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Belarus is one of those countries where a good part of key industrial assets still belongs to the state. Changes in regulations on privatization introduced within past two years were aimed at making the procedures more flexible and investor-friendly. What are the outcomes?   

Nowadays an interested investor may choose one of the following ways to acquire a stake in a state-owned enterprise.

First, the investor can become a shareholder in an enterprise in the process of being transformed into a joint-stock company. Transformation is required as the legal form of state-owned companies is a unitary enterprise (a rudimentary form from Soviet times) which has no shares to be traded. A prospective investor should wait for contests to be organized by the State Property Committee. From time to time the Committee publishes announcements about certain major enterprises on its official website (www.gki.gov.by). 

Mass transformation of state enterprises has been under way for several years now in accordance with three-year plans approved by the Belarusian President. The current plan for 2014-2016 will most likely include around 40 unitary enterprises.

Second, an investor can participate in a privatization contest or auction at which state-owned shares are offered. The procedures for acquiring shares through contest and auction are very similar. The difference is that in an auction the only criteria for determining the winner is the acquisition price, while in a contest the conditions include certain additional investment commitments to be undertaken by the acquirer.

Third, investors can acquire additionally-issued shares of transformed enterprises, injecting capital in the company and diluting the state as a shareholder. Quite a few potential acquirers are interested in this option as it implies investment straight into the enterprise rather than transferring the purchase price to the Belarus state budget. One should bear in mind, however, that in this case local municipal authorities may have a pre-emptive right to buy additionally-issued shares. 

In early 2012 President Lukashenko cancelled ineffective privatization plans and declared a new privatization strategy which may be summarized as follows: if we have an enterprise and an investor is interested, the deal must be negotiated and closed if the state finds it beneficial.  The new concept caused some confusion among the authorities involved, as well as investors and advisors, so that for about a year and a half no deals took place.

Finally, the legal framework was adjusted, the State Property Committee started to publish lists of potential targets, and the new algorithm to be used by potential investors may now be briefly described as follows:

A prospective acquirer may either find a privatization target on the list published by the State Property Committee or pick a target of its own accord and send an expression of interest to the government, the template for which is available on the State Property Committee website. Additionally, the Committee itself sometimes announces a “study of interest” in a particular enterprise. In these cases, the Committee posts information on the privatization target and sets a deadline for sending expressions of interest.

Upon receiving an expression of interest a special commission within the Committee considers it and sends a draft decision on privatization to the President of Belarus. Upon approval by the President, a privatization contest or auction should be announced. Therefore, by expressing interest, the investor initiates the procedure for selecting the best buyer of the shares, and later finds itself bidding along with other prospective investors. Announcements on contests and auctions are also published in the printed media and on the State Property Committee website.

One should note that there is no specific timeframe for this procedure. Naturally, this causes considerable uncertainty since an investor cannot know for sure when exactly the target will be available for privatization. This in turn may lead to fading of previously expressed interest.

Unlike other economies in the region in their time, Belarus is not likely to commence mass privatization, at least in the near future. However, we may see some transactions completed even in 2014. The year has already marked its first transaction: the sale of 99.5% shares in BELGIPS to Russia’s Volma Corporation. The largest transactions expected to be signed soon are the sale of Mozyr Oil Refinery shares to Russia’s Rosneft and sale of a stake in Grodno-Azot, a large fertilizer producer, the contest for which was announced recently. In addition, in summer 2014 we expect several contests to take place within the framework of the “pilot privatization” program administered by the National Agency of Investment and Privatization under the auspices of the World Bank, covering eight companies from various sectors (e.g., food & drink, road construction, production of medical devices).      

By Maksim Salahub, Partner, and Nadezhda Fomenok, Legal Assistant, Sorainen

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Unlike in most European jurisdictions, land plots and buildings aren’t considered uniform real estate objects in Russia, and as a result there are situations where a building and the land plot under it have different owners. In many cases, the State owns the land, while individuals own the buildings or other constructions thereon. As a result, privatization of land plots in Russia remains on the agenda mainly in this context.   

The question of how to determine the price of a privatized land plot has become especially pertinent now because, after July 1, 2012, the ability to apply for preferential price at privatization is only rarely available, though before that date it was a matter of right. 

Current legislation determines that the cadastral value of a land plot can be established either as a result of carrying out the state cadastral appraisal or upon the resolution of a dispute regarding the  determination of cadastral value. Cadastral value is relevant as the basis for calculation of land tax, rent payment rates, land privatization rate, and other payments collected by the State acting as the owner of land.

The basis for carrying out a state cadastral appraisal is a decision made by a relevant regional executive authority of the Russian Federation – or, where so authorized by legislation of the Russian Federation, by local government. The appraisal is carried out en masse, rather than on particular land plots – so particularities of specific plots of land are not taken into account – and the results are approved by the State authority which initiated the appraisal.

Cases often arise in which the re-established cadastral value of the land plot is several times higher than its real market price. Market price is determined by the results of an independent appraisal and – unlike the cadastral appraisal – is established not en masse, but individually for the specific land plot.

The owner applying for privatization of a land plot has the ability to challenge the declared repurchasing price of the land plot when he believes that the basis for establishing  the repurchasing price (100% of cadastral value) was incorrect. To do so he must obtain the market cost of a corresponding site by means of carrying out an independent appraisal, and then he may appeal to the court or to the commission tasked with considering disputes regarding determinations of cadastral value at the territorial administration of the Russian State Register. Within any of these procedures the establishment of cadastral value of a land plot equal to its market cost is imposed.

As establishment of market value of a land plot is almost the only instrument for defining a fair repurchasing price of a land plot now, currently a large number of claims are raised before the court challenging the cadastral value of land plots – and that number continues to increase, as a majority of cases succeed, causing the cadastral value of land plots to decrease. Thus it should be noted that within consideration of similar affairs questions may arise on which there haven’t yet been decisive precedents. For example, whether the tenant planning to redeem the land plot can challenge cadastral value. Generally tenants are refused in their claims, but several recent judgments have sustained the claims of tenants of land plots regarding the determination of cadastral value proceeding from their market costs.

Thus, contestation of the cadastral value of land plots (as bases for calculation of the repurchasing price of a site during privatization) in most cases is quite successful, but the process itself takes a lot of time. Quite often after a successful contestation of the cadastral value a competent authority initiates a new revaluation within an administrative procedure that eventually ends with return to the original cadastral value after all. Modification of the legislation regulating the state cadastral assessment is planned now to limit the use of such revaluations in administrative proceedings, and also to increase the term of contestation of determination results of cadastral value in the commission and to establish obligatory pre-judicial consideration of the corresponding disputes in the commission.      

By Sergey Patrakeev, Partner, and Irina Dyubina, Associate, Lidings

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In the past, foreign investment in Russia has been characterized by the use of offshore structures. Typically, foreign investment would be via a joint venture arrangement, whereby the parties establish an offshore holding company and regulate cooperation through a JVA. However, recent developments in Russia may impact the use of offshore structures going forward and force a reevaluation of existing structures.  

Broadly, the Bill introduces three key measures. 

First, controlled foreign companies (“CFC”) rules, whereby Russian tax residents are required to pay Russian corporate tax (20%) or personal income tax (13%) on attributed, undistributed CFC profits in excess of RUB 3 million, in respect of CFCs they “control” (i.e. exert or may exert a determining influence over decisions concerning CFC profit distribution), or CFCs in which their interest exceeds 10%. “CFC” is broadly defined. It can be a “foreign entity” that is not Russian tax resident and whose securities are not listed on a Russian Central Bank-approved stock exchange. It can also be a “foreign structure” (e.g. a fund, trust or other form of collective investment). However, a foreign entity will be exempt in certain circumstances; in particular, where its permanent residence is in a jurisdiction included in the list of states that exchange tax information with Russia (the “white list”), provided it also meets an effective tax rate test (15%). So far, there has been no indication of the jurisdictions to be included on the “white list”. However, as the effective tax rate test applies to gross income, the effective tax rate will most likely be lower than 15% for foreign entities receiving primarily tax exempt passive income. Consequently, a significant number of existing offshore structures may be caught by the CFC rules. 

Second, reporting obligations for Russian tax residents in respect of their participation in all foreign entities in which their participation is 1% or more or where they are a controlling person. There are also similar reporting obligations proposed in respect of foreign structures.

Third, a “management and control” test for assessing the Russian tax residence of foreign entities, whereby a foreign entity whose effective management and control is found to take place in Russia will be subject to Russian taxation, regardless of its jurisdiction of incorporation.

Significant fines are proposed for non-compliance.

In addition to increased tax exposure, the Bill may result in extensive compliance related costs and increased complexity and costs in maintaining existing offshore structures. 

Consequently, Russian business is currently lobbying the Russian Government to revise certain aspects of the Bill (e.g. reduce tax rates applicable to CFCs; increase default “control” threshold from 10% to 50% (plus one vote); increase reporting threshold from 1% to 25%; removal of “management and control test”; phased introduction of deoffshorization measures; moratorium on enforcement of penalties until 2017). Although the Russian Government has been receptive to some changes, discussions are still ongoing and it remains to be seen what form any concessions ultimately take.  

Nevertheless, participants should review existing structures and consider potential restructuring opportunities, to mitigate the effect of the contemplated measures.

If passed, the Bill may render offshore structures less attractive to Russian counterparties, making it difficult for foreign investors to insist on their future use. Tax considerations aside, foreign investor preference for offshore structures has predominantly been driven by the greater legal certainty, flexibility and protection such structures afford. However, recent amendments to the Civil Code, in force from September 2014, encourage the use of onshore structures by addressing perceived shortcomings under Russian law. In particular, the amendments clarify rules governing Russian-law governed JVAs and introduce additional flexibility with regard to the classification of Russian legal entities and corporate governance. 

In conjunction with proposed deoffshorization measures, the Civil Code amendments may result in a greater insistence on the use of onshore structures by Russian counterparties. However, until foreign investors can be confident that they are able to implement all their desired commercial arrangements comprehensibly and reliably under Russian law and enforce their rights thereunder, resistance to the use of onshore structures will remain; notwithstanding the form that any deoffshorization measures take.      

By Sebastian Lawson, Partner, and Sean Huber, Senior Associate, Freshfields

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

This article will provide a snapshot of the major regulatory reforms in the Republic of Moldova affecting the M&A sector. Having been directly involved in assisting the Moldovan government to cope with the challenges of the reform era, our legal specialists would like to share in this brief overview just some of the actions which have influenced or will influence the M&A sector in Moldova, which is ready to start growing.  

Protection of Competition

In July 2012 the new Competition Law was approved in Moldova. The law provides for specific rules on competition clearance of economic concentrations by the Competition Council, the competent Moldovan competition authority. Thus, prior to putting an economic concentration into operation, parties involved in the transaction should take care to obtain proper competition clearance, otherwise their transaction may lead to negative legal consequences.

The new Competition Law has set out more clearly the thresholds that make competition clearance mandatory. An economic concentration is subject to notification when the combined turnover of all undertakings involved in a deal exceeds MDL 25 million (about EUR 1.6 million) for the year preceding the intended transaction, and at least two of the undertakings concerned had a turnover in Moldova exceeding MDL 100 million (about EUR 633,000) in the year preceding the transaction. The penalty for failure to notify the competent competition authority can be significant, reaching up to 4% of the turnover for the preceding year.

At the moment, only three economic concentrations have been cleared and authorized by the Competition Council. However with the improvement of the economy and an increase in the efficiency of the Competition Council, we expect to see growth in M&A deals next year. 

Simplification of the corporate reorganization procedure

M&A deals as a rule lead to corporate reorganizations which are subject to proper registration by Moldovan competent authorities. The legal formalities related to corporate reorganizations have been rather lengthy and bureaucratic in Moldova, sometimes exceeding six months prior to formal entry of changes in corporate documents. Companies involved in reorganization were required to publish an announcement on their reorganization in two consecutive issues of the Official Gazette of the Republic of Moldova. Upon being informed of reorganization, any creditors could request that the company being reorganized provide additional guarantees for their claims within two months of the announcement’s publication. 

a) The term for creditors to request additional guarantees was reduced from two months to one month from the moment of publication of the announcement in the Official Gazette of the Republic of Moldova or from the date of other notice to the creditor.

b) The number of notifications required to be published was reduced from two announcements to one.

c) The term for submission of reorganization documents for registration was reduced to thirty days after proper notification of creditors, while prior to reform it was three months.

d) Finally, all notifications published in the course of the reorganization process will be also placed free of charge on the official website of the Moldovan registration authority, which will reduce the costs of informing the creditors.

Alternative dispute resolution mechanisms in M&A deals

One of the major challenges to foreign investments in Moldova is the quality of the judicial system and enforcement of judgments. As a prevailing practice foreign investors insist that a foreign law governs M&A deals involving Moldovan entities and that potential disputes be settled in a foreign forum (the usual choices are the arbitration courts of Hague, Stockholm or Paris). Still a number of aspects in an M&A deal are subject to Moldovan legislation, a fact which requires the close attention of Moldovan counsel preparing a legal opinion on any transaction. It should be noted that a choice of Moldovan law and venue in fact may offer decent comfort to foreign investors, at a much lower cost. Of course, there’s little doubt that a better legal framework and more transparent dispute resolution process would significantly improve the current situation and increase the attractiveness of the Moldovan dispute resolution mechanisms which are more affordable to Moldovan companies.

To boost this sector the Government has undertaken to reform both arbitration and mediation legislation to reflect the best and most efficient practices. We await a major shift in ADR which will definitely smoothen some of the issues affecting the M&A sector as well.    

By Cristina Martin and Andrei Caciurenco, Partners, and Carolina Parcalab, Senior Associate, ACI Partners Law Office

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Croatia has gained a reputation for being an overly regulated, bureaucratic, and non-investor- friendly market. The steady decline of foreign direct investments is often cited as being the result of this perception. However, with some recently enacted legislative changes, the long process of removing barriers has hopefully started and will reverse this trend.  

A particularly good example of this is the struggle of a reputable US-based fund to proceed with a residential development in Dubrovnik, just below the old Napoleon fortress and next to the proposed Dubrovnik golf course (which has been facing similar obstacles). Unfortunately, the development became entangled in the very protective (and political) local zoning regime, as the County (the second level of regional government in Croatia) denied its consent to the detailed urban plan proposed by the City of Dubrovnik. Despite the fact that a number of mandatory public debates had taken place during the process of the urban plan adoption, in which architects’ associations, citizens’ groups, local land-owners, and other interested parties voiced their opinions and finally supported the plan, County officials persistently blocked adoption. The County did this by doing such things as requesting documents not required by the applicable regulations and requesting additional studies.They even went as far as refusing to accept express clarifications of the relevant legislative act from the Ministry of Construction and Physical Planning confirming that the City’s (and investor’s) proposal was in accordance with all applicable regulations.

The Wolf Theiss team, led by Zagreb-based Partner Luka Tadic-Colic, assisted by Senior Associate Silvije Cvjetko and Split-based Counsel Dora Gazi Kovacevic, has been assisting the investor since 2010 in removing a number of hurdles that the project has faced over the course of its development (such as land registration issues and obtaining approvals and consents required in the zoning process), and has supported it in numerous discussions with the relevant authorities, including the Minister of Construction himself. As a measure of last resort, we are now developing a strategy for the final legal battle, including filing damages claims before Croatian courts, claims before European courts, investment arbitration tribunals, and even bringing criminal charges against the relevant officials.

In the meantime, Croatia has undertaken certain steps in the right direction to assure a more favorable climate for foreign investors. For example, recent changes in zoning legislation have removed the need to obtain certain consents at the regional government level, which would help in resolving situations such as the one described in Dubrovnik. Another important milestone is the recent adoption of the Strategic Investment Act, aimed at expediting the realization of strategic national investments and projects. Unfortunately, many private projects will not meet the relatively strict criteria to qualify under the Act in terms of: (i) the value of investment (generally, projects must exceed 20 million Euros), and (ii) a focus on specific sectors or activities. Also, qualifying for the status of a strategic project does not automatically occur when the conditions are met, as a discretionary decision of the Government is also required. This may not provide foreign investors with a sufficient level of security in planning their investments. However, for projects that eventually succeed in qualifying as strategic investments, the relevant construction permits will be decided upon at the central government level and cannot be torpedoed at the local level.

Finally, the Croatian prosecutor’s office has recently emphasized its commitment to combat the arbitrariness of local “sheriffs” and corruption on the local level in general. We strongly believe these are steps in the right direction and that, once undertaken, they will result in a better investment climate in general.  

By Luka Tadic-Colic, Partner, Dora Gazi Kovacevic and Silvije Cvjetko, Attorneys, Wolf Theiss

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Attracting foreign investment and improving the investment environment in Latvia are among the key objectives in policy documents and strategic development plans as well as government declarations in Latvia.  

In the area of investment protection, Latvia ranks 68th, and it has been involved in about ten investment disputes. This may not seem like much, but three of these disputes are still in process and three of them Latvia has already lost. 

Latvia has signed investment protection agreements with 59 countries. Russia, with its investors ranking 6th on the volume of investments, is however not among them. 

Different investors emphasize different issues related to the investment environment in Latvia. Eastern European and Russian investors are primarily unhappy with the low profitability of their investments, while Scandinavian investors are not entirely satisfied with the local legislation processes. This issue has also been raised in the annual reports of the Foreign Investors’ Council in Latvia.

When making decisions about where to place their money, investors look at a wide range of different factors, including economic indicators, labor supply, and tax rates. Recently, investment protection has become one of the key factors for potential investors, who look for their property not to be expropriated, for the ability to recover their investments, and for their transactions not to be reversible by any sudden changes in local regulations.

Changes in the laws and regulations of Latvia are rapid at times, and a considered transition to a new regulatory framework is not always observed. The Constitutional Court of Latvia has provided for such transition period to be observed by setting reasonable timeframes or compensation measures. 

A key to a successful trade and investment environment lies also in the ability of the parties to rely upon the knowledge that their transactions will correspond to the regulations in effect when they were executed, and that they will not be retroactively  voided due to subsequent legislative amendments.

For instance, one of the latest amendments to the Law on Coming into Effect and Application of the Law on Obligations Part of the Restored Civil Code 1937 of Latvia provides that amendments to the Civil Code limiting the amount of contractual penalties as of January 1, 2015, will apply retrospectively to all previously signed contracts valid on January 1, 2014.

Significant legislative amendments and short transition periods indicate a negative trend regarding the predictability of the regulatory framework, which may be particularly frustrating to foreign businesses that carry out or are planning investments in Latvia and are carefully evaluating the potential investment environment. 

Another notable aspect is the use of electronic signatures. The December 13, 1999 European Parliament and Council Directive 1999/93/EC on a Community Framework for Electronic Signatures establishes and defines electronic signature certification services in the legal framework. This directive provides that EU member states may not restrict each other in certification services and the use of electronic signatures if the conditions laid down in the Directive are satisfied. However, in practice there are often problems with cross-border deal closures between companies wishing to use electronic signatures.

The government of Latvia is working on solutions to make it possible to co-sign documents across borders using secure electronic signatures issued in each member state. This year electronic identity cards were introduced in Latvia, which include individual digital signatures. This means that a contract can be signed simultaneously in Estonia and Latvia using a digital signature. This system is likely to promote and encourage cross-border cooperation. 

At the same time there is still no comprehensive regulatory framework for secure and reliable cross-border electronic agreements, which would include electronic identification and authentication. For its electronic identification to be supported in other EU member states, Latvia has yet to engage in the e-SENS project, which was launched in 2013 and for which significant expansion is in the pipeline.      

By Maris Vainovskis, Senior Partner, and Elina Vilde, Lawyer, Eversheds Bitans Law Office

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In Albania commercial companies are most commonly incorporated under the form of limited liability companies or joint stock companies, and supervised companies such as banks, non-banking financial institutions, and insurance and reinsurance companies must be incorporated as joint stock companies. In practice a large number of significant companies — in terms of turnover, number of employed employees, carried-out projects, etc. — are established as joint stock companies as well, including a significant number of companies controlled by foreign investors.  

Due also to the lack of a properly organized stock market in Albania, to date only one company has been licensed as registrar of shares by the Albanian Supervisory Authority. This company is the Share Registration Centre Sh.a. (“SRC”). The SRC is controlled by the Albanian Ministry of Economic Development, Trade, and Entrepreneurship, which owns more than 80% of the shares of the SRC.

In June 2014, the Albanian Minister of Economic Development, Trade, and Entrepreneurship approved an Instruction requiring all joint stock companies registered in Albania (including those with private offer) to register amendments relating to share transfers, registered capital, number and/or nominal value of shares, etc. with the SRC before registering such amendments with the NRC. It is worth mentioning here that the NRC is a central public institution under the direct control of the Albanian Ministry of Economic Development, Trade, and Entrepreneurship, and therefore disposed to implement any orders issued from its direct superior.

Surprisingly, while relevant normative acts regulating the registration of shares of joint stock companies have not been amended, the Minister of Economic Development, Trade, and Entrepreneurship reiterated the same illegal and extra-statutory instruction by irrationally imposing additional procedures and costs on private offer joint stock companies.

In addition, the SRC procedures, costs, required documents, procedural terms, etc., are not published. Filing expenses applied by the SRC are excessively high and out of any logic compared to those by the NRC, which applies a fix flat fee of less than USD 1 for any rendered service. In practice, registration delays with the SRC are excessively long due also to the very limited number of employees at the company and their general lack of professionalism and experience. Finally, the SRC has only one central office, in Tirana, which means that joint stock companies operating in other cities are obliged to go to Tirana in order to perform filings with the SRC (for comparison, the NRC has more than 30 offices located in all the important cities of Albania).

The discussed instruction has been officially objected to by Albania’s leading law firms through a letter sent to the Minister of Economic Development, Trade, and Entrepreneurship requesting that it revoke the issued instruction. It has also, once again, been publicly contested by the Albanian business community. Nevertheless, to date this illegal, irrational, and abusive instruction remains in force, demonstrating thus that in Albania, political will may still overcome laws, and independence of administrative power from the executive is far from being ensured.      

By Andi Memi, Partner, and Selena Ymeri, Associate, Hoxha, Memi & Hoxha

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Although there has been a healthy number of mergers and acquisitions over the years in Estonia, the transactions are fairly under-regulated in the country, and there is no comprehensive court practice on the subject.  

If the shares of a private limited company have not been registered in the Estonian Central Register of Securities (Estonian CRS), which is not mandatory for private limited companies, then the share transfer deed must be notarised. In addition the application made to the commercial register after registration in the Estonian CRS would also have to be notarised. The requirements for notarial attestation are accompanied by notary fees, which depend on the value of the transaction, and are thus usually relatively high.

It is important to point out that in Estonia documents issued by a foreign state usually have to be legalised or authenticated by a certificate replacing legalisation (apostille). This can cause difficulties because in some countries – such as the United Kingdom – obtaining an apostille is complicated, in which case intra-firm transformations (i.e. changes in the composition of the management board or an increase of share capital) can take a long time due to the need to wait for an apostille. This problem in turn can inhibit the interest of foreign investors to do business in Estonia. In addition it seems overly encumbering that there is also an obligation to translate notarial certificates into Estonian.

Of course, certain notarisation requirements are necessary for security reasons such as ensuring a trustworthy business environment and even preventing crime, but it is also important to keep in mind that over-regulation can result in the deterioration of interest of foreign investors, and it can be argued that the current notarisation and certification requirements especially in connection to M&A transactions are no longer necessary to achieve the security-related goals. Most importantly, the reduction of notarisation requirements would make entrepreneurs’ lives much easier and would have a positive effect on the flexibility of the business environment.

Regarding public limited companies the registration of shares in the Estonian CRS is mandatory, and although registration is voluntary for private limited companies, it would be advisable to register the shares regardless, because due to current requirements registration results in lower notary fees. It should be mentioned that the registration of shares isn’t a very straight-forward process either, however, and in order to acquire shares one has to have a securities account, which can only be opened in a bank that is a member of the Estonian Central Securities Depository that maintains the Estonian CRS. A bank account has to be opened in the same bank, which in turn is a pre-requirement for opening a securities account.

It has to be stressed that banks have higher compliance requirements for rendering financial services to individuals who are located outside the European Union (EU). These requirements originate from the Money Laundering and Terrorist Financing Prevention Act, corresponding regulations of the Minister of Finance, the instructions of the Financial Supervision Authority, and directives of the EU. As a result the opening of an account is only simple for residents of the EU.     

By Merlin Salvik, Partner, and Deivid Uibo, Lawyer, Hedman Partners Attorneys-at-Law

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.