Taking Counsel: Changes to the Commercial Law

  • 2009-02-04
  • By Elina Rubeze [Kronbergs & Cukste]
This past January, a law was passed amending the Commercial Law to enhance the normative regulation of commercial activity, with a new section "D," entitled "Commercial Transactions." Although this new section will only come into force in January 2010, it is already worth having a look at, as it will set out both general and specific additional regulations of commercial transactions.

Why was any amendment thought necessary? To date, the Civil Law has been the source of regulation of commercial transactions, but its origins date back to the 1930s and it does not fully deal with issues arising in today's commercial transaction environment. That being said, it clearly still has its place as the backbone of Latvian law, and therefore the Civil Law will still apply insofar as it does not conflict with the new sections of the Commercial law.

The amendments to the Commercial Law provide that if a transaction is a commercial transaction for any of the parties, then it is deemed to be a commercial transaction under the Commercial Law for all of the parties.
Amendments to the Commercial Law will include provisions concerning commercial purchase, commercial commissions, forwarding, commercial storage, leasing, factoring and franchising agreement terms and conditions.

Although the amendments are not intended to fundamentally alter the process of concluding or performing commercial transactions, they are intended to set out a basic framework for regulating the rights and obligations applicable to parties to certain transactions, and will also address limitations to damages, the principles of valuation of freight, limitation periods for claims, rights of arrest of goods and securities, distance agreements, the buyer's obligation to examine goods, warehouse receipts, and other potentially relevant matters.

A basic regulatory framework for franchise agreements will be introduced, including statutory measures to protect intellectual property.
With respect to limitation periods for bringing claims, the amendments set out limitations for commercial transaction claims of three years, except for limitations to claims against a forwarder for damage to freight, missing freight or losses or delays in delivery, in which case the limitation period is one year. If a forwarder has acted in bad faith or in gross negligence, then the limitation period is three years.

Anyone contemplating bringing a claim concerning a commercial transaction would do well to take a closer look at the Section D provisions of the Commercial Law concerning the application of limitation periods 's whether contained in the Commercial Law or elsewhere.
It may be advisable to advert to the future application of the Section D provisions of the Commercial Law when drafting agreements, as such new legislation may well have an impact upon the parties' transaction.

Elina Rubeze is an associate with Kronbergs & Cukste.  Kronbergs & Cukste is a founding member of Baltic Legal Solutions providing quality legal services in the Baltics together with Jurevicius, Balciunas & Bartkus of Lithuania and Glikman & Partnerid in Estonia. Baltic Legal Solutions is a member of the Pinsent Masons Luther Group, an international grouping of business law firms.