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GLL Real Estate Partners has announced two further recent acquisitions on behalf of its GLL Pan European Fund, a Luxembourg FCP-FIS.

In addition to office assets it already owns in Frankfurt am Main and Krakow, the fund has now acquired two more Class-A office buildings in Romania and the UK. GLL was advised by Dentons and CBRE in Romania, and by Norton Rose Fulbright and Colliers in the UK on the acquisitions. When asked about the sellers, Dentons reported that the parties had agreed to keep their names confidential.

The first is the purchase of the Victoria Office Center in Bucharest for a price believed to be around EUR 27 million. The building is an 8,300 square meter Class A office building in the central business district of Bucharest and is 100% long-term leased to a roster of international tenants including Citibank, JLL, AON, AIG, and Starbucks. The fund has also completed the EUR 50 million acquisition of One Brindleyplace, Birmingham — a 6,430 square meter Class A office building in central Birmingham with a long unexpired lease term to Deutsche Bank.

The GLL Pan European Property Fund FCP is a real estate fund which will invest in assets across Europe with a target investment volume of up to EUR 1 billion. The fund has now invested over EUR 184 million into four core office buildings in the first 12 months since inception, and expects to add another prime office acquisition to its existing portfolio before the end of the year to take the fund volume to over EUR 225 million.

Image Source: Leonard Zhukovsky / Shutterstock.com

Lavrynovych & Partners has announced the opening of a representative office in Vienna, operated by the Austrian Brandstetter, Baurecht, Pritz & Partner law firm.

The formal announcement was made during an official September 24, 2015 diplomatic reception at the Embassy of Ukraine in the Republic of Austria, which was attended by the members of the parliament, various diplomats, and other public figures.

The firm explains that, as a result, firm clients will be able to acquire expert advice and legal assistance regarding their activities on the territory of the Republic of Austria, focusing in particular on the following issues:

• Business registration and bank account opening;
• Investment support;
• Support on acquisitions of commercial and residential real estate;
• Representation in all courts;
• Legal assistance in obtaining a permanent residence permit and citizenship in Austria.

In addition, the firm claims, “in turn, without any difficulties the clients of the Austrian office will be able to receive an expert support in protecting and securing their interests in Ukraine.”

In response to an inquiry from CEE Legal Matters, Lavrynovych & Partners PR Manager Tetyana Korchynska explained that “now Brandstetter, Baurecht, Pritz & Partner Rechtsanwalte represents Lavrynovych & Partners in Vienna and our offices in Kyiv [and] Odesa will now represent BPPA in Ukraine.

While Europe formulates new visions of a level playing field, national targets and national implementation create new borders within the European energy market.

European Influence

Austria’s energy business is very much influenced and determined by European initiatives and legislation.

On July 15, 2015, the European Commission launched a “summer package” on energy consisting of proposals for further discussion, including proposals for the re-restructuring of the CO2 emission trading regime as of 2021, energy efficiency label revisions, and the empowerment of energy consumers. 

Almost at the same time, Commission Regulation (EU) 2015/1221 of July 24, 2015 on Capacity Allocation and Congestion Management in Electricity was enacted, which is supposed to enhance cross-border trade in Europe.

Possible Future Capacity Restrictions for Electricity at the Austrian/German Border 

However, while the European Union takes initiatives to create a European energy market without borders and with coherent regulations in all Member States, the Austrian energy industry is closely monitoring the discussions in Germany on possible restrictions at the German/Austrian border for electricity transmission in order to address disturbances in its electricity transmission grid created by the rapid increase of Renewable electricity generation in Germany. 

Such restrictions would divide the current common Germany/Austria electricity market and could lead to an increase in market prices in Austria. 

This shows that we are still far away from a European Energy Union.

Austrian Energy Efficiency Act

In addition, the implementation of the 2012 EU Energy Efficiency Directive into national law creates new barriers for entering into national markets, with incoherent regulations in different Member States. In Austria, the Energy Efficiency Act (“EEA”) puts the main burden on energy suppliers. 

Starting with this year, energy suppliers are obliged to provide annual proof that they have realized energy efficiency measures in the amount of 0.6 per cent of their total energy supply for energetic use to end customers in Austria in the previous year. 

A guideline, which should, among other things, clarify the requirements for the documentation of the energy efficiency measures, has still not been published at the time of writing.

This causes legal uncertainty for the energy suppliers. 

One issue, however, seems to have been solved recently: Energy suppliers selling energy on a stock exchange or OTC will not be treated as energy suppliers and burdened with the corresponding obligations under the EEA as long as their counterparties do not declare themselves end-customers. Such end-customers purchasing directly at the stock exchange or OTC take over the EEA obligations for the energy bought and used by themselves.

Developments in the Gas Business

The regulatory authority E-Control Austria is adapting the main ordinance specifying detailed rules for the Austrian Gas Market Model to comply with Commission Regulation (EU) 984/2013 establishing a Network Code on Capacity Allocation mechanisms in Gas Transmission Systems, which enters into force on November 1, 2015.

On July 10, 2015, the EU and the Energy Community countries in the Central Eastern and South Eastern European region, including Austria, signed a Memorandum of Understanding regarding the building of missing gas infrastructure links, technical and regulatory issues which hamper security of supply, and the development of a fully integrated energy market in the region. 

From an Austrian perspective it is striking that the list of infrastructure projects identified as top priority in this MoU does not include any interconnection to and from Austria. The same applies to the list of projects selected for receiving financial assistance under the first CEF Energy 2015 call for proposals as published by the European Commission on July 14, 2015. There seems to be no project at hand to replace the Nabucco and South Stream projects, which would all have led to the Austrian gas hub Baumgarten. This might have implications for Austria as a major gas transit country in the future.

The current restructuring of major European energy companies also has its impact on Austria. EdF is planning to divest its 25% share in the Styrian energy company ESTAG. It is rumored that an investment fund managed by the Australian Macquarie Bank intends to acquire this stake in ESTAG. It remains to be seen whether or not the province of Styria, which holds 75% of shares, will exercise its preemption right. 

By Thomas Starlinger, Partner, Starlinger Mayer Attorneys-At-Law

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Introduction. According to the internationally renowned Mercer study (Mercer 2015 quality of living rankings), Vienna has again been elected as the world’s most liveable city in the world. We are happy to take this opportunity to illustrate why people want to live and invest in Austria and to describe the major legal framework for foreign investments.

Stable Market. Vienna is one of the most stable office markets in Europe and does not see such highs and lows as other markets. Even during the financial crisis, yields and rent level have not dramatically changed. Due to this stable environment and due to the economic, social, and political conditions in Austria, investing in Austria has been an interesting opportunity for many international investors. Hence, the commercial property investments volume reached a peak of EUR 2.8 billion in 2014. The largest group of buyers were Austrian investors, followed by investors from Germany and then other international investors.

Ownership in Real Estate. The Austrian Land Register is a public electronic register with folios for each piece of land showing the identification number of the property, its owner, and the rights and obligations related to it. Information shown in the Land Register enjoys specific protection and is deemed correct if the purchaser has in good faith relied on its correctness. It is, therefore, advisable and in some cases even sufficient to obtain all information from the land register before acquiring real estate.

Any legal person – both individuals and legal entities – can purchase and own land in Austria. This right is, however, limited by the legislation of the nine Austrian provinces and their land transfer acts. European citizens and legal entities resident in the European Union may acquire land under the same conditions as Austrian citizens. For others, the acquisition of real estate may require an approval (though in some provinces share deals are exempt from this requirement). In Vienna, for example, investments in real estate can be structured in such way that even non-EU-citizens do not require an approval. 

Taxes on Property Acquisitions. The purchase of real estate triggers a land transfer tax in the amount of 3.5% and a registration fee of 1.1%, both based on the purchase price or market value of the property. According to market practice the purchaser usually bears these costs; the total transaction costs for the purchase of real estate, including taxes, broker fees, and lawyer and notary costs, amount to roughly 10% of the purchase price.

Strict Rules for Leases. Most of the residential and commercial leases in Austria are subject to the quite strict rules of the Austrian Rent Control Act, which mainly protects tenants’ interests. Under these rules, the landlord’s right of termination is usually restricted, and lease agreements for indefinite terms may, in practice, only be terminated for good cause. 

Residential leases are often made for specific terms of 3, 5, or 10 years. Usual terms for commercial leases are between 5 and 15 years, often with an option for renewal by the tenant. Depending on whether the Austrian Rent Control Act is fully applicable or only applicable in part, the amount of operating costs to be borne by the tenant varies. However, costs relating to substantial structural repair (shell and core) and costs relating to serious damage to the structure are usually borne by the landlord, with the tenant being in principle responsible for internal repairs and redecoration.

Stamp duty on Leases. Lease agreements in Austria are subject to a stamp duty of 1% of total gross rent. As the tax base for a lease with an indefinite term is triple the annual rent, and for a lease with a specific term the whole term (with a maximum of 18 years), the costs for stamp duties on commercial leases might be substantial. Various legal models for avoiding the accrual of stamp duty are possible and are, after discussions between landlord and tenant, sometimes agreed.

By Stefan Artner, Managing Partner, Dorda

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Sometimes, you may be right and still lose in your day in court. The Austrian Supreme Court, with its decision of February 18, 2015 (Case 2Ob22/14w), added a new twist to that story: Sometimes, an arbitral award may be based on an erroneous application of EU competition law, and still be left valid.

The Case

The plaintiff, a Russian gas export company, had lost arbitral proceedings in which it had claimed more than 400 million Euros based on a take-or-pay clause in a long-term gas delivery agreement. The defendant, it had argued, had failed to fulfill the minimum purchasing obligation. The arbitral tribunal, however, had sided with the defendant, which had relied on another clause in the agreement, entitling it to reductions in the annual minimum purchasing obligation in the amount that the plaintiff, directly or indirectly, had delivered gas to direct customers of the defendant or to direct customers of those customers.

The plaintiff turned to the Austrian courts, demanding that the arbitral award be set aside, on the grounds that the clause allowing for the reductions of the minimum purchasing obligation would amount to a hard-core restriction in violation of Article 101 Treaty on the Functioning of the European Union (TFEU), with the consequence that, in turn, the arbitral award would violate the Austrian ordre public.

The Decision 

The Austrian courts, despite concluding that plaintiff’s argument regarding incompatibility of the take-or-pay reduction clause with Article 101 TFEU might well be valid, nonetheless dismissed plaintiff’s motion.

The Court of Appeal noted that the arbitration tribunal had held in relation to a different aspect of the case that the take-or-pay reduction clause was not severable from the take-or-pay clause on which the plaintiff relied: The relatively high level of the take-or-pay obligation could not be viewed independently from the take-or-pay reduction clause, which had been specifically designed to allow the plaintiff to enter the defendant’s market. The Court of Appeal found no fault with this assessment and drew a simple conclusion: Either the agreement did not infringe competition law, in which case the defendant had not failed to fulfill its minimum purchase obligation, or it did infringe competition law, in which case not only the take-or-pay reduction clause, but also the take-or-pay clause itself was null and void pursuant to Article 101(2) TFEU. In either case, plaintiff’s claim would be unfounded. 

The Supreme Court concurred, basing its decision on well-established case law. It did so also in regard to the final step of the Court of Appeal’s reasoning: even though EU competition law forms part of the Austrian ordre public, it is only the result – and not the reasoning – of an arbitral award that matters when assessing whether an application for annulment of an arbitral award must be granted. Since the result of the award – the dismissal of plaintiff’s claim for payment – was in any event compatible with Article 101 TFEU, the question of how the arbitral tribunal had come to that result did not matter any further.

The Lessons

The case is a reminder that even though EU competition law forms part of the ordre public of the EU Member States, that does not mean that parties are entitled to a full review of arbitral awards which are not to their liking. In this case, the differentiation between the result of the arbitral award and the reasoning behind it meant that the courts could limit their assessment to one single question of substance.

By Moritz Am Ende, Attorney (admitted to the bar in Frankfurt am Main), Starlinger Mayer Attorneys-At-Law 

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

An increasing number of questions have been raised since Serbia’s new Law on Bankruptcy and Liquidation of Banks and Insurance Companies (“Law”), together with amendments to the existing Banking Law, became effective on April 1, 2015.

With no case law at present to provide structure, there is a need to inspect these new rules closely, as they may considerably affect the management, existing shareholders, and creditors of Serbian banks undergoing liquidation or bankruptcy.

Terminating the Operations of a Solvent Bank

Bank shareholders may decide to voluntarily terminate the operations of a solvent bank. This decision, however, is subject to approval by the National Bank of Serbia (“NBS”) and is quite costly – it must be supplemented by a bank guarantee (unconditional, irrevocable, payable upon first demand, and issued by a first class bank) in an amount that secures all of the bank’s obligations. Once the NBS approves the termination of operations, it appoints the Serbian Deposit Protection Agency (“Agency”) as the liquidation administrator. However, if the bank fails to provide the NBS with all required documents, the NBS shall revoke the bank’s operating license. Neither the Law nor the Banking Law provides for a voluntary liquidation resulting from the previous voluntary delicensing of a bank, as seen in many EU jurisdictions.

An interesting question is raised at the very outset of executing liquidation of a bank when determining which regulations apply, as such proceedings are regulated by numerous pieces of legislation which call for the application of the Law’s provisions on liquidation as well as bankruptcy, and the supplementary application of the Insolvency Law, with exclusion of certain provisions “as fitting.” The Banking Law is also part of this regulatory framework, which in certain instances calls for supplementary application of the Company Law, which the Law does not refer to! This intersection of provisions thus requires considerable legal untangling. 

Bank Bankruptcy

With respect to bankruptcy, by issuing a decision on revocation of a bank’s operating license, the NBS simultaneously issues a decision on fulfilment of conditions for initiating bankruptcy proceedings. The Agency here performs duties of the bankruptcy administrator. Unlike the Insolvency Law, which is applicable to non-banking entities, the Law does not foresee a possibility for a bank to file for bankruptcy, but rather leaves this within the exclusive competency of the NBS. 

Creditors of a bank in bankruptcy have a number of matters to consider. Any set-off of claims towards the bank is permissible only until certain deadlines, for example. Also, the Agency and the bank’s creditors are entitled to file avoidance claims against the bank’s actions, but not against those executed by the NBS or the Agency in relation to any previous restructuring process. The Agency pays out insured deposits of the bank, as well as any insured amounts of claims of the bank’s clients if the bank is a member of the Investor Protection Fund. Notably, unlike bankrupt companies falling under the general regime of Insolvency Law, an insolvent bank cannot be bought as a legal entity in bankruptcy proceedings. 

The bank’s creditors are given between 30 and 90 days from the moment of publication of announcement on initiation of bankruptcy to report their claims towards the bank. The Agency determines if the claims are justified, and in what amount, whereas the final list of creditors’ claims is determined at the examination hearing. 

The risks which bankruptcy may generate for shareholders and management should not be overlooked. For instance, the fact that an individual was a member of a bank’s management board at the time the bank went bankrupt could impair that individual’s chances of future appointment to bodies corporate of a bank in Serbia, as the NBS may reject such appointments on reputational grounds. Reputational risks also befall present (direct or indirect) shareholders, should they attempt to found a new bank or acquire ownership in an existing one in Serbia, as the NBS also weighs the business reputation of future shareholders in banks when deciding whether to grant consent for acquisition or foundation. 

Until these concerns are fully addressed, and until the new regulations and practice are able to provide stronger footholds, Serbian banking waters should be treaded lightly and with great diligence.

By Natasa Lalovic Maric, Partner, and Andjelka Todorovic, Associate, Wolf Theiss

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Serbia has shown a strong commitment to establishing a modern market economy and has been strategically focused on the development of a sound legal and institutional framework, as well as on the implementation of international business standards and best practices.

Substantial reforms have been initiated to that end, particularly in creating a business-friendly environment. These include legal and economic reforms in all areas, aimed at ensuring legal security and harmonization with EU legislation and economic policies.

The Law on foreign exchange operations (hereinafter the “Law on FX”) provides for syndicated loans but limits domestic banks to participating in syndicated loans granted to non-residents only if payment security instruments are provided by the non-resident. Domestic banks may participate in a syndicated financial loan granted by a group of foreign creditors to a resident only if these financial credits are used for the payment of imports of goods and services and for financing the performance of construction works abroad, are concluded by residents within the scope of their activity, or for the repayment of refinancing. Residents may take foreign financial credits for other purposes as well, in the manner and under conditions prescribed by the National Bank of Serbia. 

Serbia recognized the concept of a security agent in syndicated loans for the purpose of registering collateral except for mortgages over real estate. Mortgages, as a means of collateral, did not accommodate the needs of syndicated lenders, since the only possibilities were to register mortgages in favor of all lenders – thus losing the meaning of a syndicated loan and a security agent – or to register mortgages in favor of one lender (i.e., security agent) – thus creating a two-tier system in which one lender is beneficiary of the mortgage and the rest of the lenders are not, which in effect gave less legal security to such lenders. 

The lack of a security agent in syndicated loans was one of the shortcomings that made it imperative to change the Law on Mortgage. The Serbian Parliament adopted the Law on Amendments and Supplements to the Mortgage Law which entered into force on July 16, 2015 (the “Law on Amendments”). The Law on Amendments provides a higher level of legal and economic security for creditors, while also taking into account the need to protect the interests of debtors.

The Law on Amendments provides for establishing a mortgage in favor of a security agent and enable creditors of syndicated loans to appoint one of the syndicate’s members (or a third party) with the power to undertake, on behalf of the secured creditors, any legal act aimed at protecting and enforcing the mortgage. This change has been welcomed by the banking community, as it enhances the certainty and flexibility of security arrangements for syndicated loans. It also facilitates foreign credit operations in Serbia, which are restrictively regulated by the Law on FX. It is now expressly envisaged that security agents will be registered with the real estate cadastre as the mortgagee.

Despite all the positive effects brought by the Law on Amendments, one of the priority areas that need to be aligned with the EU regulations is the Law on FX. Although certain steps towards liberalization in the field of foreign exchange operations were taken during the past few years, applicable regulations in Serbia are still significantly restrictive. However, we consider it necessary to expand the list of liberalized transactions, whenever justified and possible, especially in the field of foreign credit operations.

By Tamara Curovic, Partner, ODI Law Serbia

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Mark Harrison is Founder and Principal of Harrisons, which describes itself as “the only English Law Firm in Serbia and Montenegro.” Harrison himself has over 25 years’ experience in the Balkans, and he was the first English Solicitor and the first European lawyer to become a Member of the Serbian Bar Association. He is also the Honorary Legal Adviser to both the British Ambassador to Serbia and the British Ambassador to Montenegro and co-founder of the Serbian-British Business Club.

M.H.: Pure fate! One chance meeting completely changed my life. It was never my goal to work abroad. In 1984 I was working late one night at Linklaters in the City. They had seconded a lawyer from Beogradska Banka, a client of theirs, so he could learn about various financial instruments. I was drafting a bond issue late one night, saw this Serbian lawyer also working late, and invited him out for a beer. The next day I went with a group of (then) Yugoslavs to watch Hajduk Split play Tottenham Hotspur at football. The lawyer introduced me to most of the leading Yugoslavs working in London – mainly heads of the London-based subsidiaries of Belgrade companies – and by the late 1980’s I reckon I was acting for at least 2 out of every 3 major Yugoslav companies in London. I was then visiting Belgrade many times and was a founding member of the British Yugoslav Law Association. When I joined Eversheds in early 1991 and created their Central & Eastern Europe Practice, I convinced the firm to open an office in Belgrade as a centre for Yugoslavia. Unfortunately the disintegration of the country started in June that year which cancelled all my plans.

In 1997, I decided to form the first international law firm in Yugoslavia, resigned my partnership with Eversheds, and set up on my own in an office in Belgrade above a charity called “Bread of Life.” The rest, as they say, is history!

M.H.: At the very beginning it was very difficult to convince domestic clients to work with a foreign lawyer, not in the least because I was the first one there. They also found it difficult to understand the importance and duty of confidentiality, so competitors in business were very reluctant to instruct me. I would say Serbian companies – as in Serbian-owned – are much more likely to work with domestic lawyers. They have probably been with them from the start, as sole practitioners/friends and just stick with them.

M.H.: One of the challenges Serbia faces in starting the EU accession process is the rule of law. As a former Commercial Litigation Partner at Eversheds I still find the Serbian Court system incredibly frustrating. A lawyer needs certainty to advise his client, and there are too many variables and possibilities in going to court in Serbia. I still cannot ever recall advising a client to take his case to Court! And the appeal process in Serbia just goes on and on and on.

M.H.: I think you bring best practices from your jurisdiction. Serbian lawyers are very bright and keen to learn and likewise to embrace new ideas and concepts, including the importance of IT in the running of a firm. Management skills are learnt over time and as most Serbian lawyers were used to working as sole practitioners, I think an expat lawyer can bring a lot of ideas on running larger law firms. As we are the only English law firm in Serbia (and Montenegro) we are also subject to independent regulatory control of the SRA and that brings many responsibilities with it, such as strict “Know your Client” rules, anti-money laundering, confidentiality, and conflicts of interest. Additionally we have Professional Indemnity Insurance through London, and there are many areas of running a firm which have to be complied which are not required under Serbian Insurance, which Serbian law firms have to take out.

I think clients, obviously more the foreign clients, like the idea of an English law firm and the aspects mentioned above which go with it. I think they feel more “at home” with an expat lawyer. They speak the same language and have experienced how their UK-based lawyers work and like to see us behave in the same way. It makes them feel more comfortable, just like going to one of the Big 4 accountants.

M.H.: When I first arrived in Serbia I received a letter from the Serbian Bar Association within 14 days requesting I leave as I was persona non grata! Competition from foreign lawyers was not welcome! We were established before Kosovo and it was only after Milosevic was removed, in around 2001, that other foreign law firms appeared on the scene. There was still fierce resistance to them from local lawyers. Although the Serbian Bar recently regulated matters, and allowed me and others to join the Serbian Bar, it is still not as open to competition as the EU will require in due course. 

The legal scene has now settled in that there are probably five or six main players, and I cannot see any new foreign law firm setting up a new office here, only by way of a take-over of an established Serbian law firm, but then they would have to cover all other ex-Yugoslav countries as well.

Although we are having another good year, the overall legal market is presently tough and I get many CV’s flying across my desk. There is low-balling on fees by other law firms, but that is just a recipe for disaster in due course. Certainly local law firms have become more savvy about marketing and gaining clients so there is a bit of a cut-throat atmosphere in Belgrade itself on the big jobs, but my years in Leeds many years ago have put me in good stead for all the games that are played!

M.H.: Belgrade is a great place to live. A very good quality of life. The proof is in the pudding: this is my 18th year. Serbs are very friendly people, it is the party capital of Europe, is a very safe city, has a fantastic climate, and has not been “Westernized” or “sanitized” like other CEE capitals. Throw in the Montenegro coastline – only 35 minutes flying time away – plus its central location geographically, and you can see why expats love it.

Frans restaurant is the one place a visitor must go to – one of the top five, but you must go and try and guess what it originally was before it became a restaurant, and then make sure a female companion visits the ladies’ washrooms. Champagne on tap plus a rather unique feature (so I am told!).

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Predrag Catic is in charge of legal affairs at the Association of Serbian Banks – a voluntary, professional organization of banks and other types of organizations whose activities are related to the functioning of the banking system. Prior to joining the Association, Catic held Head of Legal roles with three banks: Banca Intesa (from 2007-2013), Societe Generale (2003-2007), and Zepeter Bank (2001-2003).

P.C.: First of all my entire education, including the legal one, was completed in Belgrade, where I finished Law School and passed the Bar exam. That means that I am educated to be oriented to the local market. After finishing university I started working in the telecommunication industry, first at the PTT traffic company, then at Telekom Serbia, the largest companies within their industries at the time here. 

My first job (and first love) revolved around litigation and insurance. The years I spent in litigation – around 8 years – trained me to understand that as an in-house lawyer/litigator I have my in-house clients and their needs and that I have to work a lot to understand their mindset and their way of understanding “business,” which was radically different from my own “legal” thinking. The “second half” of my daily work – insurance – helped me to get a deeper understanding of business books, logic, and the wonders of accounting. At that time in Serbia (in many ways as today) we had problems with debt resolution and, as a result, alongside litigation I started to negotiate ways of repayment of debt with my counterparts. My involvement in insurance paved the way to introducing new legal ways of debt resolution and, as curious as I am, that process led me to the banking sector.

P.C.: Three banks: three different, but at the same time, very common worlds. 

The main differences between them were obvious: shareholding capital origin, size, and business orientation, international, cross-border financing projects, number of employees, [and] almost everything. One big difference that affected my work was the size, as, in comparative terms, the last of the three was much bigger. All of a sudden, when I joined Banca Intensa, I was faced with managing a much bigger team than I was used to, which I quickly learned was a far more politically oriented role than a legal one. 

The main commonality thing was the special position that clients held in all of them. Everything was about clients, collateralization, and the ability to negotiate when things go wrong. 

P.C.: Well, I think it is something I derived from my education. Legal education in Serbia at that time, which I spoke a bit about already, meant gaining a wide scope of legal knowledge. That is something you need to have in the Serbian banking sector even today, when legal environment simplification and specialization are taking place. From family to international law you have to be able to support your colleagues on a daily basis, often quickly over the phone because the client is waiting in front of a bank desk. Excitement, adrenalin, involvement in everything, satisfaction of professional curiosity, all are aspects which no other industry could award you with to the same extent. Especially when you taste success. Banks are far more than just money – they are people, businesses, jobs, economic growth, new ideas – they are the heart of the economy. Therefore, it was a no-brainer: I pick the banking industry.

P.C.: My role is that of Coordinator of the Legal Committee of the Association of Serbian banks, which includes involvement in all areas in which banks are participating, both commercially and statutorily. That entails pure legal advice on both “general” and “particular” levels.

“General” means for us the aspects where we identify problems and suggest possible ways of overcoming them and initiate and participate in various initiatives in drafting new laws, thus adding our input towards the improvement of legislation at a national level. The “particular” level entails supporting banks in specific situations, which could range from usage of promissory notes to implementation of bilateral treaties Serbia has with other countries about something in focus (real estate, trade, arbitration awards, etc.). 

At the same time, as in-house lawyer I am in charge for all legal documents the Association signs, as with any other legal entity.

P.C.: We are not regulators, but we are directly involved in terms of expressing professional opinions when banking, or regulations that target the banking business, are on the agenda to be changed or introduced. Also, as I said, we are appreciated as an initiator of change in some of the relevant regulations.

As an example, recently Serbia changed its Mortgage Law, enabling the facilitation of already prescribed out of court foreclosure procedures. The new legislation is aimed at overcoming some deadlocks hidden in the previous wording of the Law, and we are very proud of the fact that the wording of the new Law passed by both the Government and the Parliament of Serbia relied on our solutions for those deadlocks.

My personal involvements are (a) organizing the banking legal community around open discussion of the regulatory framework; (b) drafting legal opinions regarding that framework with comments and suggestions; (c) participating in Government Working Group(s) for drafting legal frameworks for the valuation of real estate property, and participating in public debates on a new Law on Enforcement and Collateralization; and (d) supporting banks in the process of harmonizing their legal documents with newly introduced laws such as the Law on Protection of Customers of Financial Services, the Law on Payment Services, the Banking Law, the Law on Insurance of Deposits, and many others.

P.C.: Banking business in Serbia is generally all about two issues: collection of non-performing loans (NPLs) and accession to the EU.

At the moment the country is investing enormous efforts in pre-accession negotiations with the EU. We expect opening of the first chapters of the accession agreement soon. One of the most important chapters of that agreement for us is the one dedicated to financial services. With regard to it we are in good shape, let’s say, but we, as the banking sector, are pointing at the Enforcement Law as the one which has to be improved in terms of efficient collection of receivables. This law makes the above two issues into one and is closely linked to the legal certainty of undertaken business which, as a value in and of itself, has to be polished and further nurtured in the country.

The new law is in public debate, and we are facing clashes between two approaches to this law: a pragmatic one – related to supporting efficiency in enforcement of commercial deals – and another I would say more academic one, suitable for wealthier times in Serbia or to wealthier countries nowadays. But despite that clash – or maybe thanks to it – all involved experts are doing their best to deliver a good Law.

P.C.: Yes, yes of course! We engage external lawyers for two main reasons: one is litigation and another one is presenting their experience before the banking legal environment.

We have intensive cooperation on a daily basis with external lawyers, therefore picking lawyers for something specific is maybe easier for us than for somebody else. Usually we go through a procurement procedure in which reliability is of greater importance than price for services. 

I will say, as a new trend, we, the general legal market, are working on developing and implementing IT applications which enable better reporting, exchanging of documents, and information. As a result, lawyers with improved software infrastructure and with readiness to accommodate to new demands of this kind are at some advantage. 

P.C.: Wow, several things, first and above all I’d say spending time with my family – my wife, daughter, and son – then when time allows: friends, photography, wine, books, and traveling.

This Article was originally published in Issue 2.4. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.