Operating environment

Setting up a Business in Latvia

Forms of Business Organisation

The main law regulating commercial relations is the Commercial Law adopted on 13 April 2000 (entered into force on 1 January 2002). The Commercial Law defines ‘commercial activity’ as ‘ an open economic activity, which is performed by merchants in their own name for the purposes of gaining a profit ’. The Commercial Law defines a ‘Merchant’ (in Latvian-komersants) as a natural person (individual merchant) or a commercial company (partnership or capital company) registered with the Commercial Register.

All merchants have to be registered in the Commercial Register.

According to the Commercial Law, commercial activities in Latvia are carried out by: 

1. individual merchants (sole trader); 
2. partnerships (general and limited partnerships); 
3.  capital companies (limited liability companies ( LLC-in Latvian, SIA ) and stock companies ( SC– in Latvian, AS )).

Individual merchants

An individual merchant is a natural person who is registered as a merchant with the Commercial Register. Individuals are obliged to register as merchants when they carry out commercial activities and their annual turnover from those activities exceeds LVL200 000 or if they employ more than five employees concurrently and their annual turnover exceeds LVL20 000.

At the same time, any individual performing commercial activities, is able to register as an individual merchant at their own discretion even if his or her commercial activities do not exceed the criteria above.

Partnerships

The Commercial Law provides for two types of partnerships-general partnerships and limited partnerships.

A general partnership is a partnership, the purpose of which is the performance of commercial activities utilising a joint name, and in which two or more persons (members) have united, on the basis of a partnership agreement, without limiting their liability against creditors of the general partnership. Members of general partnerships can be both individuals and legal entities, either foreign or local. Compared to LLCs and SCs, the Commercial Law grants the members of partnerships wide discretion in the contents of their partnership agreement (in particular on issues like decision making, profit sharing and representation).

A limited partnership is a partnership in which at least one of the members has limited their liability against creditors of the partnership up to the amount of investment in the partnership. A member of a partnership with limited liability has certain restrictions in terms of representing the partnership and the distribution of profits. Otherwise, in limited partnerships the same provisions apply as for general partnerships.

Limited liability companies

The LLC is the most widely used form of business organisation. The liability of the shareholders of an LLC is limited to the amount of their investment in the share capital of the LLC, however, an LLC can also be incorporated as a company with supplemental liability where one or several shareholders are personally liable against creditors of the company with all of their assets.

The provisions of an LLC's charter may differ from those specified by the Commercial Law only if such deviations are explicitly permitted.

(a) Share capital

The minimum share capital of an LLC is LVL2000. Capital may be contributed both as cash or in kind (tangibles or intangibles). Investments in kind must be evaluated by qualified experts, except if the total value of the investment does not exceed LVL4000 and does not constitute more than half of the share capital. In such cases, contributions in kind may be evaluated by the incorporators themselves.

(b) Company management

The administrative institutions of a company are the meeting of shareholders, the board of directors, and the supervisory council (if such has been formed). The Commercial Law prescribes the following issues within the exclusive competence of the meeting of shareholders: 

• amendments to the charter; 
• increases and decreases in share capital; 
• election and dismissal of supervisory council and management board members, auditors, controllers and liquidators; 
• approval of annual accounts and distribution of profits; 
• bringing actions against members of the supervisory council and management board, founders or shareholders of the company; 
• termination or continuation of activities, or reorganisation of the company.

Other issues may be included within the competence of the shareholders' meeting by inserting the relevant provisions in the charter of the company. The shareholders' meeting is also entitled to decide any issue within the competence of the supervisory council or management board. However, in such cases the shareholders become jointly and separately liable for losses caused to the company as the result of such decisions (if such have been caused).

The Commercial Law designates two-tier management systems consisting of a supervisory council and a management board. However, the supervisory council is optional for LLCs. If a supervisory council is constituted, it is responsible for the supervision of the management board and the approval of major transactions. The management board is charged with daily management matters. The management board may consist of any number of members, even just one. The law does not prescribe any restrictions to board membership based on citizenship.

The right of representation of the company by the management board cannot be limited against third parties. Nevertheless, management board members may be granted either joint or individual representation rights.

The Commercial Law prescribes liability for losses to the company caused by the management board and supervisory council members. The burden of proof rests with council/board members to show that they have acted as honest and diligent managers.

Stock companies

SCs are designed to be public companies. As a result, they have higher minimum capital requirements and a more complex management structure. Consequently, SCs are a less popular form of business organisation than LLCs. The description of regulations covering LLCs in the previous section is also applicable to SCs, unless stated otherwise below.

(a) Share capital

The minimum share capital for SCs is LVL25 000. The entire amount of capital, as specified by the charter, must be subscribed by the date of submission of the application for registration.

SCs may issue various categories of shares which grant the shareholders one or some of the following rights: the right to receive dividends and liquidation quotas, voting rights at shareholders' meetings. Shares may be issued as registered shares or bearer shares; they may be issued either in paper form or as dematerialised shares.

The Commercial Law also allows the issue of preferential shares which grant specific rights regarding dividends and liquidation quotas. Holders of preferential shares do not have voting rights. Personnel shares may be issued to employees and members of the management board. The total nominal value of personnel shares may not exceed 10% of the subscribed share capital.

A further option is convertible bonds which entitle the holder to convert them into company shares within a specified term. Convertible bonds can be either registered or bearer securities. If the company decides to issue convertible bonds, the shareholders have the right of refusal to acquire such bonds.

(b) Company management

The exclusive competences of the meeting of shareholders of an SC are: 

• issuing and conversion of securities;
• the remuneration of the members of the supervisory council and the auditor.

Contrary to LLCs, the Commercial Law does not allow shareholders' meetings of SCs to decide any other issues other than those listed above, except if explicitly provided by law.

A supervisory council is mandatory for SCs. The supervisory council has to appoint the management board which should have a minimum of three members if the SC's shares are traded publicly (if not, one member is enough).

Units of Merchants Carrying Out Commercial Activities in Latvia

Undertakings

The Commercial Law prescribes undertakings as economic units of organisations. An undertaking comprises both tangible and intangible items belonging to the merchant, as well as other economic benefits (value) which are utilised by the merchant to perform commercial activities. A merchant can run one or more undertakings, for example, shops, factories, etc.

As a general rule, in cases when an undertaking or a separate part of an undertaking is transferred into the ownership or use of another person, the acquirer of the undertaking shall be liable for all the obligations of the undertaking or its respective part. However, in respect to those obligations which have been created prior to the transfer of the undertaking or part of it into the ownership or use of another person, and the term or pre-conditions for the fulfilment of which has come into effect within five years of the transfer of the undertaking, the transferor of the undertaking and the acquirer of the undertaking shall bear joint and separate liability if the transfer agreement does not specify otherwise.

Branches and Representative Offices

A branch is an organisationally independent part of an undertaking which is territorially or otherwise separated from the principle undertaking and at a location where commercial activities are systematically carried out in the name of the merchant. Branches are not separate legal entities and they may be opened by both local and foreign merchants. They must be recorded in the Commercial Register.

Foreign merchants (as opposed to local) may open representative offices in Latvia. A representative office, like a branch, is not a separate legal entity, but in contrast to a branch it may not carry out commercial activities in Latvia. Usually, representative offices are maintained for market research and business promotion activities.
Choice of Corporate Presence for Foreign Merchants

According to the Commercial Law, foreign merchants have the following options to establish a corporate presence in Latvia: 

• LLC 
• SC 
• partnership 
• branch 
• representative office

The choice of the most appropriate form of presence depends on a number of factors.

Partnership, as a commercial entity, is chosen very rarely by foreign investors. Most often partnerships are created between local and foreign construction companies. Such partnerships are normally set up for a limited period, e.g. for the duration of a joint construction project.

Comparing the choice between setting up branches or. subsidiaries (LLCs or SCs, respectively), the most important advantage of a subsidiary is limited liability. Branches do not have a separate legal persona, therefore, the creditor of a branch may pursue the assets of the foreign entity. On the other hand, branches have certain other advantages, such as the option to transfer branch profits abroad without the imposition of withholding tax and the ability to allocate head office expenses to a branch in proportion to the profit generated by the branch against global income.

The choice of the form of presence will also depend on the type of business to be conducted in Latvia, for example, banks and insurance companies may only be established as SCs (not as LLCs). Foreign banks may also operate as branches in Latvia.

If there is an intention to raise capital on public markets, an SC is the form that must be used, since only SCs may offer their shares to the public.

Overall, the most common choice of foreign investors is an LLC, also the most popular choice for local businesses.

Entry, Residence and Work Permits

A foreign citizen wishing to come to Latvia needs a valid travel document and, if necessary, a visa or residence permit (for exceptions see section on EU citizens).

Visas

Citizens from following countries may enter the Republic of Latvia without a visa – Andorra, Argentina, Australia, Bolivia, Brazil, Brunei, Canada, Chile, Costa Rica, Croatia, Guatemala, Honduras, Israel, Japan, Mexico, Monaco, New Zealand, Nicaragua, Panama, Paraguay, San Marino, Singapore, South Korea, United States, Uruguay, and Venezuela. Most of the agreements provide for visa-free stays in Latvia of up to 90 days within a 6 month period.

For citizens of countries not listed above, prior to the issuing of a visa, the Office of Citizenship and Migration Affairs (OCMA) needs to approve a formal invitation to enter Latvia. In order to obtain such invitations, foreign individuals or an authorised representative of the legal entity inviting them, should submit appropriate information about the invitee to OCMA for approval. Most invitations are approved within 5 working days and then they are sent to the appropriate Latvian diplomatic or consular office abroad, where the invited person should have submitted their visa application before the decision was made. However, OCMA officials have the right to extend the approval term in order to complete checking of the invited person's data, but not beyond 10 working days.

Residence Permits and Work Permits

A residence permit is required if a foreigner intends to stay in Latvia for more than 90 days within a six month period, counted from the first day of entry. Persons requiring residence permits related to commercial activities can vary from the head of a representative office and members of company supervisory and management boards, to individual merchants.

Any individual or legal entity is entitled to employ a foreigner on the basis of an employment contract or on another contractual basis whose outcome is the receipt of remuneration, but in such cases working permits are mandatory for the foreigners.

The State Employment Agency (SEA) is the state institution that approves work invitations within 10 days, thereby allowing foreigners to engage in paid job relations in Latvia. Work invitations are approved after vacant positions, registered with the SEA by employers, remain vacant for 30 calendar days. During this period, the SEA may recommend to the employer any unemployed person who meets the vacancy’s requirements.

After 40 calendar days, the employer and foreigner are free to sign an employment contract and the latter is entitled to receive a temporary residence permit and a work permit. The term of the said permits may not exceed 4 years.

Temporary residence permits and work permits are issued, without the requirement to approve work invitations, as follows: 

• to individual merchants (sole proprietor) or sole founders of commercial companies registered in the Commercial Register (not exceeding 1 year); 
• to members of partnerships with signatory rights registered in the Commercial Register (not exceeding 4 years); 
• to self-employed persons (not exceeding 1 year); 
• to members of supervisory or management boards of capital companies registered in the Commercial Register (not exceeding 4 years); 
• to persons who have invested not less than LVL600 000 (EUR855 000) in the share capital of a capital company (not exceeding 5 years); 
• to employees of foreign companies' representative offices (not exceeding 4 years).

Additionally, foreigners who come within the categories listed above are exempted from the payment of a fee for their work permit.

Temporary residence permits may also be issued to foreigners involved in scientific cooperation projects (not exceeding 4 years) and for certain non-commercial reasons (religious activities, studies, etc.).

EU citizens and citizens of Iceland, Liechtenstein and Norway

Citizens of the EU, Iceland, Liechtenstein and Norway may enter Latvia upon presentation of a valid travel document (passport or identity card). A residence permit is required only if the person stays in Latvia for more than 90 days within a 6 month period. Work permits are not required.

If the person wishes to work in Latvia and the 90-day period will be exceeded, a formal registration process has to be carried out. A term residence permit is issued for up to 5 years after submission of the following documents to OCMA: 

employment contract or other type of agreement 

two photos 

application form.

Additional information at:
www.pmlp.gov.lv

Real Estate in Latvia

The majority of real estate is in the possession of individuals and legal entities, which means that investors looking for locations are most likely to interact with the private sector and, unless there are specific reasons and requirements, will not need to request the allocation of land from the state or municipalities.

Real Estate Transactions

There are no restrictions on foreign individuals and legal entities transferring ownership or otherwise engaging in transactions with buildings, apartments or commercial space. When it comes to the purchase of land, there are a number of restrictions depending on whether the land is located in urban or rural areas.

(a) Restrictions in Cities

Currently, land in cities may only be purchased without hindrance by citizens of Latvia and citizens of European Union member states, companies registered in Latvia's Commercial Register and companies registered in member states of the European Union, provided that more than a half of the share capital is owned by:

• citizens of Latvia, citizens of a member state of the European Union and/or Latvian government bodies;
• individuals or legal entities from other countries with which Latvia has signed and ratified an international agreement on the promotion and protection of investment by 31 December 1996, or for agreements concluded after that date, if the agreement provides reciprocal rights regarding the acquisition of land.

Countries, with whom Latvia has signed and ratified agreements on the promotion and protection of investment before 1997 include Austria, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain, Israel, Korea, Lithuania, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Taiwan, United States of America, Uzbekistan and Vietnam. Countries, with whom Latvia has signed and ratified agreements on the promotion and protection of investment since 1997 include Belarus, Belgium, Egypt, Greece, Hungary, Iceland, Italy, Moldova, Luxembourg, Romania, Singapore, Slovakia, Turkey, and Ukraine.
Other individuals and legal entities that are not mentioned in any of the categories above may acquire land if they receive permission from the local authority under whose jurisdiction the land is situated, except land in:

border zones; 

• dune areas of the Baltic Sea and Gulf of Riga and protected areas of other public waters, except cases when construction has been planned in accordance with the relevant municipal master plan; 
• agricultural and forest land designated as such in the relevant municipal master plan.

(b) Restrictions in Rural Areas

Unlike urban land, land in rural areas may only be purchased by citizens of Latvia or companies registered in Latvia's Commercial Register, provided that more than half of their share capital is owned by: 

• citizens of Latvia, citizens of a member state of the European Union and/or Latvian government bodies; 
• Individuals or legal entities from other countries with whom Latvia signed and ratified an international agreement on the promotion and protection of investment by 31 December 1996, or for agreements concluded after that date, if the agreement provides reciprocal rights regarding the acquisition of land.

Other individuals and legal entities not mentioned in any of the above categories, may acquire land if they receive permission from the local authority under whose jurisdiction the land is situated, except land in:

• border zones; 
• dune areas of the Baltic Sea and Gulf of Riga; 
• protected areas of public waters, except cases, when construction has been planned in accordance with local territorial planning; 
• agricultural and forest land designated as such in local territorial planning; 
• mineral deposits of state importance.

There is, however, a transition period for citizens of the European Union intending to acquire agricultural land. This transition period lasts until 1 May 2011, and until then, only persons wishing to engage in farming may acquire agricultural land without restrictions, provided that they have previously engaged in farming in Latvia for three consecutive years.

Identification of Real Estate

Identification of real estate will usually include a verification of the current status of the real estate title and any related encumbrances (pledges, joint ownership, prohibition to sell, etc.), which are registered in the Land Register (Zemesgrāmata). While the process of identification is going on, it is also necessary to clarify the actual and permitted use of the property in accordance with approved territorial planning documents . Information about real estate ownership and related rights can be obtained from the relevant Land Register department or from the centralised and computerised Land Register, which is available on-line for subscribers.

Purchase Agreements and Registration of Title

When the real estate has been identified and agreement has been reached between the parties, the next step is to sign a purchase agreement and an application for the registration of the transfer of title in the Land Register. The signatures of the parties on the application must be notarised. Quite often, notaries will prepare purchase agreements themselves.

Additionally, for the signing of the purchase agreement and before the submission of the documents to the Land Register, the following should be carried out:

• Agents or their authorised representatives must obtain a statement from the municipality on the status of real estate tax payments. This can also be done before the signing of the agreement. 
• Agents or their authorised representatives must submit a copy of the signed agreement to the relevant municipality so that it can exercise its right of refusal, where applicable. This applies to all transfers of land, but not for transfers of individual apartments or to transfers of any undivided interest in real estate. Theoretically, every town and district has a regional plan that indicates areas where the local government may or may not have an interest in exercising its right of refusal option. In practice, most municipalities have not yet prepared such regional plans. Upon submission of a signed copy of the contract, the municipality issues a dated receipt. For any transfer, the municipality has 20 calendar days to make its decision, after that it loses the right to refusal option. If it chooses to exercise that option, it must pay the purchase price in full within ten days. Moreover, the municipality is not then allowed to sell the land within five years, except by public auction.
• Agents or their authorised representatives (which often are the buyers or their lawyers) must obtain a statement of the cadastral value of the land and/or the building(s) from the State Land Service. In accordance with the relevant regulations, cadastral values are valid for an unspecified period of time, if the value has not changed. This fact has to be certified by a State Land Service statement which can be issued on paper or in electronic form.

Once the documents have been obtained, state duty must be paid to the amount of 2% of whichever is the largest of: (a) the contract value, (b) the cadastral value of the land and/or buildings assessed by the State Land Service, or (c) the valuation of a credit institution undertaken for the purpose of mortgaging the real estate . The maximum amount of state duty is limited to LVL30 000 (approximately EUR43 000).

Additional information at:
www.zemesgramata.lv 

Protection of Intellectual Property

Legal Framework

Since Latvia became a member of the World Intellectual Property Organisation in 1993, it has adopted most of the international treaties in the field of intellectual property protection, including the Paris Convention for the Protection of Industrial Property, the Madrid Agreement Concerning the International Registration of Marks and Madrid Protocol, the Berne Convention for the Protection of Literary and Artistic Works, the Trademark Law Treaty, etc.

When Latvia joined the World Trade Organisation in February 1999, it became a member of the Agreement on Trade-Related Aspects of Intellectual Property Rights of 1993 (TRIPS).

Trademark registration and protection in Latvia is regulated by the l aw On Trademarks and Geographical Indications o f 16 June 1999 (entered into force 15 July 1999) - hereinafter the Trademark Law; the Madrid Agreement Concerning the International Registration of Marks, as well as applicable EU legislation in the area of trademarks (e.g. Council Regulation No 40/94 on the Community trade mark).

Patent registration and protection matters are regulated by the Law on Patents of 30 March 1995 (entered into force 20 April 1995) containing, inter alia, provisions on patent rights, the procedure for granting patents under the Patent Co-operation Treaty, the European patent extension to Latvia, the infringement of patents, the use and licensing of a patent and the enforcement of patent rights. The Regulations on Industrial Designs, which entered into force on 15 April 2004, regulate matters concerning industrial designs.

The Copyright Law of 6 April 2000 (entered into force 11 May 2000) sets the principal legal framework for the protection for copyright and neighbouring rights.

Regulatory Authorities

Patent Office

The Patent Office of the Republic of Latvia (Patentu valde) is an independent state institution established by the Cabinet of Ministers and operates under the supervision of the Ministry of Justice. It supervises industrial intellectual property matters in Latvia. The Patent Office maintains the official registers of patents for inventions, industrial designs and for trademarks; it certifies individuals qualifying to act as intermediaries in the registration process (referred to as patent attorneys), advises on issues relating to the protection and registration of intellectual property in Latvia, etc. In contrast to local individuals and companies, foreign individuals and companies may only apply to and correspond with the Patent Office via patent attorneys. The Patent Office maintains the register of patent attorneys.

Board of Appeal

A special body has been established, acting under the supervision of the Patent Office, for the examination of disputes relating to registration of intellectual property rights – the Board of Appeal of the Patent Office (hereinafter the Board of Appeal). The Board of Appeal is made up of three representatives of the Patent Office, as well as of four independent specialists in science, technology and law. Members of the Board of Appeal are appointed for a term of three years by order of the Minister of Justice at the instigation of the director of the Patent Office.

The Board of Appeal examines appeals on the basis of written claims submitted by legal entities or individuals against decisions of the Patent Office (for example, claims on decisions to reject application for registration brought by the applicant, as well as the applications of third parties claiming illegal registration).

Each appeal petition shall be reviewed by no less than three members of the Board of Appeal and one of them must be a lawyer. A specialist who has participated in an earlier examination of an application cannot take part in the proceedings of the Board of Appeal relating to the same application. Claims brought before the Board of Appeal must be examined within three months. Decisions of the Board of Appeal may be appealed in the courts.

Trademarks

(a) Rights of Trademark Owners

According to the Law on Trademarks, there are several categories of trademark :

• words – consisting of letters, words, also forenames, surnames, numerals; 
• graphic – pictures, drawings, graphic symbols, shades of colours, combinations of colours; 
• three-dimensional – three-dimensional shapes, the shapes of goods or of their packaging; 
• a combination – consisting of a combination of the aforementioned elements (labels, etc.); 
• specific types or special – sound or light signals and the like.

There are several restrictions on signs which cannot be registered as trademarks, for example: signs, which are contrary to public order or to socially accepted principles of morality; signs, which could be confused with previously registered trademarks, widely known trademarks or ones that have had other rights registered.
The Law on Trademarks permits the use of unregistered trademarks provided they do not infringe the rights of other persons and do not violate the provisions of laws and regulations. However, only the registration of a trademark grants exclusive rights to its use. The registered owner of a trademark has an exclusive right to prohibit other persons from using the following signs in the course of their commercial activities: 

• any sign which is identical to the trademark in relation to goods or services which are identical to those for which the trademark is registered; 
• any sign where, because of its identity or similarity to the trademark and because of the identity or similarity of the goods or services, for which the trademark is registered and for which the sign is used, there exists a possibility of confusion or a possibility of association by customers between the sign and the trademark.

(b) Registration of Trademarks

A person, wishing to register a trademark, has to file an application at the Patent Office. The applicant may apply for national registration of the trademark, effective in the territory of Latvia only, or for international registration of the trademark under the Madrid Agreement Concerning the International Registration of Marks and Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, or for European Community registration of the trademark under Council Regulation No 40/94 on the Community trade mark.

The application, as well as the list of target goods and/or services, must be in Latvian. Other materials and documents accompanying the application may be submitted in English, French, German or Russian. However, the Patent Office is entitled to request a translation of the submitted materials and documents into Latvian. Such translations shall be submitted within a term specified by the Patent Office.

Registration of a trademark is effective for a term of ten years starting from the application date. It can be extended an unrestricted number of times, each time for an additional ten-year period.

Patents

(a) Rights of Patent Owners

Under the Law on Patents, a patent shall be granted for a new invention that possesses an aspect of invention and is industrially applicable. The invention is considered to be new if it does not repeat any professional knowledge, the entire sum of which forms the technical level. With regard to invention, the technical level includes any professional knowledge, which, prior to the filing or priority date of the patent application, either by means of public use or in any other way (in writing or in words), has been disclosed to the general public.
The object of invention may, inter alia, be a device, a process, a substance, a micro-organism, or plant or animal cell culture, as well as a new use of known devices, processes, substances and micro-organisms. The following shall not be recognised as inventions: 

• discoveries, scientific theories, and mathematical methods; 
• designs; 
• schemes or methods for performing mental acts, rules and methods for playing games and conducting business, as well as computer programs; 
• methods of presenting information.

This provision shall exclude the patentability of the mentioned objects only if patent protection is claimed for these objects as such.

The rights to patents belong to inventors or their successors in title. If several persons have jointly created the invention, the right to the patent shall belong to all of them jointly. If several persons have created an invention independent of each other the right to the patent shall belong to the person who is the first to file an application with the Patent Office. These rights shall also be retained by a person who filed the first application in a country which is a party to the Paris Convention for the Protection of Industrial Property, and who has then, in accordance with the provisions of the Paris Convention, filed an application for the same invention with the Patent Office within 12 months.

Having a patent ensures the owner the exclusive right to use the invention. Third parties are not allowed, without the consent of the patent owner, to produce a patented product (device, substance, micro-organism, etc.), to offer it on the market, to put it into economic circulation or to use the product, as well as to import or stock it for the above purposes; to use a patented process; to put into economic circulation, to use, as well as to import and stock for the above purposes, a product which has been obtained by using the patented process. The patent owner has non-transferable rights of authorship.

(b) Patent Registration

A person, who wishes to obtain a patent for an invention, shall file an application with the Patent Office. The patent application may be filed in Latvian, English, French, German, or Russian. If the application has been filed in any of the said foreign languages, the applicant shall, within three months, submit a translation of the invention formula (claims) and certain other items in Latvian.

The filing date (priority date) of the application for a patent, on condition that all requirements are met, shall be the date when the Patent Office receives the application. If the requirements are not met, the filing date shall be the date when the deficiencies were corrected.

According to the Law on Patents, patents for inventions are issued for a term of 20 years starting from the application filing date. This term may be extended for a period not exceeding five years only if the patented invention is a pharmaceutical substance that is subject to compulsory testing and registration before being sold in Latvia, or a method of its preparation or unknown application of the substance.

Industrial Designs

(a) Rights of Owners of Industrial Design

An industrial design is granted with legal protection if it is new and has an individual character. An industrial design is considered to be new if, prior to the application filing date or priority date, the industrial design has not been disclosed to the public. It is considered to have individual characteristics if an informed user (consumer) distinguishes the overall appearance of the industrial design from other industrial designs publicly disclosed earlier.

Inter alia , legal protection is not granted to: 

• industrial designs which are in contradiction with public morals; 
• characteristics of the industrial design's outer surface if they are dependent only on the technical functions of the design.

The designer, rather than the owner of or applicant for registration of the industrial design, has non-transferable moral rights of authorship. Designers also have the right for their name to be included in the application for the industrial design registration and official publications, and they also have the right not to disclose their name.
Upon registration of an industrial design, the owner acquires exclusive rights to use the industrial design, to offer it for sale, to put it into circulation and import, export or stock the industrial design for the purposes listed above.

(b) Registration of Industrial Designs

A person, wishing to register an industrial design, must file an application with the Patent Office. The applicant must indicate a designer, unless the designer wishes no publicity and has filed a request stating that.

The industrial design name must be filed in Latvian; other documents accompanying the application may be filed in English, French, German or Russian. However, a translation into Latvian may be requested. One application may contain more than one industrial design, but in such cases, the designs must be in the same class of the international classification of industrial designs.

The exclusive rights of industrial designs are in force from the date they are granted and expire no later than five years after the filing date, but the rights may be renewed for subsequent five-year periods with a maximum of 25 years from the filing date.

Copyright and Neighbouring Rights

(a) Rights of Copyright and Neighbouring Rights Owners

The objects of copyright, regardless of their manner or form of expression, comprise literary works (such as books, speeches, computer programs, etc.); dramatic and dramatic-musical works, scripts and treatments of audio-visual works ; choreographic works and pantomimes; musical works with or without lyrics; audio-visual works; drawings, sculptures and other works of art; works of applied art; design works; photographic and analogous; sketches, drafts and plans for buildings and other architectural designs; geographical maps, plans, sketches, and moulded works which relate to geography, topography and other sciences; and other works of authors, irrespective of the purpose or merit of the work – irrespective of whether the work has been finished or not. Copyright may also be obtained for derivative works, such as translations and adaptations, revised works, annotations, theses, summaries, reviews, musical arrangements and for collections of works – encyclopaedias, anthologies, atlases, databases and other compiled works which are the result of creative activity. In order to be subject to copyright, the works, ideas and concepts must be made known to the public in some form.

The author has non-transferable rights of authorship. Authors have the right to use their work in any manner, to permit or prohibit its use, receive remuneration for permission to use the work and for the use of the work except in cases prescribed by the Copyright Law.

In terms of neighbouring rights, the Copyright Law prescribes the rights of performers, the producers of recordings, film producers and broadcasting organisations to apply for the protection of performances, their recordings, films and broadcasts.

Copyright is in effect for the entire lifetime of an author and for 70 years after their death . 70-year copyright terms are also granted to audio-visual works after the death of any of: the director, author of the screenplay, author of dialogue or composer. In cases where such works are created under a pseudonym or anonymously, copyright is protected 70 years after the work was originally made available to the public. Copyright expires, unless calculated from the author’s death, if the work was never made public, according to the law, within a period of 70 years. Anyone can acquire copyright for a period of 25 years, if the copyright of the previous author has expired and the work was never made public in accordance with laws.

Neighbouring rights are in effect for 50 years after the first performance or production. The same period is fixed for rights with respect to producers of sound recordings and broadcasting organisations – from the date of the first public broadcast.

All personal rights to work created by the assignment of an employer shall remain with the employee, irrespective of the form or type of work. All economic rights to work created by employees in the conduction of their employment duties shall be deemed to be transferred to the employer, unless the parties have expressly agreed otherwise.

(b) Protective Measures for Copyright and Neighbouring Rights

An action, whereby the moral or economic rights of a holder of copyright or neighbouring rights are infringed, is considered to be an infringement of copyright and neighbouring rights. To protect their rights, holders of a copyright or neighbouring rights may exercise any legal measures to protect their rights, including submitting a claim in the court in order to prevent unauthorised use of intellectual property, and to recover damages. In accordance with the plaintiff's claim, the court may apply measures specified in the Civil Procedure Law to secure the claim, to prevent illegal actions or to stop them.

The court may, corresponding to the plaintiff's claim, make a decision that the materials and equipment used for the production of infringing copies may be sold to compensate the losses incurred by the author, or also that such materials and equipment be donated for use in charitable purposes, or confiscated. The infringing copies are destroyed.

Regulation of Competition, Mergers & Acquisitions

Regulatory Framework

Foreign enterprises, starting-up business or engaging in mergers and/or acquisitions in Latvia, have to comply with the requirements of the Competition Law and government regulations. As the EU exercises exclusive competence in the area of competition and merger regulation, the Latvian legislation is fully in correspondence with the appropriate EU regulations and directives.

Since 1 May 2004 the European Commission, national competition authority and national courts have had the authority to apply all EC competition rules fully in Latvia. If the companies concerned carry out activities that may affect trade between Member States; have the intention to, or achieve the prevention, restriction or distortion of competition within the internal market, then national and EC competition laws apply in parallel, i.e., a national competition authority or a national court applies national competition law in cases where trade between Member States is affected and applies Articles 81 and 82 of the Treaty establishing the European Economic Communities. With the growth of business activity, compliance with the competition regulations has become one of the key prerequisites for large equity transactions by foreign investors.

Competition Council

The supervisory institution of competition in Latvia is the Competition Council (Konkurences padome). The main functions of the council are to monitor the activities of market participants in order to prevent the development of dominant positions, unfair competition and collusion, to review disclosures on mergers and acquisitions of market participants, and to limit market concentration by allowing or prohibiting particular mergers and acquisitions.

The council has the right to carry out market research and on-site inspections of market participants, to make use of experts, submit court claims, announce decisions and take other preventive or punitive measures to ensure that the activities of market participants comply with fair competition regulations . In cases of non-compliance, the council may forbid transactions or charge substantial penalties.

Prohibited Agreements

The Competition Law prohibits or makes null and void any collusion among market participants that is intended to restrict competition within the geographical market of Latvia. For example, agreements such as the fixing of prices, division of markets by influence, territory, contractors, etc. are regarded as prohibited.
Unless competition regulations allow a general block exemption (such exemptions exist for inland rail, road and sea transportation, and there is joint regulation of block exemptions for some other services), any agreements have to be submitted to the council. The council may decide to allow an agreement to continue if the claimant can demonstrate that it would be beneficial to the long term development of the market.

Disclosure of Market Concentration

Under the Competition Law, mergers and acquisitions are considered to be transactions leading to market concentration. If the combined turnover of the parties involved in such a transaction exceeds LVL25 million (EUR36 million), or at least one of the parties has a leading market position (its market share exceeds 40%), the transaction must be disclosed to the council. Information has to be submitted prior to the conclusion of the transaction. The council may either prohibit or allow the transaction, or allow it under certain conditions. In some cases, even the merger of two foreign companies may become the subject of disclosure requirements, since the council and Latvian courts have adopted a broad view of what constitutes a market participant.

Additional information at:
www.kp.gov.lv 

Protection of the rights and interests of investors

One of the issues to be considered when making decisions to invest in foreign countries is an evaluation of the legal measures available to protect the rights and interests of the investor in that country.

To explain the situation in Latvia, this section provides an overview of the relevant national legislation and touches on applicable European Union regulations . In summary, Latvia does provide various mechanisms for the protection of investors. The Latvian legal system is evolving to a level of legal quality similar to that of other European states but already provides satisfactory procedures for the protection of investors' rights.

The basic principle of Latvian law is that every natural or legal person has a right to the protection and enforcement of their rights or interests, and there are appropriate remedies for breaches of such rights.

The laws of the Republic of Latvia take into account all civil disputes that are subject to court verdicts, unless the law provides otherwise or the parties have agreed on other procedures for settling the dispute. After a court judgement or an arbitration award has been delivered, an execution process becomes available. At any stage of court or arbitration proceedings the parties are encouraged to reach a harmonious resolution.

Latvian Court System

Under the Law on Judicial Power, a three level court system has been established and each level has its own defined jurisdiction: 

1. District Courts
   A district (city) court is the court of first instance for civil and criminal matters,
   and matters which arise from administrative legal relations. 
2. Regional Courts
   A regional court is the court of first instance for those civil matters and criminal matters, which are within the jurisdiction of regional courts in accordance with law.
   And it is a court of appellate instance for civil matters, criminal matters and administrative matters, which have been adjudicated by a district court, or by a single judge.
3. The Supreme Court
   The Supreme Court is composed of the Senate and two judicial panels- the Civil Matters Panel and the Criminal Matters Panel.

A panel of the court is the court of appellate instance for matters, which have been adjudicated, by regional courts as courts of first instance, but the Senate of the Supreme Court is the court of cassation instance for all matters, which have been adjudicated, by district courts and regional courts, and is the court of first instance for matters concerning decisions of the Council of the State Audit Office.

Appeal and cassation procedures under Latvian law

Latvian legislation prescribes two levels of appeal. The first level of appeal is an appeal against the first instance judgment in cases of error in fact or law and may involve a substantive review of the whole case. The second level of appeal is to the Senate of the Supreme Court, and can only be appealed by means of cassation, which relates to errors of substantive or procedural law including cases where the lower courts have acted outside their jurisdiction.

Territorial jurisdiction under Latvian law

The general rule of territorial jurisdiction is that actions against natural persons must be brought to the court in accordance with their place of residence, whereas actions against legal persons must be brought to the court in accordance with the location of their registered address.

Jurisdiction according to European Council Regulation No.44/2001

European Council Regulation No.44/2001 prescribes the jurisdiction and the recognition and enforcement of judgements in civil and commercial matters on the level of EU law with a binding and directly applicable legal instrument. The scope of this Regulation covers all the main civil and commercial matters apart from certain well-defined ones.

The crucial principle is that persons domiciled in a member state must be sentenced in the courts of that member state, irrespective of their nationality. The place of domicile is determined in accordance with the domestic law of the member state where the court case is being held. In the case of legal persons, their domicile is determined by the country where they have their statutory seat, central administration or main place of business.

Execution of court judgements under Latvian law

The judgment of any Latvian court that has come into legal effect is executed in accordance with the Civil Procedures Law. The basic document for executing a judgement is an execution order issued by the court in which the judgement was passed. The order of execution is submitted to a sworn bailiff.
Execution of foreign court judgements

Executions of foreign court judgements are carried out in accordance with both the provisions of the Civil Procedure Law and international agreements, especially the agreements on legal aid and legal relationships, but also according to the provisions of Council Regulation No.44/2001.

Firstly, according to international agreements, the legal protection of persons from one of the contracting states is the same as for persons of the other contracting state. International agreements equally apply to natural and legal persons from the contracting states.

Therefore, persons of one contracting party to an international agreement have rights to apply, without hindrance, to courts and other legal institutions, to file claims and take other procedural steps under the same conditions as people from the contracting state where the procedural activities are carried out.

Latvia has entered into several agreements on legal aid and legal relationships, with Estonia, Lithuania, Belarus, Kyrgyzstan, Moldova, People’s Republic of China, Poland, the Russian Federation, Ukraine, United States of America (in criminal matters only), and Uzbekistan.

Secondly, Regulation No.44/2001 of the European Council prescribes the recognition and enforcement of any judgement delivered by the court of another member state. The enforcement procedure is based on the principle of automatic recognition of judgements given within the European Union. If a party against whom judgement has been passed denies that recognition, provisions are made for a special procedure to declare the enforceability of a judgement in another member state.

It will be impossible to enforce, within Latvia, a judgement passed in one of the states with which no international agreement on legal aid and legal relationship has been concluded, or where the legal relationship falls outside the European Union.

Nonetheless, in cases where international agreements have previously been concluded with new member states of the European Union, particularly those with Bulgaria, Romania, Estonia, Lithuania and Poland, Council Regulation No.44/2001 will replace those agreements, which will then only be applicable to issues not covered by EU law.

Arbitration

Civil disputes are not only adjudicated by the state courts prescribed by the Law on Judicial Power, but also commonly by private arbitration tribunals. An ad hoc arbitration tribunal can be established, on the agreement of the parties, to resolve a single specific dispute or the parties may agree to transfer their dispute to an existing permanent arbitration institution.

Contractual arbitration

An arbitration agreement may either be the subject of a separate contract or in an arbitration clause forming part of a wider contract. Either of these forms is accepted, but such an agreement is the sole legal basis for the jurisdiction and operation of an arbitration tribunal. In cases of civil disputes, the duty of each party is to submit the dispute to the arbitration tribunal and follow the procedure specified in the arbitration agreement.

An arbitration agreement may be concluded by civil law subjects, but the Civil Procedures Law lists a number of subjects, which may not assign mediation of a particular dispute to arbitration, including disputes regarding establishment, alteration or termination of property rights relating to real estate if, among the parties to the dispute, there is any person whose rights to acquire ownership, possession or use of real estate are restricted by law, the adjudication of which may infringe the rights or the interests of third parties, protected by law, who are not a party to the arbitration agreement in which one party, even just one, is a state or local government institution.

Arbitration foreseen in international agreements

International agreements concluded by Latvia determine procedures for the settlement of disputes arising under the scope of the corresponding agreements.

Latvia have concluded a number of bilateral agreements on the promotion and protection of investment with countries including Austria, Belarus, Belgium, Luxembourg, Switzerland, Canada, Czech Republic, Germany, Denmark, Estonia, Egypt, Spain, Finland, France, United Kingdom, Greece, Croatia, Hungary, Iceland, Israel, Italy, Korea, Kuwait, Lithuania, Moldova, the Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovakia, Sweden, Turkey, China, Ukraine, United States of America, Uzbekistan and Vietnam.

These bilateral agreements prescribe procedures for the settlement of disputes between a contracting state and a natural or legal person of the other party, concerning the obligations of the latter relating to the investment of the former.

The bilateral agreements prescribe that first of all there should be an attempt to resolve any disputes by negotiation. Further, if the parties to the dispute fail to reach an agreement in discussion, then the dispute should be handed over to the ICSID Centre established under the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The ICSID Convention came into force in Latvia on 9 August 1997. Otherwise, if the concerned state is not a Contracting State of the ICSID Convention, the dispute should be settled by a panel of three arbitrators according to the UNCITRAL arbitration policy and procedure.

Another example of an international instrument providing specific rules on the negotiation and settlement of disputes is the Energy Charter Treaty (sets out a procedure for settlement of disputes where an investor from one contracting state holds a view that another contracting state has not fulfilled its obligations under the investment protection provisions). Disputes, between parties from contracting states, relating to the investments of one in the area of the other are to be settled in a friendly manner. If that is not possible, then the investor can choose to submit the dispute to the national court of the contracting state, or in accordance with any previously agreed dispute settlement procedure, or to international arbitration through the ICSID Centre, the ICSID Centre's Additional Facility, UNCITRAL or the Stockholm Chamber of Commerce depending on the conditions stipulated in the Treaty.

Execution of arbitration awards

If an arbitration award is to be executed in Latvia, the concerned party is entitled to apply to a district court for the issue of a court order for compulsory execution of the arbitration award.

Latvia is a party to the 1958 New York Convention On Recognition and Enforcement of Foreign Arbitral Awards, which applies to the recognition and enforcement of arbitration awards made in the territory of a state other than the state where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. Under this convention each contracting state recognises arbitration awards as binding and enforces them in accordance with the rules of procedure of the territory where the award is relied upon under the conditions laid down in the Convention.

Settlement agreements

The Civil Procedures Law also prescribes the option to conclude a settlement agreement, which may be concluded at any stage of a procedure or any civil dispute, with minor exceptions provided by law, for example, disputes relating to real estate, if the parties include persons, whose rights to own or possess real estate are restricted in accordance with procedures prescribed by law or if the terms of the settlement infringe the rights of another person or their interests provided by law.

The Civil Procedures Law considers the possibility of settling an agreement at some stage during arbitration proceedings, which would then bring the arbitration to an end.

Conclusion

Adequate legal remedies are available for the protection of the rights and interests of investors in the Republic of Latvia. They include both judicial and arbitration proceedings. Additionally, these legal measures provide protection of rights and interests which are developing to meet international standards. Thus, investors considering investment in Latvia can be in no doubt that appropriate mechanisms for the protection of their rights are ensured.