice sellers often insist on this.

Seller’s obligations in connection with the receipt of complaints

In accordance with LCP 2014, the seller is obliged to:

• visibly display a notice at the point of sale on the manner and place of receipt of complaints,
• ensure the presence of a person authorized to receive complaints during working hours,
• keep records of received complaints for at least two years from the day of submitting consumers’ complaints,
• issue a written confirmation to the consumer or confirms the receipt of the complaint electronically, i.e. communicate the number under which a complaint is registered in the records of received complaints.

Contrary to the consumer’s right to be delivered a compliant product, there is an economic interest of the seller to protect himself from unfounded objections to the properties and performance of the purchased goods. In practice, this often means that sellers automatically reject complaints, or that they take over the right to choose “replacement or repair”. The sellers themselves should take care of the education of their own staff in connection with resolving complaints, as well as to regulate this procedure by internal acts (procedures, etc.) within the framework of the binding legal regime, but also to adjust the same to the goods they sell.

Seller’s response to complaint

Upon receipt of complaint, seller shall be obliged to issue to the consumer a written confirmation or to confirm the receipt of complaint electronically and to notify the consumer of the registration number of such complaint in the records of complaints.

Seller shall immediately and no later than eight days after the receipt of complaint reply to the seller in writing or electronically as regards the received complaint.

Seller’s response to consumer’s complaint needs to contain a decision whether the complaint was accepted, statement on consumer’s request, particular proposal and deadline for resolution of complaint. The deadline may not exceed 15 days i.e. 30 days for technical appliances and furniture, from the day of complaint submission.

Request for elimination of nonconformity

If the delivered goods are not in conformity with the agreement, consumer shall have the right to request from the seller to eliminate the nonconformity without compensation, by repair or replacement. The right of choice is upon the consumer since he is to choose whether the goods would be replaced or sent to official service for repairing.

If the nonconformity cannot thus be eliminated, consumer shall be entitled to request appropriate discount or termination of agreement and refund. Therefore, consumer cannot immediately opt for termination of agreement and refund if nonconformity can be eliminated by replacement of repair.

Exceptionally, consumer may immediately opt between replacement, appropriate discount or termination of agreement:

• If the same or another nonconformity occurs after the first repair; or
• If nonconformity appears within six months after the day of transfer of risk to the consumer.

Legal remedies

In case of infringement of rights in the process of complaint resolution, consumer may institute consumer dispute against seller before a relevant court. This is a dispute subject to the rules from a special chapter in the law on civil procedure and which is not subject to court fees for complaint if the value of matter in dispute does not exceed RSD 500,000.00.

There is a possibility for extrajudicial resolution of consumer disputes through special bodies established in line with LCP 2014.

Consumers may also address market inspection that is authorised for submitting requests for institution of misdemeanour procedures for misdemeanours under LCP 2014. The prescribed fines vary from RSD 300,000 to RSD 2,000,000.00 (legal entity), from RSD 50,000.00 to RSD 150,000.00 (responsible person in the legal entity) and from RSD 500,000.00 (entrepreneur).

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

According to the newly adopted package of COVID-19 economic measures, financial aid will be provided to Serbian companies registered between 15 March 2020 and 20 July 2020, which were not able to apply for fiscal benefits from April this year. The measure is introduced by Conclusion of Serbian government 05 No. 401-6052/2020 (“Conclusion”). These companies may receive direct aid in one tranche in September, in the amount of 120% of the minimum wage for March (approx. EUR 300) for each employee. These funds can be used until 31 October 2020, and only for the purpose of employees’ salaries.

Direct Aid and Tax Reliefs

In addition to direct aid, another benefit is that the payment of social security contributions and salary tax for salaries paid in August may be deferred to 5 January 2021. In order to apply for both of these benefits, these companies need to fill in the relevant boxes in the tax return for withholding taxes for salaries for August (Form PPP-PD) and submit it by 15 September the latest.

Same benefits under the same conditions are available to companies that were founded before 15 March 2020, and which, although eligible, did not use the benefits provided by the Regulation from April this year.

The companies that already used the benefits under the Regulation received direct aid in August and they will receive final instalment in September in the amount of 60% of the direct aid, which was paid to them in July 2020.

Companies that reduced the number of employees by more than 10% in three months after the receipt of the last payment of direct aid, lose the right to financial aid and will be obliged to return received funds with interest.

Benefits to Hotel Industry

On 21 August 2020, the Ministry of Finance announced that hotels, which are among businesses that suffered the most during the recent months, will receive a one-off direct aid of EUR 350 per bed, and an additional EUR 150 per accommodation unit.

Hotels may receive this aid under condition that no more than 10 percent of their employees is laid-off by the end of the 2020.

The entire program related to the benefits to the hotel industry will be implemented through a public invitation, which is expected to be published in the following days.

By Branimir Rajsic, Senior Consultant, Karanovic & Partners

On 17 August 2020, the National Bank of Serbia (“NBS”) adopted the Decision on temporary measures for banks to facilitate access to financing for natural persons (“Decision”), which was published in the Official Gazette of RS no. 108 on 20 August 2020 and which will enter into force on 28 August 2020.

The Decision provides conditions for easier access to financing for citizens and establishes temporary measures and activities that banks may implement to that end.

The Decision prescribes three sets of temporary measures that should facilitate access to housing loans for citizens, thus supporting real sector i.e. construction industry through faster turnover of assets, while providing the possibility of extension of housing loan repayment periods for maximum five years and temporary relaxation of the approval procedure for household short-term loans up to a certain amount.

The Decision aims to stimulate future economic growth and prevent potential negative effects of the COVID-19 pandemic on citizens and businesses, while maintaining financial stability.

Facilitated access to housing loans

The first NBS measure relates to the approval of housing loans to citizens for newly constructed apartments and at more favourable terms.

Namely, the newly adopted preferential treatment envisages that, in addition to fully completed apartments, housing loans may also be approved for:

• Residential real estate, which are part of buildings in construction, in case of project financed by the bank;
• Buildings in construction, regardless of the degree of completion, with the Building Directorate of Serbia as the holder of the construction permit or in case they are part of the measures of government support to specific categories of natural persons;
• Buildings in construction with minimum 60% degree of completion in case of project financing by another bank or project of a legal entity investor.

Up to the adoption of the said NBS measures, banks could approve housing loans for the purchase of minimum 80% completed buildings. Therefore, the new measures encourages banks to approve housing loans without having to wait for the residential buildings to be completed in full or for its major part.

We would also recall that by the amendments to the Decision on measures for preserving and strengthening the financial system stability adopted in June 2020, the NBS enabled the reducing of mandatory participation in housing loan from 20% to 10%, in case of first home buyers.

Extension of maturity for already taken loans

The second set of NBS measures refers to extension of repayment deadlines for already approved loans.

Namely, claims against borrowers – beneficiaries of housing loans, who had not been late in loan repayment for more than 90 days until the moment of entry into force of the Decision and who had not been restructured or problematic – shall not be considered as restructured or problematic claim or problematic loan in terms of NBS regulations, if the loan was extended by five years at most from the day of maturity of final instalment of such loan.

During this and the next year, banks may offer facilities to borrowers who had taken out a loan before the decision entered into force by extending the repayment deadline for housing loans by five years at most, without any change, i.e. deterioration of status regarding assessment of the regularity of the borrower’s loan repayment

Facilitated access to short-term dinar loans up to a certain amount

Banks may grant a loan of up to RSD 90,000 to a natural person who does not receive his/her wage or pension via an account with that bank, with the maturity of up to two years, and they may accept, as relevant evidence of employment and wage or pension of the borrower in the past three months, the signed statement on such facts issued by such borrower under full criminal and material liability.

Banks will be able to apply the adopted set of measures until the end of 2021.

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 Milan Petrovic, Managing Partner, and Natalija Dukic, Associate, PR Legal

Reducing greenhouse gas emissions (GHG) from the energy sector is critical to mitigating climate change. Studies have shown that the electricity sector will play a key role in this mission, primarily through decarbonizing electricity production, which is heavily dependent on the massive deployment of renewable energy.

Serbia has pledged to decrease GHG by 9.8% by 2030 compared to 1990 levels.

Although deficiencies in data quality and data availability for the GHG inventory (as published by the Energy Community Secretariat) make that data difficult to properly verify and assess, it is clear that the heavy dependency on coal in electricity generation represents one of the main obstacles for Serbia to reach its targets.

Up to 60% of all electricity generation capacities are large-scale thermal power plants. The share of electricity originating from coal in the total mix is even higher – in the last couple of years usually amounting to between 70% and 75%, depending on hydrology.

The historical reliance on coal and deeply rooted (and at the same time deeply wrong) perception that electricity produced from coal is much cheaper than electricity produced from renewable energy sources encourages opposition to closing even the dirtiest plants in the country.

It is clear that this situation cannot last forever. Serbia recognizes the need to make a transition to a more sustainable energy sector and plans to completely phase out the seven oldest and least efficient thermal power blocks by 2024. These blocks annually generate in average 6,000 GWh. This shortfall will need to be covered, ideally from new installed capacities in Serbia rather than from import.

Although Serbia is not yet ready to completely part ways with coal, it has set the deployment of renewables as one of its top priorities.

The previous period was pretty successful for renewables. The incentives package (based on the feed-in tariff) that was finalized in 2016 and improved in 2017 came as the result of strong efforts to create a consistent, comprehensive, and bankable framework for supporting renewable energy. The package managed to achieve the joint goal of investors, lenders, and the Government – a comfortable environment for the growth of renewables projects in Serbia.

The feed-in tariff incentives package expired at the end of 2019. As a result, new projects cannot count on incentives at the moment.

Although Serbia should continue its efforts to reform the sector and make renewables projects sustainable on market terms, at the moment it remains necessary for the Government to make a new incentives package for support to renewables available. Serbia has requested the assistance of the EBRD with the preparation and implementation of a new incentives package based on competitive renewables auctions.

Previous endeavors have shown that the critical factor for the realization of (large-scale) projects is an incentives package that meets bankability criteria. Thus, the new package would need to provide for an adequate allocation of risks among the parties to ensure that the party most able to bear the risk actually does so. Ensuring that the support entity is of adequate creditworthiness, that reasonable deadlines are in place for the finalization of projects, that protection exists in the case of force majeure, and that reliable dispute resolution mechanisms are put in place are critical if we want to see new blades spinning. The creditworthiness of the support entity will draw even more attention than before, considering that the recent experience with (arguably ungrounded) invocations of force majeure provisions under feed-tariff PPAs sent a strong signal that Elektroprivreda Srbije (the current off-taker of green electricity) has serious liquidity issues.

One thing is certain – the new package will envisage a competitive process for awarding incentives, rather than the first-come-first-serve system that Serbia has historically employed. A competitive process would promote cost-efficient development of wind projects by achieving competition among reputable developers, resulting in lower financial burdens for consumers. A competitive process would also provide greater transparency and equal chances for projects.

By the time this article is published, work on the preparation of the new package should have already begun. Despite the general elections scheduled for June, it will be important to maintain the momentum and intensify efforts to have the new package ready by the end of 2020, so that Serbia can organize the first auctions as early as mid-2021. And, in doing so, make a bold step towards transitioning to sustainable energy.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Petar Mitrovic, Partner and independent Attorney at Law in cooperation with Karanovic & Partners

This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Reducing greenhouse gas emissions (GHG) from the energy sector is critical to mitigating climate change. Studies have shown that the electricity sector will play a key role in this mission, primarily through decarbonizing electricity production, which is heavily dependent on the massive deployment of renewable energy.

Serbia has pledged to decrease GHG by 9.8% by 2030 compared to 1990 levels.

Although deficiencies in data quality and data availability for the GHG inventory (as published by the Energy Community Secretariat) make that data difficult to properly verify and assess, it is clear that the heavy dependency on coal in electricity generation represents one of the main obstacles for Serbia to reach its targets.

Up to 60% of all electricity generation capacities are large-scale thermal power plants. The share of electricity originating from coal in the total mix is even higher – in the last couple of years usually amounting to between 70% and 75%, depending on hydrology.

The historical reliance on coal and deeply rooted (and at the same time deeply wrong) perception that electricity produced from coal is much cheaper than electricity produced from renewable energy sources encourages opposition to closing even the dirtiest plants in the country.

It is clear that this situation cannot last forever. Serbia recognizes the need to make a transition to a more sustainable energy sector and plans to completely phase out the seven oldest and least efficient thermal power blocks by 2024. These blocks annually generate in average 6,000 GWh. This shortfall will need to be covered, ideally from new installed capacities in Serbia rather than from import.

Although Serbia is not yet ready to completely part ways with coal, it has set the deployment of renewables as one of its top priorities.

The previous period was pretty successful for renewables. The incentives package (based on the feed-in tariff) that was finalized in 2016 and improved in 2017 came as the result of strong efforts to create a consistent, comprehensive, and bankable framework for supporting renewable energy. The package managed to achieve the joint goal of investors, lenders, and the Government – a comfortable environment for the growth of renewables projects in Serbia.

The feed-in tariff incentives package expired at the end of 2019. As a result, new projects cannot count on incentives at the moment.

Although Serbia should continue its efforts to reform the sector and make renewables projects sustainable on market terms, at the moment it remains necessary for the Government to make a new incentives package for support to renewables available. Serbia has requested the assistance of the EBRD with the preparation and implementation of a new incentives package based on competitive renewables auctions.

Previous endeavors have shown that the critical factor for the realization of (large-scale) projects is an incentives package that meets bankability criteria. Thus, the new package would need to provide for an adequate allocation of risks among the parties to ensure that the party most able to bear the risk actually does so. Ensuring that the support entity is of adequate creditworthiness, that reasonable deadlines are in place for the finalization of projects, that protection exists in the case of force majeure, and that reliable dispute resolution mechanisms are put in place are critical if we want to see new blades spinning. The creditworthiness of the support entity will draw even more attention than before, considering that the recent experience with (arguably ungrounded) invocations of force majeure provisions under feed-tariff PPAs sent a strong signal that Elektroprivreda Srbije (the current off-taker of green electricity) has serious liquidity issues.

One thing is certain – the new package will envisage a competitive process for awarding incentives, rather than the first-come-first-serve system that Serbia has historically employed. A competitive process would promote cost-efficient development of wind projects by achieving competition among reputable developers, resulting in lower financial burdens for consumers. A competitive process would also provide greater transparency and equal chances for projects.

By the time this article is published, work on the preparation of the new package should have already begun. Despite the general elections scheduled for June, it will be important to maintain the momentum and intensify efforts to have the new package ready by the end of 2020, so that Serbia can organize the first auctions as early as mid-2021. And, in doing so, make a bold step towards transitioning to sustainable energy.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Petar Mitrovic, Partner and independent Attorney at Law in cooperation with Karanovic & Partners

This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.