BALTIC LEGAL UPDATE www.sorainen.com No 49 / January 2008

SORAINEN

Tallinn office office Vilnius office Pärnu mnt. 15 Kr. Valdemara- iela 21 Jogailos g. 4 10141 , LV-1010 Riga, LT-01116 Vilnius, tel +372 640 0900 tel +371 6 736 5000 tel +370 5 268 5040 fax +372 640 0901 fax +371 6 736 5001 fax +370 5 268 5041 e-mail [email protected] e-mail [email protected] e-mail [email protected]

with the Takeover Bids Directive (2004/25/EC “the PAN-BALTIC Takeover Directive”) was finalized November 2007 Pan-Baltic MERGERS AND AQUISITIONS with enactment of amendments to the Securities Market Act (“the SMA”), a sell-out mechanism was Welcome to cross-border mergers introduced providing additional rights for minority Welcome to cross- All three Baltic States have now adopted measures shareholders in Estonian companies listed on the to transpose the Cross-Border Mergers Directive regulated market. border mergers concerning limited liability companies (2005/56/EC; “the Cross-border Directive”). Amendments to the Under the revised SMA, minority shareholders of Estonian Commercial Code are already in force a company may use their sell-out right to compel Estonia since 15.12.2007. Although the Lithuanian a shareholder directly or indirectly acquiring at least Parliament adopted a law implementing the Cross- 90% of the shares of the company during a takeover Border Directive on 13.12.2007, the law has not bid to purchase their shares. The precondition to Sell-out mechanism for yet been promulgated. The Latvian Cabinet of this rule is that minority shareholders’ shares must Ministers has also adopted amendments to the be sold at a fair price. The statutory minimum fair minority shareholders Commercial Law. These amendments are not yet price is set at the highest value paid for the share in force but are anticipated soon. of the company during the last six months; however, a higher price can also be offered. Latvia The purpose of the cross-border merger legislation is to simplify the procedure for mergers between This new protection provides a symmetrical balance limited companies registered in Member States. for minority shareholders in correlation to the existing A range of changes in The cross-border merger legislation prescribes right established for majority shareholders holding general requirements for merger agreements and 90% of the shares of the target company to squeeze tax law related documents and procedures that are uniform out the minority. The sell-out rule provides minority for all parties. The cross-border merger legislation shareholders with a three-month period to decide will further facilitate company mergers in the Baltics whether to sell their shares. The protection is Lithuania and throughout Europe. enacted explicitly for shareholders who have opposed a takeover or who are indecisive about Additional information: selling their shares. It will also enable them to Approval of new version Toomas Prangli receive the highest consideration for their shares of Law on Collective e-mail: [email protected] in the target company. Investment The Takeover Directive creates a common set of rules for all EU Member States and thus promotes Undertakings COMPETITION AND REGULATORY the idea of unifying the Common Market. Entrepreneurs can rely on the same possibilities Launch of Baltic League of Competition Law tackling probable threats while acquiring companies EU On 17.12.2007 Sorainen initiated the founding of through takeovers pan-Europe. However, it must be the Baltic LIDC (Baltic League of Competition Law) in noted that the 90% threshold for exercising the sell- Estonia, Latvia, and Lithuania. LIDC is a worldwide out (or squeeze-out) right may vary by jurisdiction to European Court of organisation uniting practitioners and academics in a maximum of 95% in some Member States. the field of competition law/economics. Ivar Kurvits, Justice delivers two a lawyer from Sorainen, was elected President of the The new regulation only applies to shareholders of important judgments for Baltic LIDC, which will organise seminars and coffee companies listed on the local regulated market. mornings for those interested in competition law. the Baltics Additional information: Additional information: Stefano Grace Ivar Kurvits e-mail: [email protected] e-mail: [email protected] Sorainen Sorainen is organising CORPORATE ADVISORY finance and real estate Recognition for Enterpreneurs` Portal in ESTONIA European Enterprise Awards Competition seminars in February in The Enterpreneurs` Portal was acknowledged at MERGERS AND ACQUISITIONS the European Enterprise Awards 2007 as one of Tallinn and Riga Sell-out mechanism for minority share- two projects considered best in red tape reduction. respectively holders The jury recognised the Enterpreneurs` Portal as As harmonization of Estonian securities regulation the best example of reducing costs and simplifying

© SORAINEN 2008 1 All rights reserved LEGAL UPDATE procedures. The scope of application under the Consumer New transitional provisions apply in regard to 2008 The Enterpreneurs` Portal was opened on Protection Act has been expanded by the - 2010 tax assessments. These state that if the 02.01.2007. Since then, 30% of new companies amendments. Hitherto, the Consumer Protection Act use of the property does not change during these in Estonia have been formed by this means. The treated any product as a movable. Under current years, an increase in tax payable due to a new Enterpreneurs` Portal enables formation of private regulation, a product is anything offered for sale, cadastral valuation is limited to an increase of no limited companies, registration of sole proprietors, sold or marketed to a consumer in any other way, more than 25% of the tax payable in the previous general partnerships or limited partnerships as well likewise any immovable, service or right. year. The changes operate from 01.01.2008. as changes in company data entered in the commercial register. Companies can also deliver The amendments prohibit unfair commercial Excise Tax rates increase; import of oil may through the portal their annual reports and other practices in relation to any consumer. A commercial have additional customs procedure in free documents for submission to the registrar. practice is unfair if it is contrary to the requirements zones or warehouses of professional diligence observed in the economic On 01.01.2008 amendments to the law On Excise In the opinion of the jury, the Enterpreneurs` Portal or professional activities of the trader and distorts Tax came into force. With these amendments, the also serves as an example for other EU Member the average consumer’s economic behaviour with excise tax payable on petrol, diesel fuel, bio-diesel States. While forming a company takes an average regard to the product or service. Under the Act, fuel and their mixture products were increased by of 12 days in other Member States, the commercial practices are unfair if they mislead the approximately 8%. Excise duty on tobacco products Enterpreneurs` Portal enables company formation consumer or are aggressive with regard to the was increased by c. a. 32.2 %. In addition to the in Estonia in 2 days. consumer. The Act explains what kind of commercial increase in excise tax, the amendments provide practices fit into these categories. The Act defines that in cases where in free zones or free warehouses The Enterpreneurs` Portal can currently be used requirements concerning information that the trader mineral oil products are imported, to these products for expedited operations only by holders of an has to communicate. may be applied not only normal processing customs . The future aim of the procedure but also inward (temporary) processing Enterpreneurs` Portal is to enable people from other Additional information: procedure, on the condition that products will not Member States to form companies. This could Reimo Hammerberg be released for free circulation in Latvia. happen after recognition of cross-border digital e-mail: [email protected] signatures. Personal Income Tax – untaxed minimum income increases Additional information: On 01.01.2008, Cabinet of Ministers Regulation No. Karin Madisson 443 came into force. This provides that from e-mail: [email protected] 01.01.2008 the amount of monthly untaxed LATVIA minimum income will be increased to LVL 80, whereas the monthly non-taxable amount that can TAX be claimed for each dependant person (e.g., children, COMPETITION AND REGULATORY Corporate Income Tax law amended unemployed spouse) will be increased to LVL 56. First criminal punishment for cartel practice regarding luxury cars and groups of On 21.12.2007 Harju Country Court made a ruling companies Personal income tax payable by self emplo- which established that AS Spacecom (a company On 28.11.2007 changes to the law On Corporate yed persons – the rate is down to 15%; active in the transit sector) and its member of the Income Tax came into operation to further clarify increased risk of re-qualification of services management board Mr. Oleg Ossinovski were guilty expense deductions that will not be allowed in contracts as employment contracts of an attempt to agree upon practices violating free respect of motor vehicles classified as representative From 01.01.2008, those who earn their income competition. The company was fined in the amount (luxury) motor vehicles. The amendments amend the as self employed individuals will no longer pay of EEK 500,000 (approximately EUR 32,000) and method by which the value of a representative motor 25% personal income tax but 15% on this income. Mr. Ossinovski respectively EEK 180,736 vehicle is to be calculated and also deny deductions Amendments have also come into operation from (approximately EUR 11,550). This is the first court for interest paid in respect of the purchase or lease 01.01.2008 which will allow self employed decision made in Estonia which imposes criminal of a representative motor vehicle. A deduction is also individuals having a small-scale business to punishment to a natural and a legal person for not allowed for losses incurred on the sale of a alternatively choose to pay a fixed amount of violating competition law and is a clear indication representative motor vehicle if the vehicle has been personal income tax based on the level of their of the increasing activity by Estonian enforcement classified as a fixed asset but has not been gross turnover rather than the 15% rate of personal authorities in the field. depreciated for corporate income tax purposes. income tax on their net business income.

Additional information: Changes were also made to the conditions As a consequence of these changes, the law On Toomas Prangli associated with transfer of losses within a group Personal Income Tax has been amended with anti- e-mail: [email protected] of companies that includes companies registered avoidance provisions, to introduce six criteria. If in countries with whom Latvia has a Double Taxation one of these is found to exist, then the Latvian Treaty or a European Economic Zone country. The State Revenue Service can reclassify a services changes require the relevant corporate income tax (uz¿ïmuma) contract as an employment contract COMMERCIAL CONTRACTS declarations for the group members to be prepared and impose 25% personal income tax and 33.09% in accordance with the laws regarding preparation social security contributions on the earnings from More efficient protection of consumer and auditing as applicable in their country of the contract. We understand that it will be the interests residence. clients (i.e. ‘employer’) that will have to prove that On 12.12.2007 amendments to the Consumer the agreement is not ‘substance over form’ an Protection Act entered into force. These transpose Real Estate Tax rate decreases, tax base employee – employer relationship. Directive 2005/29/EC of the European Parliament increases and of the Council concerning unfair business-to- As of 01.01.2008 the law On Real Estate Tax Changes to Cabinet of Ministers Regulation No. 41 consumer commercial practices. The Directive amendments became effective to clarify and expand adopted 18.12.2007on procedures for completing addresses commercial practices directly related to the categories of real estate that will not be subject personal income tax declarations have simplified influencing consumers’ transactional decisions in to the tax. The rate of tax applicable from 2008 the process. Individuals who are filing declarations relation to products and services. The direct purpose has also been amended. Up to 31.12.2010 the only to report non-taxable income above a certain of the Directive is to protect consumer economic rate of tax will be 1% of the property’s cadastral level need only complete these sections and not the interests. At the same time, the Directive also value. From 01.01. 2011 the rate will reduce to a whole declaration. Taxpayers who use double entry indirectly protects the interests of traders – fair base rate of 0.4% and municipalities will be able bookkeeping will have to complete a new appendix competition is promoted by hindering the activities to impose an additional supplementary rate not D3. The appendix contains tables to be completed of businesses that use unfair practices. The Directive, exceeding 0.6% of the property’s cadastral value. where in the prior taxation year the taxpayer suffered as well as the Consumer Protection Act, applies to The additional rate to be imposed by the municipality losses or reclassified business assets as assets for all traders whose activities are related to advertising, must be published by October of the preceding tax personal use. sale or supply of products or services to consumers. year.

2 © SORAINEN 2008 All rights reserved LEGAL UPDATE Registration as a VAT payer simplified BANKING AND FINANCE The new law provides substantial changes in the With amendments to the Cabinet Regulations No. existing regime for insolvency in Latvia and aims 933, effective as of 01.01.2009, registration as a Substantial amendments to main legal act to improve it. The new law applies to insolvency VAT payer will be possible upon registration of a regulating securities and investment services proceedings not only against companies, but also newly established company with the Company in Latvia against associations, foundations, individual Register of the Republic of Latvia. To register the The Law on the Financial Instruments Market (LFIM), merchants, and, to a certain extent, participants in company as a VAT payer, a legal or authorised the main legal act regulating securities and financial and capital markets. Also an individual may representative of the company will have to submit investment services in Latvia, saw substantial be subject to insolvency proceedings and even to the Company Register a VAT registration form amendments with effect from 08.11.2007. These declared bankrupt. An individual may petition for completing sections B and C. The current practice amendments implement into Latvian law the Markets insolvency if unable to settle a debt i) which is due, of registration as a VAT payer by submitting an in Financial Instruments Directive, commonly referred if such debt exceeds 50 times the minimum monthly application to the State Revenue Service will also to as MiFID, which has been widely discussed wage, currently amounting to LVL 8,000, or ii) which continue. across the for the past couple of will be due after 1 year, if the individual can prove years. With these amendments, LFIM imposes it and if such debt exceeds 100 times the minimum Additional information: significant new requirements for investment service monthly wage, currently amounting to LVL16,000. Janis Taukacs providers (for example, investment advisers, fund e-mail: [email protected] managers, stockbrokers and banks offering The law provides for changes in insolvency Uve Zosars investment services), who have activities in Latvia. proceedings of legal persons. The most important e-mail: [email protected] In addition, these amendments provide for easier change is that a creditor may petition for insolvency access of EU and EEA-based investment service of a debtor (legal person) only if the debt due providers to the markets of all EU and EEA Member exceeds LVL 1,000 and if the creditor gives 3 States due to the enhanced passporting system, weeks to the debtor. If the debt due exceeds the REAL ESTATE AND as well as creation of less strictly regulated assets of the debtor, the creditor may apply for alternative investment markets (referred to as insolvency without giving three weeks’ notice. CONSTRUCTION multilateral trading facilities) which will provide new Under the old law, insolvency proceedings could New regulations on lease of land owned by opportunities for small to medium size companies be initiated for any outstanding debt (no matter the state and municipalities with growth potential seeking to raise capital. how small the amount), thus allowing creditors to On 30.10.2007, the Cabinet of Ministers adopted misuse insolvency proceedings against solvent new regulations on lease of land owned by the state Additional information: debtors. Further, the law provides a new process and municipalities. These Regulations on lease of Rudolfs Engelis of judicial composition. This is intended to restore state and municipal land establish a procedure for e-mail: [email protected] the solvency of a company when it temporarily lacks determining the amount of lease payments on land money to settle its debts due. A company may apply plots with construction not assigned for privatization for judicial protection if its assets exceed debts due or alienation, lease of vacant land plots owned by and if the company has been registered for at least the state or municipality, and lease of land plots with INSURANCE three years and has submitted annual reports for construction assigned for privatization or alienation. the last three years. Instituted insolvency (incl. Competition in the insurance intermediaries liquidation) proceedings preclude judicial protection market will increase of a company. A lease payment is determined to be in an amount As of 01.01.2008 amendments to the Activities of no less than 1.5 % of the land plot’s value established Insurance and Reinsurance Intermediaries Law for the purposes of privatization. Expenses for As a result of the Insolvency Law, further amend- came into force. The aim of the amendments is to ments to the Law on Civil Procedure and the Law establishing the value are paid by the lessee when increase competition in the insurance intermediaries concluding the lease agreement. In addition to these on the Company Register have been introduced. market. The amendments introduce a special These provide for establishment of an insolvency lease payments the lessee has to pay all related insurance intermediary category – credit institutions taxes including immovable property tax. register, where information about ongoing insolvency – who may engage in insurance mediation on behalf proceedings will be available. of and in the interests of several insurance brokers The Regulations also stipulate provisions compelling or branches of non-Member State insurers, if Additional information: owners of buildings located on land plots owned insurance is additional to services provided as basic by the state or municipalities to register the buildings activities of the credit institution. Simultaneously, Lasma Liede with the Land Book as an independent property. credit institutions may not advise or prepare an e-mail: [email protected] offer on the basis of analysis of offers. The amount of lease payment is multiplied by 1.5 Sales pitch limited, consumer protection if buildings located on the land plot are not registered Under the amendments, officials and employees of increased with the Land Book but should be registered an insurance agent (legal entity) directly involved in On 01.01.2008 the Law on Prohibition of Unfair according to the Law On Recording of Immovable insurance mediation are forbidden from employment Commercial Practices came into force. The new Property in the Land Book. The same applies if the with another insurance intermediary. Furthermore, law implements the norms of Directive 2005/29/EC title transfer of the buildings is not registered with an insurance broker and insurance agent must inform concerning unfair business-to-consumer the Land Book. the FCMC on suspending or ceasing insurance and commercial practices. reinsurance mediation services. Lease agreements, concluded before these Regu- The Law provides that unfair commercial practices lations came into force, remain valid and the amount The amendments stipulate penalties for proven are prohibited. Commercial practices relate to any of lease payment may be increased according to violations, including cases when an insurance or action (including inaction) by a trader, service the regulations only if the right is explicitly provided reinsurance agent violates anti-money laundering provider, or producer directed at promotion or sale to the lessor in the lease agreement. laws, where the FCMC is entitled to impose a money of goods, or provision of services to a consumer. penalty up to LVL 100,000. The Regulations provide that lease payments A commercial practice is unfair if within the meaning determined under these regulations may be modified Additional information: of the law it is either contrary to the requirements not earlier than by 30.12.2009 and only if the Anete Rubene of professional diligence and it materially distorts regulations on determining the amount of lease payment e-mail: [email protected] or is likely to materially distort the economic for lease of state or municipality land are amended. behaviour of the average consumer, or if it is misleading or aggressive. Additional information: Lelde Lavina CORPORATE ADVISORY As a result, producers and providers of services e-mail: [email protected] and traders will be liable, for example, for making Improvement of the existing regime for false claims about goods – such as their approval insolvency in Latvia by a public or a private body, their limited availability, On 01.01.2008 a new Insolvency Law entered into or their ability to cure illnesses. force repealing the old law on Insolvency of Companies. © SORAINEN 2008 3 All rights reserved LEGAL UPDATE Producers and providers of services and traders The competence of the Securities Commission has Once a person submits all the requisite documents, will likewise be liable if, e.g., they display a trust been extended by establishing procedures for use a file regarding the right to permanently reside in or quality mark without authorization, deliver of financial derivative instruments of collective Lithuania is compiled. materially inaccurate information about the market, investment undertakings and assessment of related claim to offer a prize promotion but with no actual risks, for merging unit trust/common funds, and An application by an EU citizen has to be reviewed reward, or describe a product as free when for distribution of units and shares of collective and decided not later than within one month after consumers have to pay something in addition to investment undertakings. filing with the Migration Agency. the cost of reply and delivery of the item. Issues regarding acquisition of a qualifying holding The description also stipulates grounds for forfeiture The law will also apply to such aggressive practices of a management company are considered of the right of EU citizens to permanently reside in as persistent and unwanted solicitations by separately. If a person wishing to acquire a qualifying Lithuania. telephone, fax, e-mail or other remote media, visiting interest in a management company is a licensed a consumer's home ignoring requests to leave or management company in another Member State, If an EU citizen changes their residence in Lithuania, not to return. or a financial brokerage company, credit institution, the local Migration Agency, upon request, transfers insurance company, or a parent company or a the file to the Migration Agency local to the new As a result, producers, service providers and traders controlling person of any of those undertakings, place of residence. Required forms include: will have to be cautious when choosing their the Securities Commission is required to seek an register of applications to approve the right strategies related to promotion and sales. opinion from the regulatory authority of the relevant of an EU Member State citizen to permanently Member State. reside in the Republic of Lithuania, Additional information: form of personal data of a foreigner, Janis Likops With effect from 01.03.2008, a permit of the e-mail: [email protected] Securities Commission will be required for approval, register of issuance of applications for change of or supplement to the digest of instruments approval of the right of an EU Member State citizen of incorporation, and for merging unit trust/common to permanently reside in the Republic of Lithuania, funds administered by a management company. register of decisions regarding the right of an EU Member State citizen to permanently reside in The license of a management company (CEIC) may the Republic of Lithuania. be cancelled as soon as the business period LITHUANIA established in the statutes of the investment New procedure for issuing work permits to company expires and the license holder fails to BANKING AND FINANCE foreigners residing in Lithuania apply in writing requesting annulment of the license. On 05.10.2007 an Order of the Minister of Social New version of Law on Collective Investment Security and Labour came into effect changing Undertakings approved This version of the Law was intended for harmonising some provisions relating to issuance of work permits With effect from 01.03.2008, a new version of the the existing Law on Collective Investment to foreigners residing in Lithuania. Law on Collective Investment Undertakings, Undertakings with Council Directive 85/611/EEC correcting inadequacies in practices established in of 20.12.1985 on the coordination of laws, The Order repeals the requirement for employers the previous law, will come into force. regulation and administrative provisions relating to wishing to employ a foreigner to provide the territorial undertakings for collective investment in transferable labour exchange with a copy of the registration This version of the Law extends the list of legal securities (UCITS), as well as with Commission certificate of a legal entity. In addition to other entities allowed in Lithuania. One of these is a Directive 2006/73/EC of 10.08.2006 implementing requisite documents, an employer wishing to employ closed-end investment company (CEIC), defined as Directive 2004/39/EC of the European Parliament a foreigner will now have to provide the territorial a public company issuing a fixed number of shares and of the Council as regards organisational labour exchange with a copy of a document redeemable for a period stipulated in the statutes requirements and operating conditions for evidencing the foreigner’s three-year work of a public company or at any other time established investment firms and defined terms for the purposes experience according to their professional in its statutes in advance. After the new version of of that Directive (OL 2006 L 241, p. 26). qualification over the preceding five years. the Law comes into effect, investment of assets of special collective investment undertakings will be Additional information: The Order establishes a new shortened term of allowed in real estate, as well as in securities of Algirdas Peksys one month for analysis of a request by an employer companies admitted to trading on a regulated e-mail: [email protected] to issue a work permit to a foreigner, i.e. a high market in trade and in other alternative investment qualification specialist. Additionally, employers must instruments. register a vacancy one month in advance before applying to the territorial labour exchange. Under the new version of the Law, only a public CORPORATE ADVISORY company holding a CEIC licence issued by the New rules for issuing certificates of per- Upon expiry of a work permit, a foreigner is required Securities Commission may engage in CEIC manent residence in Lithuania for EU citizens to leave Lithuania and may not be employed in activities. The Law further stipulates that the words With effect from 01.11.2007, a description of the Lithuania for at least one month from expiry of the “akcine bendrove” (eng. public company) in the procedure for issuing a certificate approving the work permit. name of a company with variable capital or their right of a citizen of an EU Member State allowing abbreviation AB, are not obligatory. permanent residence in the Republic of Lithuania Additional information: came into effect. Mantas Rimkevicius A public company seeking engagement in CEIC e-mail: [email protected] activities is required to apply to the Securities The description specifies cases based on which Commission annexing its programme of intended EU citizens and members of their families who have activities and other requisite information, on the resided in Lithuania less than five years, may be basis of which the Securities Commission would issued certificates validating their right to be able to decide if the company meets requirements permanently reside in Lithuania. for licensed activities. EU NEWS EU Member State citizens wishing to obtain a Managers of management companies (i.e. certificate must generally apply in person to the European Court of Justice delivers two companies engaged in managing investment Migration Department through the Migration Agency important judgments for the Baltics companies or funds) will henceforth be subject to within whose service territory they declare or intend In December 2007, the European Court of Justice extremely strict standards of good repute, which to declare their place of residence. (ECJ) handed down its first judgments in cases were not emphasised in the previous wording of which directly relate to application of the EC’s the Law. In addition, separate groups of persons defined in fundamental freedoms in the Baltics, namely – the Law have to provide the Migration Agency with freedom of establishment in Estonia (the Viking other documents. Line case) and freedom to provide services by a

© SORAINEN 2008 4 All rights reserved Office news LEGAL UPDATE Latvian company in Sweden (the Laval case). Both cases are important for overall development of Fund. Arco Capital Corporation is a premiere European law and in particular a balance between NEWS IN SORAINEN credit investment platform that serves fundamental rights such as the right to strike, and emerging markets. Hanseatic Capital is a fundamental freedoms under European law such Recent deals dedicated provider of mezzanine capital to as freedom of establishment and freedom to provide growth oriented businesses in Estonia, services. Major Baltic M&A transaction Latvia and Lithuania, and recently expanded Coopernic Alliance has agreed to acquire its geographic reach to Poland and Finland. In its judgment of 11.12.2007 in the Viking Line an 80% shareholding in UAB Palink, Sorainen team, led by partners Toomas case (C-438/05) the ECJ confirmed that the right operator of retail chain IKI. As the second Prangli and Janis Taukacs, advised in all to take collective action, including the right to strike, largest retailer in Lithuania with an 18% phases of the transaction regarding the is a fundamental right under European law. But market share, IKI is a major player there exercise of such right may none the less be subject Baltic matters. to certain restrictions. The court reiterated its case and is also growing fast in Latvia. With its law that protection of fundamental rights is a 209 stores generating annual revenues of Acquisition of Seesam Life Insurance legitimate interest which may be called on to justify 635 MEUR, IKI is among the ten largest SE a restriction of the obligations imposed by European companies in the Baltics. This acquisition Sorainen's M&A and Insurance teams are law, including freedom of establishment. Such is one of the largest M&A transactions advising Wiener Stadtische Versicherung restriction may be justified in certain cases for announced in Lithuania and the Baltics in AG Vienna Insurance Group in the overriding reasons of public interest, such as 2007. The Sorainen team, led by partner acquisition of 100% shares in Seesam protection of workers, provided that such restriction Laimonas Skibarka and senior associate Life Insurance SE from Suomi Mutual Life is suitable for securing the attainment of the objective Raminta Karlonaite, acts as lead legal adviser Assurance Company. The completion of which it pursues and does not go beyond what is for buyers in the transaction. the transaction is subject to regulatory necessary in order to attain it. It left the national approvals. Seesam Life Insurance SE has court to decide if in the present case the two latter Advising landmark transaction in the ten branches in all three Baltic countries conditions are fulfilled. Baltics and provides services for 45,000 clients Our M&A and real estate teams advised with a staff of approximately 200 emplo- In its judgment of 18.12.2007 in the Laval case North European financial group SEB in a yees. "This transaction is notable also for (C-341/05) the ECJ, while confirming the right to landmark transaction involving sale and take collective action, held that collective Swedish the fact that it is the first direct acqui- lease-back of SEB’s entire property portfolio trade union action (blockade of all Laval’s sites in sition of the shares in SE (the new Sweden) constitutes a restriction on the freedom to in the Baltics. With a value of approx. 200 European company type) in the Baltics provide services. As in the Viking Line case, the court MEUR, it is the largest and probably most and one of the first ones in the whole held that such restriction may be justified by overriding complex real estate transaction in the Europe," says Toomas Prangli, Sorainen's reasons of public interest and if that is the case, it Baltics to date. The project was led by M&A partner in charge of the transaction must be proportionate. The court accepted that in partners Kaido Loor, Kestutis Adamonis along with Tomas Kontautas, the head of principle the right to take collective action for protecting and Girts Ruda. Sorainen's Insurance team. workers of the host state against possible social dumping might constitute an overriding reason of Assistance on sale of Vicus properties Two syndicated loan transactions at public interest. However, the court held that a in the Baltic States year end restriction on providing services by Laval in Sweden Sorainen assisted Vicus Limited, a Finnish Towards the end of 2007, Riga office cannot be justified on such grounds taking into real estate investor and developer, in selling advised Raiffeisen Zentralbank Osterreich account the directive on posting of workers (96/71/EC) three large-scale commercial properties Aktiengesellschaft (RZB) on two syndicated and its implementation in Sweden. The court further in the Baltics to Cattella Real Estate AG’s loan transactions with local banks, with a held that Swedish rules, which do not take into investment fund Focus Nordic Cities. The total value of 38 MEUR. Our client RZB account collective agreements with Latvian trade real estate portfolio sold consists of Efore’s acted as Mandated Lead Arranger for a unions concluded by Laval, give rise to discrimination office, storage, and production facilities in against Laval, in so far as under Swedish rules Laval 16 MEUR syndicated loan to AS Trasta Pärnu, DHL’s logistics centre in Riga, and is treated in the same way as Swedish undertakings Komercbanka, and also as Mandated Lead which have not concluded any collective agreement. Rautakesko’s K-Rauta hardware store in Arranger together with Kaupthing Bank Such discrimination can be justified only on the basis Liepaja. The total value of the transaction Luxembourg for a 22 MEUR facility to AS of public policy, public security or public health, none is approx. 24 MEUR. The client was Norvik Banka. These transactions of which are present in this case. assisted by a team of lawyers led by strengthen the stable track record of partner Kaido Loor in Estonia and partner Sorainen as a leading legal adviser on Additional information: Girts Ruda and senior associate Renate large financing transactions in the Baltic Lasma Liede Purvinska in Latvia. markets. Senior associate Rudolfs Engelis e-mail: [email protected] acted on the Trasta Komercbanka deal, Arco Capital acquired Hanseatic while associate Inese Rendeniece advised Capital on the Norvik Banka facility. Sorainen M&A team advised Arco Capital Contributed by Tiina Erik, Estonia; Gita Rivdike, Latvia; Corporation in its acquisition of Hanseatic Acquisition of Latvia's leading Neringa Petrauskaite, Lithuania. Editor: Toomas Capital from Baltic-American Enterprise electrical wholesalers Prangli, Estonia. One of Finland's leading electrical wholesalers and professional lighting Sorainen Riga office in cooperation with Latvian Chamber of Commerce and suppliers, Elektroskandia Oy, was advised Industry invites you to the seminar by Riga office associate Julija Jereneva in its acquisition of three of Latvia's HOW TO KEEP OFF LEGAL PROBLEMS electrical wholesalers: Energo SIA, IN REAL ESTATE PROJECTS?, Baltlauva SIA, and Kolorits SIA. The buyer was advised at all stages of the to take place on 22 February 2008 at the Monika Centrum Hotels in Riga, Latvia. transactions. With these Latvian acquisitions, Elektroskandia becomes Seminar language will be Latvian. For more detailed information please visit our website: market leader in electrical wholesaling in www.sorainen.com or contact Ms Gita Rivdike (phone: +371 6 7365000 or email: the region, with estimated joint sales of [email protected]). well over 30 MEUR.

© SORAINEN 2008 5 All rights reserved LEGAL UPDATE Office News

Advising on major real estate of Sorainen. Eva is heading the firm’s Ministry of Justice where one of his most acquisition in Lithuania Corporate Advisory pan-Baltic team. Since significant achievements was representing Verdispar, the Norwegian investment joining Sorainen in 2000 she has the Government in the first ICSID case banking group, acting on behalf of clients participated as a counsel in major cross- against Lithuania. Currently he is involved and assisted by Sorainen, has acquired a border M&A deals in Latvia both on the in PhD studies at Vilnius University and complex of properties on land plot of some side of sellers and buyers on behalf of lectures at its Faculty of Law. 2 ha in central Vilnius. Previously the listed and non-listed companies in various complex of properties was owned by business sectors: media, utilities, food, Also to strenghten our Dispute Resolution Kalnapilio-Tauro Grupe AB, the major construction, property development, team, Tallinn office has employed associate Lithuanian brewer, owned by Royal Unibrew, energy, consumer finance, environment, Tonis Saul, who has gained experience Denmark’s second largest beer producer. etc. She is Legal 500 recommended from working at a notary´s office. The client was assisted by partner Tomas practitioner in Latvia. Milasauskas and senior associate Rita Svedaite, led by partner Kestutis Adamonis. At the end of 2007, five significant arrivals at Sorainen marked the high HeidelbergCement Group enters tide of the strong growth of our team Other Lithuanian market in 2007 Sorainen is top-10 M&A law firm in HeidelbergCement Group, the leading global In October our Real Estate & Construction Central Eastern Europe in 2007 building materials producer, acquired a Team was strengthened by the arrival of According to leading M&A intelligence controlling shareholding in UAB Gerdukas, associates Mari Mois to Tallinn office company Mergermarket, the Sorainen M&A a major cement distributor in Lithuania. and Indre Jonaityte to Vilnius office. team ranked No. 9 by deal volume in the HeidelbergCement’s core products include With more than six years of experience league tables of legal advisers in M&A cement, ready-mixed concrete, aggregates, with SEB, Estonia’s second largest transactions within the CEE region in the and related products. With group turnover commercial bank, Ms Mois offers exten- full year of 2007. "This means that in 2006 of 9.2 billion euros, the entry of sive knowledge of the Estonian banking Sorainen is No 1 regional M&A law firm HeidelbergCement is a significant develop- and leasing sector. She has advised clients in CEE. Ahead of us are only global law ment for the whole building materials in matters related to property, financing, firms who have offices in most major CEE industry in Lithuania. In this acquisition leasing, public procurement, public private cities" said Toomas Prangli, Sorainen HeidelbergCement was advised by partnership, amongst others. Previously partner heading its pan-Baltic M&A team. Sorainen’s Vilnius office team led by partner Ms Jonaityte worked for four years with Laimonas Skibarka and senior associate law firm Lideika, Petrauskas, Valiunas ir Sorainen is highly recommended in Raminta Karlonaite. partneriai LAWIN. Additionally to her legal the Baltics by several international practice she lectures in law at Vilnius legal directories Banking and finance team advised University. Quality of our work has again been Royal Bank of Canada recognized by the 2007/2008 editions of Vilnius office has advised Royal Bank of Our M&A and Competition and Regulatory IFLR1000, PLC Which Lawyer?, Tax Canada, one of the world's leading and teams welcomed the arrival of senior Handbook and Chambers Global, most highly rated financial institutions, associate Lauras Butkevicius. He has directories which research the legal regarding enforceability of the close-out substantial experience in M&A, compe- markets worldwide to identify the firms netting provisions under ISDA documents tition and corporate matters gained during and individuals that the market considers and validity and enforcement of collateral four years with law firm Norcus & Partners. to have expertise. arrangements under ISDA Credit Support He has also worked for leading Lithuanian documents. The client was advised by bank Hansabankas and has been a visiting Furthermore in 2007 PLC Which Lawyer? senior associates Dr. Tomas Kontautas, lawyer at Helsinki law firm Roschier. Mr included Estonia to their private equity Agne Jonaityte and associate Tadas Butkevicius also has a strong academic research and straightaway recognized Milasius. background from Vilnius and Utrecht Sorainen as the only highly recommended Universities and is currently involved in law firm in the country for private equity PhD studies at Vilnius University. practice. Sorainen is the only major law firm which has a specific focus on private Employees Senior counsel Paulius Koverovas is equity and separate private equity the most significant addition to our Dispute specialisation within its M&A team. Also New partner for Sorainen Resolution and Competition and Regu- partner Toomas Prangli was named by Mrs Eva Berlaus-Gulbe, Attorney-at-Law latory teams at Vilnius office. Previously PLC Which Lawyer? As a recommended with the Riga office has become a partner he was State Secretary at the Lithuanian practicioner in private equity in Estonia.

Clifford Chance and Sorainen lawyers Sorainen in cooperation with Äripäev invites you to the seminar publish book on EU and Estonian competition law On 17 December, the authors - Carri Ginter, NEW AND ADDITIONAL POSSIBILITIES FOR INVOLVING a Sorainen partner, and Kaarli H Eichhorn, CAPITAL IN THE CHANGED ECONOMIC a lawyer with leading global law firm Clifford Chance - presented their book on ENVIRONMENT OF 2008, competition law. The book covers the basics of free competition in Estonia and the EU to take place on 20 February 2008 at the Radisson SAS Hotel and contains a selection of adjudications in Tallinn, Estonia. of the European Court and decisions of the European Commission, describing Seminar language will be Estonian. For more detailed information please visit competition law practice. The book is useful www.aripaev.ee/seminar or our website www.sorainen.com or contact Ms Tiina Erik as a manual both to experts and students. (phone: +372 6400 900 or email: [email protected]).

Please note that the Baltic Legal Update is compiled for general information purposes only, free of obligation and free of legal responsibility and liability. 6 It does not cover all laws or reflect all changes in legislation, nor are the explanations provided exhaustive. © SORAINEN 2008 Therefore we recommend that you contact Sorainen or your legal advisor for further information. All rights reserved Baltic Legal Update is published periodically, usually every third month. Baltic Legal Update is also published in the languages of the three Baltic States consisting of the legal news of the respective countries. Electronic versions of updates are available on our web page www.sorainen.com, where you can also subscribe for it.