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Glimstedt has advised Gazprom of Russia on its sale of 37 percent of its shares in the AS Vorguteenus Valdus gas transmission network in Estonia to Estonian electricity transmission system operator Elering for EUR 19.9 million. Elering was advised by Red Legal. The deal was signed on June 19, 2015, and the acquisition was completed on June 22, 2015.

Following the acquisition Elering now holds 89.1 percent of the stock capital of AS Vorguteenus Valdus. Elering had acquired Fortum’s holding in Vorguteenus Valdus at the beginning of this year and the holdings of additional smaller shareholders in June. All the shares were obtained by Elering using the same pricing model.

Elering has reported that its goal is to become the sole owner of the transmission network and bring management of the electricity and gas networks together in one company.

 

CMS has advised IPF Investments Polska — a company belonging to the international financial group International Personal Finance plc (IPF plc) — on a bond issue on the Warsaw Stock Exchange. IPF is dual-listed on the London and Warsaw stock exchanges.

The new debt instruments, with a nominal value of PLN 200 million, were issued in a public offering without an issue prospectus. The bonds are listed from June 29, 2015 on the Alternative Trading System operated by the Warsaw Stock Exchange (ATS WSE) and BondSpot SA in Catalyst structure. 

According to data provided by the Warsaw Stock Exchange, the value of issued bonds listed on the Catalyst market at the end of June 2015 amounted to PLN 67 billion, an increase of 1.2% year on year. 

“Raising capital through the WSE may be a good way to diversify sources of financing,” said CMS’s Jakub Rachwol, “especially for companies with a good reputation and high ratings. In the case of companies operating in Central and Eastern European markets, listing on the WSE can increase their credibility on the local market. This is also true if they introduce their own securities to the market. For example, issuing company bonds on the Catalyst market involves obligations to disclose information, and this can increase the credibility of the entity, which is important, for example, in cooperating with financial institutions in negotiating loan agreements and working with local partners.”

The IPF group specialises in making cash loans, and the funds it acquires through the bond issue will be spent on ongoing operations. The group operates in Poland, Lithuania, Romania, Bulgaria, the Czech Republic, Slovakia, Hungary, and Mexico. It also operates digital services in Finland, Estonia, Latvia, and Australia. In Poland, the International Personal Finance group owns Provident Polska SA.

The CMS Polish team that worked on the bond issue was led by Partner Malgorzata Chrucciak, and included Associates Jakub Rachwol and Rafal Kluziak.

 

Tark Grunte Sutkiene has advised INVL Technology, a company investing in information and communication technologies, on its successfully-completed public offering of shares with a total issue price of over EUR 10 million and admission thereof to trading on the NASDAQ OMX Vilnius. According to TGS, the new share issue is the largest in the Baltic States since 2011.

TGS reports that, in aggregate, 126 investors subscribed the newly issued shares. Existing shareholders acquired new shares of INVL Technology for the amount of EUR 4.5 million, with institutional investors acquiring shares worth EUR 1.7 million, and retail investors worth EUR 3.8 million.

INVL Technology operates as a cluster of B2B and B2G-oriented IT businesses with a focus on four key areas: business climate improvement and e-governance, IT infrastructure, cyber security, and IT intensive industry solutions. 

TGS “provided all legal services throughout the process, drafted all necessary transaction documentation, and advised on regulatory issues relevant to the completion of the share public offering. [It] also developed a new share issue prospectus, as well as all other documents related to the project and represented the client before the Bank of Lithuania and the Central Securities Depository of Lithuania.”

The firm’s team was led by Partners Vidmantas Drizga and Agnius Pilipavicius and Senior Associate Mantas Gofmanas.

 

Baker & McKenzie is acting as legal advisor to the European Bank for Reconstruction and Development (EBRD) on the Corporate Governance Reform of Naftogaz, one of the biggest state-owned Ukrainian companies in the fuel and energy sector.  

Baker & McKenzie’s contribution to the reform has so far included analysis of the relevant Ukrainian legislation and the company’s internal regulations and preparation of an action plan for improving regulations and laws to implement corporate governance reform at Naftogaz.  

According to Baker & McKenzie, “the reform will enable Naftogaz to make fundamental changes in its governance transparency and operational efficiency, and help reform the gas sector and improve the investment attractiveness of state oil and gas assets. The aim is a significant restructuring of Naftogas for the benefit of the Ukrainian economy.”

The Kyiv team working on the project is led by Partner Olyana Gordiyenko, supported by Senior Associate Olena Kuchynska.

 

Kennedys opened an office in Moscow — its first in CEE — in May, operating in an arrangement with CIS Advocates under the name Kennedys CIS Advocates. The office is based at 1 Usacheva Street, in Moscow.

Russian advocate Constantin Saranchouk is managing the firm’s operations in Moscow. Saranchouk previously headed Clyde & Co’s insurance practice, and the Moscow office of Kennedys will carry the firm’s traditional insurance focus as well, attracting work from Saranchouk’s and its own client base of international insurance groups and London Market insurers, as well as major Russian insurance companies.  

“I have known Kennedys’ partners for the last ten years,” Saranchouk said of the office opening, “having been jointly instructed by mutual clients on a number of occasions. The firm has an excellent reputation in the insurance market and a growing international reach that will appeal to my client base. Given the current levels of activity in the Russian energy, construction and aerospace markets, and a rise in disputes, I expect the office to attract contentious instructions from both international insurers as well as major Russian carriers.”   

Saranchouk is joined by Associate Irina Molchanova, who specializes in high value insurance claims and insurance disputes in Russian commercial courts and international arbitration.      

 

Paksoy has advised the International Finance Corporation (IFC) on its issuance of TRY 100 million discount notes, becoming the first international finance institution to issue Turkish Lira denominated debt instruments.

The issuance is part of the IFC’s Global Discount Note Program, and benefited from the exemptions for international institutions to which Turkey is officially a member or partner. The exempt status of the IFC was recognized and initially introduced by the Capital Markets Board of Turkey (CMB) while reviewing IFC’s application.

Paksoy’s Capital Markets team — led by Partner Omer Collak, working with Senior Associates Okkes Sahan and Serdar Ildirar — acted for the IFC on what Paksoy describes as “ his landmark transaction,” and managed the cooperation with the CMB for introduction of the exemptions to the applicable legislation.

 

CMS has successfully advised the Value4Capital private equity fund on the sale of its portfolio company Home.pl to 1&1 Internet SE, a subsidiary of United Internet. White & Case advised United Internet on the deal, which remains subject to anti-monopoly clearances, and is reported to be for PLN 640 million (approximately EUR 150 million).

According to CMS, “Home.pl is the leading provider of cloud-based services to the SME sector in Poland and the rest of Central and Eastern Europe. The company’s services include: registration of Internet domains, web service hosting, email account hosting, offering business applications, and cloud-based products.” The new owner, 1&1, is a provider of Internet services with a presence in Poland, Germany, Austria, United Kingdom, Romania, France, Spain, Italy, USA, Canada, and Mexico.

“Considering the scale of interest in the target company from both strategic and financial investors, the competition in the sale process, the return on investment to the PE fund and the price obtained,” noted CMS Partner Marek Sawicki, “this could presumably be one of the most prominent and interesting deals in Poland this year.” 

Along with CMS, Ernst & Young, PwC, and ING Bank acted as advisors to Value4Capital. CMS’s team was led by Sawicki, who was supported by Associate Izabela Gebal.

The White & Case team advising United Internet included Partner Piotr Szelenbaum and Damian Beaven, Local Partner Aneta Hajska, and Associates Jacek Polewski, Malgorzata Mroczek, and Katarzyna Kahl.

 

On June 24, 2015, CEE Legal Matters reported that CMS Partners Malgorzata Urbanska and Malgorzata Surdek had teamed up with Allen & Overy Partner Marta Sendrowicz to represent P4 Sp. z o.o. (doing business as Play) in a successful appeal of a decision by the President of the Competition and Consumer Protection Office before the Polish Court of Competition and Consumer Protection. As we reported at the time, after considering the matter, the Court “repealed a decision of the President of the Competition and Consumer Protection Office to impose a multimillion-dollar fine for P4’s alleged involvement in a cartel of four mobile operators (Orange, T-Mobile, Plus, and P4). The alleged cartel was connected with a refusal to buy DVB-H standard mobile TV services.”

We reached out to Dominika Niewiadomska-Siniecka, the Head of Legal at P4, with Five Questions about the matter.

D.N-S: On September 2010, the President of the Polish Office for Competition and Consumer Protection (OCCP) commenced antitrust proceedings [against P4] concerning, among others, our alleged anticompetitive practices consisting in our refusal to enter into what we believe was an unfavorable agreement with Info TV FM in September 2010. From the very beginning of this proceeding, P4 was represented by Ms. Sendrowicz from Allen & Overy. It is partly thanks to her mastery, knowledge, and skills that P4 avoided a penalty for obstructing OCCP inspections at our premises, which is something that two other mobile service operators had not managed to avoid. Awareness of antitrust law in P4 was and is high; therefore, the initiation of proceedings against us was a shock. In our view, our actions were correct and arose from individual business decisions; we had nothing to complain about. Until the last moment, we were hoping for the discontinuance of the proceedings. Unfortunately, on November 23, 2011, the President of the OCCP issued a decision holding that we had participated in a cartel together with Plus, Orange, and T-Mobile. To me, it was a matter of honor and priority. We had 14 days to write an appeal against the decision. I made the decision to invite Ms. Surdek and Ms. Urbanska from CMS to cooperate with us. I knew that they are very hard-working, committed, and extremely effective. We needed to prepare the appeal, which would be written in simple terms and understandable to the court, because the essence of the case covered numerous technical details. The effect of the cooperation between our “Three Musketeers” results in us winning in court. Personally, I think that we should not be afraid of such alliances. Taking the time to prepare a good strategy process, to properly select attorneys conducting the case, distributing the duties, constantly cooperating and coordinating – all that is more than half the battle. Of course, such a solution requires more work and discernment from the in-house lawyers — but it is worthwhile.

D.N-S: Orange, T-Mobile, and Plus filed similar appeals, which were registered with the Competition Court under three separate file numbers. However, at the first court hearing before the Competition Court, all four cases were merged into one with four claimants acting against the OCCP President. Each claimant was represented by its own attorney. In theory, one attorney-in-fact could have represented all four mobile service operators. However, the conduct of each of us was different and we adopted different strategies to process. Please note that this kind of process means a ton of records, statements, data that your attorney needs to know. In addition, close cooperation between the company and the external lawyers is very important. Each company has its own rhythm of work, its own decision-making process. I personally would not agree to joint representation because it would affect the quality of services.

D.N-S: The case relates to the tender proceedings for the reservation of 470-790 MHz frequencies. Info TV FM won the aforementioned tender. One of its obligations under the reservation decision relating to this tender was to make wholesale, offers regarding DVB-H based services. All of the major mobile service operators (Plus, T-Mobile, Orange, and Play – “4 MNO”) rejected the wholesale offer of Info TV FM. According to the OCCP President’s decision, we breached the Polish and European competition laws by coordinating with these others operators, exchanging information as to the evaluation of Info TV FM’s wholesale offer for providing DVB-H mobile television services, and agreeing to publicly question that offer. We are waiting for a written justification of the verdict. However, in the Court’s opinion, the President of the OCCP did not prove a lack of independent market conduct on the part of the 4 MNOs. He pointed out that rejection of the wholesale offer of Info TV FM was based on objective reasons rather than anti-competitive conduct, such as: (i) the financial crisis on the market; (ii) euro inflation; (iii) problems with DVB-H technology; (iv) the development of alternative technologies for mobile television; and (v) the fact that the Info TV wholesale offer was not acceptable.

D.N-S: The role of an in-house lawyer in such cases is significantly broader than just gathering evidence.  He or she is responsible for the entire strategy of the process, starting from the selection of external advisors (including lawyers), through the process of familiarizing them with the case, through determination of the scope of the submission, including evidence, through building a bridge between the company and external lawyers, to coordinating the efforts and making final decisions, and so on. In this specific case, our witnesses played a significant role.  Their explanations were very reliable and clarified in a simple manner the motives behind the company’s decisions.  In my view, in the case of complex proceedings, witness statements which are clear and which restructure the knowledge are invaluable.  They make it easier for the court to develop an opinion on a given issue.

D.N-S: This was the first and last time for the Company. However, in our sector, throughout Europe, anti-competitive practices do happen. For instance, in 2013, the President of the OCCP initiated antitrust proceeding against the PLUS, T-Mobile, and Orange network operators to determine whether the application of higher mobile termination rates to the Play network by the three operators constitutes a practice limiting competition. The price per one minute from the networks of the aforementioned operators to the Play network was higher by several dozen grosz than for connections among their own networks (for instance, under one of the tariffs, the cost of a connection to the Play network was 75 grosz, while connection to operators – 29 grosz).  We are awaiting the decision of the President of the OCCP in this matter. 

 

Noerr has advised the China Fire Safety Enterprise Group Limited (CFSE) on the acquisition of a 40% interest in the Albert Ziegler Group from the China International Marine Containers Group (CIMC), which in turn acquires 30% of the shares in CFSE. The value of the transaction is approximately EUR 56 million.

The Albert Ziegler Group, which is headquartered in the German state of Baden-Wuerttemberg, is one of the world’s largest manufacturers of fire fighting vehicles and accessories, with subsidiaries across Europe and Asia. It has been part of the Chinese logistics group since 2013.  

The Noerr team advising the China Fire Safety Enterprise Group Limited on German and Czech law and coordinating the transaction was led by Berlin-based Partner Tibor Fedke and Associate Partner Tom Billing, supported by Associates Katrin Andra, Julia Gerzen, Fabian Raddatz, and Hanna Boeckmann. Prague-based Partner Barbara Kusak and Associate Halka Pavlikova were also on the team.

The Chinese Michael Li & Co. law firm worked alongside Noerr on the deal.

 

A number of encouraging trends relating to white collar crime in Russia developed in 2014.

Liability for Unlawful Remuneration

The number of companies held administratively liable for unlawful remuneration on behalf of a legal entity doubled (liability of companies for unlawful remuneration on behalf of a legal entity – i.e., bribery or commercial bribing – was introduced for the first time into the Russian Administrative Offenses Code in 2008). 

Intensification of Efforts to Prosecute Corruption-related Administrative Offenses 

The efforts of the prosecution authorities of the Russian Federation to initiate proceedings against companies in corruption-related administrative offenses intensified. 

A company shall normally be held administratively liable after a court decision enters into force regarding charges against the company’s employee of corruption-related crimes (e.g., bribery, commercial bribing). And the offenses, once established, shall be penalized with fines calculated as a multiple of the bribe or corrupt payment. 

A company may protect itself from administrative-corruption offense allegations through compliance with Russian anti-corruption laws, including the development and implementation of standards and procedures meant to ensure a company’s operation in good faith, the adoption of a Code of Business Conduct and Ethics applicable to the company and its employees, zero tolerance of forged documents, and cooperation with law-enforcement bodies. 

Increased Findings of Liability

The number of legal entities and individuals (i.e., company CEOs) held administratively liable for illegal employment or engagement of state or municipal officers and former state or municipal officers in As with many countries, Russian legislation contains a set of rules aimed at preventing and resolving conflicts of interests on the state and municipal side. One significant rule is that, when hiring a former state or municipal officer, a company must notify that person’s former employer within ten days. This requirement applies for two years after the individual’s dismissal from the state or municipal office, regardless of how many jobs the person has had during that period. 

Last year, when monitoring companies’ compliance with the anti-corruption laws, the prosecution authorities started focusing on the settlement of conflicts of interest at state and municipal office and actively used their powers to initiate proceedings of administrative offenses. 

Self-Reporting Became More Common

Introduction of anti-corruption standards and procedures, as well as internal monitoring of compliance by companies, can lead to the identification of acts that suggest administrative or criminal offenses. And under Russian law, criminal proceedings in relation to a corrupt payment in a profit-making organization may be instituted at the request of the business entity, provided that the damage was solely to this organization. In 2014, applications to the law-enforcement bodies by companies following internal compliance investigations became more common.

Significantly, although Russian criminal procedure legislation does not require companies to report corruption-related crimes, and criminal law does not provide liability for failure to report crimes, the anti-corruption laws require that organizations cooperate with law-enforcement bodies. 

New Laws Permitting Seizures During Search

Starting from 2013, documents, computers, and computerized information may be seized (i.e., obtained during a legitimate search on company premises), even during a preliminary examination – i.e., after the crime report has been registered but no order to initiate criminal proceedings has yet been issued. All information thus obtained may be used as evidence once criminal proceedings have been initiated. Such seizures should be documented with an on-site inspection report that is not given to the company representatives, making it difficult to appeal the actions of law-enforcement agencies.

A company’s election to report a crime is not a remedy against such seizures, even when the company is willing to fully cooperate with the law-enforcement bodies. 

Conclusion

It is expected that in addition to the further development of the above-mentioned trends, there will be a further tightening of legislation on criminal liability of legal entities for corruption-related crimes. A draft bill providing for criminal responsibility of legal entities for almost forty different offenses, including commercial bribery and bribery, has been submitted to the State Duma of the Federal Assembly of the Russian Federation. Multiple fines have been suggested as punishment for these crimes. 

By Victoria Burkovskaya, Partner, and Tatyana Nozhkina, Counsel, Egorov Puginsky Afanasiev & Partners

This Article was originally published in Issue 2.2. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.