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Law firm Tark Grunte Sutkiene
• One of the major law firms in Lithuania Sutkienë, Pilkauskas & Partners completed the process of merger with the Estonian law firm Tark & Co and the Latvian law firm Grunte & Cers and from now on they will carry on their business as one law firm Tark Grunte Sutkiene.
After the merger the three leading Baltic law firms will continue their previous strategic cooperation with the Belarus law firm Vlasova Mikhel & Partners.
• On 28 September 2010, law firm Tark Grunte Sutkiene together with the London law firm Berwin Leighton Paisner LLP and the Belarus law firm Vlasova Mikhel & Partners organised the conference “International taxation. Problems and opportunities”.
During the conference speakers introduced the latest tax optimisation possibilities in Lithuania, spoke on the taxation advantages available in the EU Member States and positive aspects of companies established there and transaction structures. The taxation environment in Belarus was introduced to potential investors. Internationally recognised experts of the international taxation law read their reports in the conference.
After the reports, participants of the conference were invited to individual consultations with taxation experts and representatives of the Swiss trust management company Paicolex where they discussed international taxation possibilities, received practical advice on organisation of international business structures.
• Licensing sphere is liberalized. On 1 September 2010, Decree No. 450 of the President of the Republic of Belarus, approving the Provisions on Licensing of Some Kinds of Activity, was adopted. The Provisions will come into force on 1 January 2011. The Provisions cancel licensing of some kinds of activity or works (services) that are regarded as licensable kinds of activity, speed up and to a certain degree simplify the license obtaining process. In particular, licenses for retail trade and catering (apart from the retail trade in alcohol beverages and tobacco products), designing, construction of buildings and facilities of the first and second level of responsibility and conducting of engineering research for this purpose, activity of attraction of foreign labour force to the Republic of Belarus, tourist activity, transportation and forwarding activity, activity of transportation of goods within the Republic of Belarus and a number of others have been abolished;
• On 15 September 2010, the refinancing rate of the National Bank of the Republic of Belarus was reduced down to 10.5% per annum. Such a decision was adopted by the Board of the National Bank with regard to the positive dynamics of the main macroeconomic indicators and a relatively low level of inflation in the country. In accordance with the National Bank, the reduction of the refinancing rate is aimed mainly at further affordability of bank credits for people and business entities. The refinancing rate has already been reduced six times this year;
• The National Bank of the Republic of Belarus continues negotiations with investors on sale of OJSC Belinvestbank;
• The State Property Committee announced about expected growth of cadastral value of land. The State Property Committee recommends to private business entities that are residents of Belarus and have long-term buildings to take land plots into private ownership;
• The Council of Ministers of Belarus modified the Charter of Railway Transport of Common Use allowing transportation of goods in the railway cars of third parties. According to the previous version of the Charter, transportation of passengers, goods and luggage by railway transport was carried out only in the railway cars and containers of the railway company, as well as in railway cars and containers belonging to cargo senders, cargo recipients or rented by them. In other words, third parties that were neither recipients nor senders of cargo could not be engaged in transportation of goods by railway that made the Belarusian railway company an absolute monopolist in this market segment;
• Enterprises will be able to define the cost of their production at their own discretion. In Belarus enterprises and organizations will be able to define the methodology of cost calculation at their own discretion. Such a decision is given in Decree No. 484 of the President of the Republic of Belarus, dated 23 September 2010. This decision was adopted for the purposes of liberalization of economic activity, simplification of accounting and bringing the national legislation closer to the international standards of financial reporting;
• The Embassy of the Republic of Belarus works on the possibilities of opening of a Belarusian bank or its branch in Latvia. It is expected that this bank will service export and import trade operations. The raising of this question is related with the growing financial flows between the two countries.
Supreme Court of Lithuania pronounced on indemnification for damages caused by poor quality construction works under a contract
The Supreme Court of Lithuania (hereinafter, the SCL) examined a civil case regarding indemnification for damages caused by poor quality construction works under a contract (civil case No. 3K-7-262/2010).
The SCL in this case examined issues pertaining to the application of the principle of the freedom of contract in case of a construction contract and pertaining to quality requirements for construction works, regulation of quality warranty and such warranty period.
The SCL in its ruling gives an explanation regarding the application of the principle of the freedom of contract in case of a construction contract between the parties. The restriction of the principle of the freedom of contract in case of contractual relations under a construction contract is justifiable namely by protection of public interest (constructions works and structures should not pose danger for safety of people, for the environment, etc.). Taking this into account, the expanded panel of judges arrived at the conclusion that in the presence of contractual relations between the parties, the contract made between the parties applies to the extent it is not contrary to imperative rules of law, and if the parties did not agree on a specific issue, then relevant provisions of law should apply.
The panel noted that requirements applicable to the subject-matter of a construction contract and the scope of the contractor’s duties are determined not only by the need of the client and conditions agreed between the parties, but also by imperative requirements of the acts of public law governing the relationships in construction. It is to be regarded that the contractor properly fulfilled the construction contract if the works that were performed or the result of such works conform to the quality requirements for a structure (works) set in the contract and in the applicable construction regulations.
In the case at hand, the court, referring to the above conclusions, solved the issue regarding the beginning of the warranty period and the duty of the respondent, acting as the contractor, to provide warranty service. The panel stated that according to the legislation and the contract between the parties the duration of the warranty period of the facility used by the client starts to run from the date the structure is recognised suitable for use, and there is no basis for interpreting the contract so that the warranty period would also include some other time the structure was used. A person committing a breach of law cannot benefit from it, as a right cannot arise from a wrong (ex injuria jus non oritur). If the client uses a construction object or its part in breach of the imperative provisions of paragraphs 1 and 3 of Article 29, Article 40 of the Law of the Republic of Lithuania on Construction, it is not a basis for interpreting the contract so that the client is covered by the warranty period. Such use is illegal; it is done at one’s own risk and is not subject to legal protection. If the contractor during this period performs maintenance of facilities, correct failures, etc. at its own expense, it performs such actions also at its own choice and risk. The contractor that makes it possible for the client to use the structure or its part illegally, i.e. that knows or must know that the law is breached in this way, is not regarded acting in good faith in the sense of the civil law and its rights are not defended (Articles 1.5, 1.136 of the Civil Code of the Republic of Lithuania).
Amendments of laws relating to construction and regulatory acts explicating these laws came into effect
On 2 July 2010, the Seimas of the Republic of Lithuania amended nine laws No. XI-992 to No. XI- 1000, i.e. the Law of the Republic of Lithuania on Construction, the Civil Code of the Republic of Lithuania, the Criminal Code of the Republic of Lithuania, the Law of the Republic of Lithuania on Territorial Planning, the Law of the Republic of Lithuania on Gardener Societies, the Law of the Republic of Lithuania on Local Self-Government, the Law of the Republic of Lithuania on the Real Estate Cadastre, the Code of Civil Procedure of the Republic of Lithuania, and the Law of the Republic of Lithuania on Support for Environmental Programmes (official gazette Valstybës Þinios, 2010, No. 84-4401 to No. 84-4409). These amendments came into effect on 1 October 2010. Taking into account these amendments, regulatory acts explicating these laws have been amended respectively (hereinafter, the Amendments). It should be noted that the Minister of Environment of the Republic of Lithuania:
(i) annulled Construction Technical Regulation STR 1.05.07:2002 “Set of design conditions for a structure” by his order No. D1-736 of 6 September 2010 (official gazette Valstybës Þinios, 2010, No. 106-5471);
(ii) amended Construction Technical Regulation STR 1.05.06:2005 “Designing of a structure” by his order No. D1-808 of 27 September 2010;
(iii) annulled Construction Technical Regulation STR 1.07.01:2002 “Construction permit” and approved new Construction Technical Regulation STR 1.07.01:2010 “Documents permitting construction (construction authorisations)” by his order No. D1-826 of 27 September 2010 (official gazette Valstybës Þinios, 2010, No. 116-5944);
(iv) annulled Construction Technical Regulation STR 1.11.01:2002 “Procedure for the acknowledgement of structures as fit for operation” and approved new Construction Technical Regulation STR 1.11.01:2010 “Completion of construction” by his order No. D1-828 of 28 September 2010 (official gazette Valstybës Þinios, 2010, No. 116-5947);
(v) annulled Construction Technical Regulation STR 1.09.06:2009 “Suspension of construction. Eliminating the consequences of unauthorised construction” and approved new Construction Technical Regulation STR 1.09.06:2010 “Suspension of construction. Eliminating the consequences of unauthorised construction. Eliminating the consequences of construction works under the construction authorisations unlawfully issued” by his order No. D1-827 of 28 September 2010 (official gazette Valstybës Þinios, 2010, No. 116-5946).
It is provided that the Amendments shall come into effect from 1 October 2010.
After coming into effect of the Amendments:
(i) legalisation of unauthorised structures under construction or constructed has been allowed;
(ii) the requirement to obtain a set of design conditions for a structure, which used to be issued by public administration bodies, has been annulled;
(iii) documents permitting construction works have been changed;
(iv) formalities for completion of structures have been simplified.
The Amendments provide that from 1 October 2010, unauthorised construction may be legalised in cases set forth in legislative acts and upon payment of a fee of the fixed amount, which may not be paid if the construction works are legalised by 1 January 2013. Furthermore, the Amendments lay down that if the builder of his own free will applies by 31 December 2012 to the municipal administration for the legalisation of unauthorised construction works commenced before 1 October 2010, the builder (customer) may be subject to administrative penalties; however, voluntary application for the legalisation of unauthorised construction works is considered as an extenuating circumstance. Please note that unauthorised construction works currently in progress may be legalised under the established procedure only if by 1 October 2010, no petition (action) has been lodged before a court requesting to eliminate the consequences of unauthorised construction works.
After coming into effect of the Amendments, it is not required to obtain a set of design conditions when designing a structure. The design shall be prepared in compliance with territorial planning documents, documents of construction surveys of a land parcel (territory) (if mandatory), cultural heritage research materials, applicable laws, terms and conditions for getting connected, special architectural requirements set by the municipal administration, special requirements for heritage protection issued by the Department of Cultural Heritage (if applicable), and special requirements for management and protection of the protected territory issued by the directorate of the protected territory (if applicable).
From 1 October 2010, to obtain a permit for construction of a new structure, reconstruction of a structure, reconstruction of a simple structure into a non-specific or specific structure or renovation (modernisation) of a building, the builder (customer) shall submit, directly or by electronic measures, an application of an established form, a construction design and a cadastre file (in case of reconstruction and renovation (modernisation) of a building), as well as other required documents (if mandatory (an examination act of the construction design, decision on environmental impact and admissibility of intended business activities in the selected place, co-owners’ consents and/or an agreement with the owner, possessor or user of a neighbouring parcel)) to the municipal administration. Having obtained the application, an official of the municipal administration shall indicate in the information system Infostatyba the entities, which must inspect the design according to their competence within the established terms. Failing the information, the inspecting entity shall be entitled to request stating the reasons, in writing or by e-mail, the builder (customer) or designer (design manager) to file additional information or documents or, in established cases, a hard copy of the design. If the inspecting entity fails to make a decision within the established term, the consent shall be deemed to have been given and if no disagreement has been obtained, a document permitting construction shall be issued.
Please note that in cases other than those mentioned above, a document permitting construction shall be written consent of an authorised civil servant to the design of a structure (where the design is mandatory). In those cases where the design is not mandatory, it will be sufficient to obtain the consent of owners or possessors of the land parcel or neighbouring land parcels in cases provided by laws.
After coming into effect of the Amendments, it is provided that construction completion procedures shall be carried out and a construction completion act shall be obtained if:
(i) a new specific or non-specific structure has been built;
(ii) a specific or non-specific structure has been reconstructed;
(iii) a simple structure has been reconstructed into a specific or non-specific structure;
(iv) a multi-apartment building or building for public purposes has been renovated (modernised).
It should be noted that the chairperson of the commission for completion of construction works, assuming liability for the compliance of construction works with the statutory requirements, may perform construction completion procedures and sign the construction completion act for an absent member of the commission, where he or she fails to arrive without prior notification.
In cases listed below, for proper completion of construction works, the builder (customer, owner, possessor) shall draw up a statement of an established form indicating that the structure has been constructed in compliance with the design. Generally, the builder (customer, owner, possessor), design manager, construction manager, and construction technical supervisor shall sign this statement and file it with the relevant unit of the State Territorial Planning and Construction Inspectorate. The statement shall be filed:
(i) upon completion of major repairs of a specific or non-specific structure;
(ii) upon change of the purpose of a specific or non-specific structure (premises in the specific or non-specific structure, registered as a separate object of immovable property), where only ordinary repair works of the structure are performed or the purpose has been changed without performing any construction works;
(iii) upon construction of a new detached or semi-detached house or reconstruction of a detached or semi-detached house attributed to non-specific or specific structures;
(iv) upon reconstruction of a simple structure into a detached or semi-detached house attributed to non-specific or specific structures;
(v) upon renovation (modernisation) of a detached or semi-detached house attributed to nonspecific or specific structures.
Please note that a unit of the State Territorial Planning and Construction Inspectorate shall approve the above-mentioned statement:
(i) upon construction of a new detached or semi-detached house or reconstruction of a detached or semi-detached house attributed to non-specific or specific structures; at the builder’s request a declaration on completion of construction of a new simple structure or its reconstruction (into a simple structure) may also be approved;
(ii) upon reconstruction of a simple structure into a detached or semi-detached house attributed to non-specific or specific structures.
Legitimacy of construction of the structures referred to in the statements approved, considering financing, administrative costs, will be inspected at random no later than within one year.
Explanation on the scope of application of exemptions for drawing up a prospectus, as set forth in Article 5(3)(3) and Article 5(6)(4) of the Law on Securities given
On 23 September 2010, the Securities Commission of the Republic of Lithuania gave an explanation on the scope of application of exemptions for drawing up a prospectus, as set forth in Article 5(3)(3) and Article 5(6)(4) of the Law on Securities (hereinafter, the Explanation). Article 5(3)(3) of the Law on Securities (hereinafter, the Law) provides that no prospectus shall be published where a public offering of securities, which are offered, allotted or intended to be allotted to the undertakings after their merger by acquisition or by the formation of a new company, is being exercised, if there is a document approved under the established procedure and available to future owners of these securities, containing the information which the Securities Commission considers equivalent to the information that has to be presented in the prospectus. This exemption, as referred to in Article 5(6)(4), shall also apply to the admission of these securities to trading on the regulated market.
Taking into account that both Lithuanian laws and laws of other EU member states attribute not only mergers by acquisition or by the formation of a new company but also cases of divisions by acquisition or by the formation of a new company, which are subject to analogous procedures, to reorganisation of companies, the Securities Commission explained that these statutory exemptions related to the publication of a prospectus in cases of mergers by acquisition or by the formation of a new company, where securities are offered, allotted or intended to be allotted to the public or admitted to trading on the regulated market, are equally applicable in cases of divisions by acquisition or by the formation of a new company, if there are reorganisation terms approved and announced publicly under the procedure established by the Law of the Republic of Lithuania on Companies, which the Securities Commission considers a document equivalent to the prospectus together with other reorganisation documents of companies and additionally disclosed risk factors. In each particular case, the Securities Commission shall be entitled to require additional information and documents necessary for ensuring equivalence of information. This Explanation is applicable only to those issuers who have their place of residence in the Republic of Lithuania and who offer, allot or intend to allot securities in the Republic of Lithuania or admit them to trading on the regulated market operating in the Republic of Lithuania.
Explanation on the interpretation of repurchase and reverse repurchase transactions and lending arrangements similar to these transactions and the performance of duties and obligations of financial brokers given
On 23 September 2010, the Securities Commission of the Republic of Lithuania (hereinafter, the Commission), wishing to attract the market participants’ attention to the interpretation of repurchase transactions (an arrangement under which the seller undertakes to sell financial instruments or cash to the buyer, which pays the purchase price, and under which it is agreed that the seller undertakes to repurchase the same or equivalent financial instruments or the same amount of cash from the buyer for the repurchase price at the set time in the future, hereinafter, the REPO transactions) within the context of applicable laws and aiming to dissipate any uncertainties related to legal assessment of REPO transactions in providing investment services, gave an explanation on the interpretation of REPO and re-repo transactions and lending arrangements similar to these transactions and the performance of duties and obligations of financial brokers (hereinafter, the Explanation).
The Commission explained that from economic perspectives, a REPO transaction means a transaction where the creditor extends a loan and the borrower transfers relevant financial assets (financial instruments) to the creditor’s ownership to ensure repayment of the loan. Usually, the execution of this transaction creates loan relationships; from legal perspectives, however, these relationships may not be considered as mere ordinary relationships between the lender and the borrower. By a REPO transaction, the parties agree on special financial collateral, i.e. temporary transfer of ownership to financial instruments.
In the Explanation, the Commission emphasises that the subject matter of the REPO transactions is financial instruments and the execution of these transactions is considered as major investment services under the Law of the Republic of Lithuania on Markets in Financial Instruments, where a financial intermediary enters into transactions for purchase and thereafter repurchase of financial instruments on own account, and the client enters into transactions for sale (reverse repurchase) and thereafter purchase (repurchase) of financial instruments respectively. In executing a REPO transaction, a financial brokerage firm participates itself in the execution of a transaction on its own account, therefore it should be treated as provision of investment services. The Explanation also focuses on other lending transactions, which are not REPO transactions but are similar to these transactions from the economic side, i.e. pledge of financial instruments or other assets using the received cash for acquisition of financial instruments.
The Explanation elaborates the duties and obligations of a financial brokerage firm when providing investment and/or additional services to the client.