Serbia: Economic measures in the private sector

The Government of Serbia adopted on April 10, the set of financial measures aimed at mitigating the negative economic impact of COVID – 19 pandemic and support of the private sector businesses, with an immediate effect. The most important measures include:

– State Subsidies to private sector – which includes all Serbian legal entities and entrepreneurs as well as representative and branch offices of foreign legal entities;
– Financial Program – which is aimed at providing loan facilities to private sector for the purpose of acquiring working capital and preserving their financial liquidity and which operate in the production, service, trade and agriculture sectors.


1.1. Qualifications criteria

– Companies which decreased the number of employees for more than 10% in the period from March 15 until April 10 (not counting definite term employments which are concluded before March 15 and expire prior to April 10) are not eligible. Users of economic measures shall lose this right in the event of decreasing the number of employees for more than 10% until October 31, 2020 compared to the number of employees on March 15, 2020 (not counting definite term employments which are concluded before March 15 and expire prior to October 31, 2020).
– Entrepreneurs who temporarily ceased their business activity earliest as of March 15 are eligible subject to fulfilling the above employment level maintenance criteria.
– Private sector businesses established and duly registered after March 15 are not eligible.
– Banks, insurance companies, voluntary pension funds, financial leasing companies, payment institutions and electronic money institutions when classified as large enterprises are barred.
– Opting for the use of economic support measures rules out the possibility to pay dividends until the end of 2020, otherwise the right for subsidies is lost.

Note: It is unclear whether, besides reduction of workforce based on redundancy (preventing redundancy was obviously one of the Government’s primary reasons for introducing subsidies), other manners of terminating employment for more than 10% employees in relevant period (e.g. termination due to breach of working duties, failure to achieve appropriate working results or even consensual termination of employment) would also make the employer ineligible for subsidies. As long as there are no official clarifications in this respect, we would advise the employers to apply extra caution whenever terminating an employee for whatever reason, in period from March 15, 2020 to October 31, 2020, in order to avoid losing rights to subsidies.

1.2. Types of subsidies

Fiscal benefits:

Fiscal policy measures comprise in deferral of maturity and payment dates for specified tax obligations of private sector, which are normally due in the period from April 1 to June 30, 2020, as follows:

(i) suspension of employment tax and social contributions for March, April and May 2020 until January 4, 2021 and repayment in 24 installments, free of interest.
(ii) suspension of corporate income tax advance payments for March, April and May 2020, normally due on April 15, May 15 and June 15 until submission of final corporate income tax return for 2020, i.e. until 30 June 2021 (except when the when fiscal year differs from calendar year). Repayment is allowed in 24 installments, free of interest.
(iii) analogue application of above tax deferral to entrepreneurs who keep accounting records.
(iv) suspension of advance payment of taxes and social contributions for March, April and May 2020, until January 4, 2021 for tax flat rate entrepreneurs (“paušalci”) and repayment in 24 installments, free of interest.

In the event employment taxes and social contributions for March are already paid, the taxpayer may use tax deferral benefit for April, May and June 2020.

This fiscal benefit is used by the taxpayer, upon its own discretion, and it is performed by filing monthly tax return (PPP-PD) for employment taxes and social contributions by entering January 4, 2021 as payment date for the month when support measure is used. Finance Ministry is expected to provide further instructions clarifying technical aspects linked to use of this benefit.

Direct cash subsidies

Direct cash subsidies are provided exclusively for the pay out of salaries and are payable to specially designated bank account opened with commercial banks. This measure is different for micro, small, medium sized enterprises (“MSMEs”) and large enterprises. Classification of businesses for this purpose is done on the basis of 2018 financial reports while all companies incorporated in 2019 and 2020 are considered as small enterprises.

(i) MSMEs, entrepreneurs, farmers are entitled, per each full time employee, to cash subsidies corresponding to minimum wage in March 2020 (app. EUR 260) payable in May, June and July 2020 while taking account of reported number of full time employees in PPP PD form for March, April and May.
(ii) Large enterprises are entitled to cash subsidies corresponding to 50% of minimum wage in March 2020 (app. EUR 130). Subsidies are payable per full time employee referred to paid leave either based on employer’s decision due to temporary interruption or decline in business or administrative decision brought due to disease (Articles 116 or 117 of Labor Law). As for MSMEs, payment of subsidies is envisaged in May, June and July 2020 based on the same principle.

In respect to part time employees, subsidies are payable in proportion to the time spent at work and reported in the PPP-PD tax return.

VAT exemption for donations

During the state of emergency, all traffic of goods and services free of charge, provided to the Ministry of Health, Republic Health Insurance Fund and other public health institutions is exempted from VAT. The Decree has retroactive application and takes account of transactions effected as of March 15. VAT taxpayers are required to keep special records which include identification data of the party receiving donation and value of goods and services.

Cash incentive for Serbian Citizens

Upon lifting of the state of emergency, one-time cash support in the amount of EUR 100 in Serbian dinar countervalue shall be paid to each adult citizen of the Republic of Serbia.

1.3. Procedure and deadlines

Businesses decide upon their own discretion whether or not to use available measures. Entities which decide to take benefits may opt for a 1 to 3-months period by filing adequate PPP PD return in April, May or June. For instance, entities wishing to use measures for a 3-month period should file PPP PD latest on April 30, 2020.

The subsidies are to be paid on the employer’s special bank accounts opened for this purpose. All employers having bank accounts in more than one bank need to notify the Tax Authority on-line until 25 April at the latest, in which bank the special purpose account shall be opened.


Financial Program is aimed at providing loan facilities to entrepreneurs, cooperatives and MSMEs for the purpose of acquiring working capital and preserving their financial liquidity and which operate in the production, service, trade and agriculture sectors.

The program is realized through the Development Fund of the Republic of Serbia which is accepting applications latest until December 10, 2020 and subject to availability of funds. Decisions of the Fund ought to be made by December 31, 2020 while the final deadline for realization of approved funds is March 31, 2021.

The following terms and conditions apply for the loans:
– Maintenance of employment level in line with the report of the Central Registry for Social Insurance on number of definte and indefinite term employees as of March 16, 2020. Difference of maximum 10% at the moment of applying for funds and during the loan period is tolerated.
– Loan duration of maximum 36 months including up to 12 months grace period and up to 24 months repayment period.
– 1% interest rate
– Loans are granted and repaid in local currency in monthly installments.
– Minimum amount of loan:
o RSD 1,000,000 (app. EUR 8,547) for companies, and
o RSD 200,000 (app. EUR 1,709) for entrepreneurs, cooperatives and business entities registered with relevant registries.
– Maximum amount of loan:
o RSD 10,000,000 (app. EUR 85,470) for entrepreneurs and micro enterprises,
o RSD 40,000,000 (app. EUR 341,880) for small enterprises, and
o RSD 120,000,000 (app. EUR 1,025,641) for medium enterprises.
– Collaterals are determined depending on the value of the loan.
– Applicant must not be subject to bankruptcy, liquidation, reorganization or restructuring measures.


NKO Partners

Uncertain Times: Tax Planning Considerations

Amidst these unprecedented and uncertain times, the question that often arises is what should one do regarding their own taxes? It is during times like these that tax planning becomes so much more important and critical. In this article, we will discuss some common tax planning techniques that should be considered.

For some historical context, in 1949, to pay for post-war expenditures, the government of Canada and its provinces levied a personal marginal tax rate of 84% for all income over $400,000. Currently, the highest combined federal-provincial marginal tax rate on ordinary income is 53.53% in Ontario. The government of Canada has so far pledged $82 billion to fight COVID-19, which the Parliamentary Budget Officer projects would create a $112.7 billion deficit in 2021. Based on history, it might be reasonable to expect that the government will increase marginal tax rates to recoup its expenditures and balance the budget.

Planning Tips That You Should Consider During Covid-19

Estate Freezes

Inter-generational transfers are generally taxable under Canadian law. However, an estate freeze is a common tax planning strategy that allows a taxpayer to “lock in” the current value of businesses and capital properties so that  future growth or appreciation is shifted to the next generation or to other family members. It is also a great strategy to minimize any capital gains on the death of the taxpayer. As the COVID-19 pandemic has significantly affected many businesses and the value of capital properties (such as marketable securities and real estate), the value that a taxpayer may be able to “lock-in” should be relatively low. However, a qualified valuator should be consulted in this regard. Freezing the value of the property while it is low reduces the owner’s capital gains, and can increase the gain that is transferred to family members tax-free.

Capital Gains Strip

The current corporate and personal income tax rate structure has created a significant incentive for shareholders to extract value from closely held corporations in the form of capital gains, as opposed to dividends. In general, taxpayers who expect to withdraw surplus income from their corporations in the short term might benefit from implementing a surplus strip.

A number of techniques have been developed, and aggressively implemented, to convert dividends into capital gains. The infamous 2017 consultation paper would have introduced an anti-avoidance rule to restrict the effectiveness of these transactions; however, the Liberal Government aborted this measure in the face of significant public backlash. Nevertheless, officials at the Department of Finance have publicly stated that they remain concerned with surplus stripping, and there is talk that a more targeted form of the rule might be introduced. Now, the deficits associated with COVID-19 expenditures might provide an even greater impetus to enact legislation to curtail this strategy.

Trigger Capital Gains (if any)

For those lucky ones who still hold assets with accrued capital gains, in light of COVID-19, there is a reasonable expectation that the capital gain inclusion rate will be increased from its current 50% (with perhaps some form of de minimis grandfathering). From a tax planning perspective, it may be an opportune time to trigger a capital gain before any changes to the Income Tax Act to avoid exposure to the higher capital gains inclusion rate.

Utilizing Losses

As a reminder, any net capital losses realized may be applied against capital gains and may be carried back 3 years and forward indefinitely. Similarly, non-capital losses may be carried back 3 years and forward 20 years and may be applied to other sources of income.  The Income Tax Act contains complex rules that restrict when losses may be realized and utilized. As such, we urge you to contact a member of our Tax Department to discuss your particular circumstances.

Loss Consolidation

No formal mechanism exists to transfer losses between corporations under Canadian law. However, Canadian courts and the administrative policy of the Canada Revenue Agency sanction the use of several forms of transactions to consolidate or transfer losses among related or affiliated groups of Canadian corporations. Selecting the appropriate method will depend on the particular facts and circumstances of each case. As a result, we recommend that you contact a member of our Tax Department to discuss which loss utilization technique is appropriate in your circumstances.

For more information about dealing with COVID-19, please visit our COVID-19 Resource Center.

SSEK Legal Alert

SSEK Legal Alert is a monthly survey designed to keep our clients up to date with the latest legal developments in Indonesia. To subscribe, visit our website at


Presidential Regulation (“PR”) No. 76 of 2019 dated November 13, 2019, regarding Ratification of the Agreement Between the Republic of Indonesia and the Republic of Tajikistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Income Tax. This Regulation came into effect on the date of its enactment.

PR No. 77 of 2019 dated November 13, 2019, regarding Ratification of Multilateral Convention to Implement Tax Treaty- Related Measures to Prevent Base Erosion and Profit Shifting. This Regulation came into effect on the date of its enactment.

Government Regulation (“GR”) No. 88 of 2019 dated December 26, 2019, regarding Occupational Health. This Regulation contains provisions on illness prevention, health improvement and disease management. It came into effect on the date of its enactment.

GR No. 90 of 2019 dated December 31, 2019, regarding Procedures for the Application, Examination and Settlement of Appeals at the Trademark Appeals Commission. This Regulation sets out procedure for the Trademark Appeals Commission. It implements Articles 32 and 34 of Law No. 20 of 2016 regarding Trademarks and Geographic Indicators. This Regulation came into effect on the date of its enactment.

GR No. 89 of 2019 dated December 31, 2019, regarding Amendment of GR No. 59 of 2001 regarding Non-Governmental Consumer Protection Institution. This Regulation amends GR No. 59 of 2001 so that non-governmental consumer protection bodies must now register and report their function to the relevant regional governments. It came into effect on the date of its enactment.

GR No. 5 of 2020 dated January 20, 2020, regarding Trade Information System. The trade information system collects, manages, delivers, processes and disseminates integrated trade data and/or information to support trade policy. It provides updated and accurate trade data and/or information, and quick data and/or information on trade policy and management, with the aim of improving quality of service by the central and regional governments in the trade sector. This Regulation came into effect on the date of enactment.

GR No. 3 of 2020 dated January 20, 2020, regarding the Amendment of GR No. 14 of 2018 regarding Foreign Ownership of Insurance Companies. This Regulation introduces a new threshold for foreign ownership of conventional/sharia insurance/reinsurance companies, as well as insurance/reinsurance broker companies and insurance lossappraisal companies, and sharia insurance/reinsurance companies resulting from spinoffs. This Regulation came into force on the date of its enactment.

GR No. 1 of 2020 dated January 8, 2020, regarding the Organization of Special Economic Zones. This Regulation addresses several matters, including the proposal of special economic zones (“SEZs”) by the Special Economic Zone Board, zoning regulations for SEZs, requirements for the incorporation of SEZs, the construction and operation of SEZs, and the management of SEZs. It came into effect on the date of its enactment.

GR No. 6 of 2020 dated January 27, 2020, regarding Construction and Installations at Sea. This Regulation includes provisions on the function, type, requirements, placement, demolition, monitoring and evaluation of construction and installations at sea. It came into force on the date of its enactment.

Football and administrative decisions

French regulation of football is permeated with administrative law. This is particularly true in respect of decisions and sanctions applicable to football clubs.

This is the reason why the Conseil d’Etat remains one of the ultimate French jurisdictions entitled to control the regulation produced by French agencies dedicated to football. In this perspective, the Conseil d’Etatoverseas the production of norms in the field of sports law and can be considered as the key team player in this wide and complex legal environnement.

In a very interesting case, available at the beginning of March 2020, the Conseil d’Etat (Conseil d’Etat case, Fédération Française de Football, Req. 424347) confirmed the possibility for the executive committee of the FFF (Fédération Française de Football) to accept the propositions of the CNOSF (Comité National Olympique et Sportif Français) given in the course of a conciliation and to additionally ask the DNCG (Direction Nationale du Contrôle de Gestion) to convene and to take other substitution administrative measures. In such a context, to create rights with a decision qualifying as an administrative decision (acte unilatéral), the FFF has to take a new decision containing its own legal and fact reasons (motifs de droit et de fait), this later cancelling the first one of the DNCG. This decision of the Conseil d’Etat deals with not only the way a decision qualifies as an administrative act, but also with the way the administrative judge will control its legality under the hierarchy of norms. What can be the intensity of this control over the administrative act (see e.g. Didier Truchet, Droit administratif, puf, 8th ed. 2019, p. 237, n°723 et seq.) ? This case illustrates, amongst others, the power of regulation of the administrative judge and his key function in the football economy.    

In this case, for financial reasons, the first measure ruled by the DNCG prohibited Racing Club de Lens from accessing Ligue 1. The DNCG is an entity granted by law an independent power of assessment ensuring the administrative, legal and financial control of sport associations and companies. More precisely, the aim by law of the DNCG is not only to ensure the financial sustainability of associations and companies but is also to encourage the respect of sport equity and to contribute to the economic regulation of competitions. Albeit considered as independent, the DNCG does not have the legal personality and forms part of the FFF.

After a mandatory conciliation before the CNOSF on 25 July 2014, other measures were instead proposed by such entity: (i) limitation of the number of employees and / or (ii) recruitment control. On 28 July 2014, the executive committee of the FFF thereafter decided to accept these other administrative substitution measures and additionally asked the DNCG to convene in order to determine how Racing Club de Lens would play in Ligue 1. In such a context, this latest decision was challenged by a relegated team from Ligue 1 to Ligue 2 (Sochaux) (being ranked 18 after the championship and hoping staying in Ligue 1).

Such claim is dismissed by the Conseil d’Etat for the second time.

One of the main subjects arising from this case and developed in the report of the public draftsman (rapporteur public – see conclusions M. G. Odinet, rapporteur public available on the website of the Conseil d’Etat) deals with the qualification of the second decision dated 28 July 2014 issued by the FFF and the correlative cancellation of the first decision dated 26 June 2014 of the DNCG.

To rule the case, the Conseil d’Etat uses the manifest error legal means (erreur manifeste d’appréciation) to control the legality of the new decision issued by the FFF after the conciliation on 28 July 2014, and dated the same date.

In this respect, the Conseil d’Etat followed the conclusions of the public draftsman: the executive committee of the FFF did not take an inconsiderable risk in cancelling the first decision of the DNCG dated 26 June 2014 and in deciding instead on 28 July 2014 the limitation of the number of employees and / or the recruitment control. No EMA (erreur manifeste d’appréciation) can derive from this new decision.

Even if not raised in the present case, it might be argued that a claim based on the lack of interest to act (intérêt à agir) of Sochaux could also have solved this case. In this perspective, the interest to act of Sochaux could have successfully been challenged in the first instance as these two teams were playing in different leagues. In this perspective, it is not because Racing Club de Lens would have stayed in Ligue 2 (due to financial reasons) that Sochaux would had won the right to stay in Ligue 1. Assuming that Racing Club de Lens would have stayed in Ligue 2, due to financial reasons, another team of Ligue 2 woud had been upgraded instead of Racing Club de Lens and Sochaux would had gone to Ligue 2 anyway, due to its bad ranking in Ligue 1. In other words, it might be argued that the financial difficulties of Racing Club de Lens do not have an impact on the ranking of Sochaux in Ligue 1, but, instead, have an impact on another team of Ligue 2. As such, Sochaux could also have lost the case on the ground of lack of grievance (défaut de grief) of the FFF decision. In addition, it can also be argued that Sochaux cannot be considered as representing the collective interest of the whole profession. 

By this decision, the Conseil d’Etat hopefully confirms the latitude of French sport agencies vested with public power prerogatives (prérogatives de puissance publique), but remains, with the ECHR (European Convention of Human Rights) one of the ultimate regulation entities.

Up to date 10 March 2020.

Indonesian Visas in the Time of COVID-19

On 11 March 2020, the World Health Organization (“WHO”) officially announced that COVID-19 had become a global pandemic. Following this announcement, as with many other countries, Indonesia enacted regulations to govern the traffic of individuals entering and leaving the country. These regulations specifically mandate limitations and exceptions for the granting of Entry Permits for foreign visitors, Emergency Stay Permits (Izin Tinggal Dalam Keadaan Terpaksa), Limited Stay Permits (Izin Tinggal Terbatas or “ITAS”), Permanent Stay Permits (Izin Tinggal Tetap or “ITAP”) and Re-entry Permits for foreign visitors currently in Indonesia and expatriates currently abroad whose Indonesian permits are to expire soon.

Please visit the website of the Indonesian Directorate General of Immigration,, to access the abovementioned regulations as well as the Indonesian Director General of Immigration circular letter and the Indonesian Ministry of Foreign Affairs’ announcement regarding this matter, all of which need to be read collectively to determine the required steps in terms of visas during the COVID-19 pandemic.

Entry Permits 

In response to the COVID-19 pandemic, the Government of Indonesia has suspended the granting of Visit Visa Exemptions (Bebas Visa Kunjungan) and Visas on Arrival (Visa Kunjungan saat Kedatangan) to foreign visitors visiting Indonesia from any country. Foreign visitors may still visit Indonesia on a different valid visa issued by an Indonesian representative in their country, after satisfying several requirements provided under Indonesian Minister of Law and Human Rights (“MOLHR”) Regulation Number 8 of 2020 on the Temporary Termination of Visit Visa Exemption and Visa on Arrival and the Granting of Emergency Stay Permits (“MOLHR Reg No. 8/2020”). However, this exception does not apply to foreign visitors who have traveled to certain areas/countries in the last 14 days. These countries include China, South Korea (specifically Daegu City and Gyeongsangbuk-do Province), Iran, Italy, the Vatican, Spain, France, Germany, Switzerland and the United Kingdom.

Emergency Stay Permits

As stipulated in Article 4 of MOLHR Regulation Number 7 of 2020 on the Granting of Visas and Stay Permits in Order to Prevent the Coronavirus Outbreak (“MOLHR Reg No. 7/2020”), an Emergency Stay Permit is applicable to (a) any foreign citizen currently in Indonesia; (b) foreigners who hold a stay permit of another country; or (c) the spouse or child of a citizen of a country other than Indonesia whose visa (any visa) (i) has completely expired and can no longer be extended, and (ii) cannot fly back to their country due to the COVID-19 pandemic. As further affirmed by the Director General of Immigration in Circular Letter No. IMI-GR.01.01-2114 Year 2020, Emergency Stay Permits are applied differently for foreigners who arrived in Indonesia before and after 5 February 2020.

Limited Stay Permits, Permanent Stay Permits and Re-entry Permits

MOLHR Reg No. 7/2020 and MOLHR Reg No. 8/2020 stipulate exceptions and procedures for extending an ITAS/ITAP permit for holders currently in Indonesia and currently abroad. For individuals currently abroad whose visa is to expire soon, a Re-entry Permit may be granted after satisfying certain requirements.

These exceptions and visa requirements are subject to future changes based on the situation with the COVID-19 pandemic. There may be additional requirements to obtain new visas/visa extensions in practice.

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user’s own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

By (SSEK Legal Consultants)

Rights and Liberties, Liability of the French State and Judicial Review

On 24 December 2019 the Conseil d’Etat ruled that indemnification can be granted under French law on the ground of a prejudice suffered due to the application of a law ruled contrary to the Constitution by the Conseil Constitutionnel.

The Conseil d’Etat now leaves the door open to a new possibility for indemnification, within the framework of a QPC examination (Question Prioritaire de Constitutionnalité)) or by application of Article 61 of the Constitution (subject to conditions). Based on the hierarchy of norms, this new kind of liability of the State is stated in three decisions dated 24 December 2019 (req. N°425981, N° 425983 and N°428162).

This new regime lives now next to the already existing liability due to the application of the law (responsabilité du fait des lois) based on equal treatment before public burdens (principe d’égalité des usagers devant les charges publiques).

A QPC is a question raised by a tribunal or a court aiming at determining the conformity of a law to the Constitution. Article 61-1 of the French Constitution states in this respect that during an instance before a tribunal or a court (private or public), a plaintiff can support the view that a law contravenes rights and liberties guaranteed by the French Constitution. In such a situation, the Conseil Constitutionnel can be seized after remand of the case by the Conseil d’Etat or the Cour de Cassation.

The general principle under French administrative law is that the French State can be sued simply because of the application of a law, provided that (i) the plaintiff has suffered a prejudice qualifying as important and specific (grave et special) and (ii) the law in question does not exclude the possibility for a plaintiff to be indemnified. This type of liability is applicable even if the French State is not considered as being in default with the application of the law and is named liability without misconduct (responsabilité sans faute de l’administration).

This possibility started in France at the beginning of the 20th century (Conseil d’Etat, case Couitéas – 1923), with the admission of liability without misconduct of the French State due to an administrative decision of non-enforcement of judicial decisions. In such a case, in the general interest, the French State may decide not to enforce a judicial decision, but in turn, has to indemnify the plaintiff. The ground for indemnification is the breach of equal treatment before public burdens principle (principe d’égalité des usagers devant les charges publiques). This principle is taken from the French 1789 declaration of the human rights and the citizen: each member of the community has to bear a certain amount of public burdens, but equal treatment shall prevail.

This principle has expanded thereafter with the admission of such a claim against a law (and not against an administrative decision only) by the Conseil d’Etat in 1938 (Conseil d’Etat, case Société la Fleurette – 1938). Such a case establishes that, in the silence of the said law, a plaintiff shall not bear a charge created by a law that he/she would not normally lie with, it being specified that, in the event of silence of the said law, such law shall not be considered as excluding the liability of the French State (Conseil d’Etat case Coopérative Agricole Ax’ion – 2005).

The liability of the French State can also be triggered due to its obligations to ensure the application of its international conventions, to indemnify all the prejudices resulting from the application of a law passed illegally because contrary to an international convention (e.g. ECHR) (Conseil d’Etat, case Gardelieu – 2007).

Now, according to the new decisions of the French Conseil d’Etat dated 24 December 2019, the other grounds for indemnification are (1) that the decision of the Conseil Constitutionnel does not decide that no indemnification shall be granted either (i) by excluding it expressly or (ii) by letting alive all or only a part of pecuniary effects caused by the law, that an indemnification would challenge, (2) the existence of a prejudice and (3) the link between the prejudice and the unconstitutional application of the law.

As a consequence, a plaintiff may be indemnified in the following conditions : (i) no express exclusion of indemnification by the Conseil Constitutionnel (ii) no all or part of pecuniary effects left alive by the Conseil Constitutionnel that an indemnification would challenge (iii) and (iv) a link between the prejudice and the unconstitutional application of the law.

According to the decision of the Conseil d’Etat, certain pecuniary effects of the law declared unconstitutional may prevail upon an indemnification. In this respect, it is reasonable to think that an administrative judge would apply an economic balance check between the necessity of indemnifying the plaintiff and the profit of letting alive all or only a part of pecuniary effects caused by the unconstitutional law. An economic balance check is already applied in other circumstances (expropriation with the application of the théorie du bilan coûts / avantages), by the Conseil d’Etat (Conseil d’Etat case Ville Nouvelle Est – 1971).

In this perspective, it is reasonable to think that the application of an unconstitutional law may survive if it is more interesting from an economic point of view. This mentioned carve out is quite important as it gives the possibility to the Conseil Constitutionnel to let alive, even if the law is declared unconstitutional, and then cancelled, parts of its pecuniary effects.

In addition to the breach of equal treatment before public burdens principle (principe d’égalité des usagers devant les charges publiques), it can be suggested that other principles may underpin this kind of liability: preservation of legal safety (sécurité juridique) and /or  granted rights (préservation des droits acquis), and / or economic balance check, to take into account all the adverse financial effects that an indemnification would cause.

The claim for indemnification can obviously be barred by effluxion of time, it being specified that the 4 (four) years period during which such a claim can be brought only starts if the prejudice resulting from the application of the law may be known in its reality and its scope by the plaintiff, without the possibility for him or her to be regarded as ignoring the existence of his / her right to claim until the declaration of unconstitutionality.

The indemnification request has to be brought before the administrative judge (Tribunal Administratif). It remains however to be seen whether legal practioners will try to use these decisions of the Conseil d’Etat to sue the French State before the judicial order (ordre judiciaire). Under French law, the French Conseil d’Etat is the highest court entitled to address administrative cases and is part of the administrative order (ordre administratif) whereas the judicial order (ordre judiciaire) is composed of judiciary tribunal and courts (jurisdictions judiciaires) and is competent for private matters. How dealing with the fact that a tribunal or a court may apply deliberately after the declaration of unconstitutionality a law previously declared unconstitutional outside the scope of the carve out of the ratio decidendi of the Conseil d’Etat? Would Article 141-1 of the Code de l’organisation judiciaire, which gives competence to the judicial order in the event of indemnification of a prejudice due to malfunction of judicial public service, apply? It is reasonable to think that such indemnification would not be allowed even if legal practitioners may wish to test it, and may be, open this possibility, for the residual adverse effects on the plaintiff of the law declared unconstitutional.

A lack of indemnification by the French State may also give rise to a lawsuit before the ECHR (European Convention on Human Rights), a plaintiff would still have in fine, the right to be indemnified on the basis of the application of a law declared unconstitutional. From a theoretical point of view, and on the basis of the hierarchy of norms, letting a country member of the European Council apply a law declared unconstitutional could raise issues.

Up to date 24 December 2019.

Federal Tax Relief to Alleviate COVID-19 Hardships

The coronavirus (COVID-19) pandemic has already had widespread effects on the U.S. economy. Demand for many goods and services has stalled. Unemployment claims have skyrocketed. And many schools and businesses are operating online — if at all. Life has changed dramatically across the country.

The federal government has been working on various relief measures to help individuals and small businesses cope with the situation, including tax relief provisions. Here are the tax changes that have been finalized so far.

Even more relief measures are underway. As of this writing, Congress is working on a huge new COVID-19 relief bill that will surely include a massive economic stimulus package and probably lots of tax changes. Contact your tax pro for the latest developments.

Guidance on Federal Income Tax Deadline Deferrals

On March 20, U.S. Treasury Secretary Steven Mnuchin announced on Twitter that the April 15 federal income tax filing deadlines will be extended until July 15. His tweet says, “All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.” It’s unclear at this point whether the extension will apply to the tax return filing deadlines for federal payroll taxes (Social Security and Medicare taxes) owed by employers or for federal estate and gift taxes.

In addition, on March 21, the IRS issued Notice 2020-18, which clarifies that individual taxpayers and corporations can defer until July 15 federal income tax payments that would otherwise be due on April 15. (Normally, when you file an extension, you must still make a good-faith estimate of your tax liability and, by the normal filing deadline, pay the full amount estimated to be due. This relief measure is an exception to the general rule.)

Specifics under Notice 2020-18 are as follows:

For individualsIndividual taxpayers can defer payment of federal income tax (including any self-employment tax) owed for the 2019 tax year from the normal April 15 deadline until July 15. They can also defer their initial quarterly estimated federal income tax payments for the 2020 tax year (including any self-employment tax) from the normal April 15 deadline until July 15.

Individuals who have non-salary income — such as self-employed people, investors and rental property owners — must normally make quarterly estimated tax payments to avoid an IRS interest charge penalty.

Individuals can defer their tax payments until July 15, with no interest or penalties, “regardless of the amount owed.” (Earlier IRS guidance imposed a $1 million limit, but that limit was eliminated by Notice 2020-18.)

For corporations. Corporations that use the calendar year for tax purposes can defer until July 15 any amount of federal income tax payments that would otherwise be due on April 15 with no interest or penalties. This relief covers the amount owed for the 2019 tax year and the amount due for the first quarterly estimated tax payment for the 2020 tax year. Both of those amounts would otherwise be due on April 15. (Earlier IRS guidance imposed a $10 million limit, but that limit was eliminated by Notice 2020-18.)

For trusts and estates. Trusts and estates pay federal income taxes, too. Federal income tax payments for the 2019 tax year of trusts and estates that use the calendar year for tax purposes are due on April 15. The initial quarterly estimated federal income tax payments for the 2020 tax year of trusts and estates that use the calendar year for tax purposes are also due on April 15.

Notice 2020-18 clarifies that trusts and estates can defer any amount of the aforementioned tax payments from April 15 to July 15 with no interest or penalties.

Important: Notice 2020-18 offers no relief for paying federal payroll taxes (Social Security and Medicare taxes) owed by employers — or federal estate and gift taxes. But additional relief measures may be under construction in Congress.

Tax Provisions in the Families First Coronavirus Response Act

On March 18, President Trump signed into law a COVID-19 relief bill. It’s called the Families First Coronavirus Response Act. The new law mandates paid leave benefits for small business employees affected by the COVID-19 emergency and establish related tax credits and Social Security and Medicare (FICA) tax relief for their employers.

Tax credits for emergency leave payments to employeesThe new law grants tax credits to small employers to cover payments to eligible employees while they take time off under the mandatory emergency COVID-19 paid sick leave and paid family leave provisions. These provisions apply to employers with less than 500 employees.

Emergency paid sick leave under the new law is limited to $511 per day for up to 10 days (up to $5,110 in total) for an employee who’s in COVID-19 quarantine or seeking a COVID-19 diagnosis. An employee can also receive emergency COVID-19 paid sick leave of up to $200 per day for up to 10 days (up to $2,000 in total) to care for a child whose school or childcare location has been closed or whose childcare is unavailable due to COVID-19.

In addition, the law gives an employee the right to take up to 12 weeks of job-protected family leave if the employee or a family member is in COVID-19 quarantine or if the school or childcare location of the employee’s child is closed due to the outbreak. The employer must pay at least two-thirds of the employee’s usual pay, up to a maximum of $200 per day, subject to an overall maximum of $10,000 in total family leave payments.

To help employers cover these now-mandatory emergency leave payments, the law allows a refundable tax credit equal to 100% of qualified sick leave wages and family and medical leave wages paid by the employer.

The credit applies only to eligible leave payments made during the period beginning on a date specified by Treasury Secretary Mnuchin and ending on December 31, 2020. The beginning date will be within 15 days of March 18, 2020.

The new law increases the credit to cover a portion of an employer’s qualified health plan expenses that are allocable to emergency sick leave wages and emergency family leave wages.

The credit is first used to offset the Social Security tax component of the employer’s FICA tax bill. Any excess credit is refundable, meaning the government will issue a check to the employer for the excess.

Important: The credit isn’t available to employers that are already receiving the pre-existing credit for paid family and medical leave under Internal Revenue Code Section 45S.

Employer FICA tax relief. Qualified sick leave and family leave payments mandated by the new law are exempt from the 6.2% Social Security tax component of the employer FICA tax on wages. Employers must pay the 1.45% Medicare tax component of the FICA tax on qualified sick leave and family leave payments, but they can claim a credit for that outlay.

Credits for self-employed people. For a self-employed individual who’s affected by the COVID-19 emergency, the new law allows a comparable refundable credit against the individual’s federal income tax bill. If the credit exceeds the individual’s federal income tax bill (including the self-employment tax), the excess will be refunded via a check from the government. The credit equals:

  • 100% of the self-employed person’s sick-leave equivalent amount, or
  • 67% of the person’s sick-leave equivalent amount for taking care of a sick family member or taking care of the individual’s child following the closing of the child’s school or childcare location.

The sick-leave equivalent amount equals the lesser of:

  • The individual’s average daily self-employment (SE) income, or
  • $511 per day for up to 10 days (up to $5,110 in total) to care for the individual or $200 per day for up to 10 days (up to $2,000 in total) to care for a sick family member or a child following the closing of the child’s school or childcare location.

In addition, a self-employed individual could receive a family leave credit for up to 50 days. The credit amount would equal the number of leave days multiplied by the lesser of:

  • $200, or
  • The individual’s average daily SE income.

The maximum total family leave credit would be $10,000 (50 days x $200 per day).

Credits for self-employed individuals are only allowed for days during the period beginning on a date specified by Treasury Secretary Mnuchin and ending on December 31, 2020. The beginning date will be within 15 days of March 18, 2020.

Important: To properly claim the credit, self-employed individuals must maintain whatever documentation the IRS requires in future guidance. Contact your tax professional for details.

Moving Target

This article only covers some of the COVID-19-related tax changes that have already been finalized. Other types of non-tax federal relief have also been made available and many states have announced their own COVID-19 relief. More federal measures and additional guidance are expected soon. Contact your tax professional to discuss financial relief measures that apply in your specific situation.


Time to Protect Indian Businesses from Insolvency

The medium to long term financial effects of Coronavirus are yet to unfold, but the magnitude is already anticipated to be huge. Many countries across the world are announcing financial packages for businesses. India is also on the track to take a decision on relief packages.

With widespread lockdowns, the coming months are expected to witness a series of defaults by many viable businesses, and in this situation, we need to protect viable Indian businesses from landing up in our bankruptcy tribunals, for no fault of their promoters.

Broadly speaking – today an Indian company can be pushed into insolvency proceedings if it defaults in the discharge of its liability worth over INR 1,00,000/- (USD 1,322) towards a financial creditor or an operational creditor. With a few statutory exceptions and very limited way-outs, the promoters today face a real threat of losing their businesses forever if a creditor decides to opt for a legal action upon default in a single payment above the said threshold.

The bankruptcy and insolvency landscape in India has significantly changed from the regime prevailing prior to the introduction of the Insolvency and Bankruptcy Code (“the IBC”) in 2016. The most prominent feature of the IBC is “corporate insolvency resolution process” or CIRP, during which period the creditors assume control of the company and bids to acquire its business are publicly invited by an insolvency resolution professional. The board of directors of the company is suspended during the CIRP period, and in most cases, the promoters are legally prohibited from repurchasing their companies. This mechanism of CIRP was absent under the previous regime, governed by the (Indian) Companies Act, 2013. During that time, in certain cases the High Courts granted a few weeks’ of time to the promoters to settle with the creditor(s), failing which notification of winding up was published and the official liquidator took charge to liquidate the assets of the company.

The IBC stipulates a more mechanical approach, leaving little discretion with the learned judges of the National Company Law Tribunal (“NCLT”), which is the adjudicating authority under the IBC. The practitioners of the earlier company courts would agree that during the earlier regime it was expected from a creditor to show, in addition to a default of a similar threshold, that the corporate debtor is also unviable as a business. The courts went through the past balance sheets, read auditor’s reports while quoting them in judgments, and frequently observed in courtrooms that businesses give employment, and viable businesses cannot be liquidated just because of a default.

Since the advent of the IBC, the focus changed, and for a reason – the “CIRP”. Who will buy an unviable business during a CIRP? No one. What will then a CIRP achieve? Nothing.

The “business viability/un-viability” test was perhaps therefore never propagated in the IBC. Resultantly, a default above the threshold is enough, by itself, to trigger a CIRP, with all its consequences under the IBC. What the IBC also doesn’t consider is – the reason for such default.

Time has come for us to realise that unviable businesses anyway fail the CIRP. The reports published by the Insolvency and Bankruptcy Board of India evidence that four out of every five CIRPs are not able to find a resolution anyway. Eventually, such unviable companies are thrown into liquidation. No one wins.

We should, therefore, think of a course correction, and to save numerous Indian businesses that would otherwise land up in CIRPs because defaults are now imminent – and more painful – without any fault of the promoters. We need to acknowledge, with evidence now, that each default does not indicate a fault of the promoters, and survival of the businesses of all sizes is vital for the survival of the economy. The IBC and NCLTs also have a much larger economic and functional role, beyond facilitating the buying and selling of the businesses and assets or enforcing settlements by promoters under fear of CIRPs.

We, therefore, feel that the “reason for the default” should, in some way at-least, form part of the judicial consideration while admitting cases under the IBC. Viability of the business should form another vital consideration, even if the focus is on CIRP. The thresholds also should be raised much above INR 1,00,000/-, which we note is a work in progress anyway.

Let’s save our businesses. It takes years to create each viable business. The above-suggested actions may not be exhaustive. Our hon’ble judges also have always found innovative solutions, such as reverse CIRP, when the situation demands. It is now time for the law also to consider that exceptions (habitual defaulters) are not the rule.

Force Majeure and Coronavirus: Frequently Asked Questions

Part 1: Force Majeure and Suspension/Termination of Contracts

Coronavirus (COVID-19) is turning out to be a twin fold pandemic – that started with affecting public health and soon spread throughout the economy. Sudden global shutdown and travel restrictions have brought the economy to a screeching halt before most of us could even comprehend the real impact. Many businesses are still at a loss and are only doing guesswork regarding the magnitude of potential losses and recalibration needed for the businesses to survive this time, and remain viable.

Resultantly, certain harsh realities stare at us, and certain brutal questions are to be answered. With specific reference to Indian laws, we have attempted to answer some of these questions which businesses are asking concerning the possibility to suspend, extend or cancel their contractual obligations and their ability to reduce workforce and other recurring costs and liabilities.

You are reading Part 1 of our series on “Force Majeure and Covid-19: Frequently Asked Questions”. In the next part, to be published on March 20, 2020, we would discuss the possibility of reduction in workforce and wage bills.

Question:    What is a force majeure clause and how does it help the contracting parties?
Answer:       Force majeure is commonly defined as an unforeseen irresistible force, such as an act of God or war. Performance of a contract by a party facing a force majeure situation may be impossible. Recognising this, most contracts include a force majeure clause, which permits a party, when facing a force majeure situation, to temporarily suspend its performance under the contract.

A suspension under a contract, in accordance with its force majeure clause, entitles the party suspending it to be exempted from performing its obligations under the contract. Accordingly, during the period of suspension, such party is not held liable for breach of its contractual obligations. The contract springs back to life and operation once the force majeure situation subsides. The contracts usually also provide for the termination, if the force majeure situation continues beyond a specific number of days.


Question: Is the outbreak of COVID-19 a force majeure situation?
Answer:       Force majeure clauses are a contractual feature. Indian laws do not define “force majeure”, from the perspective of contract laws.

The answer, therefore, lies in answer to the question – what are the identified force majeure situations in your particular contract? Most contracts illustrate various situations as “force majeure events”. Some contracts use words like “epidemic”, “Government order” (of shutdown) and “any other situation making the conduct of business impossible” as examples of force majeure situations. COVID-19 would easily qualify as a force majeure event in such cases.

On the other hand, some contracts give a more restrictive definition of force majeure, limiting it to physical damage to the business premises or change in law or policy.

As force majeure clauses permit contractual non-performance, they are likely to be given a narrow interpretation by the courts, when scrutinized.

Accordingly, to answer, the outbreak of COVID-19 does not automatically become a force majeure situation, and its classification as such largely depends on the language of your specific contract(s).

Question:    If COVID-19 qualifies as a force majeure situation in my contract, am I exempt from its performance?
Answer: Your chances of performance exemption are good, but not automatic. Even if COVID-19 can comfortably be classified as a force majeure situation in your contract, you must remember that:

Your performance is not suspended automatically: You would most likely need to issue a written notice to the other party, as specified in your force majeure clause, invoking the clause and notifying suspension of your obligations. Some contracts also require a party giving a force majeure notice to give a plan to mitigate the loss caused to the other party. Therefore, read your contract and follow what it prescribes.

Force majeure should affect your performance: The performance is also not suspended just because a force majeure situation has arisen unless it significantly affects your performance capabilities. A party invoking a force majeure clause should, therefore, be prepared to demonstrate as to how the occurrence of a force majeure situation has made performance by such party “impossible”. The common legal understanding is that a mere occurrence of a force majeure situation, without a real impact on contractual performance capabilities of such party, would not entitle it to suspend its performance under the contract. As lawyers, we see that some of the parties would face this challenge if their counterparties decide to legally oppose the suspension.

Question: If COVID-19 cannot be a force majeure situation in my contract or if my contract does not have a force majeure clause, what recourse do I have?
Answer:   It is still not ending of the road for you. Indian Contract Act, 1872 enshrines the doctrine of frustration of contracts, which means that a contract would become void if its performance is rendered impossible or unlawful after the contract has been made. Void contracts are unenforceable, the result of which, in layman terms, is that such contracts cannot render a party liable for their non-performance.

Similar to force majeure, the frustration of a contract would also need a party claiming so to demonstrate as to how the occurrence of a situation (COVID-19, being the case in point) has made performance by such party “impossible” or “unlawful”.

Please however note that, unlike force majeure, the frustration of a contract renders it void with immediate effect, and the law does not provide for a suspension of such a contract. Of course, if one party claims “frustration of the contract”, and then both the parties are willing to suspend the contract, they can contractually agree to a suspension. In economic difficult times, new contracts are also hard to come by, so the suspension is a real business possibility following frustration. The suspension, however, cannot be enforced in absence of a contractual stipulation (e.g. force majeure) or with the consent of the contracting parties.

Question:    While invoking force majeure clause, can we propose reduced/alternative performance?
Answer: Indian contract law requires that a party shall do everything within its control to mitigate the loss to the other party. Therefore, a party can propose reduced/alternative performance during a force majeure period. Such reduced/alternative performance may however not be enforced upon the other party unless your force majeure clause so provides. If the other party does not agree to such reduced/alternative performance (consider cases where insufficient raw material supply would make the running of the plant itself commercially untenable), one can revert to full suspension of performance.

Each case should, however, be assessed carefully, before reduced/alternative performance is proposed. Force majeure, when available, is a contractually enforceable suspension right. A unilateral amendment is ordinarily never enforceable. In cases where the contractual relationships are complex, a party needs to assess whether a proposal for reduced/alternative performance would give an opportunity to the other party to deny the applicability of force majeure clause itself.


Force majeure and frustration of contracts are contractually and legally viable tools that provide a real possibility to the businesses to deal with the current situation. Case to case assessment is however needed before implementation of these options.

Trade Marks, Designs & Copyright: IP Review

Welcome to our Annual Review of developments relating to trade marks, copyright and designs during 2019. We have selected a number of the reports that we have published over the course of the last 12 months, commenting on issues ranging from the latest guidance on the boundaries of trade marks and designs through to a number of interesting questions on copyright protection in the light of developing technology and business models. This year’s Review mentions a couple of cases in which we acted, including in a website blocking action for Nintendo in relation to sites selling devices seeking to circumvent encryption measures, and an important case for Sky in the European Court of Justice relating to trade marks.

We also include a brief update on the Brexit position. Now that the Withdrawal Agreement has been ratified and the UK has left the EU, we are in the transition period. During this period, which will end on 31 December 2020 (unless it is extended, albeit the UK Government has said this will not happen), the status quo will be preserved. There will be no change in how IP rights will be protected and enforced during the transition period and, more specifically, EU Trade Marks and Designs will continue during the transition period to extend to the UK. As part of our Brexit preparations, we have set up Mishcon de Reya IP B.V., a trade mark practice based in The Netherlands. Mishcon de Reya IP B.V. is a wholly owned subsidiary of Mishcon de Reya LLP and will allow us to ensure continued representation in relation to EU Trade Mark and Design matters before the EUIPO following the end of the transition period. We will continue to update you on Brexit developments throughout the year.

Click here to view the pdf version of our Review.

We hope you enjoy reading the Annual Review. Please get in touch if you have comments or queries on any of the topics raised.

Trade Marks

Compared to previous years, trade mark law and practice in 2019 focussed to a much lesser extent on questions of infringement and enforcement. Instead, the key cases raised questions relating to clarity and precision of trade mark specifications (and whether this can be a ground of invalidity of a registered mark), and alleged bad faith during the trade mark application process. […read more]


In a continuing trend, 2019 saw the CJEU issue a series of decisions following referrals from Member State national courts on various issues under the Copyright Directive and related Directives. This looks set to continue in 2020 with the CJEU due to hear more copyright referrals. […read more]


Alongside an important referral to the CJEU relating to ‘first disclosure’ for Unregistered Community Designs, the implications of the Supreme Court’s Trunki decision continue to be felt in the UK Courts. […read more]


The UK left the EU on 31 January 2020.  The EU and UK reached a revised Withdrawal Agreement which includes a transition period ending on 31 December 2020.  During the transition period, the status quo continues to apply in relation to IP rights, with EU trade marks and designs continuing to extend to the UK. […read more]

Other developments

Other interesting developments over the last year relate to competition law considerations in relation to brands and online marketplaces.