CEE Legal Matters has asked a number of Serbian lawyers to describe the local situation following the strike initiated by the Belgrade Bar Association. This is one of the accounts we received from Viktor Prlja. We want to thank Viktor for taking the time to write this exclusive account explaining the reasons behind the strike for our readers.
Viktor Prjla, Lawyer at Prlja-Zilovic Law firm
On Wednesday, September 13, 2014, the Serbian Bar Association passed a resolution to join the Bar Association of Belgrade on a general strike. Lawyers will not attend any court hearings or sessions or submit any written briefs. All lawyers will withdraw from the High Council of Courts and the High Council of Prosecutors (The Attorney General’s Office). The resolution also calls for the withdrawal of all lawyers from committees working on EU membership and committees working on drafts of laws. Last, but not least the resolution calls for the resignation of The Minister of Justice, Nikola Selakovic.
The strike goes into effect on Wednesday, September 17, and will continue until all demands are met. Minister Selakovic has called for the strike to be postponed and for talks to begin. The strike follows the failure of a previous round of negotiations which collapsed due to the resignation of Lazar Krstic as the Minister of Finance and unresponsiveness from the government about the demands of the Bar. The demands have expanded significantly since then.
What are the demands?
Return to the flat tax rate from 2013, and a 10% decrease
Lawyers currently pay a flat rate tax, calculated by the Tax administration. The latest change moved lawyers from taxing category 4 to category 5 for entrepreneurs.
On face value it seems like a very favorable solution for lawyers. Regardless of the revenue, you pay the same taxes. For large firms this is not a problem but for many smaller firms there is no steady stream of revenue that can guarantee to cover a flat tax. Furthermore, the tax rate is used to calculate dues for lawyers for mandatory health and social security. These can amount to a significant cost and lawyers cannot opt out of these dues.
With the number of lawyers rising, partly due to a large influx of judges into the legal profession, there is a problem finding business. This is exacerbated by the ban on advertising for lawyers imposed by Bar associations.
Interestingly enough, lawyers owe quite a lot in back taxes. On the website of the Serbian tax authority there is a list of top 1000 entrepreneurs and small businesses owing the highest amount in taxes. The list includes 156 lawyers whose overall back taxes amount to EUR 2 million Euros (RSD 200 million). The number one lawyer that owes tax is ranked 44th with about EUR 950,000 in back taxes as of June 2014.
The Belgrade Bar Association argues that half of the names on the list are no longer listed as practicing lawyers. Many of them are not registered with the Bar anymore, or are retired, or have died. The majority of them did not have lucrative careers as lawyers or law firms, and often did not pay Bar membership dues. The majority of debt consists of unpaid social security dues. This means that a great deal of back taxes can be collected by confiscating two thirds of the debtor’s pension. About 4/5 of those claims (social security) have reached the statute of limitations anyway.
On the other hand, the state owes many lawyers back fees for mandatory representation in criminal cases. The total amount owned in such back fees are in the vicinity of EUR 10 million. This is linked with an ongoing grievance of Belgrade lawyers that police connections dictate who gets mandatory representation cases and who gets paid on time. There are calls for consolidating these debts.
As the Country is slowly implementing a program of austerity with large-scale lay-offs at the center of government policy there doesn’t seem to be an argument for higher taxes, especially as lawyers, like all businesses, are feeling the crunch of the recession.
Amendments to be made to the Notary Public law
As of September 1, 2014, Serbia instated a network of notary publics. Not an unheard-of policy, as Serbia had notary publics until the end of Second World War. The solution is advertised as a way to strengthen the rule of law and facilitate faster legal transactions. There are however some serious issues with the notary public system as it is implemented.
First, it is unconstitutional. The jurisdiction of notary publics is vast. They have been given exclusive rights to not just notarize contracts but to draft (and charge) all contracts pertaining to the transfer of real estate. This includes drafting Wills and Testaments, as well as all mortis causa contracts. They also conduct inheritance proceedings, border disputes, and no-fault divorce proceedings. This is in violation of article 67 of the Constitution of the Republic of Serbia which grants sole jurisdiction of legal proceedings to Courts. Furthermore, several of the laws that direct the work of notary publics were enacted on August 31 and implemented the next day. This is a violation of the legislative process as all laws become enforceable only after 8 days of being published in the Legal Gazette.
This vast authority of notary publics is a serious challenge to many lawyers’ livelihoods, which cannot be circumvented. There is a hefty price tag to the services of notary publics as they are higher than lawyer’s fees, and much higher than regular Court taxes for notarization (a 7200% increase in some cases). Not only does this sideline Courts and law firms, but is also a heavy burden on the budget of citizens. But this isn’t where it ends.
There are now 94 notary publics. They are supposed to take on the workload of many circuit courts and of some 8000 lawyers. While more notary publics are expected to join the Chamber of Public Notaries, at this point the Chamber is 6 notary publics short of the legally- required number. Some public notaries have made appointments for March of 2015, raising considerable doubt that they will deliver the expedience that was promised with the change.
A major issue is that more than half of practicing notary publics passed their exams under reformed conditions that are not in accordance with the law. Many were accepted or rejected in a 2 minute-long interview by a new, expanded commission This has sparked the suspicion that political considerations played a large role in the review of many of the candidates. This has the hallmarks of large scale corruption. By infiltrating party loyalists among the notary publics, significant funds can be extracted for party purposes. Funds that cannot be traced. This is speculation of course, but such mechanisms have been used in Serbia in the past.
One of the solutions proposed by the Bar Association of Serbia is the so-called “German solution” where lawyers would be given similar authority to notary publics.
The resignation of the Minister of Justice, Nikola Selakovic
The resignation demand is one most likely to be used as a bargaining chip. There is however, quite a lot of resentment among the legal community towards Minister Selakovic, primarily due to the Law of Notary Publics and the lack of reforms in the judiciary system.
There is a growing fear among lawyers that there is a media boycott against the legal profession. There is very little in the media about the strike or any detailed analysis of the issues. On the other hand the media campaign behind the notary public program has been touted as a flagship policy of the regime,with local media being flooded by news stories revolving around them and expressing optimism for the program.
The notary public implementation program is made with the support and partnership ofGIZ (deutsche gesellschaft fur internationalezusammenarbeit), the German partnership program, and the European Union. The reform is touted as an important step in EU membership process, which makes it that much harder to argue against it. Croatia, Bosnia, and Montenegro have all instituted notary publics in the years since their independence.
The fear among lawyers is that the new tax rates and the notary public system is an organized move against the legal profession. Fears that there is, and continue to be, widespread corruption within the system are not far behind.
(The thoughts, opinions, and assertions contained in this account are solely those of the author, and do not necessarily reflect the opinions of CEE Legal Matters).
