CEE Legal Matters

Category: In-house

  • Inside Insight: Anita Pejic Ilisevic Head of Legal for Croatia and Bosnia and Herzegovina and Compliance Representative Adria Region at Henkel

    Based in Zagreb, Anita Pejic Ilisevic is the Head of Legal for Croatia and Bosnia and Herzegovina for Henkel, where, in May 2016, she was also appointed the Compliance Representative Adria Region. Prior to Henkel, Ilisevic was a Corporate Lawyer with Tisak.

    CEELM:

    Tell us a bit about your background.

    A.P.I.: Although I started my career as a legal trainee in a law office – which gave me firsthand experience of law and litigation in practice – after the bar exam I decided to join the corporate world to gain the full perspective of a corporate lawyer’s career. As a corporate lawyer in Tisak, Croatia’s largest news-stand chain and distributor of print products, I experienced the breadth of different legal topics and challenges specific for corporations which a lawyer in a law office can rarely come across. There I had the opportunity to actively participate in all of Tisak’s projects related to the company’s service portfolio diversification, from retail to financial services. Working with amazing professionals and experts in their fields during a time of transition between business models helped me as a lawyer to learn a lot about the business itself and how to become a truly business-oriented legal counselor. This experience definitely determined my future professional development and steered me permanently to the world of corporations and corporate law.  

    CEELM:

    You’ve spent the better part of your career in the retail/consumer goods area. Why is that?   

    A.P.I.: Retail and FMCG are areas in which every day is different and brings new challenges. I can hardly remember having two days with the same topics. The market is constantly bringing up new challenges and setting the pace, forcing retailers to respond promptly if they want to survive and thrive. Being a legal counselor in this industry is often a challenge, especially while trying to maintain a balance between legal and regulatory requirements and business needs and demands.   

    CEELM:

    Since you took on the role of Compliance Representative within the company as well, in what ways do you find the two roles (of legal and compliance) complement each other? 

    A.P.I.: Before taking the role of Compliance Representative I was (and still am) Head of Legal for Croatia and Bosnia. My prior experience as a legal counselor and corporate lawyer is definitely good grounds for a compliance role because, in certain situations, the two of them are inescapably intertwined. Compliance implies assuring the company (employees) complies with external rules and regulations and internal company regulations (standards). Thus it would be almost impossible to excel in your compliance duties without intimate knowledge of the legal framework.  

    CEELM:

    Speaking of the two functions, are they under the same umbrella in your organization, or are they separate? 

    A.P.I.: At Henkel, Compliance and Legal are two separate organizational units. In my opinion the benefit of this organizational set up is a clear separation of functions and tasks of each role.   

    CEELM:

    What would you identify as the leading challenge faced by General Counsels in your jurisdiction?

    and to an extent, still is) a substantial change of legislation in certain areas after entering the EU, a consequence of which is certain inconsistencies in practice. An unavoidable issue in Croatia is debt collection, bankruptcy, and the insolvency of a growing number of companies forcing creditors to write off receivables. Finally, I must stress the importance of inefficient legal protections in cases of unfair competition.

    By contrast, Bosnia and Herzegovina is not an EU member and is, as a country, very complicated from within because of its political set-up. You have three jurisdictions with an additional division on cantonal levels, making Bosnia and Herzegovina one of the more complex legal systems in CEE. Taking into consideration that the same subject can be regulated completely differently in each of the three entities, I would say that the biggest challenge is respecting all laws and bylaws and also identifying the governing body on a canton or entity level. But, as in the case in Croatia, a huge challenge lies in trying to find efficient legal measures to protect the business against unfair competition.  

    CEELM:

    How, if at all, would you say your work as a Head of Legal in your country differs from colleagues in other countries?  

    A.P.I.: I would say that we all have certain common points, especially within EU countries, in which legislation is pretty much aligned. Of course there are always local specifics and this is where differences in our tasks and challenges are manifested. These are areas which give us the opportunity to observe our local situation from a different perspective, compare local with foreign legislation, and look for options in applying solutions from other countries in our jurisdiction.

    CEELM:

    Of all the items in your office, which one are you fondest of?  

    A.P.I.: That would be a picture of Rovinj, my hometown. It is a small and beautiful town on the Croatian coast, where I can always go and unwind and charge my batteries. The second thing is a souvenir from last year’s San Francisco Giants baseball game – that summer in San Francisco was the best holiday I had with my husband and also my first baseball game (by the way, the Giants won!). It not only reminds me of a great new experience, but it was also the day that my now goddaughter was born – also a thing to remember and celebrate.

    This Article was originally published in Issue 3.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Inside Insight: Dino Aganovic Head of Legal and Compliance at HETA Sarajevo

    Dino Aganovic is the Head of Legal and Compliance at HETA d.o.o. in Sarajevo (former Hypo Alpe-Adria-Leasing). During the Hypo days, he represented the bank in the General Assembly of Chamber of Commerce FBiH between August 2014 and January 2015 and as its Director of the Legal Team earlier. He still is a Member of a Supervisory Board of Hypo’s Fund Management Company. Before joining Hypo, Aganovic was the Head of Legal and HRM at Intermerkur Nova d.o.o. Sarajevo and Mersteel d.o.o. Sarajevo (Merkur).

    CEELM:

    Please tell our readers a few words about your career leading up to your current role. 

    D.A.: I have to start with a joke: one enlists to a law school as it is the only mathematics-free school. However, my motives lie in the old black and white movies about court trials, prosecutors vs. defense attorneys, witness preparation, and most importantly evidence popping out in the last minute. It makes you fall in love with the idea of the law profession.

    The very same day I passed my last exam and was preparing a party, one of my friends got an interview for an internship program. She was also asked whether she knew someone else without experience who would be a candidate for the internship program. 

    As I had invited her to my party that very day, I was obviously the first name that popped into her mind. And so I got my first job in a group with a versatile portfolio of work. There I was dedicated mainly to supporting the sales function of Merkur, where I acted as a labor lawyer. This was my first direct experience with labour disputes on the defendant’s side, which made me learn the tips and tricks of the trade.

    After nearly a year with my first employer I got a chance to work for a young attorney as his apprentice. Being a relatively new kid on the block, my principal was not in a position to choose the cases so we ended up working on a variety of legal topics, different in value and complexity. This really was a lot fun and a great learning curve! Almost like in those movies I mentioned earlier. 

    After spending 2 years as an apprentice, passing a bar exam in the meantime, I got a chance to become a one-man-show as the Head of Legal and HR in the Bosnian branch of the Slovenia-based sales company Merkur, which was then facing a pre-bankruptcy state. To tell you the truth this was an immense challenge and, as it turned out afterwards, a great experience for a young lawyer. As there were no resources available for external legal aid, it was left to me to lead all litigations of the company, both active and passive, to resolve property issues, negotiate and draft all the contracts, conduct statutory changes, and the most demanding task of all: to prepare and lay-off of more than 50% of the employees throughout 2 years. Tough times but a great learning experience.

    After that I moved up to Hypo Alpe-Adria-Bank d.d. Mostar. I applied for the position of a NPL collection lawyer but instead was offered the position of Director of Legal. Needless to say, I had no in-depth knowledge of the banking sector. Yet I was given an extremely challenging team to lead – one providing legal support to all departments of the bank in doing everything but loan/deposit agreements, collateral management, and NPL collection. 

    In fact, right before I joined the bank, I recall thinking that there was nothing to do as a lawyer in a bank but draft loan/deposit agreements and collect NPLs. Oh, was I surprised. I have never seen any of the aforementioned but have experienced legal matters most attorneys do not experience in a lifetime. For the first two months I almost never went home, and, soon after, I was regarded as a veteran which even led to the shortening of my probation period. 

    In the intervening two years, my team has done amazing work, even when challenged by the huge CHF F/X issue that resulted in hundreds of lawsuits. I take great pride in the fact that the only two existing second instance verdicts are in favour of Hypo and were won by my team. We have also taken a huge role in the due diligence process of selling the Hypo Banks. One of the most demanding tasks was to pioneer a large scale NLP assignment of receivables (over EUR 500 million of receivables) to a non-regulated entity (non-bank) where I acted as a legal coordinator for both the bank and soon-to-become HETA. This project was a first for Bosnia and Herzegovina.

    After this project, I was asked by HETA’s CEO to join him and build up a legal team which would be a strong support to the entire company in resolving the most complex debtors situations and finding out new models of asset resolution, resolution of property issues, and preparation of its sale. 

    And here I am now, leading a team of eleven professionals who cover the entire scope of HETA work: litigation, property issues, compliance and AML, contracting, statutory issues, and general legal issues. The fighting does not cease. I am truly living those movies I fell in love with when I was a kid.  

    CEELM:

    How is your role different now, with the winding down organization of HETA, as opposed to your Hypo days?   

    D.A.: It differs at its core – the bank was focused on new businesses, PL clients, and development of new products. HETA on the other hand is focused on resolving its long standing NPLs. 

    Not many have the privilege of working in a company that is a one-of-a-kind and entrusted with the task of providing a wind-down of a BAM 1.2 billion (EUR 600 million) portfolio of nearly a decade-long active and passive cases. For me and for my colleagues from other departments, it is unique know-how which gives us a distinct advantage on the market. We all participated in the establishment of, and are now active participants in, further development of this specific work. 

    We had to start from scratch in early 2015. It was, and still is, a pioneer in the asset resolution domain. We had to develop a structure, to map processes, and establish controlling mechanisms to enable us to become an effective cash generation company. Legal is involved in everything – either as a support or control function or participating in negotiations on asset resolution modus operandi.   

    CEELM:

    What has your main lesson been from the winding-down exercise? 

    D.A.:  The main lesson learned is that it takes a team to achieve good results, including at the company level, and that there is always room for improvement. 

    As an asset resolution company, you do not have the luxury of acting as a bank with the monopoly in distributing money to a client and being in a position to choose the collateral for loan. We deal with those who have been in the NPL segment for nearly a decade so one has to work to understand their position and use one’s imagination to come up with a win-win solution for both sides a creditor and a debtor. This work provides a great opportunity to learn the value of and excel in the skills of negotiations and out-of-court settlements.  

    CEELM:

    Since you are a member of the Chamber of Commerce FBiH, what are the recurring discussions among members that present the greatest interest to you as an in-house counsel? 

    D.A.: Unfortunately, I am no longer a member as it was a position reserved for Hypo Bank, which did me the honor of appointing me as their representative in this distinguished function. I was a participant in the founding assembly where the old structure was replaced by new and prominent businessmen, who are doing their utmost to boost the Bosnian economy and promote it abroad. There is great room for improvement in BiH and we see things moving forward. This is also something we can testify to through the prism of our work in asset resolution – investors are interested in buying commercial and industrial properties in order to launch their businesses.  

    CEELM:

    Looking at the country’s market conditions, from your GC perspective, what are the main regulatory/legislative changes you’d be most excited to see implemented?

    D.A.: So far the regulatory framework in BiH is solid. What we lack is enforcement of laws. We have a very slow and complex administration, arising not from a bad legal framework, but more from a lack of interconnection of various databases. Also, we have a very slow judicial system. In general, even simple debt collection litigations last three to five years. Speaking on behalf of HETA, it would also be more helpful if there was a lex specialis regulating our scope of work, instead of being regulated by the general Obligations Act. This has been under discussion for the past few years, but we’ve seen no concrete result as of yet.  

    CEELM:

    For anyone visiting Sarajevo for the first time, what is the must-see spot in the city that’s not featured in the tourist guides?  

    D.A.: Well, Sarajevo is a very special place and I bet there is something interesting in it for everyone, whether you want to see the marvellous mountains surrounding it, enjoy the multicultural spirit of this city which accommodates a mosque, a cathedral, an orthodox church, and a synagogue in 100 meter radius, or simply enjoy the Bosnian cuisine. But rather than space, it is the time factor which influences the beauty of experiencing a visit to Sarajevo. I would warmly recommend coming in August, when Sarajevo hosts the Film Festival and becomes the center of the world. It seems as if no one sleeps those days in a mission to attend as many events around town as possible. This is really something worth experiencing, in addition to other features of Sarajevo.

    This Article was originally published in Issue 3.2. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Deal 5: Legal Counsel Viktor Kachurenko on the Tax Dispute over Ukrainian Tax Authorities

    Deal 5: Legal Counsel Viktor Kachurenko on the Tax Dispute over Ukrainian Tax Authorities

    On August 25th, 2016, CEELM reported that Shell Exploration & Production Ukraine Investments (IV) B.V. was represented by Vasil Kisil & Partners in a dispute over the Ukrainian tax authorities’ refusal to grant over UAH 5 million as an automatic VAT refund. We reached out to Viktor Kachurenko, Legal Counsel at Shell Ukraine Exploration and Production I, LLC, for more information.

    CEELM: What was the argument made by the Ukrainian tax authorities in attempting to retain the VAT refund, and on what basis did the Superior Court of Ukraine reject its reasoning?

    V.K.: The tax authorities claimed that some general rules of the Tax Code of Ukraine re VAT automatic refund to investor–tax payer should overrule special rules in the Tax Code legalizing the specific automatic tax refund regime for product-sharing agreements. The Supreme Administrative Court of Ukraine found that the special legal rules on VAT refund in the Tax Code are prevailingly applicable to the case and override the general rules governing the VAT refund procedure. So, the tax authorities’ cassation appeal against the winning case was rejected by the SACU and our position was supported in full.

     

    CEELM: Is the case concluded now, or are further appeals possible? 

    V.K.: The case is over at the level of the Supreme Administrative Court of Ukraine.  

    CEELM: What was the most challenging part for you during the whole process of the court proceedings?

    V.K: The most challenging was to prioritize in the Judge’s opinion formed around the case, the requirement by law to apply the specific VAT automatic refund provisions of the Tax Code and the related tax provisions in the PSA. Fortunately, we succeeded in advocating this idea and the court supported our key standpoint in its decision.

    CEELM: Why did you retain Vasil Kisil and Partners to represent you in the case?

    V.K.: We cooperate with VKP during prolonged period of time and can confirm that cooperation is fruitful.   

    CEELM: How were you working with your external counsel? How did you divide the responsibilities?

    V.K: We are working out our position in the court together with the external counsel who then plays the key representation & procedural role for Shell in the litigation. 

  • Deal 5: Nadia Bigun – Director of ProZorro

    Deal 5: Nadia Bigun – Director of ProZorro

    On September 5th, 2016, CEELM reported that Axon Partners had assisted Ukraine’s state-owned ProZorro public procurement electronic system in Ukraine on its transformation into an IT company. As the in-house legal team of ProZorro was not involved in the matter, we asked Director Nadia Bigun to answer several questions about the matter.

    CEELM: Axon Partners reported that “as a result of public procurement reform, ProZorro has become subject to compulsory implementation in Ukraine.” What does that mean, and what value does the ProZorro platform add?

    N.B.: ProZorro has some specific attributes that make it a novelty in the procurement world. Firstly, everything is open. All information related to the tender process, including suppliers’ offers, can be accessed and monitored by anyone. The system is open source, and all data is structured in line with the Open Contracting Data Standard, making cross-country data comparison and analysis possible.

    Secondly, ProZorro is a “hybrid model” e-procurement system, which means the information is stored in one central database, but suppliers and contracting authorities can access the data from a number of different platforms, choosing the one that best serves their needs. Using an API, these interfaces are connected to the central database so that all the information is synchronized across all platforms.

    Finally, the key actors in the project play their own, unique role in what we call the “golden triangle of partnership.” Government actors are responsible for setting general rules and protecting information; businesses are responsible for providing services to contracting authorities and suppliers; and civil society is responsible for managing business intelligence modules and developing risk-management methodologies. This style of cooperation has significantly improved trust among all key stakeholders.  

    CEELM: Have you already launched the system? 

    N.B.: We have already launched the e-procurement system and it is obligatory for use by all public procurers in Ukraine. But it does not mean that the IT product is completely done, we still have a lot of plans how to develop its functionality further.  

    CEELM: What were the legal riddles needed to be solved in relation to transforming the public procurement system into an IT product?

    N.B.: The list of open issues is big but the main issue is connected with transferring intellectual property rights. ProZorro as IT product was partially developed with donor’s money and partially by volunteers. At the very beginning all the intellectual property rights belonged to NGO Transparency International. Then they were transferred to SoE ProZorro. The challenge was to transfer the right while the product was still under development. Second big issue is transferring of the brand rights. To promote our reform we plan to allow institutions to use the our brand in cases when they do not get commercial profit. In cases of getting the commercial profit we plan to give the right  on commercial basis. For the first group we can provide operating licence.

    CEELM: Why did you choose to work with Axon Partners?

    N.B.: We started working with Axon Partners even before this company was actually born. At first, we were looking for someone experienced in IP and IT law. We found out that there is one team of innovative lawyers, which, by the way, worked in another law firm at that time. As we were informed, besides working with IT companies and startups, the team was supporting some legal initiatives by drafting IT and IP connected laws. When we addressed these lawyers, they agreed to provide us with a due diligence of ProZorro IP rights transfer.

    Probably, they had some inner motivation because they quickly became engaged into our working processes and promptly answered all of our requests.

    Consequently, when Axon Partners was created, we decided to continue cooperation with the new company. It’s all about the people, you know.  

    CEELM: According to Axon Partners, ProZorro was “being transformed into an IT company implementing innovative projects in Ukraine.” What are those other projects?

    N.B.: Reform of sale of the illiquid bank’s property was launched this summer under the ProZorro brand. We have other projects too, and we will tell you about them soon. 

  • Deal 5: Edvinas Eimontas – The President of Lithuanian Football Federation

    Deal 5: Edvinas Eimontas – The President of Lithuanian Football Federation

    On July 15, 2016, CEELM reported that Primus represented the Lithuanian Football Federation (LFF) in an arbitration with a football club and its players involving sanctions the LFF had imposed following match-fixing-related investigations before the Court of Arbitration for Sport (CAS), based in Lausanne, Switzerland. We reached out to the President of the Lithuanian Football Federation Edvinas Eimontas to get his insight into the matter.

    CEELM: We understand the dispute began with the football club contesting sanctions related to match-fixing. To the extent you can share this information, how were these fixed matches originally identified?

    E.E.: The LFF works closely with a company called Sportradar, which analyzes betting patterns of matches played in Lithuanian top and second divisions. These betting patterns are highlighted in UEFA Betting Fraud Detection System (UEFA BFDS) reports. As regards the matches in question, the UEFA BFDS reports demonstrated beyond any doubt that the outcome of these matches was determined in advance for the purpose of making corrupt betting profits. As stated in the UEFA BFDS reports, the suspicious betting patterns observed exceed the acceptable threshold to conclude that they were manipulated for betting purposes.  

    CEELM: According to the statement released by Primus, “this CAS award shall have a big impact on the fight against match-fixing in the future.” Why is that? How will it support your efforts in this fight?

    E.E.: The fight against match–fixing is a harsh fight, because you need a full pack of evidence in order to confront the offender and try to push him away from football by imposing appropriate sanctions. All the sports bodies, including the LFF, used to get into a deep hole when they needed to prove match-fixing. However, the LFF was eager to find better solutions and effective ways to deal with it. Therefore, in 2015 it introduced a disciplinary system according to which the offender could be punished based on the presumption of match-fixing. According to this system, the LFF is required to prove the suspicion that the player could be involved in match-fixing. The UEFA BFDS reports and an analysis of particular match videos are deemed to be sufficient evidence to prove such suspicion.

    CEELM: Primus also states that, “disciplinary bodies of federations will be able to investigate potential match fixing violations while assessing experts’ conclusions based on analysis of particular match videos.” Can you give us some details as to how this analysis of videos will work in practice?

    E.E.: Video analysis is required when the match-fixing fact is established. In case of match-fixing there must always be somebody on the pitch who is involved in match-fixing. Therefore, video analysis is used in order to pick those players who are possibly involved. This function is delegated to the football-expert group, which consist of members with well-established experience in football. This group basically decides which players do not do their job properly in the field and play the game in a suspicious way.

    CEELM: What were the main reasons you turned to Primus for legal representation on this matter?

    E.E.: One of the main reasons was their experience in CAS case law. And their constant involvement and thorough understanding of sport in Lithuania, and globally, of course.  

    CEELM: Since your association does not have a legal function, did you coordinate with your counsel directly or was it the members of the disciplinary board who did so? How did your cooperation with the firm go?

    E.E.: The LFF does have a legal counsel. Basically, he coordinated the whole process and communicated with Primus and our legal partner from Switzerland, Libra Law, which worked on this case as well. The cooperation was smooth and professional.

  • Co-Founder and CEO of DataMe Marko Vaik on New Credit Register in Estonia

    Co-Founder and CEO of DataMe Marko Vaik on New Credit Register in Estonia

    On August 22, 2016, CEELM reported that Raidla Ellex had advised fintech company DataMe OU on the creation of a new credit register in Estonia. The co-founder and CEO of DataMe, Marko Vaik, agreed to answer our questions on the subject. 

    CEELM: When you first set out to create this new register, what led you to work with external counsel?

    M.V.: DataMe collects and shares personal credit data and this area is regulated by the Personal Data Protection Act. To collect, share, and analyze personal credit data we needed a legal framework to get permission for data processing and we needed to do it without any external risks for banks and other credit providers. Setting up a business in this sensitive area for lenders needed to be without any legal problems. As a Fintech start-up company we have to operate as effectively and fast as possible so we decided to involve a legal advice partner who would help us to create necessary documents so that all aspects in our business model would be in accordance with the law.                 

    CEELM: Were there other or unexpected problems or challenges that arose after the initial instruction that required their assistance?

    M.V.: Yes, as we started consultations with Raidla-Ellex we thought that we only needed to concentrate on the terms and conditions agreement text under the loan application. But shortly it turned out be bit more complicated that we first thought. To process personal data in accordance with the law we also needed to create terms and conditions for DataMe data processing. 

    CEELM: According to Raidla Ellex, the register was meant to also make “it easier to comply with regulatory obligations.” What regulatory obligations specifically were targeted and how does this register help?

    M.V.: Lenders are obliged to check customer credit worthiness before signing a loan contract, but before DataMe there was no register that aggregated all the information about customer obligations and monthly payments. The only way available was a historical debt register, and different studies made it clear that it is not enough to predict client payment behaviour. Historical debt data just is not enough in our quickly changing economic environment, as lenders need information about existing obligations and payment behavior. This is the place where DataMe can help to comply with regulatory obligations.

    CEELM: Fintech is an ever-increasing buzz-word. To what extent do you feel the regulatory framework in Estonia is comprehensive enough — do you still feel there are ambiguities that make your operations difficult at times?

    M.V.: I think that Fintech is much more than just a buzz-word. We are talking about a sector that has operated without any major upgrades for decades. Changes in finance are just getting started and everybody is waiting for a company that would give a whole sector new breathing room, like Tesla has done in the automotive industry. For DataMe Estonian regulations are not an obstacle, as until we exchange data, we are operating under the Data Protection Act. If we are planning to offer loan recommendations in the near future, then our Financial Supervision Authority has been open to give us advice with the regulations.  

    CEELM: Why did you choose Raidla Ellex as your external adviser on this matter?

    M.V.: As we started with DataMe it was clear that we can’t allow any mistakes in programming, compliance, or choosing a right partner to outsource some of the work. We were looking for an adviser who would have excellent knowledge in data protection but also in finance to understand the specifics when it comes to doing business with highly regulated partners. After market research we found that Raidla Ellex covered all our terms.

  • Deal 5: Anita Rozentale on the Dispute with Iecava Regional Council

    Deal 5: Anita Rozentale on the Dispute with Iecava Regional Council

    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.

  • Deal 5: Klemen Bostjancic on Elektroservisi restructuring with BAMC/DUTB and Banka Sparkassa

    Deal 5: Klemen Bostjancic on Elektroservisi restructuring with BAMC/DUTB and Banka Sparkassa

    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.

    CEELM:

    When did the loans that were restructured originate, and what purposes were the funds used for?

    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.

    CEELM:

    How were the debts restructured? 

    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.

    CEELM:

    According to the report on the CEE Legal Matters website, the negotiators on the side of the creditors changed several times. Does this refer to the law firms advising the banks, or their internal negotiators? What implact did it have for the debt restructuring process?  

    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.

    CEELM:

    Why did you choose ODI to advise you on the matter? 

    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.

    CEELM:

    Did ODI assist you with the original loan? If not, why did you switch counsel?   

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

     

  • Deal 5: Lawyer at Credit Bureau Creditinfo Anatolijus Kisielis on the Use of Facebook Data Case

    Deal 5: Lawyer at Credit Bureau Creditinfo Anatolijus Kisielis on the Use of Facebook Data Case

    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.

    CEELM:

    The story on the CEE Legal Matters website asserted that “the Court decided that the data published by users of the Facebook social network may be used for assessing their creditworthiness.” Can you elaborate on the Court’s holding? What does that mean in practice, exactly? Can you give an example?

    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.

    CEELM:

    What kind of data are we talking about, and how will Creditinfo benefit from the Court’s ruling, exactly? 

    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.

    CEELM:

    Did the case arise from a specific attempt by Creditinfo to use such data in the past? Can you elaborate on the particular facts of the case?  

    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.

    CEELM:

    Why exactly did Creditinfo choose the Fort law firm to represent it in this case?

    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.

    CEELM:

    What sort of evidence and experts were considered by the Administrative Court in making its decision?  

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

     

  • Deal 5: Burgan Bank Head of Consultancy & Corporate Governance Unit Nesteren Caliskan on the Bank’s 2016 Syndicated Loan

    Deal 5: Burgan Bank Head of Consultancy & Corporate Governance Unit Nesteren Caliskan on the Bank’s 2016 Syndicated Loan

    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.

    CEELM:

    This is the second syndicated loan Burgan Bank has obtained in the past two years, following a similar one last year. The 2015 loan was reported to be “obtained for general trade finance purposes.” Was this most recent loan obtained for the same purpose(s), or for something different?

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

    CEELM:

    Why was the dual-tranche structure chosen? 

    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.

    CEELM:

    How did the recent coup attempt affect the process of putting this loan together? Did it delay or affect the negotiations in any way? 

    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.

    CEELM:

    What was your level of involvement in the matter? Did you delegate the Esin Attorney Partnership to handle all negotiations, then review the final product and step in at the end to authorize, or were you personally involved in all negotiations? Can you elaborate on your role?

    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.

    CEELM:

    Why did you choose The Esin Attorney Partnership as your external advisers on these two loans? 

    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.