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The Court of Justice of the European Union has promulgated a judgment in a case in which our team respresents Euromin Holdings (Cyprus) Limited

  • Latvia


    The Court of Justice of the European Union has promulgated a judgment on rules that set state liability caps for compensation for a breach of EU Law. Furthermore, the Court has meaningfully clarified certain rules on takeover bids.


    On 10 December 2020 the Court of Justice of the European Union (CJEU) adopted a judgment in a preliminary ruling case that was initiated by the questions asked by the Senate in proceedings between Euromin Holdings (Cyprus) Limited and the Financial and Capital Market Commission (FCMC).


    The domestic proceedings relate to methods applied for calculation  of a share price in the AS Ventspils nafta’s mandatory share repurchase offer. The Senate must rule, inter alia, on whether, for the purposes of calculating the share price, company's net assets include a minority (non-controlling interest). Minority (non-controlling interest) is the parent company’s unrelated part in the subsidiaries, thereby effectively artificially increasing the parent company's share price. Euromin Holdings (Cyprus) Limited filled an application to the court requesting to declare the FCMC's decision unlawful and to retrieve the overpaid amount as damages arguing that the FCMC had incorrectly calculated the price of the  AS Ventspils nafta share. The Regional Administrative Court upheld Euromin Holdings (Cyprus)’s claim but reduced  the amount of damages by 50%. Both parties filed an appeal-on-point-of-law to the Senate, which, in turn, asked the CJEU to interpret certain aspects of the of the European Union law. The CJEU's judgment addresses some issues that are noteworthy for all member states.


    Firstly, the CJEU has decided that the Latvia’s state liability rules are incompatible  with the principles of European Union law. Namely, the rules that grant the court a discretionary right to award damages caused by the breach of the European Union law only in part (50% or even less), are incompatible with the principle of effectiveness.


    Secondly, the CJEU has declared that, in accordance with Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (the Directive), the rules governing the pricing of shares in a mandatory share buy-back offer must be clear and precise. The CJEU also emphasised the fact that in the first subparagraph of Article 5 (4) of the Directive prescribes a single definition of an equitable price and the main method of calculating it. Derogations from this method are allowed only under clearly defined conditions and criteria. In addition, the other methods used to determine the price per share in the event of such a derogation must be based on objective valuation criteria commonly used in financial analysis, which can be considered "clearly defined".


    Thirdly, the CJEU clarified that the Directive does not allow the value of a share to be obtained for the purposes of a takeover bid by dividing the parent company's net assets, including non-controlling interests, by the number of shares issued, unless it is a method of determining the share price which is based on an objective valuation criterion commonly used in financial analysis and which can be considered as "clearly defined". The CJEU also stated that it is for the domestic court to assess whether the inclusion of a non-controlling interest in the net assets of the parent company for the purpose of calculating the share price meets the objective assessment criteria commonly used in financial analysis.


    It is now for the Senate to rule on the matter with due regard to the conclusions of the CJEU. It is expected that the final ruling in the case will form the first significant example of case law in Latvia on the issues of limitation of the amount of damages and determination of the share price in the mandatory share repurchase process.


    Euromin Holdings (Cyprus) Limited is represented in court by Ilze Kramiņa, a sworn advocate at Eversheds Sutherland Bitāns, and Krista Bērziņa, an assistant to a sworn advocate, and legal assistants Zelma Lapiņa and Rainers Svoks.

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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