Baltic Legal Update

  • 2007-10-31
  • From Sorainen
Companies can claim compensation for loss from the European Commission

The European Court of First Instance decided on 11.07.2007 that the European Commission must pay compensation to Schneider Electric, the French producer of electrical equipment, for having unlawfully forbidden Schneider to acquire Legrand, another producer of electrical equipment. The Court of First Instance has on several occasions reversed decisions of the European Commission prohibiting concentration, but this is the first time it imposed an obligation on the Commission to pay compensation for an unlawful decision in the area of competition law. The Court of First Instance did not reproach the Commission for a mistake in facts or economic analysis, but for the circumstance that Schneider was not granted the right to defend itself.

The court decided that the Commission must, first, repay expenses incurred by Schneider in respect of prolonged merger control procedure. Second, as Schneider had already acquired Legrand, but due to the Commission's prohibitory decision had to sell it on unfavourable conditions, the Commission must also compensate two-thirds of the amount by which Legrand's price had been reduced. The exact amount of loss depends on expert assessment to be performed in the near future. Although Schneider claimed EUR 1.7 billion compensation from the Commission, the actual amount will probably be considerably lower.   

The court's decision opens the door for other companies whose prohibition of concentration has been reversed by the court, to claim compensation for losses from the Commission. This judgment is a clear message to the Commission that exceeding the limits of its competence is followed by a penalty.
Additional information: Kristi Lehtis e-mail:

Amendments to the Estonian Securities Market Act: New Opportunities for Raising Capital and Additional Obligations for Market Participants

The Estonian Parliament recently adopted amendments to the Securities Market Act (SMA) transposing provisions of the Markets in Financial Instruments Directive (MiFID), the Takeover Directive and the Capital Adequacy of Investment Firms and Credit Institutions Directive. The amended SMA imposes significant new requirements for investment advisers, investment funds, fund managers, stockbrokers and banks with activities in Estonia as well as new rules pertaining to takeovers and capital adequacy requirements. In addition, the MiFID related amendments provide for the creation of deregulated multilateral trading facilities which will provide new opportunities for small to medium size growth companies seeking to raise capital. Given the complexity of these amendments, this article will focus primarily on some of the key amendments to the SMA arising from MiFID.

While Estonia missed the transposition and effectiveness deadlines, under the he directive the new MiFID provisions are effective as of 1 November 2007 and aim to provide the maximal common regulatory framework applicable to securities markets throughout the European Union. Under MiFID, the "passporting" of investment services is expanded enabling investment firms, banks and exchanges to provide their services across borders with greater ease based on harmonised national rules with respect to investment services and the operation of stock exchanges. The principle of passporting geheir home member state's Financial Supervision Authority.

The MiFID related provisions create a "best execution" regime for investment service providers, requiring them to in certain situations consider more factors than merely seeking the best price, such as the costs, speed, size and nature of the transaction and the likelihood of settling the transaction. In addition, the MiFID related amendments provide new detailed requirements regulating the following business related obligations of investment service providers:
Ensuring "fair, clear and not misleading" advertisements and promotional materials. Classification of clients as "eligible counterparties", "professional clients" and "retail clients". Ensuring that internal controls for managing conflict of interest situations are in place and are disclosed to customers. Ensuring transparency through trade and transaction reporting to clients. Maintaining adequate records for the "competent authority to monitor compliance with the requirements" of MiFID.
While the amended rules will benefit investors, issuers and market participants by promoting efficiency with respect to cross-border passporting, these additional requirements should be carefully considered and addressed when providing investment services.

Investment service firms falling within in the scope of the new MiFID related amendments are recommended to conduct a gap analysis between their current rules, procedures, disclosure measures and client agreements and the new requirements arising from MiFID to ensure compliance with the harmonized provisions. In addition, engaging local legal counsel can also assist such firms by providing MiFID compliance opinions and advising on how to implement these new measures into a firm's business practices.

Another important amendment arising under the transposition of MiFID is the deregulation of multilateral trading facilities (MTF), which provides new opportunities for small to medium sized companies to raise capital through trading their shares under less complex terms than those applicable to the regulated market.

OMX Group intends to launch First North Baltic relying on the newly adopted provisions of the SMA providing for the first MTF in Estonia, which is regulated by the market operator (the Tallinn Stock Exchange). As an MTF, First North Baltic is not subject to the SMA provisions or EU directives applicable to traded companies on the regulated market, including the Market Abuse Directive, the Transparency Directive and the Prospectus Directive. Instead, Issuers admitted to trading on First North are first required to enter into an agreement with a Certified Adviser and to abide by the First North Baltic Rulebook. The role of Certified Advisers is to advise the Issuer on the process of becoming admitted to trading on First North Baltic, to monitor and help ensure the Issuer's compliance with the First North Baltic Rulebook on a constant basis, and reporting any violations by the Issuer of the First North Baltic rules immediately to the Tallinn Stock Exchange.

Additional information: Stefano Grace, e-mail:

Changes in privatization completion provisions

On 01.08.2007 amendments to the Law on Completion of Privatization of State and Municipal Objects and Use of Privatization Vouchers came into force. The amendments stipulate changes in the rules on completion of land reform and changes to the procedure and rules on completion of privatization.

The amendments specify the periods for a competent privatization institution to adopt decisions regarding transfer of a property or a land plot for privatization or refusal to transfer a property object or a land plot for privatizatzation.

The amendments specify the periods for a competent privatization institution to adopt decisions regarding transfer of a property or a land plot for privatization or refusal to transfer a property object or a land plot for privatization. These terms depend on the registration time of privatization proposals in the privatization register.

If a decision on transferring a land plot for privatization is adopted after 31.08.2007, the value of the land plot for privatization purposes is determined as at 31.08.2007.

In addition, the amendments change the procedure for privatizing vacant land plots. The most material changes are as follows:

1)    Prolongation of the deadline for constructing buildings on a land plot (leased to a lessee as a vacant land plot) and for registering the ownership rights of those buildings in order to enable privatization of the land plot according to the privatization procedure for built-up land plots. A land plot may be privatized under the privatization procedure for built-up land plots, if (in addition to fulfilling other preconditions of the law) the lessee by 31.12.2008 (before the amendments 's 01.09.2007) constructs a building on a leased land plot and registers ownership rights to the building with the Land Book.

2)    If the lessee of a land plot has not registered title to a building with the Land Book by 31.12.2008, the respective land plot may be purchased only under the general procedure for alienation of State and municipal property, which does not enable purchase of land at a value determined for privatization purposes.

Additional information: Lelde Lavina, e-mail:

Tightened trade in alcohol and restriction on alcohol promotion on radio and TV

A new version of the Law on Alcohol Control, which came into effect on 01.08.2007, provides for new contents of definitions used. From now on, alcohol export will have the meaning of taking alcohol products out of Lithuania to other countries, except for countries of the European Economic Area and Turkey. Import means bringing in alcohol products to Lithuania from other countries, except for the European Economic Area and Turkey.

The procedure for issuing documents certifying conformity of alcohol products has changed. Breweries that use contracted services of food product quality research laboratories of other institutions and undertakings which have been certified under established procedure may issue a conformity declaration on their manufactured beer on their own based on beer research protocols issued by those laboratories. Under the former version of the law, these breweries had to refer to laboratories regarding the issue of conformity documentation.
The procedure for issuing licenses in wholesale and retail trade in alcohol products has been revised. Undertakings that intend to engage in retail trade in alcoholic beverages in retail establishments and catering establishments located in multi-family dwellings are issued licenses if consent of the residents is received under established procedure.

The new version of the Law establishes an additional restriction on trade in alcoholic beverages: this is prohibited from 10.00 p.m. to 9.00 a.m. in commercial enterprises established in multi-family apartment houses.
With effect from 01.01.2008, a legal provision imposing more severe restrictions on alcohol promotion on radio and television will come into force. Advertising alcohol will be restricted from 6.00 a.m. to 11.00 p.m. in programmes of broadcasters or re-broadcasters belonging to Lithuanian jurisdiction.

Additional information: Regina Derkintyte, e-mail:

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