On 11.02.2004, the Parliament passed the Commercial Activities Act (Kaubandustegevuse seadus) entering into force on 15.04.2004. The Act will establish general requirements for traders, organisers of trade, wholesellers and retailers of goods and services, procedure for exercise of supervision, and liability for breach of law.

      One of the most important amendments is the replacement of activity licence with registration in the register of economic activities. The register is a state register maintained with the purpose of recording the undertakings operating in areas of activity subject to special requirements. Traders may engage in commercial activities provided they are registered with the register of economic activities. The Commercial Activities Act is a general norm, and if a specific act establishes additional requirements for selling certain goods or services, the requirements of a specific act should be followed.

      A fixed-term activity licence issued before the entry into force of the Commercial Activities Act is valid until the date specified in that licence or until data indication in it is changed, but not longer than 15.04.2005. An activity licence issued for an unspecified term is valid until data indicated in it is changed, but not longer than 15.04.2005.

      The procedure for registration of undertakings operating in areas of activity subject to special requirements is provided for in the Economic Activities Register Act (Majandus-tegevuse registri seadus) entering into force simultaneously with the Commercial Activities Act on 15.04.2004. An undertaking operating in an area of activity subject to special requirements shall obtain registration by submitting a requisite registration application to an administrative body. Respective data on the undertaking shall be entered in the register within five working days from receipt of the abovementioned application.

      On 11.02.2004, the Parliament passed a Consumer Protection Act (Tarbija-kaitseseadus). The objective of the new Act is to update the valid Consumer Protection Act and to create a simplified extra-judicial system for solving disputes between the consumer and the trader.

      According to the new requirements, upon offering goods to the consumer it is necessary to disclose the sale price as well as the unit price of goods. The consumer must be informed of, in addition to the final price, also of the price of goods per kilogram, litre, metre, square metre or cubic metre.

      The new Act makes an express difference between the warranty of goods or services and the right of the consumer to file a claim regarding the lack of conformity of goods or services. Furthermore, the Act prohibits the use of the word "warranty" or any other word of the same meaning unless its meaning corresponds to warranty against defects or contractor's guarantee (sections 230, 231 and 650 of the Law of Obligations Act).

      Pursuant to the regulation provided in the Law of Obligations Act, the trader is liable for lack of conformity of goods or services that becomes apparent within two years as of the date of delivery of a thing or providing of a service.

      A warranty against defects is a promise given by a manufacturer or a trader that

      certain characteristics of goods or services shall preserve within the time period specified by the manufacturer or the trader.

      The granting of a warranty against defects is not an obligation for the trader or manufacturer, and the consumer may not demand a warranty to be granted, as by granting of a warranty the manufacturer or trader assumes voluntarily an additional obligation in order to give the consumer a better conditions than provided by law.

      The new Act also prescribes the establishment of the consumer complaints committee whose competence is to solve disputes arising from a contract concluded between the consumer and trader in case the parties have failed to solve such disputes through negotiations.

      

      

      The Ministry of Finance has drafted a new Gambling Act (Hasartmängu-seadus), which, after entering into force, shall comprise both gambling and lottery provisions including the provisions regulating commercial lotteries.

      Currently, the conduct of commercial lotteries (i.e. consumer lotteries) in Estonia is not clearly regulated, opening possibilities for considerably different interpretations, among others for the interpretation that when executing commercial lotteries, one should follow the provisions of the Lotteries Act prescribing the routine of organising

      

      ordinary lotteries. In respect of the commercial lotteries, the most important amendment to the draft act is the definition of commercial lottery and subjecting the commercial lottery to all the provisions concerning lotteries in the draft Gambling Act (requirements for conducting the lotteries, lottery tickets, prize fund, operating permit etc) except if the draft act prescribes that the regulation is not applicable for commercial lotteries, or is regulated differently. This is a considerable change and in comparison with the effective regulation shall change remarkably legal prerequisites for conducting commercial lotteries. Treating commercial lotteries made for marketing purposes equally with ordinary lotteries is clearly unreasonable and undesirable for any consumer goods manufacturer.

      According to the Ministry of Finance, the draft act has neither been sent to the other ministries for approval, nor to the professional associations for opinion polling. Likewise, there is no infor-mation, when the draft act will be accessible to the public via information system e-Õigus. At the same time, taking into account, that the draft act is scheduled to enter into force already on 01.07.2004, the disclosure of the draft act in the near future is foreseeable. Needless to say, all traders should follow closely the development of this draft.

      

      A new Law on Prevention for Delay in Payments Under Commercial Transactions (Mokėjimų, atliekamų pagal komercinius sandorius, vėlavimo prevencijos įstatymas) was adopted. It will come into force on 01.05.2004 and will be applied to commercial transactions made as of that day. The new Law regulates the default interest for late payments under commercial transactions and establishes the rights of the creditor in case of late payment. The provisions of this Law will be applied to all commercial transactions which involve repayable transfer of goods, provision of services, performance of work and of payments made between undertakings, as well as between undertakings and state institutions. The Law has been harmonized with the Directive 2000/35/EC of the European Parliament and of the Council of 29.06.2000 on combating late payment in commercial transactions.

      On 10.02.2004, the Supreme Court made a decision that significantly specified the procedure of payment of dividends in Estonia.

      General meeting of AS Balteco decided in 2001 to pay the shareholders dividends for the year 2000. No detailed procedure for payment of dividends was established immediately, but the procedure was adopted later by new decisions of general meeting where it was decided to pay dividends in monthly payments. Shareholder Mati Vann filed a claim for the immediate payment of dividends and found that the procedure for payment of dividends established later cannot concern an earlier decision of the general meeting.

      The court found that as the procedure for payment of dividends was not adopted simultaneously with the decision on payment of dividends and as it was not prescribed for in the articles of association, the shareholders were entitled to claim immediate payment of dividends from the company; such a claim becoming enforceable within seven days after the submission of the claim, according to the Civil Code then in force. The court found that such an obligation cannot be changed unilaterally by the company or its general meeting. The court admitted that certain exceptions to the prohibition on unilateral change of an obligation may be allowed, based on the principle of balance of interest of the parties, however, this was not applicable in the given case.

      The court found that a decision on payment of dividends may be made only once a year, on the basis of an approved annual report. This restriction is necessary in order to avoid deciding on payment of dividends without an audit of the financial condition of the company and its approval by the general meeting. Furthermore, the court found that the decision to distribute dividends may entail also the time-scheme for payment of dividends, and that dividends might be paid as instalments, provided that this is made in a single decision. The court noted that the procedure for payment of dividends must be in accordance with the principles of good morals and good faith.

      According to the State Chancellery of the Republic of Estonia and the Estonian Ministry of Justice, the Commercial Code and other legal acts regulating company law in Estonia have been harmonised with all of the nine effective company law directives enacted on the basis of the Treaty establishing the European Community. The fact that Estonian company law is to a very large extent in line with the acquis has been confirmed by the European Commission comprehensive monitoring report on Estonia's preparations for membership, which reflects the situation at the end of September 2003. According to the said report, Estonia is essentially meeting the requirements for membership, and is expected to be in a position by accession to implement the acquis, in the areas of company law and accounting.

      The implementation provisions of the Regulation on the Statute for a European company (SE) are currently being drafted and are scheduled to take effect simultaneously with the said regulation on 08.10.2004.

      

      

      A new version of the Law on Associations (Asociacijų įstatymo pakeitimo įstatymas) came into force on 14.02.2004. The new Law merged two previously separate forms of legal persons - public organizations and associations. Under the new Law an association is regarded as a limited civil liability legal person established with the purpose to coordinate the activities of its members, to represent and protect their interests and to meet other public requirements. Further, the new Law abolishes restriction for associations to engage in commercial-economic activities. The structural units of the public organizations, established as legal persons before coming into force of the Law are considered as legal persons with the form of associations without re-registration.

      

      The Parliament adopted a new Law on European Economic Interest Grouping

      (Europos ekonominių interesų grupių įstatymas), which will come into force as from the day of the accession to the EU. The purpose of this Law is to assure the application of the Council Regulation No. 2137/85 of 25.07.1985 to the European Economic Interest Grouping (EEIG). By introducing the European Economic Interest Grouping as the form of a legal person, the Law is aimed at developing commercial relationships between member states, ensuring the possibility for undertakings of different national dependence to unite into European economic interest groups.

      Under the Council Regulation any legal person and organization having its statutory office in EU, or natural persons engaged in any industrial, commercial, craft or agricultural activity, or providing professional or other services in the Community may become members of such groups. At least two of the grouping's legal bodies must have their central administrations or carry out their principal activities in different Member States.

      The purpose of a grouping shall be to facilitate or develop the economic activities of its members and to improve or increase the results of those activities. The new Law establishes that provisions of the Lithuanian legislation will be applied to grouping with respect to liability, insolvency and liquidity of real commercial partnership, within the limits ascribed in the Council Regulation and the said Law.

      The Law was adopted on 22.12.2003.

      

      

      Draft amendments have been developed to the Cabinet regulations No. 112 "General Construction Regulations",

      whereby large investment projects with the volume exceeding LVL 5 million will be entitled to construction permits

      

      by stages of construction works, if there is a design project developed and approved for the whole of the construction and the technical project for the respective stage of construction works, and both the design project and the technical project of the respective stage wil l be subject to the construction project expertise.

      Currently the Construction Law stipulates that prior to commencing construction works the construction commissioner or constructor needs to obtain a construction permit according to the procedure stipulated under the General Construction Regulations. Meanwhile, the Cabinet regulations prescribe that a construction permit may only be obtained on the basis of approved technical project, rather than on the basis of the design project only. Consequently, the investment process for large constructions currently is very protracted, since the construction designing process may last for several years.

      The construction designing at the level of the technical project for major construction projects is ordinarily carried out in stages and the technical projects of specific stages are often prepared before completion of the whole of the technical project. Thus for major construction projects certain construction stages could be commenced already before the completion of the designing for the final stages.

      

      On 21.01.2004 amendments were adopted to the Law On the Employee Protection in Case of the Employer's Insolvency (Par darbinieku aizsardz¥bu darba devïja maksÇtnespïjas gad¥jumÇ). The amendments are mostly related to various insolvency aspects, for instance, the provision for satisfying an employee's claim has been supplemented by stating that satisfied are only those claims that have been included in the list of claims of approved unsecured creditors passed by the meeting of creditors.

      The legal status of an employee has been adversely changed also in other provisions, for example, before the amendments the severance benefit was granted at the minimum amount only if the contract or collective agreement failed to provide for a higher amount, while now with the amendments in force, in all cases only the minimum severance fee amount is granted.

      

      Profound amendments to the Waste Act

      (Jäätmeseadus) will enter into force on 01.05.2004, changing the waste handling system and enacting the principle of liability of a manufacturer.

      The relevant changes concern the role of the local government in organising waste handling process. The local government is obliged to organise on its administrative territory a competition for the gathering and carriage of municipal waste by 01.05.2005. This way it should be achieved that the possessors of municipal waste shall subscribe to the gathering system of municipal waste.

      In case of some specific products being manufactured, resold or imported by the manufacturer, it is the obligation of the manufacturer to ensure the collection, recovery or disposal of the formed waste at their own expense. The waste of such products causes or could cause hazard to health or environment, environmental disturbance or excessive litter of environment (for example batteries, accumulators, devices containing PCB, motor vehicles and their parts, electrical/electronical equipments and their parts).

      The system of pollution charges received upon storage of municipal waste is amended, namely most of this levy shall accrue to the budget of a respective local government and rest to the state budget.

      

      As of 01.05.2004 the Baltic States as well as the other EU candidate countries will enter into new era from the legal point of view. All the new member states and their courts have to accept such principles as the supremacy of EU law over national law, direct applicability of certain EU legal instruments to member states, direct effect, liability of the member states for infringements of EU law, etc.

      The most important EU legislative instruments are regulations and directives, but the EC Treaty provides also for decisions, recommendations and opinions as the types of legal acts.

      A regulation is directly applicable to the member states, meaning that it does not have to be transposed into national law, but it confers rights to or imposes duties on member states and individuals in the same way as national law. Unless otherwise stated in accession documents, it is assumed that from 01.05.2004 all regulations in effect will be directly applicable also in respect of new member states. A directive is binding on the member states as regards the objective to be achieved but leaves it to the national authorities to decide on how the agreed Community objective is to be incorporated into their domestic legal systems. Usually the member states are granted a transposition period, after which the directives acquire full legal force. It is important to note that the directive does not supersede the laws of member states but places the member states under an obligation to harmonise their national law with the EU law. Failure to transpose the directive in whole or in part may give rise to liability of the member state.

      Other categories of the EU legal acts consist of decisions, recommendations

      and opinions. A decision is binding upon those to whom it is addressed. Decisions are used for example for granting or refusal of state aid or imposing fines. Recommendations and opinions are not binding.

      

      

      The draft legislative Act on the Compulsory Insurance against Civil Liability for Owners of Motor Vehicles

      aims at implementing the requirements of several EU directives (Directives 72/166/EEC, 84/5/EEC, 90/232/EEC, 92/49/EEC and 2000/26/EC), for instance, appropriately increasing the limits of the insurer's liability, stipulating that the insurers define the insurance premium amounts under free competition circumstances, as well as laying down the procedure for increasing and decreasing such premiums, defining certain deadlines for the insurers to provide a reply to an application for the loss of compensation. The draft legislative act intends to reorganize the Traffic Bureau currently subordinated to the Ministry of Finance into a Motor Vehicle Insurers' Bureau established by all insurers with licences for providing compulsory insurance against civil liability for the owners of motor vehicles in line with Recommendation No. 5 of the Working Party on Road Transport of the UN Economic Commission for Europe (with amendments as of 16.11.2000) and the requirements listed in the Bureau Council Constitution of the Green Card system.

      

      On 31.12.2003, an Agreement on Suppression of Visas in Ordinary Passports (Lietuvos Respublikos Vyriausybės ir Argentinos Respublikos Vyriausybės susitarimas dėl vizų panaikinimo asmenims, turintiems piliečio pasus), signed by the Governments of the Republic of Lithuania and the Republic of Argentina came into force. According to the Agreement citizens of both Republics do not require visas for a period of travel up to 90 days if the purpose of their stay is related to tourism, commerce, sports, art or science.

      A Convention signed in Madrid on 22.07.2003, between the Republic of Lithuania and the Kingdom of Spain for the Avoidance of Double Taxation

      and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital (Lietuvos Respublikos ir Ispanijos Karalystės sutartis dėl pajamų bei kapitalo dvigubo apmokestinimo išvengimo ir mokesčių slėpimo prevencijos) came into force since 2912.2003.

      The United Nations Convention of

      10.12.1982 on Maritime Law (JungtiniųTautų Orų teisės konvencija) came into force on 29.12.2003. The Convention was ratified by the Parliament of the Republic of Lithuania on 09.10.2003.

      

      

      A new version of the Law on Land (Žemės įstatymo pakeitimo įstatymas) was adopted by the Parliament on 27.01.2004. Amongst other novelties the Law introduces the maximum term for 25 years for a contract of lease of state-owned land, establishes a list of cases when a county governor has the right to adopt a resolution to trade state-owned land into other immovable property and etc. The Law also regulates the establishment and the registration of servitudes, as well as the compen-sation for losses arising from the establishment of servitudes, when such servitudes are established on the basis of administrative acts.

      The new version of the Law came into effect on 21.02.2004 and abolished the Law on Acquisition and Transfer of Land Plots Registered for Performance of Municipal Functions (Savivaldybių funkcijoms vykdyti reikalingų žemės sklypų įsigijimo ir perleidimo įstatymas). Persons who were granted the right to use the state-owned land became the trustees of that land as from coming into force of this Law.

      

      On 01.01.2004, the new wording of the Law on Public Procurement

      (Viešųjų pirkimų įstatymo ir viešųjų pirkimų įstatymo pakeitimo įstatymo pakeitimo įstatymas) came into force. Amendments are aimed to harmonize the provisions of the Public Procurement Law with the EU Laws. Among other novelties the Law specifies a definition of public procurement of works where "work" means the outcome of building or civil engineering, works taken as a whole that is sufficient of itself to fulfil an economic and technical functions.

      The Law also provides for a possibility to use design contest not only for selection of supplier/suppliers of services stated in the Law who submitted the best plan or design, but also for the acquisition of plans and designs of other spheres.

      

      Selection of relevant acts and amendments adopted 01.01-29.02.2004:

      -Organic Farming Act (entered into

      force on 14.02.2004)

      -Ratification Act of Cartagena

      Protocol On Bio-safety to the

      Convention on Biological Diversity

      (entered into force on 16.02.2004)

      -Amendment Act of Lifts and

      Cableway Installations Safety Act

      (entered into force on 23.02.2004)

      -Amendment Act of Forest Act, Law

      on the Use of the Money Accrued

      from Exploitation of the Environment and State Fees Act (entered into force on 07.03.2004)

      -Commercial Activities Act (shall enter

      into force on 15.04.2004)

      -Consumer Protection Act (shall

      enter into force on 15.04.2004)

      -Economic Activities Register Act

      (shall enter into force on 15.04.2004)

      -Waste Act (shall enter into force on

      01.05.2004)

      Selection of relevant draft acts presented to the Parliament 01.01-29.02.2004:

      -Accession Act of Convention on

      International Carriage by Rail

      (COTIF)

      -Amendment Act of Aliens Act

      -Amendment Act of Competition Act

      -Amendment Act of Income Tax Act

      -Amendment Act of Packaging Excise

      Duty Act and State Fees Act

      -Amendment Act of Plant Protection

      Act

      -Amendment Act of Water Act

      -Product Safety Act

      -Ratification Act of European

      Convention on Social and Medical

      Assistance

      

      

      Selection of other relevant acts and amendments adopted 01.01.2004-29.02.2004:

      -Amendments to the Law on

      Pollution (in force as of 21.01.2004).

      -Amendments to the 09.07.2002

      Cabinet Regulations No. 294 on

      Application of Category A, B and C

      Polluting Activities and Permitting

      of Category A and B Polluting

      Activities (in force as of 07.02.2004).

      -Amendments to the Law on the

      Circulation of Alcohol (in force as

      of 12.02.2004).

      -The Procedures for Environmental

      Impact Assessment of the Purported

      

      Activity (in force as of 20.02.2004).

      -Cabinet Regulations No. 90.

      Procedure for the Sketch Design

      Project Tenders. (in force as of

      25.02.2004).

      -Law on Outworn Vehicles Manage

      ment (in force as of 01.05.2004).

      Selection of the relevant draft acts presented to the Parliament 01.01.2004-29.02.2004:

      -Amendments to the Copyright Law

      -Law on the Obligatory Insurance

      of Civil Liability for the Road

      Transport Vehicle Owners

      -Procedures for the Circulation and

      Control with Respect to Documents

      Accompanying Excise Goods

      -Procedures pursuant to which

      Citizens of the European Union and

      their Family Members Enter and

      Reside in the Republic of Latvia

      -Regulations on the Management

      of the EC Structural Funds

      

      Selection of relevant acts and amendments adopted 01.01-29.02.2004:

      -Law on Public Institutions (entered

      into force on 14.02.2004)

      -Law on European Works Council

      (entered into force on 19.02.2004)

      -Law on Biofuel (entered into force

      21.02.2004)

      -Law on Melioration (entered into

      force on 21.02.2004)

      -Law on Excise Duty (will enter into

      force 01.05.2004)

      -Amendments to Law on Funda

      mentals of Free Economic Zones (will

      enter into force on 01.05.2004)

      Selection of relevant draft acts presented to the Parliament 01.01-29.02.2004:

      -Amendment Act of Aliens Act

      -Amendment to Law on Credit

      Unions

      -Amendment to Law on Enterprise

      Bankruptcy

      -Amendment to Law on Land

      Reform

      -Amendment to Law on Profit Tax

      -Amendment to Law on Restruc

      turing of Enterprises

      

      The Parliament adopted the amendments to the Law on Value-Added Tax (Pridėtinės vertės mokesčio įstatymo pakeitimo ir papildymo įstatymas).

      The amendments are aimed to finalize the harmonization process of the Lithuanian VAT legislation with the EU law, mainly with the Sixth Directive (77/388/EEC). The amendments establish the provisions with regard to Intra-Community Trade and implement the EU principles with regard to the place for provision of services and supply of goods, distance sales, triangular trade, acquisition of new vehicles etc.

      According to the amendments, Lithuanian residents will have to register as VAT payers if their acquisitions from EU countries exceed LTL 35 000 during a calendar year. Further, the amendments require EU residents who supply and deliver goods to Lithuanian unregistered persons to register and account for VAT in Lithuania, if their turnover from distance sales in Lithuania exceeds LTL 125 000. The amendments were adopted by the Parliament on 15.01.2004 and shall come into effect on 01.05.2004 (with some exceptions).

      

      On 01.04.2004, amendments to the Law On Value Added Tax will take effect. The law has been supplemented with a provision that defines the application of a 0% added value tax rate to a part of international passenger carriages. By applying a 0% added value tax rate to international passenger carriages, the Latvian carriers may now enjoy a fair competition with the carriers of the other Baltic countries. Consequently, from the tax legislation policy point of view, the Latvian carriers will not be subject to less favourable business conditions and there will be less of a risk that carriers should register businesses in other Baltic countries with a lower tax rate.

      EU Directive No. 6 stipulates that after the accession to the EU the new member states will be allowed to retain the value added tax rates applied in compliance with the provisions of this directive already prior to the accession. Thus by introducing a 0 % added value tax rate for a part of international passenger carriages prior to 01.05.2004, the Republic of Latvia will be able to retain this tax rate also in the future.

      The Parliament (Saeima) is currently discussing the draft Amendments to the Law On Value Added Tax. Currently the law fails to stipulate the procedure for applying the value added tax to transactions on the single market of the EU. With its accession to the EU, Latvia will join the single EU market. According to the stipulations under the Treaty Establishing the European Community any customs formalities are forbidden between the member states, any hindrances for the free movement of persons, capital, goods and services are removed. To ensure free movement of goods and services, the procedure needs to be stipulated for applying VAT to transactions involving suppliers and beneficiaries of goods and services from various EU member states.

      The draft amendments are to prescribe the application of a 5% VAT rate to newspapers, magazines, bulletins, and other periodicals issued no less than once per every three months with onetime circulation exceeding 100 copies, with the exception of publications of erotic and pornographic nature, as well as publications content- and task-wise being directed towards publishing advertising or commercial announcements. The 5% VAT rate is also to be applied to the subscription fees for the commercial TV and radio. The draft amendments are planned to take effect on 01.05.2004 along with Latvia's accession to the EU.