Eastern Europe | 27 November 2010

On 7 May 2010, Austria and Serbia signed a double taxation agreement (DTA) with an additional protocol concerning certain articles of the DTA (business profits, interest and exchange of information). The DTA and the protocol will become applicable as of 1 January of the tax year immediately following the year in which both countries have informed each other through diplomatic channels that their respective ratification procedures have been accomplished. The earliest possible date for the DTA’s entry into force is 1 January 2011. Serbia has already completed its domestic ratification procedures (the President of the Republic of Serbia signed the ratification bill into law on 29 July 2010).

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Public Sector | 01 October 2010

On 25 June 2010, the United Nations Commission on International Trade Law (UNCITRAL) adopted its revised arbitration rules (the UNCITRAL Rules).1 The new rules replace the successful UNCITRAL Arbitration Rules adopted in 1976 (the 1976 Rules).2 The revision was not intended to change the structure, the spirit or the drafting style of the 1976 Rules, and should maintain the flexibility that contributed to their success in the past.3

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TMT | 01 July 2010

The war waged by intellectual property (IP) rights holders in the EU against infringement by shipments of goods has recently become more intense. These rights mainly relate to trade marks, design and copyright, and IP rights holders pursue their claims through the customs authorities of EU member states. For example, the number of shipments stopped by Austrian customs authorities on the basis of Regulation (EC) No 1383/2003 of 22 July 2003 (the 2003 Regulation) and Regulation (EC) No 1891/2004 of 21 October 2004 (the 2004 Regulation) has greatly increased in recent years.1 In 2002 only 490 shipments of goods were stopped, while in 2009 the number had risen to 2,519.2 [Continue Reading]

Finance | 01 June 2010

An improvement in the liquidity of banks, as well as the need for an additional injection of money, became crucial for Ukrainian banks in the aftermath of the recent global financial crisis. An increase in the number of non-performing loans (NPLs) negatively impacted the overall liquidity of Ukrainian banks by forcing them to hold mandatory reserves.1

By removing their NPLs, banks are able to release reserves set aside in connection with these NPLs and thereby raise money. Therefore, the sale (or other form of disposal) of NPLs represents an attractive instrument for the reduction in the number and volume of NPLs, and the recapitalisation of the bank’s liquidity. [Continue Reading]

Eastern Europe | 01 April 2010

After advising a client on merging a group of companies across several countries, we realised there was a need for a firm-wide effort to research and compile a guide on how to successfully carry out multijurisdictional mergers. The project focused on the 12 countries in central, eastern and south-eastern Europe (CEE and SEE) where Wolf Theiss has offices. The effort resulted in the publication last autumn of Cross-Border Mergers in CEE/SEE: Practioner’s Guide (LexisNexis 2009). [Continue Reading]

Eastern Europe | 01 March 2010

The 14 jurisdictions of Central, eastern and south-eastern Europe (CEE and SEE), where Wolf Theiss concentrates its energies, are equally divided between seven members of the EU (Austria, Bulgaria, Czech Republic, Hungary, Romania, Slovakia and Slovenia), and seven members of the Energy Community, established by the Energy Community Treaty in October 2005 (Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Serbia and Ukraine). Despite the different memberships, there is a strong interplay between these two communities (the EU and the Energy Community) regarding energy issues, particularly renewable energy.

Renewable Energy in the EU

The EU has made the promotion of renewable energy sources (RES) and the production of electricity from these sources a high priority since 1997, with the publication of the European Commission’s White Paper on ‘Energy for the Future: Renewable Sources of Energy’. The Paper set out an EC strategy and an action plan to double the share of renewable energy from 6% to 12% in terms of gross inland production by 2010. In line with this strategy, the EU adopted:

  • the RES-Electricity Directive 2001 (the 2001 Directive) on the promotion of electricity from RES in the internal electricity market;
  • the Directive on Combined Heat and Power; and
  • the Directive on Liquid Biofuels 2003/30/EC (the 2003 Directive).

The 2001 Directive required member states to take appropriate steps to encourage greater consumption of RES-electricity in conformity with the national indicative targets specified in the annex to the 2001 Directive, but did not put forward a harmonised EU-wide support system. The member states were called on to set national targets for the next ten years, taking into account the reference values in the annex of the 2001 Directive, which are set with a view to reaching a 21% indicative share of RES-electricity in all EU electricity consumption by 2010.

In addition to these national targets, the 2001 Directive called for:

  • the establishment of mutually recognised guarantees of origin for RES-electricity;
  • a reduction of the regulatory and non-regulatory barriers to the increase of RES-electricity production; and
  • the guaranteed transmission and distribution of RES-electricity.

The key change and impetus came with the introduction of mandatory targets for each EU member state by the Renewable Energy Directive 2009/28/EU (the 2009 Directive) on the promotion of the use of RES. The mandatory national targets, which relate to the share of renewable energy (electricity, heating and cooling, and transport) in gross final consumption of energy, are consistent with a target of at least a 20% share of RES in the EU’s gross final consumption in 2020. The 2009 Directive further obliges member states to ensure that at least 10% of the final consumption of energy in transport is derived from RES by 2020.

As with the 2001 Directive, the 2009 Directive does not prescribe an EU-wide support system. Instead, it allows the member states to apply support schemes or measures of co-operation provided for in the 2009 Directive (eg arrangements for statistical transfers of specified amounts of renewable energy, joint projects between member states, joint projects between one or more member states and third countries, and joint support schemes).

National Renewable Energy Action Plans

By 30 June 2010, member states must adopt and notify the Commission of its National Renewable Energy Action Plan (NREAP). The Commission will then evaluate the NREAPs and assess the adequacy of the measures envisaged by the member states for the compliance with the indicative trajectory and the mandatory target for 2020.

Although the 30 June 2010 deadline is still just over two months away, the forecast documents recently submitted by the member states to the Commission provide some indication as to the strategies that they intend to adopt.

As the mandatory national targets are defined in terms of the percentage of renewable energy in gross final consumption of energy, many member states have indicated actions to increase efficiency in their strategy, which would reduce energy consumption.

In its forecast notification, Austria indicated that it can achieve its 2020 target (34% of renewable energy in gross final consumption of energy) through RES in the country itself and, therefore, did not expect to resort to the measures of co-operation provided for in the 2009 Directive.

The Czech Republic adopted the same approach in relation to its 2020 target of a 13% share of renewable energy in gross final consumption of energy. Slovenia expects to be able to achieve its 25% share of renewable energy in gross final consumption of energy by 2020 as compared to 16% in 2005, but has not yet detailed how.

Bulgaria, whose 2020 target is to achieve a 16% share for renewable energy in gross final consumption of energy as compared to 9.4% in 2005, expects to resort to the following renewable energy sources:

  • hydro power (31%);
  • biomass (36%); and
  • a marginal role for wind power (7.5%), tidal energy and sea wave energy.

In its notification forecast, Bulgaria also mentions the potential to participate in joint projects with Romania to develop hydro power plants on the Danube (two plants of 800MW each are mentioned), as well as to explore and evaluate the potential of energy production in the Black Sea.

To achieve its 2020 target of a 13% share for renewable energy in gross final consumption of energy as compared to 4.3% in 2005, Hungary plans to:

‘Increase even more dynamically the use of biomass in the agricultural sector by developing and supporting intensively the production of energy crops.’

Romania is obliged to achieve a 2020 target of 24% share for renewable energy in gross final consumption of energy as compared to 17.8% in 2005. To reach this, it plans to make significant efforts to reach higher levels of efficiency in using biomass (including firewood) and also to develop other renewable sources (including wind power).

Slovakia, which has to increase the proportion of renewable energy in final energy consumption from 6.7% in 2005 to 14% in 2020, expects biomass (mainly), geothermal energy and solar energy to replace fossil fuels in the production of heat. It expects a smaller growth in the use of RES for electricity production.

Italy is one of the rare member states to expressly anticipate in its country forecast the need to import RES-electricity from neighbouring countries, such as Albania, Croatia and Serbia.

Renewable Energy in the Energy Community

One of the principal activities of the Energy Community is the implementation by the members of the acquis communautaire for renewables. This acquis communautaire must be adapted to both the institutional framework of the Energy Community and the specific situation of each member. To date, the acquis communautaire for renewables comprises only the 2001 Directive and the 2003 Directive on the promotion of the use of biofuels and other renewable fuels for transport.

As required pursuant to the Energy Community Treaty, each member state has provided the Commission with its plan to implement the acquis communautaire for renewables.

The 2009 Directive specifically envisages that the measures of co-operation provided between member states will become applicable to the contracting parties of the Energy Community if these countries, by virtue of a decision taken under the Energy Community Treaty, become bound by the 2009 Directive. To date, no such decision has been taken but the Energy Community has set up a Renewable Energy Task Force to define the steps for implementation of the 2009 Directive.

Regulatory Framework for RES-Electricity: the Labyrinth

Subject to these directives emanating from the EU and the Energy Community, each of the 14 countries covered by Wolf Theiss is relatively free as to how to implement them in its national law, which gives rise to a very wide variety of regulatory frameworks for RES-electricity in the region. In some cases, the regulatory hurdles and uncertainties deter investors and developers interested in exploring renewable energy opportunities in CEE and SEE.

In most jurisdictions where there is a promotion scheme for RES-electricity, this takes the form of a mandatory off-take of the electricity at incentivised feed-in tariffs. Some of the applicable feed-in tariffs compare favourably with the feed-in tariffs applicable in other parts of Europe.

For example, in the Czech Republic, RES-electricity producers from solar photovoltaic plants benefit from a tariff ranging between €465 per MWh (when the installed capacity is above 30kW) and €469 per MWh (when the installed capacity is below 30kW). According to the current interpretation of the Czech Energy Regulatory Office (the ERO), the producer is entitled to this tariff for 20 years from when the installation starts to operate, subject to annual indexation reflecting the price index of industrial products.

The promotion scheme in the Czech Republic is relatively unique as the feed-in tariffs, determined each year by the ERO, can only be decreased by a maximum of 5% year-on-year. However, a legislative bill is currently being discussed in the Czech Parliament that would remove this protection of RES-electricity installations where the return of the investment is achieved within less than 11 years. This amendment would make it possible for the ERO to decrease the feed-in tariffs for installations coming into operation in 2011 and beyond by more than 5% every year. The ERO estimates that for solar photovoltaic power plants the feed-in tariffs will drop by 30% in 2011.

In Slovakia, the same types of RES-electricity producers may enjoy a feed-in tariff of €425.12 per MWh for installations with more than 100kW capacity, or €430.72 per MWh for installations with less than 100kW capacity. This tariff is applicable, without revision or indexation, for 15 years from the year the installation was put into operation.

In Romania, there is a green certificate regime, including an obligation on electricity suppliers to purchase a certain number of green certificates, depending on the quantity of electricity supplied to final customers, sanctioned by a penalty of €70 for each green certificate in shortfall. The green certificates are traded on two markets:

  1. a centralised market; and
  2. a bilateral contracts market, where there is a floor of €27 and a cap of €55.

These amounts are subject to annual indexation in accordance with the consumer price index.

As a good reminder of the variety of regulatory frameworks applicable in CEE and SEE, in some jurisdictions there is simply no promotion scheme in place for RES-electricity, for example, Albania (except for small hydro power plants), and Bosnia and Herzegovina (except in Republika Srpska, one of the two entities within the state itself).

Permitting procedures: Applicants beware!

In terms of planning procedures, which relate to land use or physical planning, most of the jurisdictions start with an optional zoning process, but this is mandatory in Albania, Bulgaria and Croatia. The planning process then follows on with the issue of a building or construction and an operation or use permit.

The jurisdictions usually provide national significance thresholds above which an Environmental Impact Assessment (EIA) is mandatory. This tends to be true for significant wind power and hydro power installations. For smaller projects, the competent authority screens individual projects to determine whether an EIA is necessary and the scope of such an EIA.

Project developers should be particularly attentive to the level of authority that would be competent for issuing the relevant permit. For example, in Austria, which is a federal state, the local municipality issues the building permits, but it is up to the federal province to apply the laws regarding EIAs.

Regarding the permitting process under the special law applicable to energy or natural resources, some form of energy permit or licence issued by the energy or electricity regulator is generally sufficient. When required, a concession may relate either to the right to generate electricity (eg in Albania) or the right to exploit natural resources (eg in Bosnia and Herzegovina, Macedonia and Slovenia). A public tender process is usually relevant for the issue of concessions, but this can be applicable for even the granting of a licence, such as the tender process currently ongoing in Hungary for licences to construct wind farms, as well as the terms of the support scheme that the wind farms would be entitled to (including feed-in tariff, duration of support scheme and quantity of electricity subject to promotion schemes).

There is one unique feature applicable in Croatia for renewable energy generally and in Macedonia for wind power that is worth highlighting. In these jurisdictions even the exploration of RES-electricity opportunities is subject to a licence issued by the relevant ministry or the regulatory authority.

Grid connection

The treatment of the issues relating to connection of RES-electricity installations to the electricity transmission or distribution network varies from one jurisdiction to another. Most jurisdictions provide for RES-electricity to have priority access to the electricity grid, but there is no detailed provision regarding the right of this priority.

There is also a wide variety in terms of the rules governing liability and responsibility for grid connection and capacity upgrades, improvements or expansion of the grid, necessitated by the RES-electricity installation. The rules regarding the sharing of these costs are particularly unclear in some jurisdictions.

Very few jurisdictions make special allowances or tolerances in the application of balancing charges to intermittent forms of generation, such as wind power and solar power.

In Slovakia, there is a scheme for the assumption of deviations from schedules submitted for installations with less than 4MW instead of installed capacity. Similarly, Hungary has a relatively wide tolerance allowing deviations of +/- 50%.

Guide to Generating Electricity from RES in CEE and SEE

Equipped with the solid experience of working with project developers, investors, financiers, and, most importantly, national and local authorities to get projects completed in the region, the teams at Wolf Theiss’ offices and its associated law firms have joined forces to produce the Wolf Theiss Guide to Generating Electricity from Renewable Sources in Central, Eastern and South-eastern Europe.

This new book, which was launched in March 2010, is intended as a practical guide to the principal regulatory features of RES-electricity projects in 14 jurisdictions covered by Wolf Theiss. The first part of the Guide presents an executive summary of the regulatory framework applicable in each of the 14 jurisdictions. The second chapter contains an outline of the main forces driving the development of RES-electricity in CEE and SEE.

The regulatory framework applicable in each jurisdiction is described in more detail in the 14 country chapters. To facilitate the reference to the relevant sections, all the country chapters follow a uniform structure, and cover the permitting process (building permits, environmental permits, and concessions or energy permits), RES-electricity promotion schemes, financial incentives, grid connection issues and carbon credits.

As highlighted in this article, in some jurisdictions of the CEE and SEE regions the regulatory framework regarding these aspects of RES-electricity generation is either non-existent or lacks legal certainty, which may deter potential developers or investors. However, with many of the RES-electricity opportunities still untapped and sometimes even unexplored, major energy companies and other project developers continue to show interest in the region.

Over the past few months, the teams at Wolf Theiss have advised on numerous RES-electricity generation projects throughout the region, such as:

  • wind farms in Austria, Hungary and Romania;
  • solar photovoltaic projects in the Czech Republic and Bulgaria; and
  • hydro power plants in the Balkans.

As for the future development of the regulatory framework, it is sometimes easy to forget that the countries covered either acceded to the EU only recently, or are now in the process of acceding or seeking accession. In these jurisdictions, Wolf Theiss is engaged in a constructive working relationship with the regional, national and local authorities, and is confident that the regulatory framework for RES-electricity projects will evolve in the right direction.

Eastern Europe | 01 March 2010

Last year saw an increase in legislative activities concerning competition law in several central and eastern European (CEE) and south-east European (SEE) countries. The non-EU member countries in the region continue to harmonise their competition law regimes with international standards applicable in most jurisdictions in the EU. This should facilitate the competition law assessment for undertakings active in numerous jurisdictions across Europe. [Continue Reading]

Eastern Europe | 01 February 2010

The current financial crisis has undoubtedly dampened the initial enthusiasm over public-private partnerships (PPP). However, ongoing developments in relevant legislative frameworks, particularly those in central and eastern European (CEE) and south-east European (SEE) countries, suggest that a belief in PPP projects as an alternative to traditional public contracts still exists.


PPP projects are joint initiatives between the public and private sectors in which the state chooses a private partner for the implementation of certain projects (usually relating to infrastructure). In most cases, the private partner will have to finance, design, construct and operate the infrastructure for a certain period (usually 20-30 years). Whereas some countries have separate laws for the implementation of PPP projects, the rules for selecting private partners are mainly regulated by concessions or public procurement law. PPP projects have a significant advantage for the state over traditional public works contracts in that the main risks involved with building and operating major infrastructure projects are shifted to a private partner. Most importantly, by placing the onus for funding the project on a private partner, the state reduces financing costs. However, private companies are finding it more and more difficult to raise money during the current financial crisis. Due to an increase in interest margins, project financing costs have risen to an extent that public financing is in many cases the cheaper alternative. Additionally, banks are currently reluctant to provide financing for the formerly standard 20-30 year period and prefer to offer shorter-term loans.


It appears that the difficulties caused by the financial crisis are widely regarded as being only temporary and PPP projects are still considered to be the concept of the future. CEE and SEE countries, outside the EU in particular, continue to develop their legal frameworks for the implementation of PPP projects. Aside from financing issues, many smaller non-EU countries lack the requisite expertise to realise major infrastructure projects and therefore require the experience of a private partner such as an international construction company.


Recent amendments to Albanian concessions law, which came into force on 21 November 2009, have established a new concessions agency in the country. The agency will be responsible for ensuring proper adherence to concessions procedures in Albania and is able to impose fines on non-compliant contracting authorities. The agency will also deal with bidders’ complaints against contracting authorities’ decisions in concessions procedures. In this context, the newly introduced requirement that bidders pay an upfront deposit of 10% of bid security, which is only returned if the complaint is successful, has been criticised as an obstacle to legal protection.

Bosnia and Herzegovina

The legal framework of Bosnia and Herzegovina is highly fragmented and different rules apply on federal and state levels. Republika Srpska approved a new PPP law in May 2009 that differentiates between concessions and contracts financed by public funds (which are effectively traditional public contracts rather than PPP). Detailed regulations on the selection of private partners will be outlined in secondary legislation.


Croatia’s legal framework for PPP projects underwent a major revision in 2008/09 with the implementation of new public procurement, concessions and PPP laws. The process of selecting a private partner has been brought further in line with EC legislation and is more stringently regulated. Croatia’s PPP legislation requires that relevant projects are approved by a newly established PPP agency. This agency will assess the project proposal with a view to harmonising PPP goals with the development strategy of affected industries, and will analyse the project value, structure and risk balance. The PPP agency will also approve relevant tender documents and concessions contracts.


Montenegro’s new concessions law came into force on 12 February 2009 and allows for the selection of private partners for large infrastructure projects without conducting a public tender where the project is of strategic importance to the country. Like Montenegro, many non-EU countries in the region have created legislation that allows for concessions and PPP projects to be awarded without the prior conduct of a public tender. Such initiatives often take the form of ‘unsolicited proposals’ in which a bidder is awarded a contract on the basis of its own proposal. Such procedures directly contradict EC laws requiring an open, transparent and competitive process, and countries seeking accession to the EU will have to adjust their legal framework in this respect.