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On October 5, 2015, the President of the Russian Federation signed into law the Fourth Antimonopoly Package. It enters into force within 90 days from its official publication.

The Fourth Antimonopoly Package continues the further liberalization of Russian antitrust legislation that began with the Third Antimonopoly Package.

For M&A transactions, the most important amendments are an expanded scope for the type of joint ventures requiring notification and various changes to the procedure for obtaining merger control approval. In addition, there are a number of important changes to the regulation of anti-competitive agreements.

Below we provide a more detailed overview of the new arrangements.

ECONOMIC CONCENTRATION

The Scope of Transactions Subject to Antitrust Clearance by FAS Russia Has Been Broadened The Fourth Antimonopoly Package has widened the range of transactions that are potentially subject to mandatory prior clearance by the Federal Antimonopoly Service (“FAS”) and now brings within its scope all joint venture agreements concluded between commercial entities that are competitors where the joint venture agreement contemplates there being joint activity in the Russian Federation.  

This is irrespective of whether a separate joint venture entity is established and will also now catch cooperative arrangements that fall short of a merger and which would previously have been subject to ex post regulation under the general restriction relating to anticompetitive agreements and concerted practices.

Such agreements will now require mandatory antitrust clearance by FAS if:

• the total balance sheet value of the assets of the parties to the agreement and their group companies exceeds RUB 7 billion globally as of the last reporting date; or
• the total revenue of the parties to the agreement and their group companies from the sale of goods for the calendar year preceding the year that the agreement is concluded exceeds RUB 10 billion globally.

If the thresholds for these indicators are not exceeded, the parties will not be required to obtain approval for the respective agreement. The parties may also apply for such approval on a voluntary basis.

Governmental Control Has Been Reduced for Transactions by Natural Monopolies, as Well as Transactions with Shares/Interests in Natural Monopolies

The Fourth Antimonopoly Package:

• envisages governmental control over transactions and investments by natural monopolies only if their revenue from natural monopoly activities exceeds 1% of their total revenues; and
• no longer requires notifications on transactions for the acquisition of shares/interests in natural monopolies.

The List of Criteria Whereby a Transaction Requires Clearance by FAS Russia Has Been Reduced

Pursuant to the Fourth Antimonopoly Package, the register of entities with a more than 35% share of a market in a particular product has been abolished. Thus, the sole criterion requiring that a transaction receive FAS clearance will be that the thresholds for total balance sheet value of assets and total revenue from the sale of goods have been reached.

New Means of Liaising with FAS Russia on Economic Concentration Have Been Introduced

The Fourth Antimonopoly Package provides for additional ways that entities can liaise with FAS for merger control purposes. In particular:

• entities may provide information on an anticipated transaction before applying for clearance with FAS, and may set forth conditions that will ensure competition on the affected market; and
• merger control application/notification filings with FAS may be made in electronic form as prescribed by FAS.

Information on the filing of submissions will be published on the official website of FAS so that interested parties can provide their opinion on the impact of the anticipated transaction on the state of competition.

ANTI-COMPETITIVE AGREEMENTS

Cartel Definition Expanded

The Fourth Antimonopoly Package expands the concept of a cartel to include, in addition to agreements between sellers, agreements between purchasers of goods. It also specifies that the prohibition on cartels does not apply to joint venture agreements cleared by FAS.

Agency Agreements Classified as Vertical Agreements

The Fourth Antimonopoly Package repeals the former exemption whereby agency agreements were not treated as vertical agreements. Agency agreements now also fall under the prohibitions and restrictions established for vertical agreements. This contrasts with the approach taken under EU competition law where agency agreements typically fall outside of the scope of the law on the basis that the selling or purchasing function of the agent forms part of the principal’s activities.

Scope of Permissible Vertical Agreements Has Been Expanded

The Fourth Antimonopoly Package expands the scope of permissible vertical agreements between entities with a small market share. Such agreements will now be allowed if the market share of each of its participants in the market for the goods that are the subject of the agreement does not exceed 20%. The previous 20% market share threshold that applied to any market on which the participants were active no longer applies.

OTHER CHANGES

The Fourth Antimonopoly Package also introduces the following changes:

• the criteria defining dominance have been limited (an entity with a market share of less than 35% may be qualified as dominant only as prescribed by federal law and not as determined by FAS) and the scope of the prohibition on abuse of dominance has been narrowed;
• the existing regulation of unfair competition has been expanded and clarified; in particular, unfair competition will include the illegal use or disclosure of information constituting a trade secret or other information protected by law, both as a result of the violation of the terms of an agreement with a party that was entitled to the use of such information, and should such information be received from a party that had access to such information by virtue of his/her employment duties;
• the scope of application of preventative measures, such as warnings and cautions, has been expanded;
• a new leniency option for filing administrative charges against participants of a cartel that are the the second and third cartel participants to contact the antimonopoly authority has been introduced;
• the procedure for examining cases on violation of antimonopoly regulations has been revised;
• decisions of FAS territorial bodies may now be appealed to boards within the central office of FAS;
• boards within the central office of FAS Russia may summarize practice on antitrust cases and issue the respective guidelines;
• the Law on Protection of Competition will no longer apply to relations governed by unified competition regulations on cross-border markets that come under the criteria established in accordance with a treaty to which the Russian Federation is a party;
• the Government of the Russian Federation has been granted the right to establish the rules for non-discriminatory access to goods sold by an entity that is not a natural monopoly but is a dominant entity on the market;
• antitrust compliance in respect of tenders has been updated; and
• an entity may no longer be charged with an administrative offense while fulfilling a compliance order to transfer to the federal treasury revenues received as a result of a breach of antimonopoly law.

By Alyona N. Kucher, Partner, Elena M. Klutchareva, Associate, Anna V. Maximenko, Associate, Timothy McIver, International Cousel, Debevoise & Plimpton

White & Case has advised Mid Europa Partners, which in 2012 took a 50% stake in Walmark — one of the largest suppliers of dietary supplements in the region —  on its acquisition of the remaining 50%, giving the firm full ownership of the business. The transaction remains subject to anti-trust clearance. The acquisition of a 100% stake sees the Walach family, Walmark’s previous owner, exit the business. The Walach family was advised by Allen & Overy.

Mid Europa, which operates from London, Budapest, Warsaw, and Istanbul, is the largest private equity firm focused on Central Europe and Turkey, advising and managing funds of approximately EUR 4.2 billion. 

Walmark has made bolt-on acquisitions of respiratory food supplements manufacturer Sinulan (reported on by CEE Legal Matters on June 3, 2015) and the consumer healthcare business Valosun (reported on by CEE Legal Matters on October 7, 2015), and reportedly intends to pursue further acquisitive growth.

Michelle Capiod, Partner at Mid Europa, commented: “We would like to thank the Walach family for our excellent partnership and wish them great success in their future endeavours. We have jointly transformed Walmark from the leading dietary supplements business in Central and Eastern Europe into a focused consumer healthcare platform with an exciting pipeline of new products. We are delighted to continue our active support of management in their execution of this successful strategy.”

Adam Walach, on behalf of his family, stated: “As passionate entrepreneurs, we have always enjoyed new challenges and opportunities. After 25 years of building Walmark, we have decided to pursue other interests and new investment opportunities, capitalising on our experience. We also want to actively engage in socially responsible and philanthropic projects.”

The White & Case team consisted of Partners Michal Smrek, Damian Beaven, and (newly-promoted) Alena Naatz, and Associates Jakub Mencl, Jan Stejskal, and Petra Zunova.

The Allen & Overy team consisted of Prague-based Counsel Prokop Verner and Budapest-based Partner Hugh Owen.

Sorainen Lithuania has assisted the Lithuanian Ministry of Finance in issuing two (10– and 20–year) Eurobonds of EUR 750 million each in the international capital markets.

The ten-year EUR 750 million Eurobond will have the lowest coupon in the country’s history at 1.25 per cent. It will also be the largest among Lithuania’s Eurobonds of that duration in the euro market (previously the largest Eurobond issue amount was EUR 600 million). The Notes will mature on October 22, 2025. The twenty-year EUR 750 million Eurobond with a 2.125 coupon marks the first Lithuanian Eurobond issue and the second issue among Government Securities of this duration.  Proceeds from the offering will be used for redemption of a EUR 1 billion Eurobond due on February 10, 2016, as well as for general budgetary purposes.

Lithuanian Finance Minister Rimantas Sadzius commented that: “Lithuania has borrowed a large amount for a long duration by issuing a dual tranche Eurobond for the first time. The decision reflected investors’ demand and our borrowing strategy. The long duration will allow us to achieve a smooth debt profile and lock into low interest rates for a longer period. Low interest rates will help to refinance old debts and to redirect savings on interest to public needs.”

The transaction was lead-managed by Barclays, BNP Paribas, and HSBC.

The Sorainen team consisted of Partner Tomas Kontautas, Senior Associate Daiva Liubomirskiene, and Associate Agne Sovaite, who all advised on last year’s borrowing by Lithuania of EUR 1 billion, due 2026. (Reported on by CEE Legal Matters on October 27, 2014). 

Tuca Zbarcea & Asociatii (TZA) has advised Interbrands Marketing & Distribution on its acquisition of Europharm Holding, a local drug distribution company owned by UK drugmaker GlaxoSmithKline.

The transaction includes Europharm shares and “several additional commercial contracts.” The deal was signed on October 13th, and it remains subject to antitrust clearance from Romania’s Competition Council and on the completion of various commercial terms. TZA did not reply to a request that it identify counsel for GlaxoSmithKline.

Interbrands is the largest Romanian company in the distribution and marketing of fast moving consumer goods.

Tuca will continue to act for Interbrands on regulatory/competition clearance matters and other steps in completing the closing. The firm’s team on the transaction was led by Managing Associate Andreea Lisievici, working alongside Senior Associates Andreea Oprisan and Ruxandra Frangeti.

“The takeover of Europharm has been quite an exceptional project for so many reasons,” said Lisievici. “First, aside from the business-related complexity, it made us face successive changes in the commercial foundation of the transaction which needed to be translated into efficient contractual clauses. Second, our ability to concentrate on the commercial goal of the contracts and give it precedence over the legal approach has been greatly tested, and Interbrands is the ideal client with which to undertake such a task.”

Editorial Note: On October 21, Wolf Theiss informed us that the firm’s Bucharest office advised GlaxoSmithKline on the deal. The Wolf Theiss team consisted of Partners Ileana Glodeanu and Bryan Jardine and Associates Luminita Gheorghe, Diana Stetiu, Monica Tintoiu, Alice Apetrei, and Mircea Ciocirlea.

Greenberg Traurig (GT) has represented Orlen Upstream in connection with its entrance into a definitive merger agreement pursuant to which it will acquire all the outstanding shares of common stock of NASDAQ-listed FX Energy. GT declined to identify the firm representing FX Energy on Polish elements of the deal, though FX Energy independently identified Bracewell & Giuliani and Kruse Landa Maycock & Ricks as counsel in the United States.

In the transaction, holders of FX Energy common stock will receive consideration of USD 1.15 per share in cash, which represents a 22% premium over the average closing price for the company’s common stock for the 60 trading-day period ended on October 12, 2015. The transaction values FX Energy at approximately USD 119 million, including the Company’s net debt at June 30, 2015. On October 13, 2015, FX Energy announced that “the agreement with Orlen Upstream is the result of FX Energy’s previously announced process to explore a possible sale of the Company or other transaction and has been approved unanimously by the Company’s Board of Directors.” 

Under the terms of the merger agreement, ORLEN Upstream will commence a cash tender offer to purchase all of FX Energy’s outstanding common stock, with a merger following the completion of the tender offer that would result in all shares of common stock not tendered in the tender offer being converted into the right to receive the cash consideration. Following the completion of the tender offer, if Orlen Upstream owns at least 90% of the outstanding shares of FX Energy common stock, including through the exercise of a “top-up” option granted to Orlen Upstream, the merger will be effected through a “short-form” merger without further action by stockholders of FX Energy. FX Energy granted Orlen Upstream a “top-up” option to acquire directly from FX Energy after completion of the tender offer the number of shares of common stock required to effect the “short-form” merger, subject to the availability of sufficient authorized and unissued shares of FX Energy common stock. If, after the completion of the tender offer and any exercise of the “top-up” option, Orlen Upstream owns less than 90% of the outstanding shares of FX Energy common stock, FX Energy will convene a meeting of the holders of its common stock to approve the merger. Orlen Upstream agreed that it will vote all shares of FX Energy common stock then owned by it in favor of approval of the merger. The tender offer is expected to commence by October 27, 2015, and the transaction is expected to be completed in the fourth quarter of 2015 if effected as a “short-form” merger or in the first quarter of 2016 if a meeting of FX Energy’s common stockholders is required to approve the merger. The closing of the transaction is subject to customary closing conditions, including at least a majority of the outstanding shares of FX Energy common stock being tendered in the tender offer and receipt of required antitrust approvals. The merger agreement provides that all outstanding shares of FX Energy’s 9.25% Series B Cumulative Convertible Preferred Stock will be redeemed in connection with the transaction pursuant to the terms of the preferred stock at the redemption price of $25.00 per share, plus accrued and unpaid dividends to, but not including, the redemption date. 

FX Energy based in Salt Lake City, Utah, is a company engaged in the exploration, development and production of petroleum and natural gas with its main assets in Poland. David Pierce, FX Energy’s President and Chief Executive Officer, expressed his approval of the deal: “Following a thorough process conducted with our financial advisor, the Board of Directors determined that this transaction provides the best opportunity to deliver value to our stockholders in view of the challenges we face with the current commodity-price environment, currency exchange-rate fluctuations and our current capital structure and limited access to the capital necessary to realize the value of our assets in Poland.”

In Poland, the transaction was led by Greenberg Traurig Partners Lejb Fogelman and Rafal Baranowski. Other members of the GT team included Adam Opalski, Malgorzata Bednarek, Filip Kijowski, Antoni Bolecki, Lukasz Gorek, Anna Cienkus, Mateusz Koronkiewicz, Malgorzata Pasnik, and Mateusz Slizewski.

In the United States, the Greenberg Traurig team included Partners Dennis Block and Nicole Perez from Greenberg Traurig’s New York office and Stacey Kern from its Chicago office, as well as William Garner from the Houston office. From the Amsterdam office, Partner Jan Kees Brandse and Eva Herde were responsible for legal advice with respect to Dutch law.

Evercore Group, L.L.C. acted as financial advisor to FX Energy. 

At its session on 25 September 2015, the Croatian Parliament adopted the Act on Amendments to the Capital Markets Act (“Act”). This Act transposes Directive 2013/50/EU and all of its subsequent amendments into Croatian law. The Act will enter into force on 21 October 2015, with the obligations regarding quarterly financial reports entering into force as of 1 January 2016.

Alongside fines and administrative measures against non-compliant issuers, the Act also regulates financial reporting by issuers whose securities are listed on the regulated market. Primarily, the Act obliges Croatian-based issuers to report to the regulated market on a quarterly, semi-annual and annual basis. However, this Act also regulates and extends the terms for preparing and publishing semi-annual and fourth quarter reports. The period during which published reports must be publicly available has been extended from five to ten years as of their first publication date.

In order to ensure the transparency of corporate ownership, the changes in voting rights that need to be reported now include all financial instruments that provide their holder with the same economic rights as bestowed through the ownership of shares or the right to acquire shares. Additionally, the Act introduces the possibility of suspending voting rights for holders of shares and financial instruments who do not comply with the notification requirements.

The Act provides a more precise determination of the home country of the issuer. The official register of regulated information (European electronic access point and unified electronic form for reporting) will be managed by the Croatian Financial Services Supervisory Agency and the register will become the officially established national mechanism for storing and publishing regulated information.

The amendments to the Capital Markets Act grant the regulator more authority in the application of administrative sanctions and measures, including for the application on misdemeanours. All administrative measures and sanctions will be published on the website of the Croatian Financial Services Supervisory Agency. 

By Vice Mandaric, Attorney at Law, Schoenherr

Dr Reddy’s Laboratories Ltd. has hired Timur Khasanov-Batirov as its new Compliance Manager in Russia.

Established in 1984, Dr. Reddy’s Laboratories Ltd. is a pharmaceutical company, operating in the USA, Russia & CIS, India, and the UK, among other markets.

Khasanov-Batirov is experienced in compliance, law, and corporate governance includes work in the USA, Uzbekistan, Ukraine, and Kazakhstan. He previously was the Chief Compliance Officer of Energy Holding DTEK and Co-Chair of the Compliance Club under the American Chamber of Commerce in Ukraine. Prior to joining DTEK in Ukraine in July 2008, he worked for Carlsberg in Kazakhstan as its Executive Officer, Legal & Corporate Governance. Between 2004 and 2006 he worked for Baker & McKenzie. 

Khasanov-Batirov describes his focuses as “ensuring Tone at the Top, promotion of anti-bribery programs, along with wide engagement of personnel into ethics within a emerging markets’ reality.” 

White & Case has announced the promotion of 31 lawyers worldwide to its partnership. The promotions will become effective January 1, 2016, and include, in total, 15 different offices around the world.

According to White & Case Chairman Hugh Varrier, “we consistently strive to be the firm of choice for our clients’ most complex, cross-border legal challenges. I offer congratulations and a warm welcome to our new class of partners – a group of diverse, engaged and ambitious lawyers who are clearly prepared for the exciting road ahead. I know their collective expertise will serve both us and our clients well.”  

The new Czech Partner is Alena Naatz, a lawyer in the firm’s Global Mergers & Acquisitions practice. She specializes in M&A, private equity, and commercial law, including Corporate matters. Naatz joined White & Case as an Associate in 2002, immediately after graduating from Charles University in Prague. She also received an LL.M. from Durham University in 2006, and a Ph.D. from Charles University in 2010. She was made a Local Partner at White & Case in January, 2012.

On 6 October 2015, the European Court of Justice declared the European Commission’s Decision 2000/520/EC of 26 July 2000 (the “Safe Harbor Decision”) invalid.

The Safe Harbor Decision stipulated that under the “safe harbor” scheme, i.e. the principles regulating the protection of personal data applied voluntarily by the United States undertakings for secure data transfer, the United States provides for a level of protection of personal data that is adequate when compared to European standards in accordance with the Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995. This decision of the European Court of Justice may have some far-reaching implications on the future conditions for transfer of personal data to countries that do not guarantee the same level of protection as EU members and signatories of the Convention for the Protection of Individuals with regards to Automatic Processing of Personal Data (the “Convention”).

The safe harbor agreements allowed approximately 4,500 United States undertakings, including Google and other IT giants, to legally transfer user, customer or employee data from Europe to the US by offering adequate protection of personal data. However, in light of the Edward Snowden’s leaks regarding mass surveillance of personal data by the National Security Agency (the “NSA”), it was clear the US is not capable of adhering to the strict requirements set out in European regulations. Hence, the Court found that “the existence of the Safe Harbor Decision finding that a third country ensures an adequate level of protection of the personal data transferred cannot eliminate or even reduce the powers available to the national supervisory authorities under the Charter of Fundamental Rights of the European Union and the directive”. The main practical implications of this ruling for American undertakings are twofold: (i) they may be subject to adapting to a number of different data protection regulatory environments and (ii) they may face considerably higher inspection from individual national data regulators in Europe with regard to conformity of data transfer procedures with European legislation.

Similar to EU provisions, the Serbian Data Protection Act provides that personal data may be transferred to a third country only if such third country provides for at least identical level of personal data protection in accordance with the Convention. Any transfer of personal data to those third countries is preconditioned by the approval of the Serbian Data Protection Commissioner. Although Serbia is not part of the European Union, the Serbian Data Protection Commissioner has in practice shown strict adherence with the European standards and has insisted on applying the highest level of protection of personal data. With the decision of the European Court of Justice, the Serbian Data Protection Commissioner may be inclined to impose more rigorous requirements on transfer of personal data to the US, and perhaps, even start denying its approval to safe harbor agreements. Needless to say that this could have devastating implications for any United States’ undertaking wishing to transfer personal data to US since it would be faced with finding new and innovative solutions to circumvent the mandatory preconditions existing in the Serbian law.

By Milan Samardžic, Partner and Nikola Kasagic, Senior Associate, SOG / Samardzic, Oreski & Grbovic

Zivkovic Samardzic has announced that two of its lawyers — Of Counsel Milos Zivkovic and Associate Vesna Zivkovic — have been appointed to the  List of  Arbiters of the Committee for the Resolution of Disputes Relating to the Registration of National Internet Domains recently established by The Chamber of Commerce and Industry of Serbia.

The list was established upon the proposal of the Serbian National Internet Domain Registry (RNIDS), a private not-for-profit foundation that manages Serbian country-code top-level Internet domains (ccTLD) .RS and .CPb (the Cyrillic counterpart).

The Committee for the Resolution of Disputes Relating to the Registration of National Internet Domains is a body attached to the Serbian Chamber of Commerce and Industry,that resolves Serbian ccTLD domain name disputes, under the Rules for Proceedings for the Resolution of Disputes Relating to the Registration of National Internet Domains, approved by the RNIDS Conference of Co-founders.