Category: Deal 5

On August 8, 2016, CEELM reported that Sorainen had represented the Bauskas Dzive newspaper in a dispute with the Iecava Regional Council in Latvia on a pro bono basis. We asked Anita Rozentale, the CEO and Chief Editor of Bauskas Dzive, to eleborate on the procedings. 

CEELM: Can you explain a bit about the dispute? What were the articles and advertisements published by the Iecava Municipality Council in Iecava Zinas that the dispute was based on?

A.R.: This is a fundamental issue for a democratic state – a free and independent media that competes under fair conditions of competition. Under Latvian law municipalities in certain situations have an obligation to distribute public relations information about their work and decisions that have been adopted. To some extent the law also addresses the channels that municipality may use to distribute this information. For this purpose a municipality may issue its own newsletter or publication. However, the law does not allow municipalities to engage in commercial activities by competing with independent private media. For many years a number of local municipalities (in some biggest cities and regional centers) have been engaging in this unfair commercial activity and have been pretending to be independent newspapers by publishing 1) journalist-genre articles and information (as opposed to pure public relations information); and 2) publishing and selling advertisements and announcements for considerably discounted prices. The prices are below market prices due to subsidies by the municipality that come from the municipality’s budget. These municipality newspapers are directly subordinated to the head of the municipality who is a politically elected official representing political parties, and the editor-in-chief is appointed by the municipality or, in many instances, may even be an official of the municipality. Most of these newspapers employ municipality paid PR experts instead of journalists. These municipality newspapers have not only become tools of propaganda of the governing political power, but are also seriously distorting the independent regional media market in Latvia, causing unfair competition and disrupting the economic basis of the independent regional media struggling to survive. Moreover, this practice distorts the understanding of the role of an independent media in a democratic society and it contradicts the principle of freedom of press. As a result, one of the four powers, an independent media in a democratic society, is losing its role in supervising the government. 

Under this background, in protecting the principles of a democratic society and media independence, the newspaper Bauskas Dzive (BDz) decided to fight with the Iecava Regional Council (the “Council”) over its publishing of journalistic articles and advertising in the municipal newspaper Iecavas Ziņas – a practice that endangers freedom of the press in Latvia and violates a number of laws and the Latvian Constitution. BDz – with the help of the Latvian Association of Journalists – engaged Sorainen, a leading regional law firm, to help in this fight. Given the greater good and importance of the case for the democracy in Latvia, Sorainen agreed to represent BDz pro bono. BDz has filed a claim with the administrative court and has asked the Council to stop publishing these items in the municipal newspaper, and claimed damages for a certain period of time. The claim in detail provides examples of journalist-genre publications that have nothing to do with the municipality’s activities. It also analyses market prices of the advertisements and announcements in similar publications. The Council has so far avoided responding to BDz’s basic request. However, the Administrative District Court has imposed an obligation on the Council to respond to BDz’s application by August 15, 2016.

CEELM: Is this the first such dispute between Bauskas Dzive and the Council?

A.R.: This is the first time the matter has been brought to court. Iecavas Zinas has been published since 2009, but BDz has applied numerous times to the Ministry of Regional Development and other high state officials. Journalists and their professional organizations have been drawing the government’s attention to this issue without any notable success. BDz even applied to the President of Latvia. After these unsuccessful attempts we decided to turn to the court. On February 2016 we sent a letter to the Iecava municipality asking it to stop this illegal practice. The municipality did not reply for four months. BDz was forced to file a lawsuit in Administrative District Court. This matter is difficult for the management of the BDz emotionally and professionally. The Iecava municipality is creating various obstacles for our journalists, for example, denying access to information. This is our first experience doing this, and it is a tough one.

CEELM: The Administrative District Court obliged the Council to respond to BDz’s application by Monday, August 15th. Have they done so?

A.R.: Yes, they have responded. At this moment our lawyers are analyzing the reply of the municipality and we are waiting for them to come up with recommendations.

CEELM: What did the municipality say? What’s your next step?

A.R.: The Iecava municipality does not admit the wrongdoing and illegal practices and has refused to cease the illegal activity (excess of powers). Our Sorainen lawyers are preparing next steps and the actions to be taken. Since the reply of municipality fails to comply with the court’s order fully, it gives us further ground to file additional submissions with the court and continue this dispute. We are determined to fight this fight till the end. 

CEELM: Why did you reach out to Sorainen in particular for assistance in this matter?

A.R.: This case is about fundamental values relating to fair competition and freedom of the press in Latvia. We also hope that our case will inspire other independent regional media to fight as well to ensure their existence and to promote the sustainability and professionalism of regional independent media. Nevertheless, without top legal support this struggle is impossible. The Association of Latvian Journalists, in which I am a member, made an agreement with Sorainen, and their attorneys prepared the case for the court and are representing us in the proceedings. Sorainen provides its legal assistance pro bono, which is crucial for us, since regional press in Latvia cannot afford such legal expenses. According to Sorainen they agree to work in this case pro bono because, like us, they care for democracy and values that are key in a democratic society, and they believe that democracy cannot last without freedom of press and an independent, professional regional media.

On August 8, 2016, CEE Legal Matters reported that ODI had advised Elektroservisi — which builds, reconstructs, and services electrical power systems and facilities and is closely connected to Elektro Ljubljana — on a EUR 12 million out-of-court restructuring with BAMC/DUTB and Banka Sparkassa. We reached out to Klemen Bostjancic, the Director of BRIO svetovalni center, the financial advisor to Elektroservisi on the matter, for more information.

K.B.: The loans originated from 2008 to 2010. The funds were mostly used for a real estate project — the construction of a larger residential and business complex in Kranj.  To a lesser extent the funds were used for working capital.

K.B.: The maturity of debt was prolonged allowing Elektroservisi to sell the real estate and repay the majority of debt with the purchase price. Additionally, new bank guaranties have been granted to Elektroservisi, which enables it to carry on with its core business.

K.B.: The change refers to the change of internal negotiators on the side of creditors and especially to the structural changes. Several mergers of creditors occured during talks regarding the financial restructuring. The impact of these changes was mainly negative, primarily due to the prolongation of the restructuring process. The new participants required additional time to review the documentation, and in one case the cooperation of one of the creditors materially altered after the change of internal negotiators. From the beginning till the end of the process the architecture of the restructuring changed substantially as a result of these changes.

K.B.: ODI has acted as a legal counsel in several successful restructuring cases in Slovenia and it is well known for its expertise in corporate restructuring as well as in the banking area.  We wanted to engage someone with experience, who would be proactive in the process.

K.B.: Elektroservisi did not engage a law firm for the original loans.

On July 21, 2016 CEELM reported that Fort had represented credit bureau UAB Creditinfo in a case before the Supreme Administrative Court involving the legality of using data published on Facebook to assess the creditworthiness of those who publish it. Creditinfo — which doesn’t have an in-house legal team — was advised by lawyer Anatolijus Kisielis, who we reached out to for comment.

A.K.: Supreme Administrative Court of Lithuania ruled that users‘ data on social networks could be used for assessing their creditworthiness. That means that if a lender has a scoring system, he is available to ask a borrower to submit social network‘s data for social credit score calculations. Examples of similar models from Western countries show that social data is important source of information about person‘s characteristics. For instance, if social data suggests that a person is impulsive, indiscreet, ignores public norms or has addictions, you probably will treat that person differently compared with person with positive characteristics.

A.K.: Court ruling do not specify data. It states that there is no end list of personal data in Personal Data Protection Act that could be used for assessing credit risk. In addition, such data as client‘s profile information, activities, pages a person follows, visited places, correct grammar and other information could be used for creditworthiness evaluation.

A.K.: Credit bureau Creditinfo developed social credit score in 2014. This score is a numerical expression (from 300 to 800) based on analysis of user presence at social network, to represent a creditworthiness of a consumer. Creditinfo then made an application for State Data Protection Inspectorate to be registered as Facebook data processor. However, due to lack of legal practice Inspectorate rejected Creditinfo application. One of the main Inspectorate arguments was that: a) that social network data cannot be used for creditworthiness assessment because of different data procesing purposes; b) there is an end list of personal data in Personal Data Protection Act that could be used for assessing credit risk.

A.K.: Prof. Dr. Mindaugas Kiškis is recognized in legal community as a highly qualified expert in personal data with a large practical experience. Creditinfo and Mr. Kiškis’ close cooperation already lasts several years.

A.K.: Court ruling was based on Lithuanian, EU legal practice and logic.

On August 15, 2016, CEE Legal Matters reported that the Esin Attorney Partnership had advised Burgan Bank on a syndicated loan.

Burgan Bank Head of Consultancy & Corporate Governance Unit, Nesteren Caliskan, worked closely on the deal and agreed to answer our questions.

N.C.: This is the second syndicated loan obtained for general trade finance purposes as well.

N.C.: Although we prefer 367 days, some of the participant banks define one year as 364 days and are constrained, tenor-wise, by their Credit Committee approvals. In order to enable these kind of banks to participate in the syndicated loan deal we offered 364 and 367-day tranche options.

N.C.: There was no negative reaction or any withdrawal of commitments from the investors’ side, which we really appreciate this approach, and see this as a trust to our organization and the country.

N.C.: As in-house legal department, we have a motivation to establish a close relationship with all relevant parties, such as business units, our vendors, and our external lawyers. It is very precious to combine different experiences and know-how, that’s how we build up most of the major projects. And the answer is yes, as in-house legal department we and our bank’s FI team worked closely with Esin and tried to be involved in most of the negotiations.

N.C.: Their business-wise perspective is one of the main reasons for choosing Esin. And they always respond to you very timely which is very important considering the dynamic business environment.

On July 21, 2016, CEE Legal Matters reported that the Science Technology Park Belgrade (STB Belgrade) had been established in Serbia. We reached out to Jelena Stojanovic, Head of Legal at STB Belgrade, for an insider’s view on the Park and her role.

CEELM:

J.S.: Science Technology Park Belgrade Ltd was founded in partnership with the Government of the Republic of Serbia (on behalf of the Government and the Ministry of Education, Science and Technology Development), the City of Belgrade, and the University of Belgrade. The Government of the Republic of Serbia is the majority shareholder with 60% of the shares, while the City of Belgrade and the University of Belgrade each hold 20% of shares. Based on the Company Law of the Republic of Serbia (RoS), STP Belgrade has been established as limited liability company, which is a company in which founding members have their shares in the share capital and the liability of members of the company is limited to what they have invested or guaranteed to the company. STP Belgrade has a one-tier management with the Assembly and Director. The STP Belgrade Assembly consists of the appointed representatives of the founders. In the area of internal and external trade, STP Belgrade is represented by the Director independently and without limitations in accordance with the Founding Act and Decisions of the STP Belgrade Assembly. 

The legal team consists of in-house lawyers/legal associates covering company law, labor law, contract law, and public procurement, as well as external associates covering the intellectual property law and regulations related to the company’s establishment. The legal team is responsible to and reports to the Director of STP Belgrade.

J.S.: Based on the Innovation Law of the RoS, Science Technology Park offers infrastructure and business support services to all STP members. Taking into consideration that the mutual rights and obligations of the member and STP are regulated through an agreement, STP Belgrade needed legal assistance in developing these rights and obligations based on the best international practice. Therefore, we chose the Gecic Law Office based on their experience and reputation in setting up similar institutions. In addition, since STP Belgrade is the first science technology park in Serbia [designed] to connect businesses and science in developing new technologies and commercializing innovation, we needed an innovative approach in establishing the institution and developing the relationship with STP members. The Gecic Law Office was very open in establishing new legal practices in cooperation with our legal team and developed a set of documents, including an agreement on the provision of infrastructure and professional services, specific conditions, a list of infrastructure and business support services, a pricelist, evaluation criteria, house rules, etc. We are extremely satisfied with our cooperation with the Gecic Law Office.

J.S.: STP Belgrade was appointed to overtake the management of the Science Technology Park from the temporary management of the Project Implementation Unit that was in charge for the construction of the complex of buildings, based on Government Conclusion 05, no. 022-3124/2015, from March 26, 2015. In that process questions of legal regulation of the company and obligations that STP Belgrade had to undertake based on the law appeared and in that respect STP Belgrade needed legal support from the Gecic Law Office. 

J.S.: I started to work at STP Belgrade few months after the legal establishment of the company, and what motivated me most to join the STP Belgrade team is the fact that this is the first science technology park in Serbia developing a set of services based on the best practice examples. In addition, the innovation and high tech development sectors in Serbia are not regulated extensively, which I see as the opportunity to set up new legal practices by working in this kind of institution.  I have extensive experience in law office  and commercial law,  and I believe that this position will provide me with additional knowledge and experience particularly in the field of international cooperation with other science technology parks around the world.

J.S.: We are constantly working on improving the mutual rights and obligations between STP Belgrade and members, as well as on providing legal support to members in all areas related to their business development. At STP Belgrade there are 30 companies with around 300 employees, each with specific needs and problems in their business development. Our goal is to support them and enable them to focus on innovation development and job creation. The legal team will be dedicated to developing the legal services that our members need most.   

Image Source: piu.rs

On July 18, 2016, CEELM reported that JSK advised Ashok Leyland UEA on the ownership transfer of truck manufacturer Ashok Leyland Motors to the Czechoslovak Group.

We reached out to Abhijit Mukhopadhyay, the President (Legal) & General Counsel (Europe) at Hinduja Group, London, to find out more about this CEE-South Asian transaction.

A.M.: Transfer of shares happened because of strategic reasons. The Board of Ashok Leyland recently reviewed their global operations and took this decision purely for business and commercial reasons.

A.M.: The main challenges related to distance. While Ashok Leyland was in India, the transaction was in the Czech Republic and co-ordination was done from London. Apart from time differences, even language was a problem. Cultural differences and ways of working sometimes created delays.

A.M. Before joining Hinduja Group (the owner of Ashok Leyland), in India, I was a director, global GC and company secretary of several large multinational companies where I was involved in many JVs, M&As, and strategic alliances with global companies. So, I am used to facing challenges! The main reason for delay in this project was because most of the time we had to operate through our lawyers to interact with the other side’s lawyers and there was not much interaction between the buyer and seller at different level. This slowed down the sale process.

A.M.: Although shares were transferred, there would be a business relationship between the parties irrespective of ownership transfer.

A.M.: Ashok Leyland has global operations with manufacturing facilities in many countries. So it won’t have an impact. 

A.M. As GC, I was involved completely when Ashok Leyland acquired AALM a decade back. Over the years I advised AALM (and also Ashok Leyland) on AALM legal issues. I am the legal advisor of Ashok Leyland’s holding company in London where there were discussions on the performance of AALM. So since its acquisition, I have been constantly involved in AALM’s matters.

A.M.: JSK was involved with our Czech company for a long time. That is why we retained them. We found them competent, knowledgeable on local laws, and cost effective, with magnificent response times. Overall, we were very happy with their performance, which continued almost for one and a half years. 

On June 30, 2016, CEE Legal Matters reported that Selih & partnerji had advised German company C3 on its acquisition of a majority stake in PM, Slovenia’s largest content marketing agency, making C3 the biggest content marketing agency in Europe.

Christian Brugger, Executive Director of Corporate Development at C3, kindly agreed to answer our questions:

C.B.: We’ve known PM’s managing directors Igor Savic and Primoz Inkret for a couple of years before the deal and were always very impressed with the outstanding work they provide for their clients. We also understood quite early in these regular interactions that we share a common strategic perspective on the marketing market and its future development. During that period we also worked together with PM on various client opportunities and projects. Hence this transaction was the vehicle to strengthen the ties between us. Within the C3 agency network PM will now be the part driving further growth in the attractive Slovenian market as well as further expansion of the business into the Western Balkans region. 

C.B.: As indicated in the previous question the process of our discussions was very smooth as the transition between high-level strategic thoughts on joining forces, joint project work for individual clients, and actual drafting of the appropriate deal structure and terms was a gradual process. We were under no specific time pressure and rather wanted to make sure we get the right structure and terms in place to reflect the partnership approach for our joint undertaking. We spent roughly 4 weeks on the actual due diligence and continued fine-tuning the structural elements in parallel.

C.B.: We have recently opened a C3 office in Prague to serve our key client Skoda, among others, directly from this local subsidiary. Our Prague and Ljubljana teams will now jointly drive business in the CEE region developing further client relationships and project opportunities. Further inorganic activities would then be considered opportunistically as they arise.

C.B.: We worked very closely with the Selih & partnerji team on fine-tuning the transaction structure and terms to make them fit our strategic intention for this deal. Our in-house team mainly focused on the commercial elements of the transaction and the Selih team was responsible for advising us both on the due diligence as well as on the SPA drafting and negotiations, providing the required legal expertise in specific matters as well as for local particularities.  

C.B.: PM is a strategically well-positioned and well-functioning agency, hence we will mostly rely on the existing structure. We would rely on external counsel support only if deemed necessary for specific legal matters. 

On June 30, 2016, CEE Legal Matters reported that Noerr had advised Target Global on a multi-million dollar investment in ZnanyLekarz sp. z o.o. (which does business as “DocPlanner”). 

DocPlanner Chief Financial Officer Peter Bialo agreed to answer Five Questions about the deal.

P.B.: Thank you. Aside from Target Global, one of our investors from the previous round, EBRD (via its Venture Capital Investment Programme), and ENERN Investments joined the syndicate for this latest round. We have now raised USD 34 million in four rounds in total, making us one of the biggest, if not the biggest, Polish-based recipients of venture capital funding in history.

P.B.: The deal was very similar to the previous one, only the amount was significantly greater. The use of the proceeds, however, is quite different, since we have used most of the investment to make a large acquisition of Doctoralia, a Spain-based competitor. This was a transformational deal that will give us access to numerous Latin American markets where Doctoralia was the clear traffic leader.

P.B.: Our strong track record of growth since commencing operations in 2012 was probably the most compelling factor. This stems from a number of sub-factors such as a focus on product development, an experienced and diverse management team, and strong execution (especially in sales). Secondly, the huge market opportunity which is the still undisrupted healthcare space was also super attractive for Target. Finally, Docplanner is now one of the world’s largest players in the online healthcare booking sector and is uniquely positioned to consolidate the market further.

P.B.: There were a few sticky negotiation points in the documents this time around, which is always the case, but Target’s pragmatic approach helped us get the deal across the finish line quite swiflty. This affirmed our previous belief that selecting the right investor with a consistent long-term strategic vision as management, good business understanding, and supportive character is a crucial decision that shouldn’t be taken for granted.  

P.B.: As I mentioned earlier, a bulk of the money has gone to acquiring Doctoralia, with the remainder to be spent on bolstering positions in key markets (Poland, Turkey, and Italy) and commercializing the main Doctoralia countries. Furthermore, we will continue to invest in developing the product in order to provide doctors with a more comprehensive practice management tool.