LEGAL UPDATE the BALTIC STATES September 2005 No

LEGAL UPDATE THE BALTIC STATES www.sorainen.com September 2005 No. 37

Sorainen Law Offices Parnu mnt. 15 Kr. Valdemara iela 21 Jogailos g. 4 Museokatu 9 B 17 10141 Tallinn, Estonia LV-1010 Riga, Latvia LT-01116 Vilnius, Lithuania 00100 Helsinki, Finland Tel: +372-6 400 900 Tel: +371 7 365 000 Tel: +370-5 2685 040 Tel: +358-9 4369 0840 Fax: +372-6 400 901 Fax: +371 7 365 001 Fax: +370-5 2685 041 Fax: +358-9 4369 0841 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected]

Estonia Essential amendments adopted to Civil Procedure and Dear clients, co-operation partners, friends and other readers, Enforcement Procedure Codes In the beginning of September 2005 Sorainen Law Offices celebrated its 10th anniversary. It was a moment to look back and remember what we have achieved over the past few years. Tallinn in September 1995 marked the start up, consisting of myself and a secretary - now our current Tallinn Latvia office manager, Mrs. Kristiina Härms. These were indeed modest beginnings: the first computer and printer were borrowed from the very first client More favourable AGA Gas company. privatisation rules From day one the focus area of our work was very much the same as today: corporate, including mergers & acquisitions, financing, real-estate law, and so on. Even the client profile was very much the same: international corporations entering or expanding in the Baltic markets, and larger local Lithuania firms doing international transactions. So even though we have experienced fast growth and a vastly changed legal and business environment, some Road Tax finally things have remained the same. abolished By the summer of 1997 we were still a fairly small firm in Estonia with only eight lawyers. But we then decided to push through our initial plan of creating a true Pan-Baltic business law firm. The first step involved ope- Sorainen Law ning an office in Riga. The first lawyer there was Gints Vilgerts – today, the office managing partner in Riga. Despite the economic crises in the Baltics Offices in 1998 and 1999, we moved on to open an office in Vilnius in January 1999, thus fulfilling our Pan-Baltic law firm concept. The first three lawyers Sorainen Law in Vilnius were Pekka Puolakka, Renata Berzanskiene and Kestutis Adamonis. All are partners with us today. Offices celebrated its 10-year During our years of operation, we have realised that the most valuable asset we have is our personnel. We have been very lucky to be able to attract anniversary some of the best lawyers and administrative personnel on the market, provide on-the-job training - and keep them. Today we number 90 people, of whom 65 are lawyers. So far, we have served more than 3000 corporate clients in Sorainen Law the Baltic States and have advised in more than 300 company acquisitions. With over 200 clients in all three Baltic States, on average we receive 300 Offices in Riga is new assignments every month. Our operation has grown larger and stronger than I ever dreamed of. organizing a seminar on development of To conclude, I would like to thank all our clients, co-operation partners, friends and - last but not least - our personnel for the years spent together Public Private thus far. I hope we will continue to enjoy each other’s company over many years to come. Partnerships (PPP) in Latvia and Europe Aku Sorainen Managing Partner

1 © SORAINEN Law Offices 2005 All rights reserved LEGAL UPDATE Estonia EUROPEAN UNION chromium) and brominated flame retar- EXECUTION PROCEEDINGS dants (polybrominated biphenyls (PBB) Electrical and Electronic Equipment or polybrominated diphenyl ethers New Code of Enforcement Procedure Waste Management and Hazardous (PBDE)) in new electrical and electronic makes debt collection easier Substances equipment put on the market from Under legislation adopted 15.06.2005, 01.07.2006. A number of applications the new Codes of Civil Procedure The European Union (EU) identifies waste for these substances are exempted in the (tsiviilkohtumenetluse seadustik) and prevention and management as one of Directive. As a result, the the WEEE Enforcement Procedure (täitemenetluse four top priorities in its 6th Environment Directive will require producers’, seadustik) take effect on 01.01.2006. The Action Program. In order to tackle the importers’ and distributors’ consideration new Code of Civil Procedure was fast-increasing waste stream of electrical to include in their supply and other described in the BLU May 2005 issue, and electronic equipment, the EU business contracts the requirements for and in the current issue we will briefly adopted Directive 02002/96/EC on waste compliance with the Directive and the introduce the essentials of the new Code electrical and electronic equipment (the allocation of liability for treatment and/or of Enforcement Procedure. WEEE Directive) and Directive disposal and/or recovery of WEEE sold 2002/95/EC on restricting the use of after 13.08.2005. The new Code provides more exact certain hazardous substances in electrical regulations for the work of bailiffs and and electronic equipment (the RoHS In Estonia, Latvia and Lithuania, the improves the possibilities of creditors in Directive). Both Directives will affect WEEE collection and management collection of debts. The Code makes it not only producers of electrical and system must be organized to ensure that possible to obtain better information electronic equipment, but will also have from 01.01. 2009 the volume of collec- about a debtor’s income, in particular a implications for distributors and end ted WEEE reaches at least 4 kilograms sworn statement from debtors as to their users of these products. of household WEEE per inhabitant per assets and liabilities. This is especially year. Practically speaking, these volumes useful in cases where data available in The WEEE Directive aims at minimising should be reached in 2008. Moreover, public databases do not enable the impact of electrical and electronic as from 13.08. 2005, producers and execution of enforcement procedures equipment on the environment both importers of electrical and electronic or in cases where a debtor’s economic during their life time and when they equipment must mark products put on relations are complicated and the pool become waste. It applies to a great the market after that date with a special of assets is relatively volatile. number of products (i.e. refrigerators, symbol. washing machines etc) listed in the The Code of Enforcement Procedure Annexes to the Directive. It encourages Additional information: extends the possibilities for seizure of a and sets criteria for the collection, Marius Urbelis debtor’s assets. Now, these can be treatment, recycling, and recovery of e-mail: [email protected] subject to pledge of seizure. This is based waste electrical and electronic on which claims are to be satisfied, equipment. The Directive makes proceeding from the occurrence of producers responsible for financing most pledges of seizure. Therefore, in the of these activities. It also requires future, the creditor should turn to the producers to appropriately mark - with bailiff as soon as possible to ensure an a specific symbol - electrical and early right of pledge. electronic equipment put on the market after 13.08.2005. Following the WEEE ESTONIA The Code enables seizure of concealed Directive, distributors will have to take income – for example, when a debtor’s back electrical and electronic equipment EMPLOYMENT LAW salary is paid to a third person or where from private householders free of charge. More certainty in labour disputes a clearly too low salary is agreed with The Directive also sets the requirement On 15.06.2005, the Parliament adopted the employer. addressed to EU Member states to ensure amendments to the Individual Labour that by 31.12.2006 at the latest they Dispute Resolution Act (individuaalse Another new institution is replacement achieve a rate of separate collection of töövaidluse lahendamise seadus). These seizure, according to which an item of at least four kilograms on average per amendments, entering into force on value owned by a debtor (e.g. an antique inhabitant per year of WEEE from private 01.01.2006, provide that Labour Dispute dining table, a valuable watch or clock, households. This requirement will Committees may not resolve individual expensive tableware) may be seized if materialize in the shape of specific tasks labour disputes where financial claims a less valuable item or a sum of money that producers and importers of electrical exceed 50 000 Estonian kroons. This for obtaining it is given to the debtor in and electronic equipment must comply means that labour disputes involving exchange. with by the given deadline. As a result, higher amounts should be referred the WEEE Directive will oblige directly to the court. Compared to the In addition, execution proceedings producers, importers, and distributors court, the Labour Dispute Committees include a recovery mechanism (i.e. to consider including in their supply and are viewed as more favourable to certain transactions by a debtor may be other business contracts requirements employees, so that this change in declared null and void for the purpose for compliance with the Directive and legislation should come as welcome of restoring the debtor’s pool of assets), the allocation of liability for treatment news for employers. which until now was only possible in and/or disposal and/or recovery of WEEE bankruptcy proceedings. Immediate sold after 13.08.2005. Additional information: compulsory enforcement will also be Lea Liigus significantly more effective – a person The RoHS Directive, complementing the e-mail: [email protected] who has submitted to immediate WEEE Directive, aims at protecting compulsory enforcement based on a human health and the environment by respective agreement may only dispute restricting the use of certain hazardous the compulsory enforcement by filing a substances in electrical and electronic suit with the court. Previously, submitting equipment. The RoHS Directive requires a declaration of opposition to the bailiff the substitution of various heavy metals was sufficient ground to suspend the (lead, mercury, cadmium, and hexavalent execution proceedings.

© SORAINEN Law Offices 2005 2 All rights reserved Latvia LEGAL UPDATE To summarise, the application of the not consider it relevant who is the about the draft reorganization agreement new Code should make execution operator of the aircraft or who holds the will have to be published in the news- proceedings considerably more efficient operating license, certificate of air carrier, paper "Latvijas Vïstnesis". and should improve possibilities for and air service license for an airline on collection of debts based on execution a particular route. Additional information: documents. Brigita Terauda Additional information: e-mail: [email protected] Additional information: Carri Ginter Carry Plaks e-mail: [email protected] e-mail: [email protected] Selection of relevant acts and amendments adopted 01.06.2005-31.08.2005 FINANCIAL LAW • Law on amendment of the Law on Implementation of EU norms on Fees for Excess Storage (in force as of TAX LAW supervision requirements for financial 30.04.2005) conglomerates Income tax decrease in Estonia • Law on application of the Code of On 12.07.2005 the Financial Conglo- The income tax rate, both for private and Civil Procedure and Code of Enforcement merate Law (Finan‰u konglomerÇtu public persons, will decrease to 23% on Procedure likums) came into force, introducing a 01.01.2006, according to the changes • Law on amendment of the Copyright number of EU norms stipulating addi- adopted on 20.06.2005. The current Law (in force as of 01.07.2005) tional supervision provisions for com- income tax rate is 24%. Further, under • Law on amendment of the Waste panies that are part of financial conglo- these changes the income tax rate will Act, Packaging Act, and Packaging Excise merates. A financial conglomerate is a decrease in 2007 to 22%, in 2008 to Duty Act (in force as of 10.07.2005) group comprising companies acting both 21%, and in 2009 to 20%. in insurance, banking, and investment • Law on amendment of the Structural sectors, provided their activities in these The Estonian Parliament previously adop- Aid Act (in force as of 01.07.2005) sectors are of some importance. The aim ted changes that provided for a quicker of the Law is to improve protection of reduction in the income tax rate. How- customers of banks, insurance and ever, recently the Estonian Parliament investment agencies included in financial decided that the initial reduction is not conglomerates against the insolvency risk financially viable for the state budget and, of these companies that may increase as a result, slowed down the process of due to their interrelation. reduction in the income tax rate. LATVIA Additional supervisory provisions apply Additional information: COMMERCIAL LAW to those groups of companies that are Konstantin Kotivnenko considered to be financial conglomerates, e-mail: An essential norm regarding Articles of mainly regarding regular provision of [email protected] Association of public limited companies information on performance of capital and other amendments to the Com- sufficiency requirements, risk concent- mercial Law ration, important transactions, as well as Amendments to the Commercial Law the requirement to implement risk TRANSPORT LAW (Groz¥jumi KomerclikumÇ) entered into management and internal control systems. force on 20.07.2005. Compliance with this Law in Latvia is Carrier’s responsibility for damage to supervised by the Financial and Capital passengers in international air transport An important norm regarding Articles of Market Commission. On 25.05.2005 the Civil Chamber of Association of public limited companies the National Court delivered its decision has been introduced – in the future these Additional information: in the case of AS Enimex vs Gjelstad (3- may stipulate that upon equal division of Girts Ruda 2-1-51-05). This expands regulation of votes, chairman of the Management Board e-mail: [email protected] responsibility of contractual carriers or the Council has the casting vote. based on the so-called Warsaw Convention and of non-contractual A new norm has been introduced, that carriers, based on the Guadalajara in a single-holder company transactions INSURANCE LAW Convention, which supplements it. between the shareholder and the According to the Guadalajara company represented by them should be Importance of insurance rules Convention, damage caused to a executed in writing. The procedure, In May this year, the Supreme Court passenger is compensated in accordance according to which a commercial register issued a survey of practices at the with the provisions of the Warsaw office convenes the Meeting of Share- Senate’s Department of Civil Cases when Convention in cases where transportation holders upon request in the event the adjud-ging disputes related to was actually provided by another person Board or the Council has failed to do so performance of contractual obligations than the one with whom the passenger within the term stated, has also been with regard to vehicles and their owners’ had concluded a personal contract of specified. It is stipulated that the third party liability insurance. The survey carriage. This applies if the actual carrier commercial register office convenes the pays special attention to one of the most provides transportation on behalf of the Meeting for a fee. unclear issues in resolving disputes on contractual carrier and this is based on indemnity payments – gross negligence an agreement concluded with the It has to be considered that henceforth by either insurer or insured. Up to now contractual carrier. Simple renting of a appending the shareholder’s register and no un-ambiguous court opinions as to manned aircraft does not give sufficient draft reorganization agreement and their what behaviour of the insurer is consi- grounds to consider an entity the actual amendments to the registration file is dered gross negligence have been carrier replacing the contractual carrier subject to a state duty (in an amount published. – it is also important who gave the orders determined by the Cabinet of Ministers, to the crew of the aircraft in reality. which is not known yet). Information Regarding its decision, the Chamber did

3 © SORAINEN Law Offices 2005 All rights reserved LEGAL UPDATE Lithuania The full article “Importance of insurance European Union countries – Austria, Italy, airplanes and ships with alcoholic beve- rules” is available on our web-page Spain, Slovenia, Germany, Lithuania, rages, tobacco products, and fuel, as well www.sorainen.com. Czech Republic, Finland, Hungary, Poland as for fuel packaging. and Cyprus - as well as a member of the Additional information: Common Transit Convention – Switzer- 3) Additionally now permitted is adding Anete Rubene land - in which the electronic Guarantee additives to fuel by using the flow method email: [email protected] Management System operates. when providing fuel.

Additional information: New Cabinet of Ministers regulation Janis Taukacs e-mail: [email protected] PROPERTY LAW adopted on application procedure of value added tax (VAT) Edgars Koskins More favourable privatisation rules in On 28.07.2005 Cabinet Regulation No. e-mail: [email protected] Latvia 534 On the Procedure for Applying the The Latvian Parliament has recently pas- Norms of the Law on Value Added Tax Selection of relevant acts and amend- sed several important laws regarding the (Likuma “Par pievienotÇs vïrt¥bas nodokli” ments adopted 01.06.2005-31.08.2005 further privatisation process, the main normu piemïro‰anas kÇrt¥ba) came into • Cabinet Regulation No. 367 On ones being the framework law “On the force. The new Regulation has mainly Detailed Planning development Agree- Completion of the Privatisation of State been developed for the purpose of ments and the Procedure for Detailed and Municipal Property and Use of specifying the so far unclear issues Planning Development and Financing Privatisation Vouchers” (Valsts un pa‰val- regarding VAT application, as well as to (commenced as of 04.06.2005). d¥bu ¥pa‰uma privatizÇcijas un priva- explain how to apply the norms of the tizÇcijas sertifikÇtu izmanto‰anas Law on Value Added Tax that came into • Cabinet Regulation No. 453 On pabeig‰anas likums), (the “Privatisation force on 01.01.2005. For instance, the Construction Company Registration Law”, entered into force on 01.09.2005). Regulation includes a new explanation (commenced as of 01.07.2005). The main aim of the new regulation is to of the moment of providing a service and • Cabinet Regulation No. 491 On the establish clear procedures and to set the procedure for issuing an invoice for Procedure for Licensing and Supervision reasonable terms that will speed up and product shipment services within EU of Companies Providing Recruitment simplify completion of the privatisation territory and shipment services related to Services (commenced as of 01.07.2005). process, which so far in many cases has export, import, or transit. The Regulation • Amendments to the Financial been complicated and lengthy. also specifies that the restrictions Instrument Market Law (entered into force stipulated in the VAT Law regarding simultaneously with the Financial Conglo- It is important to stress that privatisation preliminary tax deduction are not merate Law, i.e. on 12.07.2005). is an option to acquire state or municipal applicable to VAT amounts overpaid • Amendments to the Credit Institution real property for approximately 2/3 of the during the process of property construc- Law (entered into force simultaneously market value and to pay partly by tion, reconstruction, renovation, or with the Financial Conglomerate Law, privatisation vouchers that can be pur- restoration. Following amendments to the i.e. on 12.07.2005). chased below their nominal value. Any Law, the norms regarding exchange and person (including foreigners who have setoff transactions have also been deleted • Amendments to the Law on business in Latvia) is entitled to initiate from the Regulation on the VAT appli- Restrictions of Tobacco Product Sale, the privatisation process. cation procedure. With the coming into Advertising and Use (commenced as of force of the new Regulation, Cabinet 20.07.2005). The Law also affects future lease of vacant Regulation No. 427 of 22.07.2002 On • Cabinet Regulation No. 516 state and municipal lands (i.e. lands the Procedure of Applying the Norms of Amendments to Cabinet Regulation No. without registered buildings). From now the Law on Value Added Tax is declared 213 of 29.04.2003 On Residence Permits on, lease terms for these lands will be no longer valid. (commenced as of 01.08.2005). limited to 12 years, while the lessees of the current vacant lands will be entitled New Cabinet Regulation on the to apply for privatisation if the construc- Procedure for Excisable Goods Circu- tion of a building takes place. It is foreseen lation that the new procedures will solve various A New Cabinet Regulation on the uncertainties with public land and will Procedure for Excisable Goods Circulation help ensure a safe environment for secure (Akc¥zes preãu aprites kÇrt¥ba) entered investments. into force as of 01.09.2005. This replaces LITHUANIA the previous Regulation of the same title. The full article “More favourable priva- In comparison with this, key novelties PROPERTY LAW tisation rules in Latvia” is available on are that: Expropriation of Land for the Benefit of our web-page www.sorainen.com. 1) The Regulation permits registration in the Public Good the general invoice-waybill registry of Additional information: On 25.08.2005, the Government adop- invoices-waybills of goods drawn for ted Resolution No. 924 Regarding Con- Lelde Lavina movement of alcoholic beverages and e-mail: [email protected] firmation of Regulations for Submission tobacco products. Further, other goods - and Analysis of Applications for in addition to tobacco products and Expropriation of Land for the Benefit of alcoholic beverages – may be included the Public Good and Regulations for in the same invoice-waybill. Invoices- Arrangement and Implementation of TAX LAW waybills for fuel may also be registered Projects on Expropriation of Land for the in a separate invoice-waybill registry. Benefit of the Public Good (Dòl pra‰ym˜ The electronic transit guarantee manage- paimti Ïem´ visuomenòs poreikiams ment system has started operating in 2) The Regulation also stipulates the need pateikimo ir nagrinòjimo taisykli˜ ir Ïemòs Latvia for filing additional reports on fuel, paòmimo visuomenòs poreikiams projekt˜ Continuing with implementation of the tobacco product and alcoholic beverages rengimo ir ∞gyvendinimo taisykli˜ New Computerized Transit System, on circulation at excisable goods ware- patvirtinimo). This establishes mechanisms 21.07.2005 Latvia joined those eleven houses, tax-free outlets and supply of for submission and analysis of appli-

© SORAINEN Law Offices 2005 4 All rights reserved Lithuania LEGAL UPDATE cations for expropriating land for the of securities with a registered residence TAX LAW benefit of the public good provided by in Lithuania, who intend to publicly offer state institutions and municipal councils or list securities in the regulated market New Temporary Social Tax Law will be or their authorized institutions or agencies. in Lithuania and (or) any other member applied in Lithuania In addition, it provides for the content, state of the European Union. On 07.06.2005, the Parliament adopted submission, coordination, confirmation a Temporary Social Tax Law (Laikinasis and implementation of projects on the This Law regulates in greater detail public socialinio mokesãio ∞statymas). This expropriation of land for the benefit of offering and listing of securities: introduces the temporary social tax, to be applied during the tax periods 2006 the public good. This Resolution came • in the regulated market of other into force as of 27.08.2005. and 2007. This temporary tax is intended member states by issuers with a to offset revenue loss resulting from registered residence in Lithuania; and Additional information: abolition of the road tax and cuts in Marius Urbelis • in the regulated market of Lithuania individual income tax. e-mail: [email protected] by issuers without a registered residence in Lithuania. The social tax has been construed on the basis of corporate profit tax. The Particular attention must be paid to the main elements of social tax (taxpayer, amendment, which states that the Law tax basis, tax period etc.) are generally SECURITIES LAW extends the application of squeeze-outs the same as in the case of normal Amendments to the Law on Securities and compulsory bids to all public corporate profit tax. Market companies. On 23.06.2005, the Parliament adopted The social tax is applied on an annual a Law Amending and Supplementing the It must be noted that the Law has chan- basis. The rate of social tax for 2006 is Law on the Securities Market (Vertybini˜ ged the concept of “issuer”, introducing 4%, while in 2007 it will be 3%. In fact, popieri˜ rinkos ∞statymo pakeitimo ir an amendment according to which not one could say that the corporate profit papildymo ∞statymas). The purpose of only issuers established in Lithuania can tax at the standard rate of 15% will this Law is to implement the legislative publicly offer and (or) list their securities increase by 4% in 2006 and 3% in 2007. acts of the European Union. in the regulated market. Therefore periodic information and information Social tax has to be paid by companies The new wording of the Law associates on material events now must be whose profits are subject to corporate the possibility to offer securities publicly presented by all issuers whose securities profit tax (with some exceptions). and to list them in a regulated market are publicly offered or listed in the with a publishing of a prospectus and regulated market of Lithuania. Social tax must be paid in advance, calculated on the taxable profit of the not with registering them with the Additional information: Securities Commission as was the case previous year. The same applies to social Mindaugas Lescius, tax payable for 2006. Therefore, in 2006 before. Requirements regarding the e-mail: [email protected] arrangement, confirmation, and publi- cation of the prospectus apply to issuers

Please be informed that on 24 October 2005, within the 11th international conference "BANKING AND FINANCE IN THE BALTICS", Sorainen Law Offices in Riga is organizing a seminar

“Development of Public Private Partnerships (PPP) in Latvia and Europe”.

For more detailed information please see www.lbsconferences.lv

5 © SORAINEN Law Offices 2005 All rights reserved LEGAL UPDATE Office news companies will be required to pay in method, which in future will be used only advance social tax calculated on the in a limited number of cases. NEWS IN SORAINEN basis of profits earned during 2005. Additional information: LAW OFFICES Additional information: Tomas Davidonis Tomas Davidonis e-mail: [email protected] e-mail: [email protected] Selection of relevant acts and amend- Recent deals Road Tax is finally abolished ments adopted 01.06.2005-31.08.2005 Advice on Benchmark Property Road tax is abolished as of 01.07.2005. • Law on Amending and According to the general rule, road tax M&A Supplementing Articles 2, 32, 33(1), 44, Sorainen Law Offices advised the was imposed on all income recognised 66, 67, 68, 95, 177 of the Value Added for corporate profit tax. Special provisions Finnish listed property investment Tax Law (enters into force as of company, Citycon Oyj, in acqui- as to the application of road tax were 01.01.2006 (with exceptions)). established in respect of certain types of sition of the Rocca al Mare Shopping Centre in Tallinn, income, such as income of construction • Resolution of the Government Amen- Estonia. Citycon also acquired companies, intermediaries, or capital ding the Resolution of the Government 28.01.2003 No 115 Regarding Confir- neighbouring land with city gains received from the transfer of long planning for future extension. The term assets. mation of Model Form of Labour Agree- ment (in force as of 26.08.2005). total debt-free purchase price was EUR 62,1 million. This acquisition • Resolution of the Government The basic rate of road tax was 0,48%. has been cited as the first major Amending the Resolution of the Trading companies were required to pay property M&A and benchmark tax of 0,3%, undertakings trading in liquid Government 14.05.2003 No 587 Regar- transaction in Estonia. The team gas for vehicles were paying 0,1% tax, ding List of Work which may Require of lawyers, led by partners Toomas while road tax of 1% payable on the Performance of up to 24 Hours per Day; Prangli and Kaido Loor, provided margin and other services, was imposed Peculiarities of Work and Rest Time in support in all phases of the on credit institutions. the Economic Sphere of Business; Work transaction, including legal due and Conditions under which Summary diligence, negotiations, and Additional information: Recording of Working Time may be closing the transaction. Tomas Davidonis Introduced, Approval of the Procedure e-mail: [email protected] for Introduction of Summary Recording Assisting Valio Oy in takeover of of Working Time in Enterprises, Institutions shares of AS Võru Juust Reforms of Real Estate Tax and Organizations (in force as of Tallinn office advised the largest On 07.06.2005 the Parliament adopted 26.08.2005). Finnish milk processing and a Law on Real Estate Tax (Nekilnojamojo • The Minister of Social Security and marketing company Valio Oy in turto mokesãio ∞statymas), which will its attempt to acquire 100% of the come into effect on 1 January 2006. The Labour issued Order No. A1-169 approving Description of the Procedure shares in Estonia’s largest and new law establishes that this tax is levied oldest cheese producer, AS Võru on premises, buildings and constructions for Providing Information on Posted Employees (in force as of 22.06.2005). Juust. The takeover of shares for registered in the Lithuanian Real Estate monetary compensation was Register, owned by corporate undertakings • Order No. A1-192 of 05.07.2005 of successful – via its subsidiary, Valio or individuals. the Minister of Social Security and Labour Oy became the sole shareholder Amending Order No. A1-179 of of AS Võru Juust, with none of the Until now, in case of individuals the real 16.07.2004 of the Minister of Social minority shareholders disputing estate tax was applied only in respect of Security and Labour On Approval of the the takeover of shares. The case land. Thus, in contrast to companies, Procedure for Issuing Labour Permits to was handled by partner Karin individuals were not required to pay tax Foreigners. Madisson and associate Lea Liigus, on other real estate, such as buildings. who provided assistance, starting . with negotiations with minority In the opinion of tax officials, the law shareholders, leading the takeover aims at creating a transparent system for process, drafting required relevant real estate, introducing internationally documents and concluding with accepted valuation methods in respect the takeover of shares. of the tax value of real estate and preventing tax evasion through transfer Assisting YIT Group’s company in of real estate to natural persons and acquisition subsequent lease back schemes. Tallinn office advised Nordic building system services market Real estate tax will be applied on an leader, YIT Group’s YIT Building annual basis and the rate will be 1%. The Systems Oy, in its acquisition of a tax will be applied on the market value majority holding in the Estonian of real estate calculated by way of mass company Aktsiaselts Emico and valuation conducted by State valuers. its wholly owned subsidiary Taxpayers who do not agree with the Osaühing EMICO ELEKTER, both engaged in electrical contracting value established under mass valuation and servicing operations. YIT will have the right to apply for an Building Systems Oy offers individual valuation. electrical, lighting, HEPAC, security, automation and A/V Further, as from the application of the systems. The case was handled by new Law on Real Estate Tax, valuation partner Pekka Puolakka and will be conducted on the basis of Contributed by Lea Liigus, Katri-Helen Agur, associate Anne Adamson, pro- internationally accepted valuation Estonia; Gita Rivdike, Latvia; Tadas Milasius, viding legal assistance to YIT methods. This replaces the recuperation Lithuania. Edited by Girts Ruda, Latvia

starting with conducting legal due preparing and negotiating the share Hungary. Triin speaks Estonian and diligence on the target companies, purchase agreement and other English. Leho has worked pre- assisting in negotiations for prior transaction documents, obtaining viously in Kadrioru Law Office, sale of immovable by the target approval for the transaction from Hansapank, and Rodi Law Firm. company, acquisition of the the Latvian Competition autho- Specialising in real estate and shareholding and various post- rities, and other assistance up to construction matters, he graduated acquisition issues. closing the deal. from the Tartu University and speaks Estonian and English. Support to a UK and local pro- Acquisition of the Business Center perty investor in Vilnius Riga office was joined by a new Tallinn office provided a legal due A team from Vilnius office, led by lawyer, Debora Pavila, who diligence report, acquisition and partner Kestutis Adamonis, assisted graduated Oxford University this post-acquisition advice to a joint foreign investor ECE European City summer, acquiring a MA Honors venture between a UK and Esto- Estates AG in acquiring the Busi- in law. Her key fields of nian property investor in the pur- ness Center in Vilnius. The case specialization are merger and chase of a medium-sized shopping involved advice on acquisition of acquisition issues, competition, centre real estate in Tallinn from the building and land, as well as and EU law. Debora is fluent in three local investors. The case was on the lease of the acquired Latvian and English. handled by partner Kaido Loor and premises. senior associate Ene Soop. Riga office lawyer Julija Jerneva Assistance in dispute settlement has returned from studies abroad. Advice to a major Finnish property Attorney-at-Law Renata She obtained an MA in law at the investor Berzanskiene, a partner at Vilnius College of Europe in Brugge, Tallinn office assisted the client in office, assisted one of the biggest Belgium. legal due diligence and acquisition work-wear and mat rental of a SPV operating a yet-to-be- companies, amicably settling a Associate Sergejs Trofimovs and constructed industrial building dispute initiated by a customer of senior associate Algirdas Peksys from a well-known construction the company. have joined the Vilnius office team. company. “Lesson learned on the Sergejs graduated from Concordia way was that even most theoretical International University Estonia Law risks can materialise 36 hours School (LL.B.) and Riga Graduate before signing of the SPA. Had this School of Law (LL.M.). His key happened after signing, the SPA specialization is European Union and other transaction documents Employees law. He speaks English, Latvian, would have mitigated the exposure The offices in Tallinn, Riga, and Lithuanian and Russian. Algirdas of the buyer to this risk,” com- Vilnius have rapidly expanded graduated from Vilnius University, mented partner Kaido Loor. during the last half of the year. In Faculty of Law (LL.M.). His key particular, a number of talented specialization area is securities Sale of shares in recreation new employees have joined us. At market law and he has experience business present, our offices employ 90: of in providing legal services to Vilnius Tallinn office defended the client these, lawyers and attorneys stock exchange. He speaks English, against claims of pre-emption and number 28 in Tallinn, 20 in Riga, Lithuanian and Russian. post-closing reduction of sales and 17 in Vilnius. price. The case was handled by This summer’s honours students at partners Kaido Loor and Pekka Luc Nijs has been invited to join Oxford University also include Puolakka. Sorainen Law Offices as a partner, lawyer Martins Paparinskis from head of tax, to strengthen and Riga office. He will continue his Establishing a subsidiary for world- build up Sorainen Law Offices’ studies on the PhD program in leading insurance broker Pan-Baltic tax practice. Mr. Nijs’ Oxford from October this year. Leading global insurance broke- main areas are tax-efficient supply rage group - Colemont – has chain management, financing, Riga office lawyer Edgars Briedis is established a subsidiary, Colemont company valuation, asset mana- beginning his studies on the MA Eesti Kindlustusmaakler OÜ, in gement, and non-adversarial dis- program at the University of Estonia. A team of associates Jane pute resolution. Previously he has Essex, UK, in October 2005. Eespõld and Kai Kaljaste provided worked for Arthur Andersen and legal advice and assistance in Deloitte in Belgium, The Nether- Reimo Hammerberg, a senior establishing the company and lands, and Portugal and lately in associate at Tallinn office, has entering it into the list of insurance Central Europe where he fulfilled received a William Fulbright brokers kept by the Estonian a regional business development scholarship, leaving the office in Financial Supervision Authority. role for the international tax July 2005 for one year to obtain a service line. master’s degree in Law (LL.M). He Assistance in acquisition of the will study at the University of San largest meat processing company Senior Associate, Attorney-at-Law, Diego, School of Law (USA) with in Latvia Triin Toomemets and Leho Pihkva, focus on real estate and financing Riga office represented Askembla Associate and Attorney-at-Law, law. Growth Fund KB, a Swedish private have joined the Tallinn office. Triin equity fund, in a recently finalised previously worked in law office Rosa Rotko, an associate at the transaction for acquisition of a Laus & Partnerid and has extensive Tallinn office, will be away from shareholding in SIA Trials, the experience in litigation and real the office for one year from October largest meat processing company estate matters. She has a Master of 2005 to obtain a master’s degree in in Latvia. Legal advice from Law (LL.M) degree from the Central Law from the University of Oxford Sorainen Riga office included European University in Budapest, (England). performing legal due diligence,

Articles opportunities in the fast-growing Sorainen Law Offices rewarded real estate investment property the best Bachelor’s theses in law You may read articles written by market in the Baltic States. Focus In August, Sorainen Law Offices lawyers from Sorainen Law Offices was on prospects for the Office declared the winners of the scho- by visiting our website Sector, Retail, Residential Deve- larship contest which began in the www.sorainen.com. lopment and Real Estate Finance. spring; they were Karin Mölder This year’s conference brought and Ivan Kuznetsov from the together almost 200 developers, Faculty of Law of the University financiers, investors, agents and of Tartu and Annemari Õunpuu end-users for an often lively from the Institute of Law, University discussion of trends, predictions, of Tartu. Seminars and the future of the market. The 10-year anniversary confe- Kestutis Adamonis from the Vilnius “Through the competition we in- rence on Baltic M&A and post- office delivered a presentation and tend to promote improved imple- acquisition corporate practices Aku Sorainen from the Tallinn mentation of theoretical inves- was a great success office was one of the Chairmen of tigations in practice," commented On the occasion of Sorainen Law the conference. For more detailed scholarship commission member Offices’ 10-year anniversary, a information please see www.baltic- and Sorainen Law Offices’ conference on Baltic M&A and forum.com. Attorney-at-Law Carri Ginter. “Very Post-Acquisition Corporate Prac- often students write interesting tices was held on 8 September Support to the international confe- works which do not make it into 2005 in cooperation with HVB rence on Insurance and Re- practice or make it only in an Bank. The subject of the confe- insurance in the Baltics 2005 edited form. This type of rence was chosen due to record Sorainen Law Offices is supporting information loss is regrettable, growth in direct investments in the the IX Annual International Con- because the vast majority of Baltic States via corporate mergers ference “Insurance and Reinsu- students’ valuable work hours and acquisitions. According to Mr. rance in the Baltics 2005”, which could be better used towards Aku Sorainen, founder and will take place on 7 October 2005 raising the quality of the practice managing partner of Sorainen Law at the Radisson SAS Daugava Hotel of law. The provision of scholarship Offices, corporate mergers and in Riga. Gints Vilgerts, partner at creates a good foundation for the acquisitions are of continued Sorainen Law Offices in Riga, will exchange of information and interest owing to expanding global give a lecture on the topic cooperation”, Ginter added. In markets and favourable interest “Insurance news: laws, regulations addition to Ginter, members of the rates. “We are now living in a peak and court practice”. For more scholarship commission included season of M&A transactions, where detailed information please see Paul Varul, representative of the globa-lisation has also led to www.laa.lv. Faculty of Law of the University numerous corporate mergers and of Tartu, and Kalev Saare, repre- takeovers in the Baltic States,” Seminar in cooperation with Aon sentative of the Institute of Law, Sorainen explained. “Acquisition Latvia the University of Tartu. of a firm can be characterised as Sorainen Law Offices will take part a very complex activity of high- in the seminar „Liability of the risk nature, requiring meticulous Management“ organized by inter- planning and a solid legal national insurance brokers and framework”, he added. consultancy company Aon Latvia. The seminar will take place at the The conference was attended by hotel Konventa Seta in Riga, Latvia more than 110 participants and on 18 October 2005. The issues received high evaluation. presented by the Riga office of Sorainen Law Offices will cover Hosting annual meeting of Young the liability of administrative Lawyers’ Exchange Program bodies, jurisprudence and com- On 2-4 September 2005 the Vilnius pany management risks. Additional office hosted the annual meeting information on the seminar is of the Young Lawyers’ Exchange available from Ms Linda Pukite, Program. The meeting took place Aon Latvia, tel. +371 7892551. in the beautiful surroundings of Utena district near lake Alauas, the country tourism homestead. Young lawyers from six European countries participated in this event. Representatives from law firms Other news Tærø Nielsen & Hulgaard, Sorainen Law Offices to publish Mazanti-Andersen, Korsø Jensen its 2nd edition of the Insurance & Partners and Sorainen Law Baltic Legal Update (IBLU) Offices Vilnius prepared presen- At the end of September 2005 our tations for this event. Insurance Practice Group is preparing and releasing the 2nd Participation in the Baltic Real edition of the IBLU. More Estate Investment Forum information on the previous and On 19-20 September 2005, the upcoming editions is available on Baltic Real Estate Investment Forum our webpage www.sorainen.com took place in Vilnius. This two-day international conference examined

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