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Lideika, Petrauskas, Valiûnas & Partners
On 19 July 2007, the European Commission launched a public consultation on the problems arising while conducting intra- Community business activity. Stakeholders are also invited to comment on the future content of the European Private Company Statute. The consultation consists of two target areas: • the problems arising while managing small and medium size enterprises (comments on the obstacles that such enterprises face while conducting business through an establishment in another Member State may also be delivered, and; • the remarks and suggestions as to the content of the future European Private Company Statute. The consultation is to be closed on 31 October 2007. For more information please see the internet: http://europa.eu/rapid/pressReleasesAction. do?reference=IP/07/1146&format=HTML &aged=0&language=EN&guiLanguage=en
On 12 July 2007, the European Commission adopted a Communication addressing the main problems faced by EU companies in the areas of company law, accounting and auditing. The European Commission also proposed measures to solve these problems by reducing administrative burdens for EU businesses Every interested person is requested to address the European Commission with the comments on the proposed measures. The consultation is expected to be closed in October 2007. The main topics for deliberation are the following: • modifying the content of company law directives relating to basically domestic situations; • simplifying disclosure requirements and reducing reporting and auditing requirements for undertakings. For more information please see the internet: http://europa.eu/rapid/pressReleasesAction. do?reference=IP/07/1087&format=HTML &aged=0&language=EN&guiLanguage=en
On 1 July 2007, EU electricity and gas markets became completely open for competition. Until that date only big consumers could choose their suppliers. As of that date (subject to some exceptions) all EU citizens may choose their gas and electricity supplier freely. Gas and electricity market opening is expected to introduce benefits to both industry and consumers. As regards gas and electricity suppliers, they will face neither legal nor administrative barriers to enter these markets in the EU. This involves an opportunity to provide services to consumers at competitive prices and will stimulate energy efficiency and investment. As to consumers, such a change is intended to result in a more secure supply of production, right to choose the supplier and the possibility to switch suppliers without incurring any costs. Seeking to safeguard consumer interests, the European Commission even aims to adopt the Energy Consumers Charter. The mentioned requirements apply fully in Lithuania as of 1 July 2007. However certain derogations apply as to the opening of these markets in Latvia and Estonia. Electricity market in Latvia and gas market in Estonia are open from 1 July 2007. Nonetheless, the opening of gas market in Latvia and of electricity market in Estonia are delayed until 2010 and 2013 respectively.
For more information please see the internet: http://europa.eu/rapid/pressReleasesAction.do ?reference=IP/07/983&format=HTML&aged =0&language=EN&guiLanguage=en
On 12 July 2007, the Regulation on transboundary shipments of waste entered into force in all EU Member States. The Regulation sets a new framework regarding the safe handling of waste while transporting it by sea. The Regulation revises the existing EU legislation on waste shipment.
The Regulation sets forth efficient measures for transporting waste by ships within the EU and to non-EU countries. Seeking to prevent developing countries from being dumped (by waste exported from the EU), the Regulation prohibits certain waste shipments to the countries outside the EU and EFTA. The Regulation also clarifies certain aspects of waste shipment. It: • sets certain requirements as well as notification and information procedures that must be obeyed in waste shipment to non-EU countries; • contains stricter rules which indicate enforcement measures (i.e. inspections, spot checks, etc.); • lays down detailed provisions concerning intra-Community shipment of waste and export of waste to third countries. More information on waste shipment is available at: http://europa.eu/rapid/pressReleasesAction.do ?reference=IP/07/1078&format=HTML &aged=0&language=EN&guiLanguage=en http://ec.europa.eu/environment/waste /shipments/index.htm http://ec.europa.eu/environment/waste /shipments/legis.htm
On 24 July 2007, two European Commission Regulations (amending Regulation No 2245/2002 and No 2245/2002) entered into force and enabled EU entrepreneurs to safeguard their design rights on global scale with less bureaucracy and reduced costs. By these two pieces of EU law it is intended to accomplish the accession of the European Community to the Geneva Act of the Hague Agreement concerning the international registration of industrial designs. Such membership grants EU companies the possibility to register a design in the EU and in the countries which are members of the Geneva Act by filing a single application. The Regulations put forward provisions which create the system for administration of design applications. The newly established order as compared with the Community Design system enables stakeholders to acquire exclusive rights to a design in a number of countries through a single international application filed with the International Bureau of WIPO. This procedure helps to avoid lodging of numerous applications with national authorities. These two acts introduced modifications with regard to: • the examination of design applications; • the means of communication with the International Bureau of WIPO; • the administration of the design procedures by the Office for the Harmonization in the Internal Market (OHIM); • design registration fees. EU businesses are expected to benefit from the new design registration system from January 2008. More information about design registration is available at:
On 10 July 2007, the European Commission proposed a fundamental review of EU insurance law (replacing 14 existing directives with a single one). This future revision sets new requirements for the financial status of an insurance undertaking taking into account recent developments in the spheres of insurance, risk management, finance techniques, etc. The new system of rules (called “Solvency II”) should replace the existing 30 year-old insurance legislature which is considered to be poorly reflecting the true risks of an insurance undertaking. “Solvency II” will focus on strengthening supervisory review process, stability of financial markets and seeking for more harmonization in the insurance law sector. The intended review of insurance law will contain the following major provisions and requirements: more risk-sensitive solvency requirements necessary to improve financial soundness of insurers. These requirements are expected to guarantee that insurers have sufficient financial coverage to withstand possible catastrophic events (e.g. storms, accidents, etc.) and to increase their financial soundness; the insurers’ capital will be assessed with regard to all risks under the “Own Risk and Solvency Assessment”; the „Supervisory Review Process“ will be used while evaluating risk profiles of insurers and the quality of risk management and governance systems; control of insurance groups will be transferred to the „group supervisor“ who will work together with national supervisors. Such cooperation will enhance the scrutiny of insurance group risks and help to manage those risks more effectively; insurers will be required to hold certain amount of capital to be able to cope with possible market risk, credit risk and operational risk. Such risks are not covered by existing regime.
For more information please see the internet:
http://europa.eu/rapid/pressReleasesAction.do ?reference=IP/07/1060&format=HTML &aged=0&language=EN&guiLanguage=en
http://europa.eu/rapid/pressReleasesAction.do ?reference=SPEECH/07/483&format=HTML &aged=0&language=EN&guiLanguage=en
On 7 July 2007, the Parliament adopted Law No X-1246 on Amending Articles 5, 26, 158, 2093, 221, 224, 237, 2591, 282, 320 of, and Adding Articles 1331 and 21427 to, the Code of Administrative Violations of Law. This Law provides for the liability of the owner (possessor) of a vehicle for failing to fulfil the obligations set forth by the Law on Safe Road Traffic, i.e. when the owner (possessor) of a vehicle refuses to indicate the driver in the case of infringement by exceeding the speedlimit or fleeing the place of accident occurrence, etc. The owner or possessor of a vehicle (individual or head of an enterprise, organisation, institution or a branch thereof) will incur for such breach a fine from LTL 300 to LTL 500. A repeated commitment of such breach will invoke a fine from LTL 1,500 to LTL 2,000.
On 21 June 2007, the Parliament adopted Law No X-1198 on Amending and Supplementing Articles 2, 7, 11, 12, 16, 17, 18, 26, 29, 33, 34, 35 of the Law on Alcohol Control. This Law tightens the provisions governing the advertising of alcohol. It is prescribed that as of 1 January 2008 the advertising of alcohol in the programs of broadcasters and rebroadcasters within Lithuanian jurisdiction will be prohibited from 6 a.m. to 11 p.m. Further, seeking to ensure the observance of alcohol trade limitations applied by municipal councils to enterprises or prohibitions existing during holidays and mass events, it is set forth that any infringement of the said requirements will incur on enterprises a fine from LTL 1,000 to LTL 50,000. The right to impose such fines is vested with the police and the State Tobacco and Alcohol Control Authority.
Invalidity of a purchase-sale transaction when a mistake is essential. On 5 July 2007, the Supreme Court of Lithuania in civil case No 3K-3-306/2007 J. T. and V. T. v UAB Vilvatëja stated that upon establishing according to the factual data in the case that the seller has mislead the buyer, however not intentionally and without seeking to deceive and when a mistake is essential, the court, upon request by the person to declare the transaction invalid as concluded by fraud, may declare the transaction invalid as concluded by mistake, i.e. on another ground set forth by the law. Such change of the grounds for declaring the transaction invalid also implies different remedies in respect of the violated rights. If the transaction is declared invalid due to fraud, the aggrieved person may claim compensation of moral damage and request application of unilateral restitution (i.e. only the guilty party being obliged to return everything it has received under the transaction to the aggrieved person, and not both parties). If the transaction is declared invalid due to mistake, such remedies are not possible.
On 28 June 2007, the Parliament adopted Law No X-1231 on Nuclear Power Plant. This Law sets forth the provisions of implementation of a new nuclear power plant project. The project of a new nuclear power plant will be implemented through a company specially established in Lithuania for this purpose. This company may be established on the initiative of a national investor awarding an opportunity to participate therein for strategic partners who meet appropriate criteria laid down in the Law. The Law prescribes that a national investor is public company Lietuvos energija which should own the title to the controlling interest in the company established for implementation of the new nuclear power plant project, accounting for no less than 34 percent of shares in this company and votes at a general meeting of shareholders. The Law empowers the Government and the shareholder with the controlling interest in public company VST to invest accordingly, in the procedure prescribed in this Law and other laws, the shares of the public company Ryt¸ skirstomieji tinklai and public company VST, which account for more than 1/2 of the shares in each company and votes at a general meeting of shareholders, into the authorised capital of a national investor – public company Lietuvos energija. The Law defines in detail the procedure for increasing the capital of a national investor and regulates the matters of management of the new nuclear power plant project implementation company, the requirements for a national investor and the matters related to the place of construction of a new nuclear power plant.
Gross negligence of the employee is the basis for reduction of indemnification. On 18 April 2007, the Supreme Court of Lithuania in civil case No 3K-3-157/2007 A. L. v Lithuanian and Canadian private company Pajûrio mediena noted that the court of appeal instance had validly reduced the amount of the damage to be awarded for the injury suffered during the accident at work, because the committed violation of the standard acts of labour safety or failure to comply with the basic selfpreservation requirements by the employee may be declared by the court to be one of the criteria significant in evaluation of moral damage caused to the employee. It was established in the case that the plaintiff (employee) had been familiarised with the requirements of safety at work standard acts in a timely and proper manner, including the work instruction not complied with by the plaintiff (employee) in due manner which resulted in injury. Violation of the instruction should be deemed gross negligence of the plaintiff himself, as an employee with a sufficient experience, because he could and ought to have foreseen possible consequences of such violation. Accordingly, such negligence of the employee is the basis for reduction of the indemnification.
On 21 June 2007, the Parliament adopted Law No X-1249 on Amending and Supplementing Articles 2, 12, 13, 15, 25, 33, 37, 38, 66, 76, 77, 78, 80, 81, 84, 87, 89, 93, 97, 100, 101, 104, 105, 108, 113, 117, 118, 128, 130, 132, 133, 135, 141, 142, 164, 165 of, and Adding Article 1331 to, the Law on Administration of Taxes. This Law empowers a tax administrator (its officials), within the limits of the functions assigned to it and without infringement of inviolability of private life of an individual secured under the laws, to make photos, audio and video records. This Law also prescribes that a taxpayer may be exempted from the fine imposed for infringement of tax laws in cases where a taxpayer has breached a tax law due to misleading advice of a tax administrator on tax matters provided by phone, if such advise has been recorded by the central tax administrator in due manner and there is a possibility to identify a calling person – taxpayer (or his representative). The EU accession is not a force majeure event. On 21 March 2007, the Supreme Administrative Court of Lithuania in administrative ruling No A-415-304-07/A7- 304-07 UAB Krasta auto v Customs Department under the Ministry of Finance ruled that there are no legal grounds to exempt the applicant from a fine due to change of legal acts upon the EU accession. The attempts were made in the proceedings to invoke the Law on Tax Administration providing for exemption from a fine when the tax law was violated due to circumstances beyond control of the taxpayer which were not and could not be foreseen by it. However, the court has emphasized that the circumstance that the laws changed upon Lithuania’s accession to the EU, which resulted in incorrect completion of the import documents, might not be recognised as significant. Erroneous application of the law may not be viewed as circumstances beyond control of the taxpayer which were not and could not be predicted by it. Invoice is contestable evidence. On 29 March 2007, the Supreme Administrative Court of Lithuania in administrative case No A-17- 328/2007 (A-556-328-07) UAB Ginara v State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania ruled that the tax administrator had validly called into question the sale price of the tank truck indicated in the seller’s invoice, and correctly determined the tax base according to the difference of the price of the tank truck indicated by the buyer and declared by the seller. The purchase price of this vehicle indicated by the buyer of the tank truck (which was higher than that in the invoice) was confirmed by the assessment of the value of the property carried out upon order of the tax administrator and other evidence. In view thereof, the court stated that the tax administrator had validly determined the tax base according to the difference of the price of the tank truck indicated by the buyer and declared by the applicant and applied the tax sanctions to the applicant.
Electricity supply objects and companies managing them satisfy special public needs, therefore this economic activity is based on a public interest and this justifies restrictions of the ownership right to an immovable thing used for electricity transmission and/or distribution equipment. On 13 July 2007, the Supreme Court of Lithuania in civil case No 3K-3-315/2007 A. J. v AB VST ruled that a building owned by a person in which electricity supply equipment owned by the electricity supplier is mounted is a servient thing on the basis of the servitude established by the law for ensuring proper use of the energy object (dominant thing) meant for transmission and/or distribution of electricity. In such case losses of the owner of the servient thing incurred as a result of the activity of energy companies are reimbursed by the energy company which owns the object situated in the immovable thing of the protection zone. Apart from reimbursement of losses, a single or periodic compensation may be established to the owner of the servient thing by laws, agreements, court judgement or administrative act payable by the owner of the dominant thing. It should also be noted that under the Law on Energy, energy companies redeem energy objects arranged and jointly used for transmission and/or distribution of energy until the coming into effect of the before mentioned law. When evaluating if an energy company has a duty to conclude a transaction, it is necessary to take into account such circumstances as: first, joint use of the energy object has to be stated; second, this energy object has to be meant for transmission and/or distribution of energy. However, it should be noted that the Law on Energy regulates redemption of energy objects, rather than buildings. Such duty to redeem a servient thing arises only when use by the land owner of the land plot is materially restricted due to establishment of the land easements on use of the energy objects.