The Belgrade Bar Association is likely going to call for a strike effective tomorrow morning to protest changes affecting the legal profession.
While not yet confirmed by the Bar Association, one source in the market who preferred to remain anonymous told CEE Legal Matters that, upon a telephone consultation with Bar representatives, there is a 90% chance that tomorrow morning will mark the commencement of a strike of lawyers in Belgrade. The initiative belongs to the Belgrade Bar Association, which is the largest member of the Serbian Bar Association (its membership count is around 5,000 out of the total 7,000 lawyers in the country).
This is not the first set of protests this summer. In mid-June 2014 Belgrade lawyers stepped into a strike in order to prevent the significant increase of the taxes that was announced and consequently conducted through the tax administration decrees. In reality, the action undertaken by the lawyers was only colloquially named as a “strike,” while it was actually performed in the form of protest of warning which consequently blocked the work of some institutions, especially the courts. As the first attempt did not lead to desired results, the protest continued and even extended so that, at the end of June, the Bar Association of Serbia joined the action of Belgrade Bar, making the whole country involved in the warning protests which lasted until the beginning of July.
The causes of the potential strike
Multiple partners on the ground have confirmed that the main reason for the strike is a change in the way lawyers are taxed in Serbia. The change, which was introduced at the beginning of this year, involves the “flat tax” that most lawyers (primarily solo practitioners and those that cover civil and criminal law) pay in the country. Up to a certain threshold, irrespective of a lawyer’s revenue, he or she is taxed a flat amount, calculated based on the earnings of the previous year. Another anonymous source commented that this system has been operating in the country for the last 20-30 years with the flat tax being set at a “ridiculously low level.” Earlier this year, when lawyers receive their “Tax Decrees” (which informs them of their tax dues) they were informed that the flat tax had been increased approximately twofold, according to Milan Lazic, Partner at Karanovic & Nikolic. While this change did not affect law firms (most of which are set up as partnerships which pay regular tax as a percentage of revenue), there was a strong negative reaction from many Bar members. Talks were initiated with the Ministry of Finance and a solution was promised by the end of June, but when the Minister resigned this summer without an agreement having been reached the current impasse was reached.
A secondary grievance of lawyers involves the new Notary Public Law introduced a couple of weeks ago. According to one source, public notaries, which did not exist in Serbia until recently, were granted a number of competencies that were previously the exclusive domain of lawyers, particularly in real estate transactions. While in the past, contracts had to be certified by the court, the new legislation states that a notary public has to not only certify certain contracts, but also draft it, carving out, as a result, a considerable chunk of lawyers’ revenue.
What the strike entails
According to Senka Mihaj, Senior Associate at Karanovic & Nikolic, the announced strike has not yet been confirmed, as talks with the Ministry of Finance are still ongoing. Lazic explained that pursuant to the strike “imposed” by the Belgrade Bar Association, should no last-minute solution be found, lawyers will neither go to court and attend hearings nor send correspondence related to ongoing cases. It is uncertain at this point what the ramifications are for the rest of the market will be if the strike goes into effect as Lazic explained that the Serbian and Belgrade Bar Associations did not always see eye-to-eye. He points to previous strikes where the Belgrade Bar Association was in strike for a longer period time than the Serbian Bar Association. This discrepancy caused a lot of problems for Belgrade attorneys in cases where an opposite attorney was not a member of the Belgrade Bar Association.
The pulse on the ground
Commenting on the likely strike, one named partner at a Serbian firm said that he couldn’t possibly agree with the mission of the Bar in this matter. In his view, the Ministry of Finance had to solve a chronic issue resulting from the fact that many of the solo practitioners, especially in criminal law, operated in an “incredibly grey area” and did not report their income in full. This in turn meant that the flat rates calculated for them were considerably lower than what they should have been paying. Further still, he explained that for a criminal case, “a lawyer stands to make EUR 5,000, 10,000, or even more already pushing that lawyer above the flat-tax threshold. With much of this income not being reported, even with the increase in the flat-tax, the taxes actually paid are considerably lower than what would be due.”
Lazic said that, while he understands the goals of the Bar Association, there are definitely better means at its disposal to achieve them. In his view, the potential strike harms both the interest of their clients as well as the work of lawyers, especially since it comes at a particularly bad time, freshly out of the slow period during the judges’ vacation between July and August.
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