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Schoenherr Prague has advised EVO Payments International, a world leading integrated payments processor and acquirer for merchants, independent sales organizations, financial institutions, government organizations, and multinational corporations located throughout the United States, Canada, and Europe, on the creation of a payment card acceptance alliance with Raiffeisenbank in the Czech Republic. Havel, Holasek & Partners advised Raiffeisenbank on the matter, which closed on February 29, 2016.

According to Schoenherr, Raiffeisenbank has transferred its existing merchant acquiring business into a new Czech subsidiary of EVO that will closely cooperate with Raiffeisenbank. EVO will make a wide variety of market-leading card acceptance solutions and processing for alternative payment methods available to the bank’s merchant customers, and will support the acquisition of market share. The innovative and secure solutions offered through this partnership will form a stepping stone to strong future cooperation with the bank’s clients, and will be developed further and supported by the strategic partners.    

“This deal demonstrates the significant role that EVO plays in the global payments market and represents a particularly powerful statement from the market on EVO’s pan-European operation out of Germany, and its strong domestic presence as Popular Payments in Spain, eService in Poland, and recently started payment business in Ireland,” stated Schoenherr Partner Vladimír Cizek, who led the firm’s team on the deal along with Warsaw-based Partner Katarzyna Terlecka. Other Schoenherr team members included Belgium-based Partner Volker Weiss, and Czech-based Attorney at Law Daniel Kostal and Associate Rudolf Bicek.  Additional legal advice was provided to EVO by Alston & Bird. 

Associate Filip Cabart of Havel, Holasek & Partners advised Raiffeisenbank on the deal.

Editor’s Note: After this article was published, Havel, Holasek & Partners informed us that, in addition to Filip Cabart, the firm’s team consisted of Partner Petr Kadlec, Managing Associate Vitezslav Semora, and Associate Zuzana Hajkova.

The likelihood of the assessment of a company’s compliance management system (CMS) by a court is high once criminal conduct within a company is subject to investigation. To prevent management’s civil and criminal liability, a CMS shall be efficient and able to identify risks as well as to control and prevent compliance-related transgressions.

The fight against corruption has intensified over the past few years in Austria, highlighting the importance of corporate compliance. In line with this development, Austrian corporations are increasingly implementing compliance management systems (“CMS“) to ensure compliant behaviour. Since there is still a lack of case-law in Austria regarding what qualifies as being legally sufficient for such CMS, and for their effective implementation, a German landmark decision ruled by the District Court of Munich (No. 5 HK O 1387/10; the “Court“) is all the more important. The case was settled out of court, so the Court’s decision will never become legally effective. However, it is still likely that Austrian courts will refer to the German decision, as the legislation on director’s compliance obligations is essentially the same in Austria. Thus, the ruling is also highly relevant for Austrian directors and management bodies of corporations, regardless of whether they run a joint stock company, or a limited liability company.

The Court’s case in a nutshell

Since the 1980’s, Siemens had a system of so-called “black accounts” that around 2001, turned into a system of sham contracts for consulting services. The money running outside of bookkeeping was used to conduct bribes in foreign countries. These bribes were made over a long period of time, despite the fact that the company had an established CMS. This unlawful situation was repeatedly pointed out to the management board, which, consequently, reorganised the firm’s CMS in 2004. Still, those measures did not suffice to stop the non-compliant behavior.

In 2008, Siemens was penalised in terms of court rulings in Germany and the United States, as well as by the US Securities and Exchange Commission. Siemens was ordered to pay fines and penalties in the aggregate amount of approximately EUR 1.2 billion, as well as a further EUR 13 million in legal fees. Siemens sued numerous members of their management board for damages, but ultimately settled all cases. The case against the firm’s former CFO is the only one that went to trial before settlement, with Siemens claiming damages in the amount of EUR 15 million as a partial claim. The Court held the former CFO liable for breach of duty with regard to an inadequate CMS.

Legal basis for management’s liability

The Court based its decision on the so-called duty of legality (Legalitätspflicht), according to which a director is on the one hand not allowed to order a legal infringement, and on the other hand, has to ensure that the corporation is organised and supervised in such a way that a legal infringement may not occur. This duty of legality is also generally accepted under Austrian law. It is derived from the general duty of acting with the “diligence of a prudent and conscientious manager” (Sorgfalt eines ordentlichen und gewissenhaften Geschäftsleiters), which is codified in Article 84 para 1 of the Austrian Stock Corporation Act, and Article 25 para 1 of the Austrian Limited Liability Companies Act.

The Court held that – irrespective of its actual legal foundation – the duty of legality is only sufficiently met if the management board complies with its organisational duty (Organisationspflicht) to implement a CMS based on effective prevention and risk control. The scope of such CMS depends on the type of activity, the company’s size and organization, the relevant regulations, the geographical presence, and the (suspected) cases of non-compliance in the past.

By recognising these factors, the Court acknowledged that the specific form of what would constitute an effective and adequate CMS, is in fact at the management board’s discretion. Therefore, it would be wrong to assume that every legal infringement constitutes a breach of a director’s duty of legality. Such an assumption would imply a strict liability (Erfolgshaftung) for directors, which is not established in Austria.

Based on an objective standard of due care, the responsible CFO should have been aware that these measures were not sufficient to prevent further legal infringements – especially since further cases of suspected bribery came to his attention afterwards. As Austrian criminal law has established the liability of guarantor status (Garantenhaftung), it can be understood that this principle would be applicable in a criminal court case in Austria (see Article 2 of the Austrian Criminal Code). It is a guarantor’s obligation to protect the company from criminal offences and damages. An omission of such obligation is punishable by Austrian law.

Specific compliance measures arising from the Court’s decision

The Court’s decision established several key elements for an effective CMS which are transferable and applicable for Austrian corporations. It gives a glimpse into the requirements to be met by management when acting with the objective standard of “diligence of a prudent and conscientious manager”.

With regard to recurring bribery suspicions, the management board should review the efficiency of the existing CMS and take the steps necessary to improve it in a sufficient manner. The management board has the obligation to create clear rules about whose main responsibility it is to ensure compliant behavior within the company. In light of the firm’s size and its existing exposure to compliance breaches, a clear allocation of organisational compliance responsibility amongst the directors should be implemented. Furthermore, the management should ensure that the persons in charge of compliance have sufficient authority to draw the necessary consequences for violations.

Individuals may not rely on the argument that they have no right to instruct certain employees or departments, because this would contradict the overall responsibility of the management board for a functional compliance system. The management board should actively step in and create an organisational structure to ensure a direct reporting line with a corresponding disciplinary competence.

Further, the management board should make sure that it is being provided with the results of internal investigations, as well as information about consequences for personnel, and especially about how to avoid continued compliance breaches. Management’s investigation duties are quite extensive: it is not sufficient for them to take care only of a case at hand, but rather they must also make sure there are no other similar cases in existence.

Ultimately, the Court held that a director cannot rely on the fact that the term “compliance” had not yet been fully established during the time period in question: though the term itself may be quite new, the underlying principle, namely that the management board has to take care that the company and its employees comply with legal requirements, is not.

One cannot stress enough that the omission of implementing an efficient CMS, and reviewing its effectiveness is a breach of duty. It is the obligation of the entire management board to constantly review, and verify that the implemented system is suited to prevent infringements of mandatory laws.

Fortunately, both the Austrian (ONR 192050), and international (ISO 19600) standards now provide guidance to reduce liability, though it always depends on the individual case.

Challenge yourself

• Is the CMS established within your corporation able to identify, control, and prevent compliance risks and transgressions?
• Is the entire management board being kept in the loop, and do they have sufficient information and power to create, monitor, and – if necessary – adjust a functioning CMS?
• Does the CMS provide clear reporting lines, and sufficient power for the person in charge to draw the necessary personnel and structural consequences for compliance violations?

The knowledge that measures are not sufficient to prevent legal infringements may lead to civil and criminal liability of the management.

By Heidemarie Paulitsch, Counsel, Schoenherr

On 27 January, Rask signed a formal agreement confirming that it will advised the Estonian National Culture Foundation on a pro bono basis to help it achieve its goals. Rask will help the Estonian National Culture Foundation with various contracts and other matters including sub-funds, scholarships, and tax law.

Linda Piik, board member of the Estonian National Culture Foundation, explained that RASK’s assistance will help the Foundation to organize its work better. ”Like anyone else, we encounter problems in our daily work and need legal expertise to solve them. As the Foundation’s team is small, the opportunity to seek professional advice on legal issues is of great help. The pro bono agreement with Rask Attorneys-at-Law provides us a sense of security and allows us to fully focus on the Foundation’s main operations.”  

According to Rask, the Estonian National Culture Foundation, “aims to support Estonian national culture through the purposeful accumulation and distribution of financial means.” The Foundation has operated since 1991, and distributes scholarships and grants to individuals to promote academic, research, creative, and sports activities. The Foundation also supports organizations in implementing cultural projects.

Partner Marko Ketler and Attorney Jaka Simoncic, both working in cooperation with Karanovic & Nikolic, have successfully advised the Republic of Slovenia, Slovenian Sovereign Holding (SSH), and the Bank Assets Management Company (BAMC) on their sale of shares in Adria Airways to AA International Aviation Holding GmbH (a subsidiary of the Luxembourg-based investment fund 4K Invest). The transaction closed on March 15, 2016.

According to Karanovic & Nikolic, “the deal in question revolved around the sale of Adria Airways’ approximately 6.3 million shares …. The Republic of Slovenia, SSH, and BAMC received the proceeds from this sale, thus relieving themselves of their 83.01% of Adria Airways’ equity stake. Furthermore, it should be noted that, prior to finalizing the aforementioned deal, the Republic of Slovenia, on the basis of the Shareholder Resolution of Adria Airways of 19 January 2016, paid EUR 3.1 million for a share capital increase process on 8 March 2016, with an additional EUR 1 million then paid by the buyer in accordance with the Shareholder Resolution. Therefore, including the capital increase that resulted from this process, 4K Invest now holds an equity stake of 96.09% in Adria Airways, with reported intentions of approaching the carrier’s few outstanding shareholders concerning the remaining 4% stake which, once acquired, would allow it total control of the airline.”

AA International Aviation Holding was advised on the transaction itself, according to Karanovic & Nikolic, by In-House Counsel Steve Roeper. Schoenherr advised the purchaser with respect to Slovenian corporate law issues and provided notice of the transaction to the Slovenian Competition Protection Agency. According to Partner Eva Skufca, “the concentration was notified on the 20 January and unconditionally cleared on 19 February, which allowed the parties to swiftly proceed with the implementation of the transaction.” 

Skufca led the Schoenherr team along with Partner Vid Kobe. Others on the team included Partner Petra Smolnikar and Associates Jurij Lampic and Matija Rencelj.

Stratulat Albulescu Attorneys at Law and Fieldfisher have advised the German group Wirecard on its EUR 32 million acquisition of Provus — Romania’s leading payment processing and technological service provider — from the Polish private equity investor Innova Capital. Clifford Chance advised Innova Capital on the acquisition, which was completed on February 29, 2016, and also involved the acquisition of Romcard and Supercard Solutions & Services, the two Romanian subsidiaries of Provus.

Provus supports companies in outsourcing, acquiring and card processing, e-commerce payment transactions, and point-of-sale (POS) operations. Its customer base includes major Romanian banks and other significant telecommunications and retail players. In addition, Provus has worked with the Romanian government in the digitization of health and payment cards.

Wirecard is a software and IT specialist for outsourcing and white label solutions for payment processing and issuing products. 

Fieldfisher’s Dusseldorf and London offices coordinated the acquisition and led the negotiations on behalf of Wirecard, while Stratulat Albulescu conducted the due diligence investigation and provided legal advice on Romanian law aspects of the transaction. The Stratulat Albulescu team was led by Partners Silviu Stratulat and Alexandra Radu and included Partners Andrei Albulescu and Delia Belciu, Senior Associate Cristina Man, and Associates Ana Chira, Cristiana Ditoiu, and Andrei Balus.

The Clifford Chance team consisted of Warsaw-based Partner Nick Fletcher, Bucharest-based Counsel Mihaela Mindru, and Bucharest-based Associates Miruna Poenaru and Silviu Munteanu.

Image Source: wirecard.com

Squire Patton Boggs has obtained a victory for alcoholic spirits company Frucona Kosice in the EU General Court in a case in which the European Commision had previously found a tax debt write-off to be incompatible with EU state-aid rules.

According to Squire Patton Boggs, the case dates back to a October 2004 tax settlement between Frucona Kosice and the local tax office. A complaint was lodged with the Commission alleging that the alcoholic spirits company had received unlawful state aid. The Commission’s original decision was appealed by the Squire Patton Boggs team up to the Court of Justice, which ruled in Frucona’s favor and sent the decision back to the General Court for a further assessment. Before the results of this review were reached, the Commission adopted a new decision that sought to correct the errors identified by the European Court of Justice. The Squire Patton Boggs team not only appealed the new decision, but also sought injunctions preventing the Commission from enforcing it before the local courts. The Court has now ruled that the new decision should be annulled. 

The Squire Patton Boggs team representing Frucona Kosice on the matter was led by Brussels-based Partners Brian Hartnett, Global Co-Chair of the Competition & Antitrust Practice, and Oliver Geiss, supported by Senior Associate Anthony Bochon and Associate Will Sparks. 

Integrites has announced that Svyatoslav Sheremeta has joined the firm as a Partner and Head of Corporate and M&A in Ukraine.

Prior to joining Integrites, Sheremeta co-headed the legal department of Dragon Capital, one of the largest Ukrainian investment companies, and headed the legal department of PJSC Mironivsky Hliboproduct. Previously Sheremeta worked in the Kyiv offices of Squire Sanders (now Squire Patton Boggs) and Baker & McKenzie. 

According to Integrites, Sheremeta “is an expert in the fields of investments, mergers and acquisitions, corporate law, debt restructuring, as well as possesses significant experience in capital market transactions. In particular, [he] advised Ferrexpo, MHP, Kernel Group, as well as a number of other companies, during their initial public offerings (IPOs) on several European exchanges, including Warsaw and London Stock Exchanges. He also worked on a number of landmark M&A transactions, including acquisitions of Ukrainian banks by international financial groups such as Commerzbank, UniCredit Bank, and Intesa Sanpaolo.”

At Integrites, the firm reports, Sheremeta “will provide legal support to the firm’s clients in all aspects of M&A transactions (both local and multi-jurisdictional), privatization processes, joint ventures, cross-border corporate restructurings and reorganizations, including for the purposes of receiving debt or equity financing, entering foreign markets, or reconciling shareholders’ interests.”

Sheremeta obtained his degree in law from Ivan Franko National University of Lviv (Ukraine) and an LL.M. degree in International and Comparative Law from the University of Iowa College of Law in the United States, where he studied as an Edmund S. Muskie/Freedom Support Act fellow. 

Karanovic & Nikolic has announced that Senior Associate Mirko Kovac has been re-elected to the position of Vice President of the Serbian Foreign Investors Council (FIC) HR Committee for a period of 2 years, effectively giving Kocac his second mandate as the Vice President of the HR Committee.

According to a Karanovic & Nikolic statement, “the FIC was established in 2002 as a non-profit association of foreign business investors, with the goal of promoting the kind of business environment that is conducive to creating a positive investment climate in Serbia. By collecting and sharing practice insights and expertise from around the world, FIC prides itself on being able to offer practical and concrete business recommendations, all the while doing so in an ethically conscious manner. For the purpose of maximising their results, FIC has developed different forms of dialogue with the Government, both in terms of promoting their views in front of the highest officials, as well as through organising numerous expert-level roundtables concerned with clarifying and resolving current issues related to state administration processes.”

The firm also reports that the FIC’s HR committee “is of a cross-sectional nature, as it is committed to implementing modern human resource systems in Serbia, encompassing both managing and educational policies. This committee’s mission is two-fold, as on one side it is dedicated to working on proposals aimed at removing obstacles faced by investors in the HR area, while on the other it is engaged in making suggestions on how to improve the quality of human resource systems within the country. Current partners of the HR committee in this enterprise include the Ministry of Labour and Social Policy, various universities, legal offices, as well as other FIC members and consultants. In his re-elected mandate, Mirko will look to further impact the positive cooperation between the responsible bodies, facilitating the legal aspects of the process while continuing to contribute to the Council’s goals with his industry-specific knowledge and experience.”

Biris Goran has announced that it advised Adamerica on its acquisition of Phoenix Tower, a 10,000 square meter office tower located on Calea Vitan in Bucharest, from the building’s majority owner, Commerzbank AG. CMS advised Commerzbank on the deal.

The Biris Goran team was spearheaded by Partner Victor Constantinescu, who reported being “delighted to have assisted our long-time friends from Adamamerica, many of whom were founders of Adama,” and who said that, “their return to the Romanian market is a sign that the health of the market has likewise returned.” Constantinescu was supported by Biris Goran Associates Tudor Stanciu and Mariana Signeanu, “along with many other members of Biris Goran on due diligence.”

The CMS team was led by Roxana Fratila, CMS’s Head of Real Estate in Romania, supported by Associate Alexandru Dumitrescu.

Image Source: phoenix-tower.ro

Randa Havel Legal has advised Jan Galgonek on his consolidation of ownership in and subsequent sale of the Adexpres Group to the Dentsu Aegis Network, a multinational media agency headquartered in London. DLA Piper advised Dentsu Aegis on the sale, which was completed on March 3, 2016.

Randa Havel reports that Galgonek — and the three former minority shareholders whose shares Galgonek acquired before selling Adexpres to Dentsu Aegis — will stay with the Adexpres Group and continue to participate in its management. The firm describes Adexpres Group as “a major digital media agency serving clients throughout Central and Eastern Europe. In addition to Adexpres.com, s.r.o., Adexpres Group consists of Prague Bistro Digital s.r.o., Mobile Internet s.r.o. and Bistro Social s.r.o.”

The DLA Piper team was led by Partner Jakub Adam, supported by Lawyers Marek Stradal, Petr Samec, and Zuzana Slovakova.