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Lideika, Petrauskas, Valiūnas & Partners
On 8 November 2005, the Court of Justice of the European Communities (ECJ) in case C-443/03 Götz Leffler v Berlin Chemie AG clarified that the refusal by the addressee to accept a judicial or extrajudicial document
because of the language in which it is drafted does not result in nullity of the document in question. Council Regulation (EC) No 1348/2000 on the service in the Member States of judicial and extrajudicial documents in civil
or commercial matters is designed to establish the principle of direct transmission of judicial and extrajudicial documents in civil and commercial matters. The Regulation also provides that the addressee of such a document
may refuse to accept it if it is not in the official language of the Member State to which it is transmitted or a language of the Member State of transmission which the addressee understands.
The ECJ held, first of all, that the consequences of refusal to accept the document must be determined by an autonomous interpretation of the regulation and not by national law. It then
further revealed that, when the ddressee of a document has refused it on the ground of infringement of the "language rule", it is possible for the sender to remedy that by sending a translation of the document as soon as possible
and in accordance with the procedure laid down by the Regulation. In so far as the factual situation of the case at issue was concerned, the ECJ stated that a period of one month from receipt by the transmitting agency of the information relating to the refusal might be
regarded as appropriate but, the ECJ added, this period is to be determined by the national court according to the circumstances.
Insofar as the date of service of judicial and extrajudicial documents was concerned, the ECJ provided that the applicant must be able to benefit from the effect of the initial service to
the extent he/she/it displayed diligence in
regularising the document by sending a
translation as soon as possible. However, the ECJ pointed out, effective protection of the addressee entails taking into account, in his/her/its regard, only the date on which he/she/it received the translation of the document. The ECJ thus concluded that if a document has been refused on the ground that
it is not in accordance with the language rule and the defendant has not appeared, judgment is not to be given until it is established that the document in question has been regularised by
the sending of a translation and that this took place in sufficient time to enable the defendant to prepare his defence.
On 25 November 2005, Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies was officially published. The EU-wide legal instrument responds to strong demand from businesses and
enables cross-border mergers of limited liability companies in the European Union, which had been almost impossible or very difficult and
expensive until now. The Directive is expected to reduce costs, while guaranteeing the requisite legal certainty and enabling as many companies
as possible to benefit. It sets up a simple framework drawing largely on national rules applicable to domestic
mergers and avoids the winding up of the
acquired company. The Directive covers all limited liability companies, except for the ones engaged in collective investment in transferable securities (UCITS). The Directive also contains
special provisions concerning cooperative societies. Given the diversity of cooperatives in the EU, the Member States are allowed, upon the consent of the Commission, to prevent a
cooperative from taking part in cross-border mergers for a limited period of five years. Under the regulation provided by the Directive, employee participation schemes shall apply to cross-border mergers where at least one of the
merging companies already operates under such a scheme. Employee participation in the newly created company shall be subject to negotiations based on the model of the European Company Statute. The Directive strikes an important gap in the EU
company law, and is the first measure adopted under the Commission's Action Plan on company law and corporate governance in the European Union, published in May 2003. The Directive will enter into force on the 20th day
following its official publication, i.e. 15
December 2005. The Member States are
required to duly transpose it into their law
within the period of two years.
The Supreme Court of Lithuania in its 19
October 2005 ruling in civil case
No 3K-7-378/2005 AB Lietuvos dujos v AB Kauno energija has stated its opinion
concerning the grounds for recognition of the transaction as null and void. The court has THE RIGHT TO RECEIVE INFORMATION ruled that a transaction signed under economic pressure may be recognised as null and void
only in cases where the following
circumstances exist: (i) another person has demanded to conclude a contract; (ii) another person has threatened with economic grounds that depended on his unfair actions; (iii) a transaction has been concluded on the conditions obviously unfavourable to the
individual who has entered into such
transaction; (iv) the transaction would not have been concluded if there had been no economic pressure. Application to the court in exercise of the right to receive money for the sold goods or provided services is not considered as
economic pressure. Due account of a business risk should be taken
while recognising the transaction between legal entities as null and void on the basis of existing grave circumstances. On this ground a
transaction may be recognised as null and void only in case the following conditions are met: (i) if there exist the circumstances, beyond control of the other party to the transaction,
that have caused an individual to enter into the transaction on expressly unfavourable conditions; (ii) if the other party to the transaction is aware of these circumstances, uses them and imposes its will on the other party to the transaction. Thus, no transaction
may be recognised as null and void on the basis of a difficult financial position of the debtor, in particular in cases where the matter at issue is related to the award of damages and default interest which is the liability of the debtor.
The Supreme Court of Lithuania in its 26
October 2005 ruling in civil case
No 3K-3-511/2005 R. Svitojienë v V.
Krachmalis has stated that the principle of freedom of contract allows the parties to the private contract to freely establish their rights and obligations. In this sense, a contract additionally regulates the behaviour of the persons. The principle of freedom of contract is not absolute. The parties by their agreement may not change mandatory legal rules. Even if
the parties agree to change their mutual rights and obligations otherwise, such agreement would not be valid and a mandatory legal rule would apply. Another important aspect related
to the content of contract is the flaws of
contract. The contracting parties for one or another reason often do not define certain conditions of contract that might be unequal in their importance. Some of them are material conditions and the failure to agree on them would result in non-conclusion of a contract. The contracting parties can establish material
conditions of a contract only themselves,
expressing their concerted will. Other
conditions are considered as non-material and, therefore, a contract will be valid even if such conditions are not agreed upon. In case of a dispute the flaws of a contract caused by nonmaterial
conditions can be eliminated by the
court through interpretation of the contract and application of non-mandatory legal rules. The Supreme Court of Lithuania in its 14 November 2005 ruling in civil case No 3K-3-565/2005 UAB Verslo konsultacijų
spektras v Vilkaviðkis District Municipality has held that unless a contract provides for otherwise a client must pay the whole price
The Minister of Environment by its Order No D1-555 of 17 November 2005 approved the Rules for Registration of Manufacturers and Importers. These Rules set forth the procedure
for registration in the Digest of Manufacturers and Importers of the manufacturers and Importers placing on the domestic market of Lithuania the lubricants, vehicles, electric and
electronic devices, the products and/or the packaging filled with the products which are taxed under the Law on Environmental Pollution Tax. The Digest of Registration of Manufacturers and Importers is administered by, and announced in the website of, the
Agency of the Ministry of Environment. The Rules will come into force as of 1 January 2006.
On 15 November 2005, the Commission
adopted Regulation (EC) No 1864/2005
endorsing amendments to International
Accounting Standard (IAS) 39 Financial
Instruments: Recognition and Measurement, the Fair Value Option. This Regulation follows 2 Lideika, Petrauskas, Valiūnas ir partneriai LAWIN
Regulation (EC) No 1606/2002 on the
application of international accounting
standards, whereby the IAS 39 Financial
Instruments: Recognition and Measurement was endorsed. However, the latter Regulation contained exceptions relating to the provisions
of IAS 39 on the unrestricted Fair Value Option and hedge accounting. The full Fair Value Option related provisions were excluded because of concerns expressed by the European Central Bank as well as prudential supervisors
represented in the Basel Committee.
Consequently, the International Accounting Standard Board recognised these concerns and focused on the preparation of a new version of
IAS 39 providing for a restricted fair value
option. In order to enable companies to apply the amended standard for their financial statements of 2005, retroactive application of the Regulation is established therein. While the Regulation contains no provisions
concerning the removal of the carve-out relating to the hedge accounting standartisation, the Commission again emphasises the need for the European Banking Federation as well as the
IASB to find an appropriate technical solution in question as soon as possible.
The Supreme Court of Lithuania in its 24
October 2005 ruling in civil case
No 3K-3-503/2005 AB Lietuvos draudimas v UAB ERGO Lietuva, UAB Ritranspeda has addressed an issue concerning application of subrogation (the passing of the insured person's
rights to claim damages onto the insurer) in the case of civil liability insurance. The court has
stated that the purpose of subrogation is to set forth an exception to the general rule of the law that the fulfilment of an obligation will cause its expiration. Exceptions are established for the
creditor to retain all the rights of the previous creditor because, upon fulfilment of an obligation, the rights would expire under the general rule and, therefore, the creditor would lose the advantages of the previous obligation.
While providing for the cases of subrogation in the law, the very wording of subrogation makes reference to the manner of change of creditors
in the existing obligation because the claim right, upon passing onto the insurer, will be implemented complying with the rules that establish the mutual relations between the insured person (beneficiary) and the person
liable for damages. Subrogation may not be equalled to regress stipulated in insurance legal relations since in
such case the matter would be concerned with possible regress of the insurer against the insured person. The panel of judges have emphasised that in the case of civil liability insurance the following two options are possible:
(i) Where the insured person and the person liable for damages is one and the same person or where insurance covers indirect civil liability, the insurance protection will inure to the interest covered under insurance contract.
Accordingly, the insured person insures himself gainst damages inflicted to third parties, in order not to suffer losses upon occurrence of an insured event, or, for example, to guarantee that the insurer who has ensured civil liability of an
employer does not acquire the right to claim the indemnities from the employer's employees, i.e. the insured person, while insuring his civil
liability, also ensures the persons for whose actions he is liable. Thus, the right of recourse of the insurer who has paid an indemnity in respect of the insured person or the persons
covered by him would make the civil liability insurance meaningless. Consequently, the rules for impossibility of subrogation in the case of civil liability insurance are applicable only to
subrogation claims of insurance companies which have paid indemnities under civil liability insurance against the insured person (beneficiary);
(ii) A different situation is in the cases where a civil liability insurer and the person liable for damages are different persons, the insured person has insured only his own civil liability and has not insured the civil liability of the person liable for damages, i.e. the insurance
protection will inure only to the insured person and not to the person who has inflicted damages. In such cases, the insurer upon compensation of damages on behalf of his insured person will acquire the claim right to the person who has inflicted damages, or, if the
latter has insured his civil liability (his interest), jointly and severally to the said person and his insurer.
On 10 November 2005, the Parliament
adopted Law No X-382 on Supplementing of the Code of Administrative Violations of Law
with Articles 418 and 419 and on Amending of Articles 85, 88, 187, 233, 2591, 262 and 320 thereof. Article 418 of the Code sets forth administrative liability of employers or their authorised persons for non-application of statutory guarantees to seconded employees or
for the failure to provide, in the prescribed
procedure, the information on such applicable guarantees to the territorial department of the State Labour Inspectorate. Depending on a
particular composition of an offence, the
penalty stipulated under the mentioned Article of the Code of Administrative Violations of Law will range from 400 to 2,000 Litas. Article 419 of the Code sets forth administrative liability of employers or their authorised persons for non-assurance of guarantees for the
representatives of employees as provided for in the Law of the Republic of Lithuania on Participation of Employees in Decision Making in European Companies. Depending on a particular composition of an offence, the
penalty stipulated under the mentioned Article of the Code of Administrative Violations of Law will range from 400 to 2,500 Litas. The Supreme Court of Lithuania in its 2 November 2005 ruling in civil case No 3K-3-532/2005 L. Karuþienë v AB Lietuvos draudimas has ruled that a rough breach of the
office duties under the Labour Code constitutes a breach of labour discipline resulting in an infringement of the provisions of laws and other legal acts directly regulating an employee's
work, or another offence in respect of the office duties or the labour discipline. The Labour Code also contains a list of rough breaches of the office duties which, however, is not finite. Rough breaches of the office duties will include not only breaches listed in sub-paragraphs 1-10
of paragraph 2 of Article 235 of the Labour Code but also other offences resulting in the breach of the labour discipline. The list of such other offences is not provided in the Labour Code. An offence which according to its nature,
consequences, the degree of an employee's fault and other relevant circumstances may be qualified as an offence resulting in rough breach
of the labour discipline, will also be considered as a rough breach of the office duties. In cases where an employee who is dismissed from work
for such rough breach of his office duties
contests the lawfulness of termination of the employment contract in judicial procedure, an employer should provide evidence (legal reasoning) justifying the qualification of an offence as rough, while the court, in view of particular circumstances of the case, each time
should assess whether an employer has
reasonably qualified the committed offence as a rough offence.
The Supreme Administrative Court of
Lithuania in its 17 November 2005 ruling in administrative case No A1-931/2005 UAB Tele 2 v Competition Council of the Republic of Lithuania has stated that when judging whether advertising is misleading account must be taken
of the criteria of accuracy, comprehensiveness and presentation of advertisement. The criterion of accuracy means that the statements contained in an advertisement are inaccurate if the provider of an advertisement cannot prove the accuracy of these statements
at the time of use of such advertisement. The sufficiency of the data proving the accuracy of the statements contained in advertisement is to be decided in each particular case. The witnessing and recommendations of persons
whose competence is not related to the content of the provided information will be not recognised as the data evidencing the accuracy of the provided statements. The criterion of comprehensiveness means that
the information provided in the advertisementis incomplete if a certain part of information is missing and taking into account other information presented in the advertisement, the missing part of the information is necessarily
required to preclude the misleading of the users of advertisement.
The criterion of presentation means that the manner or form of presentation allows the user of advertisement to perceive an implied inaccurate (misleading) statement of
advertisement. In the opinion of the panel of judges, this criterion is important in cases where the issue of a potential, not actual, misleading of users is being decided. The panel of judges have also stated that the definition of a comparative advertising in the
Law on Advertising encompasses not only the cases where a competitor of the provider of advertising is directly indicated in the advertising. For stating the fact of comparative advertising the naming of a competitor of the provider of advertising directly is not necessary.
Comparative advertising also includes the advertising where the content allows an average user to identify a competitor of the provider of advertising.
On 14 November, the Council adopted new rules for registration of medicines at the European Agency for the Evaluation of Medicinal Products (EMEA). A number of current fees was reduced and time for payment extended. Council Regulation (EC) No 1905/2005 of 14 November 2005 amending Regulation (EC) No 297/95 on fees payable to the EMEA aims to adapt the existing fee scheme
to the revised legislation and the new
responsibilities conferred on the EMEA. The regulation is intended to be a measure to ensure proportionality between the amount of fees, on
the one hand, and the nature of services
actually provided by the agency, on another, as well as to alleviate the financial pressure put on applicants, though without undermining the
EMEA's ability to perform its tasks.
The Regulation, firstly, covers a number of fee reductions, and establishes new fee categories for new services provided by the EMEA, e.g. scientific opinions on traditional herbal medicines. Further, the Regulation extends the deadline for payment of the fees from 30 to 45
days. It also provides for further flexibility to adapt certain fees to the type of service and the related costs. It, finally, increases the maximum threshold for the annual fee applicable for each marketing authorisation of a medicinal product,
while giving a mandate to the EMEA
Management Board to define cases where a reduced annual fee should apply.
The Regulation was officially published on 23 November 2005, though has been directly applicable in all the Member States as from 20 November 2005. Additional financial and administrative incentives for small and medium
sized enterprises are also planned to be
published by the Commission soon.
On 1 December 2005, the European
Parliament approved the Commission's
proposal for a Regulation on compulsory
licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems.
According to the would-be Regulation,
"pharmaceutical product" would mean any product of the pharmaceutical sector, including medicinal products, active ingredients and diagnostic kits. For the aid to be granted, the countries in question, members of the World
Trade Organization (WTO), would first have to notify the WTO of the pharmaceuticals they need. The companies interested in operating
under the Regulation would have to apply to their national institutions and be granted the "compulsory licence". It is important to control the direction of the traffic of the pharmaceuticals and to protect patent holders, therefore the proposed Regulation would
prevent the re-importation of the
pharmaceuticals produced under the system back to the EU. For the Regulation to become effective, it must still be adopted by the Council
and published officially.
This proposal aims to implement the WTO General Council Decision of 30 August 2003 on the Implementation of the Declaration on the TRIPs Agreement and Public Health (WT/L/540 of 2 September 2003). The Decision
waived obligations under Article 31(f) of the TRIPs Agreement and so granted developing countries a wider access to vital drugs.
The Director of the Communications
Regulatory Authority in its 4 November 2005 Order No IV-941 approved the Rules for Granting and Provision of Access, Including Interconnection of Networks. The Rules will apply to the subjects who under procedure
prescribed by legal acts are recognised as exerting considerable influence on a relevant market and who must perform the obligations of transparency and access granting set forth in the Law on Electronic Communications. The
Rules are aimed at ensuring non-discrimination of an undertaking and equal possibilities for an undertaking to obtain access, including
interconnection of networks, by fair, objective and transparent means.
These Rules establish: (i) the requirements for the announcement of the conditions of making
a standard offer to provide access, including interconnection of networks and related services; (ii) the requirements for the content of
a standard offer; (iii) the procedure and
conditions for provision of access and related services as well as information referred to in a standard offer; (iv) the requirements for a standard offer to interconnect public telephone
The Rules are elaborated based on the Law of Electronic Communications, directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on Access to, and Interconnection of, Electronic Communications
Networks and Associated Facilities (Access Directive).
On 10 November 2005, the Parliament
adopted Law No X-383 on Amending the Law on the Right to Receive Information from State and Municipal Institutions. This Law ensures an individual's right to receive information from state and municipal institutions and organisations, sets forth the procedure for realisation of this right and governs the actions
of the state and municipal institutions and
organisations during provision of information. Information in this law is defined as knowledge which is at the disposition of a state or municipal institution or organisation. The Law
establishes the rights and obligations that
institutions may exercise during preparation and provision of information to the applicants, giving priority to provision of information through internet or other electronic means of communication. The Law prescribes general principles of provision of information, defines the conditions under which compensation may be taken for provision of information and sets
forth the procedure for determining such
compensation. Also, prohibition is imposed on institutions to enter into agreements with third parties concerning exclusive rights to provide information.
The provisions of the Law on the Right to
Receive Information from State and Municipal Institutions will not apply to the following information: (i) information the management of which is not related to the performance of functions ascribed to institutions by legal acts; (ii) information which is held by an institution or
organisation by the industrial ownership rights, or by third parties by the copyrights, related rights or sui generis rights; (iii) information which is at the disposition of the Lithuanian
National Radio and Television and other
translators paid from the state budget; (iv)
information which is at the disposition of
schools, libraries and research institutions; (v) information which is at the disposition of museums, theatres or concert institutions, as well as the institutions established by the
Lithuanian Department of Archives; (vi)
information which is recognised under laws as not to be provided by virtue of national or public security, defensive interests of the state, restrictions imposed on the use of statistical data, or which constitutes a state, business, commercial, professional, bank secret, and in other cases stipulated by laws. The Law is also not applicable in cases where information is mutually exchanged by public administration
institutions for the purposes of inter-institutional assistance. The Law is harmonised with directive 2003/98/EC of the European Parliament and of the Council of 17 November 2003.