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November, 2013 - Estonia, Estonia

 

 

Represented by LAWIN, Siemens Wins 4-year-long Case Concerning Penalties

 

In November of this year, the German engineering company Siemens, which was represented by LAWIN, the leading law firm in the Baltic States, won a 4-year-long case concerning penalties against the companies Urbico and Fima. On 18 November of this year, the Supreme Court of Lithuania quashed the judgments of the Vilnius Regional Court and the Court of Appeal of Lithuania whereby these courts ordered Siemens to pay huge penalties amounting to LTL 50 million for the allegedly unlawful termination of a joint venture agreement. The amount of LTL 110 thousand was also awarded against Siemens as compensation for legal expenses.

In handling the Siemens case, the German engineering company was represented by a team of LAWIN experts. Dovilė Burgienė, partner of LAWIN, and Laura Šlepaitė, senior associate, were the main members of the team. Many other lawyers of LAWIN also contributed to the successful outcome of the case.

“In legal terms, this is a precedent. In very few cases have issues concerning the performance and termination of joint venture agreements been dealt with so far in the case law, although there have been an enormous number of disputes over joint venture agreements” Dovilė Burgienė said.

In 2006, the aforementioned companies set up a consortium under a joint venture agreement with the aim of jointly performing a project for modernisation of the traffic signal equipment in Vilnius. Three years later, in 2009, Urbico concluded transactions with a third party without coordinating those actions with its partners or obtaining their consent or subsequently informing Siemens to that effect. In view of these unlawful actions and the resulting damage incurred, Siemens was forced to terminate the joint venture agreement. It nevertheless fulfilled all its obligations to the client under the services project.

The Supreme Court of Lithuania established that the joint venture agreement was an agreement based on trust and the highest principles of fairness and cooperation. According to the precedent, this needs to be taken into consideration in deciding whether the breach of the agreement was material and justified the termination of the agreement.

“This case is relevant to both legal community and businessmen. The Supreme Court held in its judgment that in pursuit of the common interest the parties must comply with the material conditions of the joint venture agreement pertaining to reconciliation and coordination of actions between the partners. The violation of these material conditions may lead to distrust between the partners and lawful termination of a joint venture agreement. The rule established by the court will also encourage businessmen to be more careful in selecting partners and avoid haste in proper preparation of mechanisms for resolving the disputes between the partners”, Burgienė said.

“This is also very important and good news for foreign investors. This ruling of the Supreme Court of Lithuania undoubtedly strengthens the confidence in the Lithuanian legal system, and that is one of the most important factors in evaluating investment opportunities in Lithuania. It is just a pity that in order to defend ourselves against the unreasonable charges, we had to pass through the entire justice system and this took us 4 years. We managed to defend ourselves against the enormous penalties only after having reached the court of final instance”, the partner added.


 

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