Category: Uncategorized

This article, authored by Veton Qoku, was originally published in the European Employment Law Update published by Shepherd and Wedderburn.

Regulation of employment in Macedonia has recently been subject to numerous changes, including two successive sets of amendments to the social and health insurance regulation, several amendments to the Labour Law and the introduction of a new Law on the Prohibition and Prevention of Performing Unregistered Activity.

Payment of mandatory contributions for social and health insurance

The Macedonian Assembly recently introduced two sets of amendments to the acts regulating mandatory obligations of payment of contributions for social and health insurance, as follows:

• In July 2014, the Macedonian Assembly introduced an obligation on natural persons who generate income by performing physical and/or intellectual work on the basis of service contracts, authorship contracts and other contracts (“Non-Employee Service Contracts”) to make contributions if the monthly gross income earned by such contracts is higher than the minimal monthly salary determined by law (to be enforced as of 1st of January 2015). Before these amendments were enacted, income from Non-Employee Service Contracts was only subject to personal income tax. These amendments also provide that, if the income from Non-Employee Service Contracts which is subject to contributions is received from only one company, the company itself has an obligation to calculate and pay the contributions. However, in cases where individuals generate income based on several Non-Employee Service Contracts concluded with two or more companies, which in total exceed the amount of the determined minimum wage, the natural person is under an obligation to file a request for calculation of the contributions and to pay the contributions him or herself. 
• These obligations were generally not well received by the public and the Macedonian Assembly further amended them in February of 2015. With the new February amendments, the original abovementioned obligations were further amended as follows:
  • Unemployed persons are now obliged to pay contributions for monthly income generated by Non-Employee Service Contracts only to the extent exceeding the minimal monthly salary determined by law.
  • Employed and retired persons are now obliged to pay contributions for social and health insurance for the monthly income from Non-Employee Service Contracts only in respect of the income exceeding the national average monthly net salary for the previous year.

However, as an exception to this rule, if an employed person generates income from a Non-Employee Service Contracts concluded with his/her employer, the contributions shall be paid on the whole amount of the Non-Employee Service Contract in question.

Amendments to the Labour Law

Certain amendments were also introduced in the Macedonian Labour Law with regards to the rights and obligations of employees, employers and state inspectorate institutions, including:

• Employers now have the right to present a salary range (rather than a single salary figure) for work positions when they publish announcements with the Employment Agency. Before this amendment was enacted, Employers were obliged to file a fixed salary with the Employment Agency;
• Overtime work must now not exceed 8 hours per week on average calculated over a three month period;
• Employees can now divide and use their total annual leave days in more than two parts throughout the year. Employees are now also entitled to use two (instead of one) days of annual leave on a discretionary basis; by simply notifying the employer three days in advance;
• The scope of authority of institutions performing market, sanitation, technical and health inspections related to employment have been broadened.

By Veton Qoku, Associate, Karanovic & Nikolic

Crido Legal has advised Exact Systems (part of the Work Service Group) in connection with the acquisition of two companies – Control + Rework Service Poland Sp. z o.o. and Control + Rework Service NV – in a deal with a reported transaction value of PLN 30 million. The sellers were represented by lawyers from the German law firm Graf von Westphalen.

Exact Systems is a market leader in quality control for the automotive industry. As a result of the deal, it acquired a 100% stake in Control + Rework Service Poland Sp. z o.o. (with its registered office in Gliwice (Poland)) and Control + Rework Service NV (with its registered office in Genk (Belgium)).

Pawel Gos, CEO of Exact Systems Capital Group, stated: “The merger of our companies marks the beginning of joint hard work on the successful outsourcing of quality control for the European automotive industry. We believe that the union of two market leaders will allow us to further leverage strategic opportunities to deliver the values expected by our clients. In addition, we hope that this will ensure our stable development in a constantly changing market environment.”

Jakub Ziolek, Partner at Crido Legal law firm, added: “Representing Exact Systems during an M&A transaction is not only about Crido Legal’s participation in another project of company acquisition. It also means supporting a dynamically developing Polish company’s international expansion. Polish entrepreneurs cross the border more often now acquiring foreign entities and we are glad that we can actively take part in such processes.”

Crido Legal’s team included Ziolek, Senior Associate Filip Grzesiak, and Associate Szymon Syp. The team also coordinated the work of cooperating German and Belgian law firms.

Equity Advisors was the financial and transactional adviser of Exact Systems.

Image Source: exactsystems.com

This article, which was authored by Jelena Danilovic, was originally published in the European Employment Law Update published by Shepherd and Wedderburn LLP.

A New Collective Bargaining Agreement (“GCBA”) for Montenegro entered into force on 30 March 2014. The new GCBA introduced a broader scope of labour rights, so Montenegrin employers must take care to comply with these new rights and obligations. The main features of the GCBA are as follows:

• Additional situations where employment contract annexes may be applied (e.g. annex as a means of extending a definite term employment contract for up to 24 months; annex for a transfer from part time to full time work; annex for the introduction of non-competition clauses etc.);
• Salary calculations under the new GCBA are complex and are based on elements envisaged in the former GCBA –the initial part of a salary (meal allowance + 1/12 of annual leave allowance), coefficient value (currently 90 EUR gross, but subject to change in the coming period) and job coefficient, the minimum of which is determined in the new GCBA. Each of these elements must be taken into consideration when calculating an employee’s salary;
• Disciplinary proceedings for a breach of working duties have been regulated in more detailed. These proceedings are mandatory and an employee cannot be dismissed for breach of work obligations/work discipline without going through the required internal disciplinary proceedings;
• New grounds for the termination of employment, in addition to grounds determined by law, have been introduced (e.g. breach of non-competition clause, misuse of medical leave, criminal offence in relation to work, etc.); and
• Payment of 0.2% of an employee’s salary to the account of a Montenegrin representative trade union, for work disability prevention and recreational leave has been introduced. This obligation does not apply to employers that are, according to the branch CBAs, obliged to pay these amounts into an account of the branch trade union.

Divergence between the GCBA and the Labour Law

The introduction of new grounds for termination of employment under the GCBA, which are not recognised by the Labour Law, appear to be one of the most problematic issues of the new GCBA. In addition, the GCBA eliminates the legal obligation to issue a termination warning letter in certain specific cases of termination (e.g. for breach of a non-competition clause, or in case of violent behaviour of the employee).

The Labour Law does not envisage the possibility for such alteration of provisions related to termination of employment. As a general rule of Montenegrin employment law, provisions of the GCBA should not be less favourable for employees than provisions of the Labour Law. Accordingly, it is questionable whether certain provisions of the GCBA (introduction of new grounds for termination of employment, and eliminating of the legal obligation to issue a termination warning letter) are lawful, given that they provide that employees may be dismissed in cases which are not recognised by the law, or they oppose to the procedural means provided for in the law. 

Signatories to the GCBA apparently intended to make it easier for employers to dismiss employees in certain cases where a breach is obvious (such as misuse of medical leave, breach of non-compete clause etc.), and to not require disciplinary proceedings in these situations. However, these intentions have not been adequately reflected in local employment regulations; the Labour Law provisions on dismissal cannot be altered by GCBA provisions. Court interpretation on this inconsistency is currently not available so the effects of application of these disputable provisions and procedures have yet to be determined in practice.

By Jelena Danilovic, Senior Associate, Karanovic & Nikolic

Drakopoulos has “successfully led” a case involving “a large quantity of seized counterfeit goods” resembling the Asics’s brand, and has convinced a Greek court to order the seized goods destroyed at the Bulgarian infringer’s cost, with an additional award of “moral damages” to Asics.

Drakopoulos reports that, “following the seisure of a shipment of 30,108 pair of shoes at the port of Thessaloniki imported from China by a Bulgarian company, bearing white color stripes significantly similar to the well known Asics stripes, the trademark owner identified the goods as counterfeits and requested destruction of the goods, to which the Bulgarian company refused to consent.” Drakopoulos then initiated the claim on behalf of Asics.

In June, Drakopoulos, working in cooperation with React — its client — participated in the police’s seizure of 54 thousand fake watches, which were also then destroyed. (Reported on by CEE Legal Matters on July 31, 2015)

Image Source: asicsamerica.com

Paksoy has advised the shareholders of Hidro-Mak, a Turkish company, on the sale of a majority of shares to Kirchhoff Ecotec, the owner of the FAUN and ZOELLER brands. The AVK law office advised Kirchhoff Ecotec.

Hidro-Mak has manufactured on-vehicle equipment and provided parts and repair and maintenance to its customers since 1961. Its portfolio includes waste collection vehicles, sweeping machines, and lifters, which will remain separate as independent brands.   

The Paksoy team advising on negotiation of the share purchase agreement and shareholders agreement as well as the completion of the share transfer was led by Partner Togan Turan, working together with Senior Associate Selen Terzi Ozsoylu and Associate Zeynep Toma.

Image Source: hidromak.com

Introduction

One of the main duties of tax authorities is collection of taxes and control over the tax obligations of taxpayers and individuals. Furthermore, the tax authorities are responsible for investigation of tax evasion and avoidance schemes. With no doubt cooperation between countries through international exchange of information about taxpayers’ data plays a crucial role in dealing with this phenomenon.

Thus, one of the main topics under consideration during the IFA 2015 congress in Basel was the process of information exchange and its impact on taxpayers’ rights. As Philip Baker – an expert in international taxation and the representative of the Field Court Tax Chambers – said: the only thing that BEPS  is missing – is taxpayers’ rights and their protection in view of global trends of transparency and combating tax avoidance.

Due to the mentioned trends in the international environment, the standards of information exchange have changed dramatically over the last several years. 

Overview of the international instruments in the process of information exchange 

• At international scale the process of information exchange is governed, inter alia, by the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention on Mutual Assistance) that provides for exchange of information on request, automatic and spontaneous request of information. The Convention was developed jointly by the OECD  and the Council of Europe in 1988 and amended by the Protocol in 2010. Currently the Convention is signed by more than 80 countries including all G20 countries, all BRIICS  countries, almost all OECD countries and a growing number of developing countries. 

It should be noted that the Convention on Mutual Assistance is the most comprehensive multilateral instrument available for all forms of tax cooperation in order to combat tax evasion. The Article 6 of the Convention on Mutual Assistance provides for automatic exchange of information, and Competent Authorities from 61 jurisdictions have signed the respective multilateral agreement (hereinafter – the Multilateral Agreement). 

Such multinational agreement is a framework agreement, specifying the details of what information will be exchanged and when. However, as the agreement is multinational the actual information exchange between states will be possible after subsequent bilateral exchanges between particular signatories that file the notifications under Section 7 of the agreement (that still has not been done). 

In line with the international movement towards transparency and exchange of information, lots of jurisdictions, generally considered as tax heavens, have joined the Convention on Mutual Assistance in 2014 – 2015 (Mauritius, Seychelles, Philippines, Cyprus, Belize). Of course, this does not mean that those states will start transmitting taxpayers’ data to other jurisdictions immediately. Signing of the respective bilateral agreements is still required. However, such trend undoubtedly shows the willingness of countries all over the world to be compliant with the international standards of transparency and exchange of information. 

• Furthermore, most double tax treaties (DTT) between countries include the provisions related to the exchange of information based on the OECD Model Tax Convention on Income and Capital (Model Convention). According to the article 26 of the said Model Convention the information may be exchanged when it is considered as relevant for carrying out the provisions of the convention and the domestic laws of the contracting states. The considered relevance means that the requested information relates to the administrative or court trial in the requested state and the request is made under the international convention and does not contradict to the national legislation of the requested state.

Under the Model Convention a country is allowed not to provide the requested information, if the respective request does not seem pertinent to the income details of the particular taxpayer. Thus, the request on exchange of information may be rejected, especially if it is construed as a “fishing expedition” by the requested state. 

Actually the Article 26 of the Model Convention considers three main restrictions on use of taxpayers’ data: (i) first, such information may not be used for carrying out administrative measures that do not comply with the laws of the contracting states; (ii) second, it is not allowed to collect information, which is not obtainable under the laws or in a normal course of the administration of the contracting states; (iii) third, it is forbidden to collect information, which may disclose any trade, business, industrial, commercial or professional secret or disclosure of which would be contrary to public policy. 

The third restriction is the most controversial, since in some countries even the name of a taxpayer, in case if he/she is a holder of a bank account, may constitute a professional secret. As a result the requesting country may reject the respective request of information. 

• Moreover, the OECD in response to the G20 call to strengthen fighting tax evasion and ensure tax compliance has developed the Standard for automatic exchange of information at their meeting in St. Petersburg, Russia in September 2013. 

Further, a new global standard was endorsed by the G20 Finance Ministers and Central Bank Governors in February 2014. This new standard for Automatic Exchange of Financial Account Information for Tax Purposes (“the Standard”) includes the Common Reporting Standard (CRS) containing the due diligence rules for financial institutions to follow, the Model Competent Authority Agreement (MCCA) and commentaries that illustrate and interpret the above-mentioned documents. In order to restrain multinational tax avoidance and offshore tax evasion in developing countries, the Global Forum on Transparency and Exchange of Information for Tax Purposes delivered a Roadmap to the G20 Development Working Group in assistance to developing countries for meeting the Standard’s requirements and overcoming the obstacles in this way. 

In August 2015 the CRS Implementation Handbook was published, providing assistance to the government officials in the implementation of the Standard and setting out the necessary steps to be taken. In broad terms under the Standard, the financial institutions report information on details of financial assets they hold on behalf of a taxpayer to the tax administration in the jurisdiction, in which they are located. However, in order to implement the Standard, each country shall meet the four major requirements: 

• Translate the reporting and due diligence rules into domestic law;
• Select a legal basis for the automatic exchange of information;
• Put in place the IT and administrative infrastructure and resources;
• Ensure protection of taxpayers’ personal data;

Currently more than 90 jurisdictions have committed to implement the above mentioned requirements and start the automatic information exchange by 2017 or 2018. 

Also, within the BEPS’s project the OECD has developed the Action 5 that is aimed at combating harmful preferential regimes and enhancing transparency by governments and MNEs by means of achieving the standard of automatic exchange of information between tax authorities. 

In particular, as a part of the BEPS’s Action 5, the compulsory spontaneous exchange of rulings related to the preferential regimes is required. Upon analysis of the initiatives provided by the Action 5, it may be concluded that if certain information about a taxpayer pursuant to the Article 7 of the Convention on Mutual Assistance has to be disclosed without a request, noncompliance with this spontaneous exchange of rulings would lead to a regime being clarified as preferential that is harmful.

• Other international trends aimed at transparency in the tax sphere 

On 20 of May 2015 the European Commission approved the forth EU anti-money laundering Directive 2015/849. The Directive is applicable to all obliged entities as defined therein (financial institutions; auditors, external accountants and tax advisors; other independent legal professionals, trusts or company service providers and others). 

Under the Directive the member states will be required to hold information on the beneficial owners of all corporate and other legal entities (including trusts) incorporated within their territory in a national central register. Competent authorities and entities subject to the Directive will have access to the register, as well as any person demonstrating “legitimate interest”. 

The member states are obliged to implement its provisions into their national legislation within two years after the official publication of the Directive (June 2015). The Directive and implementation of its provision is another step forward to development of new tax transparent and cooperative environment at international scale. 

Taxpayers’ rights in course of the BEPS’s Action 5 and the process of information exchange 

Needless to say that tax administrations of different countries highly supported the trends on automatic exchange of taxpayers’ data since they facilitate the fighting with tax evasion and avoidance.

However, the recent promoting in international cooperation in tax matters through exchange of information may significantly affect the fundamental taxpayers’ rights for confidentiality, protection of personal data, the right to raise defense and to be informed.

Each country in view of its national jurisdiction applies differently the rules of information exchange.

In most cases the exchange of information is not a public procedure that occurs between tax administrations of two countries. Thus, certain unbalance may occur between this process and the right of privacy of the taxpayer who may be even unaware of such a process. 

Therefore, at one of the Seminars at the IFA Basel congress the following rights of a taxpayer in the process of information exchange were discussed:

• rights to be informed on gathering data;
• rights to raise defense and to challenge such gathering;

Furthermore, such questions as which state shall inform the taxpayer (the requesting or the requested one) and when (prior the provision of the information or afterword), should there be any exceptions to the general rule, also arose. 

The international standard of the Global Forum recognizes protection of taxpayer’s rights (“Notification requirements and rights and safeguards”). However, such rights are not absolute since they should be compatible with the effective exchange of information:

• It should not prevent or unduly delay the effective exchange of information; and
• It should consider exceptions from the prior notification (e.g. in cases, in which the information request is of a very urgent nature or the notification may frustrate the effective exchange of information).

It seems that it is quite difficult to find the right balance between the protection of the taxpayers’ rights, insurance of confidentiality of personal data, and meet the requirements of the Standard. 

During the IFA Basel congress the following best practices were proposed by the specialists in international taxation:

• A taxpayer should be informed that a cross-border request for information is to be made.
• Where a cross-border request for information is made, the requested state should also be asked to supply information that assists the taxpayer.
• Provisions should be included in tax treaties setting specific conditions for the exchange of information.
• The taxpayer should be given access to the information received by the requesting state.
• The information should not be supplied in response to a request where the originating cause was the acquisition of the stolen or illegally obtained information.
• The requesting state should provide confirmation of confidentiality to the requested state.

At the same time the implementation of the above-mentioned best practices absolutely depends on the national policy of the country and may vary from country to country. 

Example of standards of information exchange in specific countries 

As it was mentioned in part I in this publication, the process of information exchange is governed inter alia by the Convention on Mutual Assistance. Article 4, para 3 of the said Convention provides for the possibility to each signatory to declare that according to its national legislation its authorities may inform its residents about exchange of information requests before the information is transmitted to the other state. 

As of February 2015 the following states have endorsed such declaration: Japan, Latvia, Netherlands, Poland and USA. Switzerland is also going to make such declaration with certain exceptions. 

As to the Multilateral Agreement such document does not address the right of the individual to be informed, to take part in the investigation process or to challenge the result of the process in court. The contracting states, however, may govern these issues in the respective DDT, as Switzerland and Spain did, for instance. The protocol to DDT between Switzerland and Spain consists of the mutual consent of both states that the taxpayers’ participation rights in the requested state remain applicable before the information is transmitted to the requested state. 

In Germany, for example, there are provisions in the Fiscal Code (para 117 par.4. and para 91 par.1) entitling the concerned person to be informed and heard before the information is handed over to the requested state. Some expectations, however, are available in cases when the request is based on the EU Mutual Assistance directive and when an immediate decision seems to be necessary due to the public interest or imminent danger (para 91 par.2 of the Fiscal Code). Also, it should be noted that no right to be heard is granted if no domestic party is involved in the exchange of information process. 

In Luxemburg, a concerned person is not notified of the request for exchange of information at all. However, the information holder tends to inform the taxpayer about the request until 2014. Moreover, resident and nonresident taxpayers are entitled to raise objections to the request and further delivery of the information with the administrative courts. The situation has changed in November 2014, when the Luxemburg parliament approved the revision to the Tax code, according to which the tax authority may forbid the information holder to inform the person concerned of the request of information, if the requesting state asked to do so. 

As of 1 January 2014 the Netherlands do not notify taxpayers of the respective request. Although, before this date the Netherlands tax authority usually provided for a notification procedure as well as for the right to appeal against the delivery of the collected information on the local taxpayers. Such practice was criticized by the Global Forum in 2013 since the appeal process is very time consuming and may be used as a delaying tactic. 

The Ukrainian legislation does not provide for the notification procedure or the right of a taxpayer to appeal against the transmission of the information. 

Ukraine has ratified the Convention on Mutual Assistance in 2008 and the Protocol thereto in 2013 that facilitates the process of information exchange between Ukraine and other signatories’ countries. 

Also, Ukraine has signed a number of DTT (based on the OECD Model) containing the respective provision regarding the exchange of information in the Article 26. According to the said Article the requested information about a taxpayer shall be treated as confidential and the requested country has the right to disclose such information only to the competent authority (court of law or other authority responsible for the administration of taxes). 

According to the national legislation the exchange of taxpayers’ data is governed by the Order of the Ministry of Finance of Ukraine no. 1247. According to the said Order, the information under the request may be provided only if (i) there is the respective international agreement between the states and (ii) if there are reasonable grounds to believe that the taxpayer’s activity allows to hide certain income from taxation.

In general, the procedure for satisfaction of the foreign authority’s request for information is rather vague and the decision is taken in every particular case at the discretion of the tax authority. For instance, according to the Order the request may be rejected if:

• there is no DTT or other international agreement between Ukraine and the requesting state;
• the request is sent by an incompetent authority;
• the requested information is not considered by the Convention on Mutual Assistance or collection if such information goes beyond the competence of the tax authority. 

As to the automatic exchange of information, Ukraine has not signed the Model competent authority agreement yet and is still at the stage of implementation of the AEOI standard. Hence, as for now, the exchange of information on request is the most widespread instrument of receipt of the information about the taxpayers for the Ukrainian tax authorities. 

Following the global trend of transparency and combating tax evasion from 2013 Ukraine is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The membership in the Global Forum provides Ukraine with the opportunity to have access to the analytic and theoretical base of the Forum in order to use the instruments on combating tax evasion more effectively. 

Also in April 2015 the Cabinet of Ministers of Ukraine approved the draft agreement with the US government aimed at fulfillment of the provisions of the FACTA and authorized the Ministry of Finance of Ukraine to sign the respective agreement. By signature of the said agreement Ukraine undertakes to inform the IRS on every bank account in Ukrainian banks opened by American taxpayers and their affiliates. After the official signature of the agreement it will be ratified according to the national legislation of Ukraine. 

Conclusion

Sharing the information about taxpayers’ activities in other jurisdictions is crucial in the global trend of combating tax avoidance schemes. The OECD initiatives resulting on Global Standard for automatic exchange of information and the BEPS action plans will finally and inevitably eliminate the last obstacle in this way – the lack of transparency. 

However, incensement of transparency, cooperation, and accountability among financial institutions and tax administrations raises substantial concerns regarding the protection of taxpayers’ rights for confidentiality of personal data and for challenging the collection of the information. 

Thus, it is highly important that at least minimal standards related to the taxpayers’ rights are being introduced in the national legislation of the countries in the process of implementation of the global standards on automatic exchange of information.

By Iryna Kalnytska, Senior Associate, Gvozdiy & Oberkovych Law Firm

Goltsblat BLP has advised the Russian Federal Agency for State Property Management (Rosimushchestvo) on a shareholders agreement with the Republic of Bashkortostan on voting by and disposal of shares in the Bashneft oil company.

Pursuant to the Agreement, the parties undertook to exercise shareholder rights in relation to the preparation and voting at general shareholder meetings of Bashneft, as well as at Board of Directors meetings on key operational issues, such as approval of the development strategy and budget, determination of dividends, approval of major transactions, election of the Chairman of the Board of Directors, appointment of the President of the Company, and other matters. The Agreement also sets out the parties’ obligations regarding disposal of Bashneft shares.

Goltsblat BLP’s team included Partners Anton Sitnikov and Matvey Kaploukhiy, and Anton Panchenkov, Head of Group, Corporate/M&A.

Image Source: bashneft.com

CEE Legal Matters is a proud partner of the 8th annual SEE Private Equity and Mergers & Acquisitions Forum due to take place in Belgrade on September 24.

Leading up to the event we spoke with Rob Irving, Private Equity Partner and Co-Chair of the Global Private Equity Group of Dentons, an international law firm that is co-sponsoring the conference, in order to learn more about what we can expect next week.

R.I.: Last year we co-sponsored the conference with EY, who brought it to our attention. M&A and private equity in SEE are core to our practice and being involved in the event and supporting the business and legal community involved in M&A in the region made a lot of sense for us. This is by far the highest profile conference dedicated to the topic of M&A in the SEE region. There are indeed some others dedicated to CEE and some other smaller ones but this particular conference is by far the biggest event and last year it experienced a renewal of sorts, registering very strong attendance and people who were very excited to be there.

R.I.: The market dynamics played a big role. M&A activity was generally quiet in the SEE region between 2001 and 2012, and especially after the crisis in 2008. While in Poland – which recorded the highest economic growth rate in the EU between 2008 and 2012 – big M&A deals regularly happened and to some extent in the Czech Republic as well, the former Yugoslavia was fairly quiet until 18 months ago, when pent-up demand seems to have been unleashed. 

In Slovenia for example, more than 60% of the economy is state-owned directly or indirectly. This is a result of the fact that a lot of the privatizations carried out in the 90s or early 2000 were made to local groups which overleveraged themselves in the process. Once the crisis hit they had trouble repaying that debt, the banks foreclosed on the underlying companies and with some banks being nationalized the state ended up owning a great deal of the economy.  When the Greek crisis first hit and southern Europe wobbled, the Slovenian government came under pressure from the EU and IMF to initiate a privatization program in order to not be forced into a bailout. 

In Croatia, a bit of privatization is happening.  However, more interestingly, there are a number of large domestic groups such as Agrokor, Adris grupa, or Atlantic Grupa that hold large diversified business portfolios. Increasingly, they are looking to optimize such portfolios by selling those assets which promise lower growth and reinvest in higher growth businesses. 

In Serbia, while not a lot of big ticket M&A occurred in the aftermath of the crisis, the government is now very keen to start stimulating it and, as part of this, they are looking to privatize several companies including Serbia’s second largest bank, Komercijalna Banka,Telekom Srbija, and the Belgrade Airport – all of which seem to be generating interest. At this point it does however depend a lot of whether the type of buyers and the prices they are willing to pay match up with expectations of the government. For example, the primary interest in Telekom Srbija at the moment appears to be from financial buyers with less interest from strategic investors like Deutsche Telekom, Telekom Austria, or Orange that the government might have been more keen to attract. 

R.I.: Politically privatizations in SEE are always difficult, with questions revolving around whether the population is really behind them, whether the business community in the country in question are behind them, whether the government is truly committed – all of these are big questions especially when types of buyers and prices they are willing to pay may not be what they would have been 10 years ago. 

There are two competing philosophies when it comes to privatizations: one according to which you should be very careful, find the right buyers, and wait for the right prices, as opposed to operating based on the assumption that it is better to get assets in private hands as quickly as possible and let the market play out. In the latter, you are more concerned with running an open, fair, and transparent tender process and letting the pieces fall where they may. It is difficult to say in which of these ways SEE countries will act. For example, Slovenia adopted the second philosophy in privatizing NKBM, its second-largest bank, while was more protective of Telekom Slovenia.  In Serbia, for example, it is an open question as to what route they will take. 

R.I.: I’m expecting some nice debates. Matej Runjak, a Member of the Management Board at the Slovenian Sovereign Holding, has been involved in some very high profile privatizations – both successful and unsuccessful – and it will be interesting to hear his insights as to what went wrong when it did and what were the key ingredients behind the successful deals. 

It will also be interesting to also hear the comparison of Serbian and Slovenian privatizations with the former not being as influenced by EU state aid law. Despite the fact that Serbia does have an agreement with the EU, which requires it to use reasonable efforts to observe EU principles, it does benefit from more flexibility in their legislation than other countries, which can influence a deal greatly. For example, when you look at these transactions, the absolute need in EU privatizations to treat bidders equally and transparently can sometimes be difficult in the dynamic of a transaction where one bidder may want to bid with an apple and another with an orange.  In a private transaction, one would have the flexibility to compare the apple with the orange, but in an EU privatization a seller must drive the deal in order to be in a position to compare apples and apples even though a buyer might be able to give you a better more attractive deal with an orange.

R.I.: We hope to be back as a sponsor next year as this is an event which is very important to us. The region is going to continue to see a lot of M&A activity and an evolution in that activity in the next 12 months, so assessing the activity 12 months and forecast the longer term future at that time will be exciting. In some parts of the world you have a half dozen of these kinds of conferences whereas this is THE conference in SEE. So once a year having opportunity to draw a line for the previous year and look through the crystal ball and discuss the upcoming year is a must. 

 

Borenius has announced that it is withdrawing its brand from the Baltics, and that its offices in Lithuania, Estonia, and Latvia will — after a “locally defined” transition period — “continue their operations outside of the Borenius Group brand alliance.”

According to Borenius, “this decision was supported by recent legal market changes in the Baltic area and by our firm’s focus on developing its core business under the Borenius brand.” The firm emphasized that its Baltic offices were already separate legal entities owned by local partners, and the logistics involved will thus be fairly minimal. The firm reports that it “will carry on building on and strengthening its current presence in Finland, Russia and the United States.”

Capitalizing on the opportunity, Sorainen announced that former Borenius Lithuania Managing Partner Daivis Svirinas, and Zygimantas Pacevicius, the former head of the dispute resolution practice in that office, have agreed to join its team in Vilnius, along with another eleven qualified lawyers.  

Svirinas has been Managing Partner at Borenius Lithuania for the past 5 years, and has also headed the office’s competition and energy practices. Now he will head the Competition & Regulatory Team at Sorainen Lithuania, which includes the Competition, Energy & Utilities, Infrastructure & Regulatory and EU Law practices.

For his part, Pacevicius will be a Partner with the Sorainen Dispute Resolution Team.

The team of lawyers joining Sorainen with Svirinas and Pacevicius includes IP/IT and Dispute Resolution specialist Stasys Drazdauskas, plus Attorneys-at-law Jurgita Karvele, Jonas Kiauleikis, Julija Kirkiliene, Laima Kuncinaite, Simonas Skukauskas, Andrius Sidlauskas, and lawyers Monika Malisauskaite, Natalja Moll, Ieva Cumacenkaite, and Ingrida Kryzauskiene.

Svirinas said of the change: “We have always striven to ensure the highest quality of legal services to our clients. Client expectations have been growing lately and this further stimulates the ongoing consolidation of the legal services market. Having seen the agile growth of Sorainen in the Baltic States and Belarus, we decided to join this firm with which we also share the same professionalism, high standards and approach towards the quality of legal advice. Sorainen will be strengthened by the accession of our team and thus even better placed to ensure top quality services to our clients.”  

Laimonas Skibarka, the Co-Managing Partner of Sorainen and the office Managing Partner of Sorainen Lithuania, said: “We are glad that Daivis Svirinas and Zygimantas Pacevicius have decided to join our firm, bringing with them a strong team of lawyers. They will further strengthen our practices in competition, energy and dispute resolution and will contribute to helping our clients succeed, which is our core purpose.” 

Kocian Solc Balastik has helped the CART electric device manufacturer win a lawsuit against the Czech Environmental Inspectorate, which had imposed a penalty on it for allegedly failing to abide by the Electric Waste Act. The penalty, which the Ministry of the Environment confirmed, was rescinded by the Municipal Court in Prague as unlawful.

The dispute dates back to 2005/2006 when the Ministry sought to appoint – for each of the ten electrical and electronic equipment (EEE) categories for electrowaste collection – a single operator of a collective system for electrowaste handling as a so-called monopoly fund manager. 

KSB successfully represented REMA System (an affiliate of CART), which had unsuccessfully tendered to become the monopoly fund manager in several categories of EEE. As a result of this victory, the Ministry’s original selection of the monopoly fund manager was abolished. At the same time, all penalties imposed on manufacturers of EEE were cancelled. Finally, the law applicable to the issue was amended and the monopoly of “fund managers” eliminated.

The KSB team consisted of Vaclav Rovensky, Tomas Sequens, and Petra Mirovska.

Image Source: f1street.com