ADMINISTRATIVE LAW. June

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1 June 2011 Contacts For further information, please contact Rimtis Puišys Attorney tel rimtis.puisys@evershedssaladzius.lt VICTORIA Tower, J. Jasinskio 16B LT Vilnius, Lithuania Tel Fax law.firm@evershedssaladzius.lt For a full list of Eversheds offices and contact details please visit ADMINISTRATIVE LAW Amendments to the Law on Control of Circulation of Seals and Stamps adopted Taking into account provisions of the Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (hereinafter referred to as the Directive on services in the internal market) and thus to reduce administrative burden on business, the Parliament adopted amendments to the Law of the Republic of Lithuania on Control of Circulation of Seals and Stamps on 19 May According to the currently valid regulatory framework, the right to make seals and stamps has been granted only to legal entities registered in accordance with the procedure set by laws as well as branches of foreign legal entities, which have a licence to make seals. The amended law dropped a requirement for licensing the manufacturing of seals and in its stead established, as an instrument that limits activities of commercial undertakings to a lesser extent, a duty to report to the Police Department under the Ministry of the Interior on the commencement of manufacturing of seals. In addition, the amendments grant the right to be engaged in the manufacture of seals not only to legal entities, other organisations and their divisions, but also to natural persons. Moreover, governmental and municipal institutions as well as persons entitled to use seals containing the Lithuanian national coat of arms or a municipal coat of arms will be relieved of obtaining permissions for manufacturing seals. These amendments will be effective as of 1 August 2011.

2 LABOUR LAW Amendments to the Labour Code adopted On 19 May 2011 the Parliament adopted amendments to Articles 88, 108, 113, 130 1, and 132 of the Labour Code of the Republic of Lithuania (hereinafter the Labour Code). Article 88 of the Labour Code has been supplemented with new Part 3, which establishes that peculiarities of temporary agency work shall be established in a special law of the Republic of Lithuania. The above-mentioned law is the Law of the Republic of Lithuania on Temporary Agency Work and has been described in greater detail further below. In Article 108 of the Labour Code, which provides a list of type of employment contracts, the term temporary employment contract has been replaced with the term short-term employment contract. Respective editorial changes have been made in Articles 113, and 132 of the Labour Code, where the title of temporary employment contract has been also changed to short-term employment contract. The amendments to Articles 88, 108, 113, 130 1, and 132 of the Labour code will come into force on 1 December Law on Temporary Agency Work adopted Until late, there was no legislation in Lithuania to regulate the temporary agency work relationships, the so-called employee rent. In order to transpose the provisions of the Directive 2008/104/EC of the European Parliament and of the Council of 19 November 2008 on temporary agency work and in order to ensure better conditions for business, so that entrepreneurs could hire employees in more versatile forms, the Law on Temporary Agency Work was adopted on 19 May This law established the details of employment relationships between temporary agency workers and temporary work agencies as well as rights and duties of persons involved in relationships related to temporary agency work. The law laid down that employment contract is concluded with a temporary work agency, i.e. the relationship between a temporary agency employee and a temporary-work agency are employment legal relationship. A temporary-work agency assigns a worker to another enterprise or another person, which are called user undertakings. The law defines the legal relationship between a temporary-work agency and a user undertaking as civil relationship. Furthermore, the legal relationship between a temporary agency worker and a user undertaking are not deemed to be a traditional employment relationship, since a user undertaking and a temporary agency worker do not enter into an employment contract. A user undertaking has the right to demand from a temporary agency worker to perform his work function and to execute related instructions. Since a user undertaking is in full control of the work process, a user undertaking is responsible for ensuring safe and healthy working conditions. Prior to commencing work, a user undertaking must make a temporary agency worker acquainted, against his signature, with his future working conditions, work

3 regulations, other legal acts that regulate his work for a user undertaking, and applicable requirements of statutory instruments for employee safety and health. A temporary agency worker must be acquainted with risks and health-threat factors in his work place as well as with the use of protective means. The schedule of a temporary agency worker is to be discussed in an agreement between a temporary-work agency and a user undertaking. Accordingly, during the temporary agency worker s assignment a user undertaking takes part, but not all of the employer s rights and duties. Temporary-work agencies will have to inform, in accordance with the set procedure and time limits, the State Labour Inspectorate of the Republic of Lithuania about their engagement into temporary agency work, indicate user undertakings with which contracts on the use of temporary work have been concluded and the number of temporary agency workers assigned to work for user undertakings. The purpose of such provisions is to ensure the protection of the rights of temporary agency workers. The new law offers the hope of creating new jobs, livening up the labour market, and assisting in reducing illegal labour. This law will come into force on 1 December By this date, the Government of the Republic of Lithuania or its authorised institution will have to adopt subordinate legislation implementing the new law. New Model regulations of occupational safety and health services approved Effective as of 1 June 2010, the amended and supplemented Articles 2, 8, 12, 13, 22, 27 of the Law of the Republic of Lithuania on Safety and Health at Work, inter alia, dropped the requirement for licensing of legal entities or natural persons engaged in occupational safety and health services, in order to implement the Directive on services in the internal market, to establish non-discriminatory regulatory framework with respect to providers of occupational safety and health services of other Member States, and to ensure equal conditions of business and competition. On 2 June 2011, taking into account the amended provisions of the above-mentioned articles, the Minister of Social Security and Labour of the Republic of Lithuania and the Minister of Health of the Republic of Lithuania issued a joint order No. A1-266/V- 575 to approve the new Model Regulations of Occupational Safety and Health Services (hereinafter the Regulations) and to declare void the same-titled regulations which had been approved by joint order No. A1-186/V-694 of these ministers of 27 November It should be noted that, although the requirement for licensing has been dropped, specialists of occupational safety and health, specialists of occupational safety and health of legal entities, and natural persons who perform functions of occupational safety and health services must conform to qualification requirements, taking into account that occupational safety and health and, especially, improvement in prevention of accidents at work and occupational diseases are an important sphere from the viewpoint of the public interests. The description of these qualification requirements was approved by order No. A1-342 of the Minister of Social Security and Labour of the Republic of Lithuania of 15 July 2010.

4 COMPANY LAW Model incorporation documents of an association approved On 3 June 2011 the Minister of Justice issued order No. 1R-142 to approve a model form of an incorporation agreement of an association and model articles of association of an association. These model documents can be used in preparing incorporation documents of an association and submitting them electronically to the managing authority of the Register of Legal Entities as soon as the managing authority of the Register of Legal Entities implements an IT system which will allow electronic submission of incorporation documents of an association directly to the manager of the Register of Legal Entities by making use of the self-service system of the Register Centre at Model incorporation documents of a non-profit organisation and recommendations on their filling approved On 10 June 2011, the Minister of Economy issued Order No to approve model forms of an incorporation agreement and an incorporation act of a non-profit organisation, model articles of association of a non-profit organisation, and recommendations on filling of these model incorporation documents. As soon as the managing authority of the Register of Legal Entities makes required technical changes in its IT system, these model documents can be used in preparing incorporation documents of a non-profit organisation and electronically submitting them directly to the managing authority of the Register of Legal Entities by making use of the self-service system of the Register Centre at MARITIME LAW New Procedure for business dispute resolution at the Maritime Arbitration Court approved The Maritime Arbitration Court has been operating in Lithuania since 1 January By now this specialised arbitration court has been administered by the non-profit organisation Vilnius Court of International and National Commercial Arbitration (hereinafter referred to as the Vilnius Arbitration Court). According to a partnership agreement between the Vilnius Arbitration Court and the Association of Lithuanian Shipbuilders and Ship Repairers (hereinafter referred to as the LSSRA) of 13 April 2011, the Maritime Arbitration Court will be administered by both of the above-mentioned institutions on partnership grounds effective 1 July The General Meeting of Member of the Lithuanian Arbitration Association adopted resolution No. 1-2 on 22 April 2011, and the Council of the LLSRA adopted resolution on 27 May 2011 to jointly approve the Procedure of Resolution of Business Disputes at the Maritime Arbitration Court, which establishes that the Maritime Arbitration Court shall have jurisdiction over any type and category of international and national business disputes in the field of maritime activities, except cases when Lithuanian laws, European Union regulatory framework or agreements of parties to a transaction set a

5 different procedure, other than arbitration, for examination and settlement of disputes. At present the Maritime Arbitration Court has two separate valid procedures that regulate procedures for settlement of international and national maritime business disputes. Same as now, the claim to examine and settle a specific maritime business dispute will have to be submitted to the Secretariat of the Vilnius Arbitration Court or the representative office of the Lithuanian Arbitration Association in Klaipėda, maintained by the LLSRA. COMPETITION LAW The Competition Council presented commentary on de minimis in advertising cases Article 23 of the Law of the Republic of Lithuania on Advertising (hereinafter the Law on Advertising) establishes that the Competition Council shall investigate and examine the cases of use of misleading or unpermitted comparative advertising. If an infringement of the Law on Advertising is so insignificant as to be de minimis or if an infringement does not cause essential damage to the persons interests protected by the Law on Advertising, the Competition Council, on the basis of the criteria of justice and reasonableness, may impose just a warning as an administrative penalty for the use of misleading or unpermitted comparative advertising, without imposing a fine on operators of advertising activity. In order to explain what major criteria and what circumstances the Competition Council will take into account when deciding if facts indicated in a complaint are deemed to be de minimis and do not cause essential damage to the persons interests protected by the Law on Advertising, on 25 May 2011 the Competition Council adopted resolution No. 1S-98 to approve the commentary of the Competition Council on de minimis in cases of infringement of the Law on Advertising. In the commentary, the Competition Council referred to the extent and length of dispersed advertising as being among the most important criteria which indicate possible damage to the interests protected by the Law on Advertising. Other criteria might be the nature of possible infringement, possible effect of advertised information on the consumers economic behaviour, the size of the advertisement s audience, the nature of the target audience of advertising, possibility of a technical mistake, the number of complaints about advertising, repetitiveness, the lapse of prescriptive period for imposing a fine for dispersion of misleading advertising, etc. The Competition Council noted that the significance of the criteria may differ depending on specific circumstances as well as on characteristics and peculiarities of the goods; therefore, the Competition Council will evaluate the above-mentioned criteria and their significance on an individual basis. Moreover, even if it is decided that facts indicated in a statement (complaint) are to be deemed as insignificant, such a decision does not imply an affirmation that the Law on Advertising was not infringed and does not preclude commercial undertakings from applying to court to claim damages.

6 CASE LAW Lithuanian case law Regarding distinction between seizure of collateral and interim measures of protection, control of fairness of terms in consumer contracts, and rules for early contract termination On 15 June 2011 an extended panel of the Civil Division of the Supreme Court of Lithuania ruled in civil case No. 3K-7-272/2011, in which a dispute arose between natural persons and a bank, which gave credit to purchase real estate, about legitimacy of the procedure of forced debt recovery from a collateral source. In deciding whether cassation against a rule of an appellate court is possible, the distinction between seizure of collateral and interim measures of protection (seizure of real estate being one of the interim measures of protection) became important in this case. The extended panel pointed out that, although seizure of collateral and interim measures of protection have certain common features (they are enforced to temporarily limit property rights of a debtor or a respondent in order to secure the possibility of realistic satisfaction of the claim of a creditor/plaintiff), the nature, the purpose, prerequisites and procedure for application of those institutions are different. The extended panel emphasized that seizure of collateral, applied on the basis of Part 1 of Article 558 of the Code of Civil Procedure of the Republic of Lithuania (hereinafter the Code of Civil Procedure) may not be recognized as a merely interim measure of protection within the meaning of Article 144 of the Code of Civil Procedure and stated an objective need to alter the previous case law on interpretation and application of this provision. In addition, the extended panel qualified the contracts on credit and mortgage as consumer contracts and emphasized the duty of the courts to control fairness of terms in consumer contracts that are basis for a creditor s claim to demand from a hypothecary judge to perform a respective action (Part 2 of Article 353 of the Code of Civil Procedure). The court s duty to evaluate ex officio the terms of a consumer contract in accordance with fairness criteria laid down in Article of the Civil Code of the Republic of Lithuania (hereinafter the Civil Code) must be universally performed regardless of judicial procedure within which a judge makes procedural decisions related to evaluation of such terms. The panel called to attention that this rule is applicable in special legal proceedings as well. The extended panel noted that, in the cases of early termination of a credit contract based on the procedure set by law rather than by contract, that parties must follow the rules established in Articles and of the Civil Code. The extended panel pointed out that in the case under consideration the creditor was subject to the above-mentioned rules and had to provide data on the debtor s failure to satisfy the creditor s demand during an additionally set time limit, due to which the creditor terminated the contract. In order to satisfy the conditions for forced recovery from mortgaged property as laid down in Part 1 of Article of the Civil Code, the creditor has a procedural duty (Article 178 of the Code of Civil Procedure) to submit evidence of due termination of the contract, whereas a hypothecary judge must, upon receipt of the creditor s request regarding forced recovery from mortgaged property, check the

7 presence of the basis to initiate recovery according to the factual data indicated and documents submitted by the creditor. In the absence of data on the debtors performance or non-performance of the obligation during the additionally set time limit, it is impossible to decide if the termination of the main contract was in compliance with the procedure set by law, therefore, a hypothecary judge cannot initiate the procedure of forced recovery and must deny the creditor s request. Case Law of the Court of Justice of the European Union Regarding determination of jurisdiction in the case of distance selling The Italian enterprise Edil Centro and the French enterprise Electrosteel concluded a contract for the sale of goods, but did not agree on jurisdiction. When a dispute regarding performance of the contract arose between the parties to the contract, there was also a dispute regarding jurisdiction. Subject to general provisions of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, persons domiciled in a Member State are to be sued in the courts of that Member State. If there is no agreement on jurisdiction, the Regulation No 44/2001 set special rules, according to which a respondent domiciled in a Member State may be sued in matters relating to a contract in the courts of another Member State for the place of performance of the obligation in question rather than in the Member State of domicile. If not agreed otherwise, the Regulation considers the place of performance of the obligation in question to be, in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered, or, in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided. The seller of the goods Edil Centro asserted that, since the contract contained the clause concerning the place of delivery of the goods in the seller s seat in Italy, the Italian courts have jurisdiction to hear the case, whereas the buyer Electrosteel argued for the jurisdiction of the French courts. Having examined the circumstances of the case, on 9 June 2011 the Court of Justice of the European Union (hereinafter referred to as the Court of Justice ) gave judgement in case C 87/10 Electrosteel Europe SA v. Edil Centro SpA, in which the Court of Justice ruled that, in the case of distance selling, the agreed place of delivery of the goods must be determined on the basis of the provisions of that contract taking into account all the relevant terms and clauses of that contract which are capable of clearly identifying that place, including terms and clauses which are generally recognised and applied through the usages of international trade or commerce, such as the Incoterms drawn up by the International Chamber of Commerce in the version published in The Court of Justice noted that stipulations, which merely lay down the conditions relating to the allocation of the risks connected to the carriage of the goods or the division of costs between the contracting parties, do not necessarily also identify the place of delivery of the goods. If it is impossible to determine the place of delivery on the basis of the contract, without referring to the substantive law applicable to the contract, the place of delivery is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have

8 obtained, actual power of disposal over those goods at the final destination of the sales transaction. This Newsletter is intended as general guidance and is not a substitute for detailed advice in specific circumstances. If you wish to be removed from or included in our mailing list, please us at law.firm@evershedssaladzius.lt Law Firm Eversheds Saladžius, a member, 2011.