CEE Legal Matters

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  • Baker & McKenzie Advises Dogan Group on D-Market Stake Sale

    The Esin Attorney Partnership — a member firm of Baker & McKenzie International — has advised the Dogan Group on the sale of 25% of the shares of D-Market Elektronik Hizmetler Ticaret to the Abraaj Group, which was represented by the Verdi Law Office in Turkey, and Freshfields in Dubai.

    D-Market, which is owned by members of the Dogan family, operates Hepsiburada.com — Turkey’s leading e-commerce site — as well as Evmanya.com and AltinciCadde.com. The deal was signed on December 30, 2014 and closed on February 20, 2015.

    Dogan Holding, founded by Aydin Dogan in 1959, is a leading Turkish conglomerate operating in the energy, retail, industrial, real estate, tourism, and financial services sectors. The Dogan Group primarily focuses on Turkey’s media sector. 

    The Esin Attorney Partnership described Hepsiburada — which was founded in 1998 and offers a selection of over 600,000 products in 30 categories such as electronics, sporting goods, home goods and pet care — as “Turkey’s leading multi-category e-commerce site.” 

    The Abraaj Group is a Dubai-based private equity investor operating in high-growth markets. Employing over 300 people, Abraaj has over 25 offices spread across six regions with hubs in Istanbul, Mexico City, Dubai, Mumbai, Nairobi, and Singapore. The Group currently manages USD 7.5 billion across more than 20 sector and country-specific funds, encompassing private equity and real estate investments. Abraaj’s investment in Hepsiburada marks its ninth transaction in Turkey since 2007.  

    M&A Partner Eren Kursun and Associates Gul Incesulu and Mehmetcan Atasoy advised the Dogan Group on the cross-border deal. According to Kursun: “The recent transaction is a sign of Turkey’s growing e-commerce sector and paves the way for Hepsiburada to expand regionally. Over the past couple of years, we’ve seen increased interest in Turkey’s e-commerce sector from international companies and we are proud to have taken part in a number of transactions that demonstrate this interest.”

  • BBH Partners Makes New Partner

    BBH has announced that lawyer Katerina Vorlickova has been promoted to partner in the firm’s Prague office, where she specializes primarily in Corporate/M&A, contracts, and due diligence.

    According to BBH, Vorlickova focuses particularly on investments and acquisitions in the Russian Federation, including in the preparation of transaction documentation relating to the acquisition of a Russian insurance mediation company operating in Russia, Ukraine, and Kazakhstan. The firm also described Vorlickova as being involved in the “preparation of the transaction documentation and other legal acts for the acquisition of one-third share in a Russian credit organization,” and as “representing the largest Russian engineering company in the process of its acquisition of a Czech company providing engineering and supply services for the realization of industrial plants in the petrochemical area.”

    Vorlickova joined BBH in 2007, after working from 2003-2007 as a trainee with Pokorny Wagner & Partner. She graduated in 2003 from the University of West Bohemian Pilsen, Faculty of Law, and obtained an LL.M. in 2007 from Tilburg University in the Netherlands.

  • The French Recipe: Gide’s Regional CEE/SEE Hub

    The French Recipe: Gide’s Regional CEE/SEE Hub

    Late this November, Partners from Gide CEE offices met in Budapest with Gide’s SEE Group correspondent firms for one of their regular gatherings. CEE Legal Matters took the opportunity to sit down over a double espresso (enjoyed by the CEELM Editor) and an electronic cigarette (enjoyed by the Partner and craved by the Editor) with Francois d’Ornano, Partner in charge of Gide’s Budapest office and of the SEE Group who lived in Budapest until returning recently to Paris, and with Ioana Knoll-Tudor, Associate at the firm who is d’Ornano’s right hand when it comes to building the firm’s SEE Group.

    Gide’s Budapest Hub

    While “Hub” is not the official name set by the firm, the Budapest office has been gradually evolving over recent years towards operating as a hub for the firm’s SEE operations. Despite an impression that the French firm might be losing interest in the region following pullouts in Serbia and, more recently, Romania, d’Ornano explained that the firm has been undergoing a process of  “reorganization based on two principles: (1) profitability and (2) efficiency.” He explained that while CEE was the first region in which the firm expanded internationally, in light of recent changes, especially in the economic climate, the firm had decided to structure its presence differently in the region by “maintaining a strong presence in Eastern Europe – Poland, Ukraine, Russia, Turkey – while for the rest of the CEE/SEE region building up a strong network of correspondent firms coordinated out of Budapest.” D’Ornano explained that the drive was to be able to “follow and serve the clients, wherever they operate, by taking a coordinated regional approach that did not compromise on quality, even where the firm is not directly present with an office.” According to the SEE Group head, “clients perfectly understand this approach, because they acknowledge the firm cannot physically be present everywhere.” In other words, he noted, “if you try to be everywhere, you end up being nowhere.”

    D’Ornano also explained that the impression that the firm is losing interest in the region could not be further from the truth, demonstrated by the considerable investment the firm has made towards building up the Budapest office as a regional hub. He pointed to recent hires designed to build a regionally-focused team, including that of Balazs Kutasi from Allen & Overy to head the Dispute Resolution practice, Dasa Vukelic (a UK solicitor of Slovenian origin) from White & Case who specializes in private equity, and the dual-qualified (Hungarian and Romanian) Anna-Maria Veres, who specializes in corporate law and M&A transactions. The firm has also invested in bringing an expat from Paris – Senior Associate Franck Audran – to co-head the Budapest office together with Akos Kovachon, a decision d’Ornano cited with a smile as an illustration of the firm’s commitment to the region, since “moving an expat is never cheap.” The firm is also expecting to add other lawyers able to cover other jurisdictions in the near future. 

    “Focus on Practicalities”

    In light of the regional network that the firm has been developing, the natural question that arose was why the firm felt the need to build a regional team in Budapest. After reflecting for a second, d’Ornano said simply, “I’m a practical guy.” He explained that he likes “having people in one place that possesses a true regional perspective,” and, pointing towards Knoll-Tudor, said, “like someone who is Romanian, did her legal studies in France, has spent five years in Gide’s Warsaw office, and is now in Budapest.” He went on to say that “not only is the region more interesting if you are able to understand it as a whole, but we also need people who understand the individual, local markets to be able to effectively work with the correspondent firms by understanding the local issues first hand. We need to do this because, for us, it is not just a matter of transferring the file to the local correspondent. We actively work on the file from within the Gide office, meaning that we can sell the product as a Gide/international product.” 

    Knoll-Tudor added: “as a result of this approach, the Budapest team can currently draft directly in Romanian, Slovenian, Serbo-Croatian, Polish, and naturally Hungarian, with the set of local expertise likely to grow in the near future.” She explained that, “our correspondents on the ground are critical, but we are not fully dependent on them. We wanted to make sure that our Budapest regional stamp is really more than just a stamp, but forms a genuine regional team.”

    The firm also needs to be able to be proactive in these local markets, d’Ornano explained, since real client focus means also having the capabilities to reach out to local potential clients directly. 

    Building and Managing the Network

    When asked how the firms in their network were picked, d’Ornano explained that it was done on a case-by-case basis. Certain offices, such as Romania and Serbia, are former Gide offices. Others were recommended to him and, after meeting with them, he became convinced they were a good match. “There are some common denominators,” he explained. “They are all young, dynamic, and independent teams. They are also manageable (not too big) and share the same values and client focus. All the teams we work with have an international background, meaning that critical aspects for our clients such as conflicts of interest, confidentiality, etc., are uncompromisingly adhered to.” He added, “we also selected them because of a shared approach to legal advice that is heavily business-oriented.”

    As to Gide’s unique selling points when reaching out to local firms to include them in the network, d’Ornano pointed out that, most importantly, neither side is committed to exclusivity (except in Serbia). The second aspect, in his view, is the fact that, unlike other international firms looking to set up networks in the region, Gide already has over 25 years of first-hand experience in it. 

    We also asked about the main challenges they have in terms of managing a network with such a broad geographical scope. D’Ornano’s answer was that “quality is always the primary focus,” and they are building up the SEE Group specifically to be able to ensure that “Gide service” is offered to all clients. 

    Gunning for Regional Cross-Border Work

    The end result of this strategy over the last couple of years? D’Ornano was excited at the beginning of the sit-down when speaking about the recent gathering in Budapest. He was more than happy to see new attendees, in particular the partners of Chiomenti, their global alliance firm in Italy, actively impressed not only by the network Gide has built up in SEE and how well it runs but also by the level of collaboration between the local firms themselves. Knoll-Tudor pointed out that they were delighted to see that files are now not only being exchanged between Gide and local firms, but that the firms have started sharing between themselves as well. 

    Within this setting, d’Ornano was optimistic about Gide’s ability to pitch for, and deliver on, big-ticket regional cross-border work. He acknowledged that Anglo-Saxon firms have a slight advantage in terms of perception (“they benefit from the same stereotype as a French man deciding to become a chef”) but emphasized that the firm not only has common-law qualified lawyers on its team (in London, Paris, and Budapest), but also a strong local network of professionals who are able to provide advice on local civil law matters. 

    From an office in a CEE capital that has been “historically focused outwards towards the region,” as d’Ornano describes it, and with increasing investments in building up a network in the region, the Head of the SEE Group seems to have all his ingredients in place, and time will tell if the French recipe will work in SEE. 

    This Article was originally published in Issue 6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Experts Review: Serbia: Custody/Authorized Banks

    Experts Review: Serbia: Custody/Authorized Banks

    Serbia is an undeveloped market when it comes to Capital Markets transactions but, judging by the trends of the last few years, it appears that the Custody Services market is growing thanks to a relatively liberal regulatory regime. There are a number of questions to be answered when it comes to an operational regime for the banks performing Custody Services, but it appears that the most frequently asked questions are those regarding the treatment of assets and funds deposited with a custodian – or an authorized bank in the case of bankruptcy/insolvency of a bank – and the liability of a custodian in the case of physical loss of deposited assets. 

    General

    Under the Law on the Capital Market (the “Securities Law”), a bank may perform the activity of a custodian or sub-custodian bank (“custody bank”) if it obtains a license for performing these activities from the Securities and Exchange Commission (“SEC”). The term “custodian services,” as defined in the Securities Law, refers to services that may be exclusively provided by custody banks to the companies managing investment funds, voluntary pension funds, and investment and pension funds. A licensed custody bank remains under the supervision and control of the SEC for as long as it conducts the activities of a custody bank. 

    Services of a similar scope provided to clients other than investment/pension funds and their managing companies are defined as “investment services,” and they may only be provided by so-called investment companies (i.e., brokerage companies) and/or by the banks licensed by the SEC (“authorized banks”) to do so. 

    A licensed authorized bank will remain under the SEC’s supervision and control for as long as it conducts the activities of an authorized bank.

    According to the Securities Law, investment services are divided into regular investment services and ancillary investment services. Only authorized banks holding an SEC license for all regular investment services may provide a full scope of both regular and ancillary investment services. However, an authorized bank which holds the license for at least one regular investment service may obtain a license for any of the ancillary investment services. 

    A bank not licensed as a custody and/or authorized bank (“credit institution”) may still provide all ancillary investment services (which includes the safekeeping and administration of securities and money accounts), but it may not provide regular investment services (including the reception and transmission of the sale and purchase orders or the execution of client orders). 

    Bankruptcy of Custodian

    Neither the securities recorded in the owner’s securities account or summary account nor the funds (cash) in the client’s money account kept with an authorized bank form part of the property or assets of an authorized bank, nor can they be made part of its estate upon the bank’s bankruptcy or insolvency (or be used for payment of liabilities of an authorized bank toward third parties).  

    However, a recovery of securities would need to be made in the bankruptcy procedure of an authorized bank. In order to accelerate the recovery of securities (i.e. in order to allow market-based monetary compensation rather than recovery of securities) in the event of bankruptcy or insolvency of an authorized bank, the Securities Law provides for the establishment of an Investor Protection Fund (“Fund”). The Fund – acting upon the request of an authorized bank’s client – reimburses the client up to a total amount of EUR 20 thousand (in the Serbian currency equivalent) for all the securities and/or cash held in the accounts for the purchase of securities (cumulatively) before the authorized bank went bankrupt or became insolvent. However, a credit institution as a client of an authorized bank undergoing bankruptcy or insolvency is not entitled to any recovery by the Fund.  

    As it is not an authorized bank, there is no statutory protection for the clients of a credit institution with respect to the securities it held; accordingly, regular rules relating to the recovery of securities in the case of bankruptcy and insolvency of a credit institution would apply. These rules are established by the Law on Bankruptcy and Liquidation of Banks and the Bankruptcy Law. Creditors of a bankrupt bank, including holders of securities, are reimbursed from the bankruptcy estate following the procedure (and in the order) established by the Law on Bankruptcy and Liquidation of Banks and the Bankruptcy Law.  

    Recovery of Lost Assets

    There appears to be no provisions of the Serbian law that would restrict a custodian’s (or its customer’s) ability to recover lost securities. But note that securities, for the purposes of the Securities Law, are described as “simultaneously issued, transferable, electronic, registered documents […]” which are issued, transferred, and recorded in the form of electronic records in the information system operated by the Central Registry of Securities and their records are permanently maintained. This would imply that all securities regulated by the Securities Law are traded on the organized market and are in an electronic-dematerialized form (meaning those securities which are not evidenced by a certificate of title) and cannot be physically lost. 

    By Milica Popovic, Partner, Petrikic and Partneri in cooperation with CMS Reich-Rohrwig Hainz

    This Article was originally published in Issue 6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • The Buzz: November – December

    In “The Buzz” we offer our readers in each issue a short summary of the major and relevant topics of interest in Central and Eastern Europe, provided by those best positioned to know: law firm partners and legal journalists/commentators on the ground in each CEE country.

    Austria

    “Usual end-of-the-year busy times…”

    One of the main aspects currently in the public spotlight in the Viennese market, according to Jasna Zwitter-Tehovnik, Partner at DLA Piper, is the sale of the South Eastern European subsidiaries of the previous Hypo-Alpe-Adria Group. The deadline for achieving the sale has been “more or less set in place by the EU,” for the nationalized bank to be sold off by 2015. According to the DLA Piper Partner, while the transaction with the EBRD and the US private equity fund Advent was making progress it has recently been put on hold and further progress of this highly scrutinized deal is questionable. 

    Aside from that, Zwitter-Tehovnik reported, she and her peers are facing the “usual end-of-the-year closings” but otherwise are involved in no real huge deals (at least that she is able to disclose). 

    On the legislative side, while there are several upcoming changes, she reported that few are likely to be significant for businesses in the country.

    Belarus

    “New regulations set the scene for high-tech sector expansion”

    The legal market in Belarus is optimistic these days about developments in the IT industry, according to Ivan Martynov, Partner at Archer Legal. Ivan pointed out that the recent MAPS.ME sale to Mail.Ru Group (reported on by CEE Legal Matters on November 24, 2014) was definitely one of the largest of its kind in the country. The IT industry, Martynov explained, has been primarily fueled by the Belarusian “High Technology Park,” which offers considerable tax benefits to certain types of IT companies. In fact, many of the success stories in the industry, such as Wargaming.net and EPAM – the first Belarusian company to undergo an IPO in the West – are residents of this Park.

    On November 4, the President extended the scope of companies which may apply for registration in the High Tech Park. Accordingly, microchip manufacturers, nano-technologies companies, and even some types of IT consultancy firms will be able to register as residents, implicitly benefiting from the same tax benefits. “For lawyers, that will likely mean a lot of work coming in from international companies, who were already considering moving production and development facilities to Belarus. If they hear of this new opportunity, there’s a great chance they will decide to push that button,” Martynov explained.

    Estonia

    “Minority shareholders’ rights and state participation in public tenders … just some of the case highlights in Estonia”

    There are a couple of important cases that are being discussed by lawyers in Estonia these days, according to Toomas Vaher, Managing Partner at Raidla Lejins & Norcous. Based on the first, it is not possible for a minority shareholder in Estonia to demand share dividends if the majority shareholders vote to accumulate profits in the company’s interest instead. According to Vaher, there has been quite a serious dicussion in Estonia on whether the minorioty shareholders have sufficient rights to demand it. The Partner explained that the decision clarified that generally the minority has no such rights and, according to the Supreme Court, it is up to the Estonian legislator to decide whether such protection is needed for the minority shareholders, not the courts.

    The other controversial case is an ongoing one related to a public procurement matter involving the ferry service between the Estonian islands and the mainland – a case that the Estonian partner described as “both politically and legally sensitive.” Vaher explained that, for many years now, the ferry service was operated by a private company but, recently, a public tender was launched by the state for companies to bid for the next 10 year period, due to start with 2016. In the first attempt of the tender, the current operator was the only one to participate. However, in a second round tender, a state-owned company was added to the tender list, which went on to win the new contract.

    According to Vaher, there are other important cases going on in the country but these two will leave an important mark in the precedents they create and have been the main discussion point for a while now. 

    Greece

    “Non-performing loans first come to mind”

    Catherine Karatzas, Partner at Karatzas & Partners, told us that the big question mark in Greece at the moment relates to non-performing loans and how banks will deal with them in a timely fashion. According to Karatzas, between the New Code of Conduct introduced in November and potential upcoming changes in the regulatory environment, there are currently several pending questions as to who will be able to purchase NPLs. 

    At the same time, a new potential bankruptcy code is on the horizon in the market – at this point, it is a draft which never passed Parliament but is expected to do so soon according to Karatzas – which may see the introduction of bankruptcy procedures for individuals as well, not just companies.  

    Aside from these potential legislation updates, Karatzas mentioned that the M&A scene seems to have lost some of its momentum, primarily as a result of the pending elections and the likelihood of ensuing political instability.

    Lithuania

    “Everyone is holding their breath over the adoption of the Euro”

    According to Ausra Maliauskaite-Embrekte, Associated Partner at Glimstedt, a range of legislative amendments and regulations have already been adopted in preparation to the transition to the new currency in Lithuania, which will be effective as of January 1, 2015. These include amendments to the Civil Code, the Law on Companies, the Law on Banks and the Law on Payments, and other legislation. 

    Among the most important of the updates that will become effective on January 1, 2015, according to Maliauskaite-Embrekte are the amendments to the Civil Code, which will expand the list of transactions for which the mandatory notarial form is required as well as amendments adopted to the Law on Companies together with a newly-published Law on Expressing the Share Capital of Public and Private Companies and the Nominal Value of Securities in Euro. The latter bring two main changes in Lithuania’s corporate law: (1) a slight decrease in the minimum share capital of both private and public companies, and (2) the nominal value of shares will be expressed in EUR. 

    Other changes related to the transition concern the protections of employees’ interests when it comes to converting wage rates to the new currency. 

    Poland

    “Warsaw increasingly looking towards other cities”

    According to Mariusz Kowalski, Partner at Magnusson in Poland, one of the most interesting trends developing in the market is the “dynamic between international firms, strong local Warsaw-based firms, and the increasingly strong regional firms based in other growing cities.” His take on the market is that international firms are facing increasing pressure both from regional firms – which he described as “not the A&Os or W&Cs of the world but growing regional firms like ours or the WTs” – and local players. What he identified as “rigidity on fees when it comes to compensating for the increased competition,” is leading to increased pressure on partners who are more and more drawn towards “more flexible local players.” Based on the fact that “comparative differentiators between international and local firms are becoming more and more blurry,” Kowalski predicted that the international firms will find the Polish market “increasingly challenging.” 

    This will also result from increased competition from non-Warsaw-based firms coming from cities such as Poznan or Krakow. Kowalski pointed to several conversations with General Counsel, according to whom local players outside of Warsaw are, by this point, strong enough to participate directly on any work outside of the Polish capital. Increasingly, Kowalski said, Warsaw-based firms are looking to other polish cities either in terms of opening up offices or setting up relationships with existing local firms. 

    While this is a recently-developing trend, the Magnusson Partner explained that it could be traced back several years to when regulations relating to access to the legal profession were eased, resulting in a lot of  “young, hungry lawyers who are now challenging the market.” While he predicted it will still take a few years for these younger firms to play a strong role in the bigger M&A work, they are eating up a lot of “bread and butter, mid-level work.”

    Romania

    “Compliance is the word of the day”

    According to Dragos Vilau, Partner at Vilau | Associates, with a record number of criminal investigations against Romanian politicians – including 2 European level cases and several arrests of high profile members of the Romanian Parliament – it has been indeed an extremely “hot fall,” and compliance seems to be the most used word in the Romanian corporate scene. Vilau stated: “We’re witnessing increasing attempts by the Romanian prosecutors to determine not only individual but also corporate criminal liability in corruption cases.”

    In line with the above, Vilau explained that an increasing number of large Romanian companies are undertaking a thorough review of their compliance internal rules and regulations starting with the adoption – or, as the case may be, updating – of their Corporate Code of Ethics and Internal Regulations, the implementation of a training program for management and employees, and monitoring the strict “enforcement” of the Code.

    One interesting aspect highlighted by Vilau is that “the recent wave in compliance does not deal with corruption and EU funds only but covers a wide spectrum from best practices in antitrust and state aid matters, data security, money laundering, intellectual property, and IT.” He predicted that this trend will significantly increase the activities of Romanian lawyers with experience on this topic.

    He also pointed to a recent high profile case in which the High Court of Cassation and Justice stated that, in his words, “a legal entity is criminally liable for acts against the financial interests of the European Union.” According to Vilau, the case in review dealt with submission of false statements by the vice-president of a legal entity that led to the obtaining of financial assistance from the European Agricultural Guarantee Fund. 

    Russia

    “De-offshorization. From a 20,000 mile view, all other aspects pale in comparison”

    By far the most important point of discussion in the Russian market these days represents the new CFC rules, generally known as the “de-offshorization” of the Russian economy. According to Marat Davletbaev, Partner at Nektorov, Saveliev & Partners, the new rules, which were passed by the Russian Parliament recently and signed by the President on November 24, will introduce new concepts to the Russian legislative framework such as “controlled foreign companies” and “beneficial ownership.” Through these, taxes will be payable by Russian economic agents on revenues generated from foreign registered companies where they have a controlling interest.

    This will, according to Davletbaev, have a considerable impact in a market in which many economic agents in the last 20 years “have been structuring their assets throughout foreign companies to reduce the amount of taxation.” The new law, Davletbaev explained, would either force businesses to disclose such ownership and pay taxes on them or “change the ownership structure to hide it even more.” Either way, there is a great deal of work in the future coming in for legal and tax consultants as a result.

    The law is due to come into effect on January 1, 2015, meaning that the full income of a company for the new year, subject to certain limits for the first year of the law, will be taxed under the new regulation. 

    Relative to this, Davletbaev explained, all other matters pale in comparison, especially against the background of a general slowdown in Corporate/M&A work. On the latter, he explained that, while some transactions are still going on, most of them tend to be within Russia, with no real cross-border element.

    Turkey

    “Looking outward”

    The main discussions in Turkey, according to Theodore Cominos, Partner at Edwards Wildman Palmer, revolve less around legislative updates per se and more around potential political risks. He pointed out that the current political landscape – marked by “some unfortunate headlines” in the country – is making an increasing number of potential investors, especially those from the US, shy when it comes to the market. 

    Despite this, the market is registering some “interesting outbound work” these days, Cominos reported, with several Turkish companies presenting an interest in regional acquisitions in neighboring countries, including in the financial and manufacturing sectors. He described these as very positive developments for Turkey in terms of further positioning Istanbul as a strong regional hub. 

    Other interesting projects these months in the country include airport PPPs and several ongoing discussions of bond work. When we asked what type of work his firm has been receiving the most calls for, Cominos pointed towards corporate and financial work and a strong interesting in refinancing and restructuring projects. 

    Lastly, Cominos expressed excitement over his own firm’s merger with Locke Lord, creating a firm of approximately 1,000 lawyers working from 23 offices (see page 15), a move that he said is “very exciting for the team covering Istanbul as well since it means we will benefit from more offices and partners globally who can work on complex/cross-border projects.”

    Ukraine

    “New Parliament, New Hopes”

    With politics inevitably being a primary subject of discussion among lawyers, Alexander Borodkin, Partner at Vasil Kisil & Partners, explained that one of the main aspects that the market is buzzing about is the new Parliament in the country. According to Mr. Borodkin, a large number of lawyers from Ukraine have entered this new Parliament as MPs, and there is “a great deal of hope that it will be a highly reformative one.” While on the subject of reforms, Borodkin mentioned that a bunch of new anti-corruption and anti-money-laundering laws were adopted within the past several months in the country. Other potential reforms in the country include a pending court system reform, but that is still in a “discussions phase.”

    At the same time, the Association Agreement with the European Union was ratified this September, which means that many lawyers are now busy analyzing the implications for the market and predicting how it will affect businesses. The political part of the agreement was originally reached in March and the free trade part in June but only ratified altogether by Ukraine in September. It is now pending individual member states’ ratification.

    Mr. Borodkin also pointed towards several not new but ongoing issues related to the geopolitical situation in Ukraine that affect businesses as well as the nature of advice that lawyers need to offer. He pointed to Crimea’s use of the Russian law system at the moment, while Eastern Ukraine territories affected by military actions, he said, “don’t apply the Russian system – but it’s not like they apply the Ukrainian one much either.” 

    Thank you!

    We thank the following for sharing their opinions and analysis on the news:

    • Ivan Martynov, Partner, Archer Legal 
    • Jasna Zwitter-Tehovnik, Partner, DLA Piper
    • Theodore Cominos, Partner, Edwards Wildman Palmer
    • Ausra Maliauskaite-Embrekte, Associated Partner, Glimstedt
    • Catherine M. Karatzas, Partner, Karatza & Partners
    • Mariusz Kowalski, Partner, Magnusson
    • Marat Davletbaev, Partner, Nektorov, Saveliev & Partners
    • Toomas Vaher, Managing Partner, Raidla Lejins & Norcous
    • Dragos Vilau, Partner, Vilau | Associates
    Image source: hypo-alpe-adria.hr

    This Article was originally published in Issue 6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Alternative Financing for Companies in Lithuania: Looking for Workable Solutions

    Alternative Financing for Companies in Lithuania: Looking for Workable Solutions

    Lithuanian companies have increasingly begun to realize that the implementation of the Third Basel Accord (Basel III) will impact the way they finance their businesses. With Basel III – full implementation of which is currently planned for 2019 –  financial institutions are bound to stricter standards, tightening (among other things) the requirements for capital adequacy and their ability to deal with market liquidity risks. Banks and other financial institutions are already in the process of adjusting their processes to meet these standards.

    As a result, companies in Lithuania can expect a more restrictive lending policy. Borrowing from a bank will become more expensive for most of them, provided that the bank decides to lend at all. Considering that bank loans are by far the most widely used means of financing for Lithuanian companies, companies should start to think about alternatives to such traditional financing. These alternatives might include the issuance of corporate bonds and bonded loans (both of which are used, for example, in Germany). 

    Currently, corporate bonds are not very popular in Lithuania. However, issuing them allows a company to borrow money while diversifying its financing and becoming less dependent on banks and their lending policies. Unfortunately, in Lithuania memories of negative examples of bond issuances still prevail. During the last financial crisis companies like Agrowill Group and Snaige failed to pay bondholders on maturity. This led to mistrust in the market. Consequently, the already small corporate bonds market in Lithuania further declined. However, it is worth noting positive examples from abroad, such as the one of Germany-based KTG Agrar SE, a leading agricultural company in Europe which also has major operations in Lithuania. KTG Agrar SE successfully issued corporate bonds twice: in 2010 with a volume of EUR 50 million at the stock exchange in Stuttgart, and in 2011 with a volume of EUR 180 million at the stock exchange in Frankfurt. In issuing these bonds KTG Agrar SE took advantage of recent changes in the law liberalizing the issuance of corporate bonds at stock exchanges in Germany. 

    Apart from the negative image due to past experiences, additional reasons explain why companies make little use of corporate bonds as a means of financing in Lithuania. First, under current Lithuanian legislation only joint-stock companies may issue corporate bonds to the public. This is not allowed for closed-stock companies, the legal form overwhelmingly used by Lithuanian businesses. Furthermore, Lithuanian law requires that to issue corporate bonds on the Lithuanian stock exchange the issuer must appoint a bondholders’ trustee. This trustee acts for the interests of the bondholders and is usually a local bank or investment house entitled to provide such services. This increases the expense of the bond emission and makes this form of borrowing less attractive. The Lithuanian Government does not intend to liberalize the legal framework in the foreseeable future. 

    Lithuanian companies therefore might want to look for other workable solutions. One of them could be bonded loans, also known as assignable loans, promissory notes, or debenture bonds, a debt instrument widely used in Germany (where they are known as Schuldscheindarlehen). The borrower issues a promissory note to the initial lender (usually a bank that often transfers the bonded loan in parts to investors, like insurance companies and pension funds). The promissory note evidences the debt, yet it is not considered to be a security. Therefore, bonded loans are not traded on the stock exchanges. In Lithuania bonded loans are still fairly unknown and rarely used. 

    Progressing the implementation of Basel III standards will increasingly prompt Lithuanian companies to look for alternatives to traditional bank financing. Well-advised companies will not wait for the Lithuanian lawmaker to put more trust in the maturity of Lithuanian businesses and to liberalize the legal framework by opening the local capital market to emissions of bonds by closed-stock companies, to name just one example. Rather, Lithuanian companies should start looking for alternative means of financing that are already available locally (crowd funding of certain projects, for example) as well as abroad. For larger Lithuanian companies it might even be interesting to investigate, together with competent advisors, the possibility of issuing their bonds to the public at foreign stock exchanges.

    By Frank Heemann, Partner, and Karolina Grityte, Associate Attorney, bnt Attorneys-at-law

    This Article was originally published in Issue 6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Asters Advises Ardis Group on Acquisition of Milk Production Equipment

    Asters has advised the Ardis Group, a Ukrainian importer and distributor of food products, in connection with the company’s acquisition of milk production equipment in Italy.

    The firm’s role included preparation of the transaction documents and structuring of settlements. The firm’s team consisted of partner Oleksiy Demyanenko and Associate Yuriy Radko.

    Both Demyanenko and Radko also advised the Ardis Group in connection with the recent exist of its minority shareholders.

  • New Head of Legal at Lidl in Lithuania

    Vilma Brilinkeviciene has become the new Head of Legal at Lidl — the German global discount supermarket chain — in Lithuania.  

    Brilinkeviciene received her law degree from the Vytautas Magnus University in Kaunas, Lithuania, in 1998. She began her legal career in 1999 at SEB banks, then — after two years — she moved to Swedbank, where she spent the next five and a half years. She spent the next two plus years in private practice — first with Grajauskas & Partners and then with Sutkiene, Pilkauskas & Partners — before, in 2008, moving back in-house as Head of Legal at Eurovaistine, the largest pharmacy chain in the Baltic States and Poland. She spent 6 years with Eurovaistine before leaving the company in October of 2014.

    Brilinkeviciene’s hire is part of Lidl’s long-planned expansion into Lithuania. Brilinkeviciene says she’s “excited to be joining Lidl, and look[s] forward to helping the company grow in the years to come.”

    Image source: JuliusKielaitis / Shutterstock.com

  • CHSH Advises Cascade Group on Partnership with Cremonini

    CHSH Cerha Hempel Spiegelfeld Hlawati has provided comprehensive legal advice to the Cascade Group in connection with the acquisition of a minority share of 40% in an Austrian joint venture company managing all activities developed by INALCA (Cremonini Group) in Russia. The Kunz Schima Wallentin law firm represented INALCA (Cremonini Group).

    The Austrian joint venture company has now successfully completed Russian merger clearance procedures and received a capital increase.

    The new joint venture company — 60% owned by INALCA and 40% owned by the Cascade Group — holds and manages all participations developed by INALCA in Russia. The purpose of the joint venture is to foster the joint development of food distribution and meat production of activities in the Eurasian markets.

    The investment of the Cascade Group amounts to EUR 60 million, corresponding to an equity value of over EUR 150 million of the joint venture company and its food distribution and meat production activities in Russia.

    The CHSH team was led by Partner Thomas Trettnak, and included Partner Heinrich Foglar-Deinhardstein and Associates Stephanie Heimel and Eva-Maria Abpurg.

  • KWR Brings on New Head of IP/IT

    KWR Karasek Wietrzyk Rechtsanwalte has announced that Austrian IP specialist Barbara Kuchar has joined the firm to head the KWR IP/IT department. Kuchar specializes in intellectual property rights, industrial property rights, and competition law.

    After getting her law degree from the University of Vienna, Faculty of Law in 1991, Kuchar joined Weiss-Tessbach, where she stayed for nine years. In 2002 she left to co-found the Gassauer-Fleissner law firm, where she has been for the past 12 years.

    Kuchar welcomes the challenge of taking over the management of the IP/IT-department at KWR: “I am looking forward to the exciting task of developing the IP/IT-department and positioning it as integrated service in the market along with a number of colleagues in a dynamic commercial firm like KWR. I am confident that with this step I will be able to offer optimal consulting for KWR’s clients as well as my own clients.”

    According to KWR Managing Partner Thomas Frad, the addition of Kuchar is an important sign of the firm’s commitment to its clients. “The significance of intellectual property increases constantly,” he said. “As a full-service firm, we strive to guarantee our clients the best possible consulting also in this area. We are therefore very pleased that we could win such a renowned specialist as Ms. Barbara Kuchar for our team.”