Businesses wary of further commercial law amendments

  • 2002-01-31
  • Leah Bower
RIGA - As Latvia's long stalled commercial code finally takes effect almost two years after being passed, businesses are proving reluctant to re-register, fearing they may have to register yet again if pending amendments are passed.

One section of the new law, originally passed in 2000 in order to combine and clarify conflicting regulations, reduces the number of types of entrepreneurship from 10 to five.

The commercial law is crucial to Latvia's efforts to close the competition chapter in accession negotiations with the European Union and its delay has drawn harsh criticism.

The new law will force about 100,000 businesses to re-register with the Enterprise Registry according to the new classifications, at considerable expense to themselves.

Amid the uncertainty over possible additional amendments the Enterprise Registry itself is discouraging companies from registering.

"Businesses can register now," said Janis Endzins, a deputy to the notary general at the Enterprise Registry. "But it would be more advisable to wait until the amendments are passed by the Saeima [Latvia's parliament]."

Businesses won't be forced to completely re-register a third time, but additional paperwork might be required if the amendments warrant it, he said.

But business registration is only one aspect of the new law, Endzins said.

Creditors receive stronger protection, commercial norms have been aligned with EU norms and businesses may also be forced to undertake.

But under the new amendments due to be debated by Parliament on Feb. 10 anything could happen.

"Some of the amendments I regard as very needed and positive because they make the law more explicit," Endzins said. "Whereas other parts of the proposed amendments are very unwelcome, including some terminology changes."

An amendment that would reduce creditor protection is one he hopes will fall by the wayside.

Glacial pace

What grates on everyone from EU officials, who assumed the law would go into effect shortly after being passed, to businesses waiting to register is the repeated delays and holdups.

After the fall 2000 passage of the law, it was supposed to take effect on Jan. 1, 2001 - a date that was later postponed to April 1, 2001, then to Jan. 1, 2002.

"The arguments for not implementing the commercial code have included a sublimely absurd debate over the 'Latvianization' of the word businessman," Latvian Television journalist Karlis Streips said.

The law refers to businessmen as "komersants," a legitimate Latvian word, but the People's Party claims the correct one is "uznemejs."

"It is a silly reason to postpone a law," Streips said.

But Endzins said he wasn't surprised at all the controversy since the law's implementation changes the entire business environment in Latvia and would force some reforms.

"It is logical that it triggered off a heated discussion in society and among entrepreneurs themselves," he said.

The worst effect of the delays in implementing the commercial law was that Latvia's reputation was tarnished.

"For a long time those old laws were in effect with many drawbacks regarding the business environment," Endzins said. "EU officials have repeatedly pointed to this delay as negative and say delayed implementation could be interpreted as unwillingness to change anything in this sphere."