Increase in the number of commercial disputes about competition and trade marks

Lithuanian businessmen tend to settle their disputes in court – in H1 2016 courts started 6 % more commercial cases than during a relevant period in 2015. The courts got a record number of cases about competition and trade marks, whereas the biggest drop was in the number of disputes about establishment or liquidation of companies. Such conclusions can be made on the basis of the overview “Dispute Resolution Index” prepared by law firm JUREX.

Latvians and Estonians go to courts less

In 2013, Lithuanian courts started 185,000 cases, in 2014 – 198,000 cases, in 2015 – 206,000 cases, in H1 2016 – 106,000 cases in total. Meanwhile, Latvians and Estonian sought to settle their disagreements in court in the first half of this year much more seldom: Latvian courts started 20,000 civil cases, Estonian courts – just 15,000. The number of civil cases in both the neighbouring countries dropped by 3–4 %.

Jurgita Judickienė, Managing Partner of law firm JUREX, notes that starting with 2010 it was namely cases related to business relationships the number of which has been, though only slightly, decreasing in Lithuanian courts. However, compared to the previous year, in H1 2016 the number of new commercial disputes was the biggest: in H1 2016 – 50,000, in H1 2015 – 47,000, in H1 2014 – 48,000.

“We see a tendency that the number of cases about competition, trade marks, cases with an international element, cases about public procurements, construction contracting, defence of business reputation of legal entities, unfair competition has been increasing already for a few consecutive years. Meanwhile, the number of cases in connection with labour legal relationships, transformation of legal entities, financial lease agreements remains stable. Such factors can be affected by changing business environment and stricter legal regulation”, attorney at law J. Judickienė comments on the study conclusions.

Business gets to appreciate confidential information and intellectual properly more and more

In recent years, the number of cases about competition has been increasing significantly. In H1 2014 courts started 21 competition cases, during a relevant period in 2015 – 7 cases, and in the first half of this year – even 93 cases. The number of disputes about trade marks and service marks is also increasing: in H1 2014 there were 22 new cases, in H1 2015 – 16 cases, in H1 2016 – 35 cases.

“If we take a look at the commercial disputes study data, we can see that business is appreciating fair competition more and more, also pays more attention to protection of intellectual property. That is turning into ever more important and more sensitive factors that help today’s business to be successful in the Lithuanian market, to attract customers or even talented employees”, J. Judickienė, Managing Partner of law firm JUREX, shares her insights.

The attorney at law notes that the number of disputes concerning companies’ non-property rights and intellectual property will continue to increase as in spring 2018 the General Data Protection Regulation will become applicable, which will require more transparent reporting on activities and will provide for big fines for improper data processing.

The number of enterprise bankruptcies is increasing again

In H1 2016 Lithuanian courts started just a few cases regarding establishment (1 case), liquidation or transformation (9 cases) of legal entities. However, if watching tendencies of cases pertaining to legal entities, one can notice that the number of bankruptcy proceedings is increasing – in H1 2016 the courts started 11 % more legal entities bankruptcy proceedings than during a relevant period in 2015.

“The ever increasing number of bankruptcy proceedings usually signals about a change in the economic cycle or even about an approaching economic downturn. On the other hand, in our practice we notice that initiation of bankruptcy proceedings and active participation in bankruptcy proceedings becomes an efficient measure of defending creditors’ rights. Business’s attitude to bankruptcy is changing – in order to recover at least a part of the debt in the bankruptcy process it is necessary to take active participation in procedures and to control the bankruptcy administrator’s work instead of staying passive”, J. Judickienė overviews the tendencies.

According to data of the Authority of Audit, Accounting, Property Valuation and Insolvency Management, in H1 2016 the number of enterprises in bankruptcy increased by 29 %. Most bankruptcy proceedings have been initiated against companies engaged in wholesale and retail trade (30 %), construction (13 %), processing manufacturing (11 %), administrative and service activities (9 %), also transport and storage (9 %).

The new Labour Code can increase the number of disputes

After Labour Disputes Commissions started their activities, in 2013 courts got 33 % less labour cases, in 2014 – 25 % less, in 2015 – 11 % less. Courts mostly examine disputes related to termination of or amendments to employment contracts and disputes over work pay. After the effective date of the new Labour Code, the number of labour disputes is expected to grow again due to expanded requirements for employers.

“The new Code provides for the employer’s duty to establish a proper work pay policy, to introduce mechanisms that enable employees to combine family commitments with working time, to ensure protection of employees’ honour and dignity at work. Companies’ commercial secrets and confidential information must be properly described, types of employment contracts that best suit the character of work must be selected, the principles of collective representation must be implemented. All these requirements will demand employers’ time and financial resources and if the requirements are not met – there will be more risks of disputes and disagreements with employees”, attorney at law J. Judickienė says.

Disputes still rarely end in amicable settlement

Though Lithuanian courts get more and more civil cases each year, but just 2.5 % of cases ended with an amicable settlement agreement in H1 2016 (in H1 2015 – 2.4 %, in H1 2014 – 2.5 %).

“Business still rarely uses a possibility to settle disputes amicably, though in order to settle disputes in such a way, we have both the institutions of judicial and private mediation, an amicable settlement agreement, which is a non-procedural measure. Mediation, compared to a judicial process, is a more flexible, faster and more attractive method of solving disputes. In case of an amicable settlement agreement no party to the dispute loses, therefore a possibility remains to restore former relationships or even undertake new common projects”, J. Judickienė, Managing Partner of JUREX, notes.

The overview of commercial disputes tendencies “Dispute Resolution Index” prepared by law firm JUREX analyses statistical data obtained from the National Courts Administration, UAB Creditinfo Lietuva, arbitration courts located in Lithuania, the State Labour Inspectorate, the Authority of Audit, Accounting, Property Valuation and Insolvency Management, the Public Procurement Office and other institutions. “Dispute Resolution Index” has been regularly prepared since 2012.

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