Ellex Baltic Fintech Legal Outlook 2026

Ellex Baltic Fintech Legal Outlook offers a comprehensive overview of the most significant legal developments and market trends expected to shape the fintech sector in Estonia, Latvia and Lithuania during 2026. Involving insights from leading legal experts in fintech, this publication highlights key regulatory changes (including PSD3/PSR, CCD II, EU AML package, MICAR, EU AI Act, Digital EURO) as well as country specific initiatives and elaborates on their impact to the local fintech markets.

In 2026, the Baltic FinTech landscape is defined by regulatory maturity, consolidation and cross-border ambition. Estonia remains a digitally advanced and credible fintech hub, benefiting from constructive engagement by the regulator and a shift towards sustainable, pan-European scaling. Latvia gains momentum with its FinTech Strategy 2026–2027, supported by active regulators´ backing and increased licensing activity, strengthening its position as an attractive innovation hub. Lithuania continues to offer efficient access to the EU market, while facing heightened supervisory expectations around AML, operational resilience, AI, cybersecurity and governance as EU regulatory integration deepens.

You can start reading or download the full report HERE.

Estonia: From rapid expansion to sustainable, regulated growth

Estonia enters 2026 as a mature fintech hub, building on its strong start-up culture, advanced digital infrastructure and a well-experienced regulator in technology-driven business models. While the market has peaked statistically in terms of start-ups and unicorns per capita, the focus has shifted from rapid growth to sustainability and cross-border scaling.

Regulation continues to play a decisive role in the sector in line with broader EU trends. Estonia’s relatively compact regulatory environment remains as an advantage, allowing for swift and constructive dialogue with the regulator. The regulator is placing strong emphasis on further enhancing the efficiency of Estonia’s regulatory landscape by reducing administrative burdens for market participants, streamlining regulatory requirements and introducing new solutions to facilitate a smoother and more efficient licensing process. At the same time, supervisory practice has become more selective resulting in higher licensing standards and a smaller but more credible market.

From a regulatory perspective, 2026 is defined by implementation rather than transition. MiCAR has changed the digital asset landscape, DORA has shifted the focus to operational resilience and ICT risk management, the upcoming application of the PSD3/PSR is redefining the provision of payment services and artificial intelligence is reshaping how the financial services are provided in general. These developments require fintech companies to combine technological innovation with regulatory maturity, reinforcing Estonia’s position as a stable and credible jurisdiction for financial services innovation.

Latvia: a coordinated push toward competitiveness

Latvia steps into 2026 with a new FinTech Strategy for 2026–2027 with a main objective to ensure that Latvia becomes a competitive FinTech hub in Europe by offering an attractive environment for licensing, innovation and growth.

With strong support from the legislators and the financial supervisory authority, Latvijas Banka, the country is on the right path to achieve this ambitious goal, as evidenced by an increasing number of authorizations issued to FinTech companies in 2025, including several CASP authorizations.

Lithuania: Alignment with evolving EU frameworks and stricter supervisory expectations

In 2026 Lithuania’s fintech ecosystem should anticipate alignment efforts with evolving EU frameworks, as well as stronger supervisory emphasis on AML, operational resilience, AI/automated risk models, cybersecurity and governance arrangements. Deeper EU regulatory integration with MiCAR, AML regulation, PSR and PSD3, among others, will be critical in ensuring both a growing competitiveness and appropriate risk management. While Lithuania remains as one of the key players in the European fintech ecosystem with a rapid market entry potential, stricter conduct expectations, supervisory oversight and maturity of compliance and risk management are expected to be defining topics this year.

About Ellex

Ellex is a leading law firm in the Baltics, providing comprehensive legal services to fintech companies and other business sectors. With a client-focused approach and unparalleled industry knowledge, we empower businesses at the forefront of innovation to thrive in an ever-evolving digital economy. Ellex stands out with its deep expertise and proven track record in navigating the complex legal landscape of fintech, digital assets, and IT law. Our clients say:

There are quite a lot of firms offering FinTech legal services, but not many of them have Ellex´s track record in real executions and experience with regulators and different market participants.

In 2025 the transaction market in Estonia grew by 18.5% – the largest deals reached record levels

The market analysis Transaction Radar, prepared by Ellex, shows that a total of 205 transactions were carried out in Estonia in 2025, which is 32 more than in the previous year. Transaction activity particularly increased in the second half of the year, confirming the market’s recovery after an earlier period of caution. 

According to Ellex Partner Risto Vahimets, the macroeconomic environment is supporting further revitalisation of transaction activity. “Banks are ready to provide financing, interest rates remain at reasonable levels, and pressure to conclude deals has increased both due to accumulated capital and because many companies have long been held by funds,” Vahimets noted. At the same time, he emphasised that geopolitical uncertainty continues to remain a significant risk factor. “In the coming year, we expect a focus on technology, above all on artificial intelligence, healthcare and energy technologies. Private equity and financial investors will gradually begin to return to the market, but the direction of the market will most likely continue to be shaped by strategic buyers.”  

Transactions carried out in Estonia were distributed as follows:  

• 83 venture capital and technology transactions 

• 95 traditional mergers and acquisitions 

• 14 large-scale real estate transactions 

• 13 issuances 

Among the largest landmark deals of the year were the sale of Rimi Baltic to the Danish retail group Salling Group for EUR 1.3 billion, as well as INGKA’s acquisition of a forestry portfolio from Södra in Estonia and Latvia.  

One of the key regulatory milestones of the past year was the amendment to the Competition Act that entered into force in July, bringing the regulation into line with the ECN+ Directive. A new competition supervision procedure was established, ensuring principles similar to criminal proceedings. During 2025, 45 merger notifications were submitted to the Competition Authority, nine of which resulted in the initiation of additional proceedings. In light of the updated law, an increase in the duration of proceedings is expected during the adaptation period.  

The largest deal in Europe was the acquisition of the Dutch company JDE Peet’s by Dr Pepper for EUR 19.7 billion. Globally, infrastructure and technology transactions dominated – the largest of these was Union Pacific’s acquisition of Norfolk Southern for USD 86 billion. No European transaction entered the global TOP 10, indicating a concentration of capital in America.  

The international transaction market in 2025 presented a mixed picture. According to Dealogic, the number of transactions in the first half of the year was 16% lower compared to the same period in 2024, while the total value of transactions, on the contrary, increased by 28%. This indicates a clear shift towards large strategic transactions. Infrastructure and technology deals dominated. The largest was Union Pacific’s acquisition of Norfolk Southern for USD 86 billion, followed by the merger of American Water Works and Essential Utilities valued at USD 63 billion, and the acquisition of Electronic Arts by a Saudi fund together with Silver Lake and Affinity Partners for USD 55 billion.  

Of the ten largest transactions worldwide, three were US infrastructure deals, two were cybersecurity services transactions, two were medical transactions, and two were transactions in the gaming and entertainment industries, reflecting a clear trend towards secure and strategic investments.  

The Transaction Radar has been published since 2020, shortly before the end of each half-year. It analyses the background and reasons behind the largest transactions in Estonia and forecasts possible trends for upcoming periods.  

The full market analysis is available HERE. 

Christmas Labour Act Notes in Good Cheer

As the holiday season approaches and offices fill with decorations, treats, and the shared drive to finish the year’s work, we would like to share a few seasonal reminders from an employment‑law perspective. May the notes below serve as a helpful and warm reminder while you enjoy the festive spirit with your teams.

Corporate Events and Holiday Parties

Christmas and year‑end celebrations are a wonderful chance for colleagues to meet in a relaxed atmosphere, enjoy some well‑earned rest, and celebrate achievements together. At the same time, it is important to remember that a safe, respectful, and inclusive environment matters during festivities too.

A short reminder about appropriate conduct and professional boundaries helps ensure that everyone enjoys the event — and that management or HR do not face unexpected “post‑party issues.”

This season is also a good moment to revisit working time rules. If celebrations take place during working hours, employees are expected to participate or continue their duties, as this time is paid work. Team‑building events outside regular hours are always welcome for team spirit, but participation should remain voluntary.

Holiday gatherings may include a toast or a festive drink. Employers may allow moderate alcohol consumption at organized events, but it is essential to set clear boundaries and behaviour guidelines to maintain a safe and respectful workplace.

Seasonal Health & Safety Considerations

Winter brings its own charm, but it also brings challenges. Snow, ice and early darkness increase risks around entrances, parking areas and other outdoor spaces, so extra care should be taken for employees working outside. This is a good time to remind teams about safe behaviour, proper protective equipment, and caution on slippery or uneven surfaces.

Indoors, it is equally important to ensure a safe environment. Wet floors, temperature changes and poor lighting are common in winter, and regular checks can improve both health and workplace comfort.

Festive decorations add warmth and cheer, but they must be used responsibly. Candles and lights should be handled safely, cables kept away from walkways, and decorations placed so they do not block exits or access to tools. Companies that welcome guests or partners may find it useful to set clear guidelines for decoration use.

Even if winter brings surprises, workplace accidents should never become part of the holiday tradition. A few simple reminders and preventive steps help keep the season safe and festive for everyone.

Vacation Planning and Business Continuity

The end of the year is one of the busiest times for vacation requests. At the same time, employers need to plan ahead to ensure that work continues smoothly without interruptions.

It is helpful to encourage employees to coordinate their vacation dates early. This is also a good moment to remind everyone to check any unused vacation days, so they do not accumulate excessively and so that a healthy balance between work and rest is maintained.

Remote Work During the Festive Season

December often adds a cosy touch to remote work — candles, lights, a favourite mug of something warm, or even a pet joining video calls. The festive atmosphere is welcome, but it is important that the home workspace remains safe, ergonomic and suitable for productive work.

It is also useful to remind employees that, even when working remotely, they represent the employer. Professionalism should remain a constant value throughout the holiday season.

Christmas Gifts and Ethics

Exchanging gifts among colleagues is a familiar December tradition, and small, thoughtful presents can lift the mood and strengthen team spirit.

At the same time, it is worth reminding everyone about the organisation’s rules and ethical standards. Extra care should be taken with gifts that may seem too expensive, too personal, or create a sense of obligation — whether between colleagues or in dealings with clients, suppliers or other partners.

To avoid misunderstandings, it is helpful to clarify the company’s approach to gifts from third parties. Clear guidance ensures transparency and allows the tradition to be enjoyed with confidence.

We hope these reminders and seasonal insights support you in navigating the festive period smoothly and confidently. The end of the year is a welcome moment to pause, reflect and celebrate the achievements made together with your teams. Should you have any questions about the topics covered in this newsletter, or if you would like assistance in preparing for the year ahead, our team is always ready to help.

We wish you and your colleagues a peaceful holiday season and a successful start to the new year!

With warmest regards Ellex Klavins Employment Law Practice Group

EU Payments Legislation in transition: where PSD3 and PSR stand now

The European Union has been laying the groundwork for a comprehensive regulatory reform of the payment and e-money sector for several years. In June 2023, the European Commission unveiled its long-anticipated proposals for a revised Payment Services Directive (PSD3) and a new Payment Services Regulation (PSR).

Following the European Parliament’s adoption of its position in April 2024, many market participants expected the final texts of PSD3 and PSR to be published in early 2025. However, negotiations within the European Council proved more time-consuming than anticipated, with its position only being formally agreed in June 2025, more than a year after the Parliament’s adoption of its position.

Although this has paved the way for trilogue negotiations between the EU institutions, it’s clear that the path to finalising regulations that will reshape the payments and e-money industry remains challenging. As the legislative process approaches its final phase, here is a brief look at where the EU institutions stand on some controversial key elements of PSD3 and PSR.

Commentary by Ellex in Estonia experts Anneli Krunks and Marion Müürsepp.

• Capital thresholds remain a point of contention. The proposed capital requirements have emerged as one of the areas of disagreement—somewhat unexpectedly—particularly due to the European Council’s diverging views. This concerns, in particular, e-money and money remittance service providers. For e-money service providers, the European Commission initially proposed a capital threshold of 400,000 EUR, which the Council has suggested reducing to 150,000 EUR. Conversely, for money remittance providers, the original proposal set the threshold at 25,000 EUR, while the Council has pushed for a significant increase to 150,000 EUR. These substantial discrepancies highlight the need for further negotiation and compromise among the EU institutions during the trilogue phase.
• Clarification needed on the use of agents by e-money service providers. The use of agents by e-money service providers remains an open issue requiring further clarification. The initial proposal introduced a distinct regulatory framework for using e-money distributors—covering both the distribution and redemption of e-money—and required e-money service providers to undergo a passporting procedure when engaging such distributors. The European Council, however, has significantly revised this approach by introducing an agent regime (similar as to payment service providers). Under this amended framework, e-money service providers would still be required to undergo passporting when using agents. However, the Council’s version limits the scope of agent activities to redemption only, explicitly excluding distribution of e-money from the agent’s functions. This change would substantially reduce the regulatory burden for e-money service providers, streamlining cross-border operations while maintaining oversight of key redemption functions.
• Passporting timeline remains uncertain. The timeline for passporting procedures remains unresolved. While the original proposal retained the current maximum deadline of three months, the European Parliament has advocated for a significantly shorter 30-day timeframe. In contrast, the European Council has proposed extending the deadline to four months. A compromise is likely to fall somewhere between these positions. It is widely acknowledged that a 30-day deadline may be unrealistic for some Member States, given administrative constraints. At the same time, market participants are unlikely to support any further extension beyond the current three-month period, due to concerns over regulatory delays and operational efficiency.
• Reapplication process still on the table. The initial proposal requires currently licensed payment and e-money service providers to reapply for authorisation within 24 months of new regulations entering into force, demonstrating compliance with the updated regulatory requirements. Notably, the European Parliament has taken a pragmatic stance by emphasising that supervisory authorities should request only the data and documentation newly required under the new regulations. The Parliament’s position also introduces the possibility of extending the transitional period, which has been positively received by industry stakeholders. Nonetheless, aside from these adjustments, the overall approach to reauthorisation has remained largely unchanged. As a result, greater responsibility now falls on supervisory authorities to establish a clear framework and step-by-step process to guide firms through reapplication efficiently and transparently.
• Fraud prevention remains a central pillar. The EU institutions continue to underscore the critical importance of enhancing fraud prevention within the payments sector. Reflecting this priority, both the European Parliament and the Council have proposed further refinements to the fraud prevention framework, going beyond the measures outlined in the Commission’s initial proposal. These developments reaffirm that fraud prevention will remain a core element of the upcoming regulatory framework under PSD3 and PSR.
• Diverging institutional views on the provision of payment accounts to payment service providers. The question of whether credit institutions must provide payment accounts to payment service providers has proven to be a contentious issue, with the European Parliament and the Council adopting significantly different positions. The European Commission’s initial proposal outlined specific circumstances under which a credit institution could refuse to open or could close an account. These included legitimate concerns such as suspected money laundering or a material breach of contract, but also broader and more subjective grounds—such as when the payment service provider’s business model is deemed too risky or the associated compliance costs are considered excessively high. The European Parliament, in its position, expanded the Commission’s proposal even further, granting credit institutions greater discretion to refuse or terminate access to accounts.
  By contrast, the European Council has taken a fundamentally different approach. It emphasises that payment service providers should have access to payment accounts on an objective, non-discriminatory, and proportionate basis. The Council’s position significantly narrows the grounds on which access can be denied or account terminated. Notably, it does not consider the perceived riskiness of the payment service provider’s business model or high compliance costs as valid reasons for refusal or closure.
  It remains to be seen which of these positions will ultimately prevail in the final text of the regulation.

Although the current expectation is to finalise the texts in the first quarter of 2026, the volume of proposed amendments to the original drafts may lead to further delays.

Ellex Transaction Radar: summary of the first half of 2025

Ellex Transaction Radar summarises the most important trends of the transaction market in the first half of 2025. The first half of 2025 saw 96 transactions in Estonia, just two more than in the previous half-year. The highest number of transactions over the past four quarters occurred in the most recent quarter (52), but the overall transaction volume has remained at the same low level as at the end of 2024.

According to the Transaction Radar, the European and global transaction markets are paralyzed from the general geopolitical instability. There were certainly other important factors but the main driver was President Trump’s tariff circus which affected the transaction market in the half-year that just ended. In Estonia the scene is still negative due to inflation and economic recession.

In the first half of 2025, a total of 96 transactions were registered in Estonia, divided as follows:

• 39 venture capital and technology transactions;
• 43 traditional M&A transactions;
• 6 major real estate transactions;
• 8 share issues (incl. OTC issues).

According to Ellex partner Risto Vahimets, the energy, defence, and technology sectors remain in the spotlight. “However, we must seriously address issues that the rest of the world has largely overcome but which still affect both the investment climate and the overall state of the country and society. I’m referring to inflation and economic recession,” Vahimets noted.

Partner Sven Papp added that one positive takeaway from the first half of the year was the sustained interest and presence of foreign investors – a subject that has raised many questions and even concerns in recent years. “Just like elsewhere in the world, turbulent times give local investors a home-field advantage, as they tend to feel somewhat more secure here. Still, we’re seeing institutional investors remaining passive and in a wait-and-see mode everywhere, which will likely continue until the outlook becomes more predictable,” said Papp.

Ellex Transaction Radar has been published since 2020, following the end of each half-year period. It provides insights into the key drivers behind major deals in Estonia and forecasts potential developments for the periods ahead.

The full market analysis is available HERE.

Filips Kļaviņš about deal with Donald Trump, career in New York, and returning to Latvia

In this podcast episode, Ellex in Latvia partner Filips Kļaviņš shares vivid stories about a deal with Donald Trump, his early career in New York, and returning to Latvia during the formative years of its modern business landscape.

⚪️ What was entrepreneurship like in the 1990s?

⚪️ Why is intuition just as important as knowledge?

⚪️ And why are some decisions best made with the heart—not just a calculator?

Many thanks to the Podmedia team for the professional conversation and the opportunity to reflect on the journey from Wall Street to Ellex.

Listen to the episode in Latvian: HERE

Issuer Fails to Make Bond Payments – What Are the Next Steps?

By Anna Mišņeva, Sworn Attorney, Ellex Kļaviņš
Nasdaq First North Certified Advisor

New barriers to trade, disruptions to international commerce, financial market tensions and geopolitical uncertainty continue to put pressure on companies. Baltics experienced wake of high-profile bond defaults recently. The high-profile PlusPlus case involving €70 million in secured bonds in Estonia has drawn significant public attention. More recently, Nasdaq Baltic delisted the bonds of Lithuanian UAB “Integre Trans” following the initiation of bankruptcy proceedings. From time to time, we see issuers placed under surveillance or their public trading on stock exchanges suspended.

While no recent defaults have occurred in Latvia involving publicly traded bonds, it is crucial to raise investor awareness about available remedies when an issuer refuses to honour its bond payment obligations.

Limited Legal Framework

Latvia currently lacks specific legislation governing investor rights or enforcement procedures in bond defaults. Therefore, bondholder protection is entirely contractual — based on the provisions included in bond documentation such as the terms and conditions, prospectus, and the related security agreements.

Typically, bond documentation will define what constitutes an event of default — for example, failure to make payment within 20 business days. Upon the occurrence of a default, bondholders are entitled to exercise legal remedies, such as issuing default notice to the issuer, enforcing security, or initiating insolvency proceedings.

Below is an outline of the key steps in this process and practical issues that may arise.

Step 1: Formal Default Notice

The default process is generally initiated by a group of investors issuing a formal notice of default on behalf of the bondholders. Bond documentation typically sets thresholds for representation — e.g., holders of 10%, a majority of 50% plus one vote, or other criteria.

Such a decision may be taken at a bondholders’ meeting (convened by the issuer or in another manner defined in the terms). Proactive investor participation is crucial at this stage. However, in practice, it can be challenging as bondholders often do not know or communicate with each other prior to default.

Latvia does not have a trustee concept in bond transactions. Nonetheless, investors are free to appoint a representative to act on their behalf to initiate and coordinate the process.

Once default is declared, bondholders must determine:

• how decisions will be made,
• who will communicate with the issuer,
• who will lead enforcement actions, and
• how associated costs will be covered.

These details are often missing in the bond documents.

Step 2: Restructuring Discussions

Parties frequently attempt to restructure the debt. This may include changes in payment terms, reduction of the principal amount, or exchange offers involving new securities.

As this process is not regulated by law, restructuring outcomes depend on mutual agreement. It is critical to reach consensus among all bondholders, as dissenting investors may delay proceedings through legal actions.

Step 3: Enforcement of Collateral

If no restructuring is agreed, investors typically proceed to enforce the collateral. Collateral may include real estate, assets, shares in related companies, or guarantees — all outlined in bond documentation.

Collateral is registered in the name of a security agent, not the bondholders, to ensure practical enforceability. The agent holds and enforces the collateral on behalf of bondholders.

The agent enforces security upon bondholder instruction and distributes proceeds in line with the bond documents. Individual bondholders do not have the right to enforce security independently.

The agent’s mandate is defined in the bond terms and the security agent agreement, typically attached to the bond documentation. However, the agent may decline to act if, for example:

• advance payment for its services has not been made, or
• enforcement is not reasonably feasible.

Step 4: Litigation Against the Issuer

If the bonds are unsecured and no restructuring agreement is reached, bondholders may initiate legal action to recover amounts due. This can be done collectively or individually.

Latvia has little judicial precedent in such cases, litigation can be lengthy, costly, and unpredictable.

Step 5: Insolvency Proceedings

Insolvency proceedings may be initiated by any creditor (including a bondholder or a group of bondholders), in cases defined by law.

While insolvency is strictly regulated, bond terms will only apply insofar as they are not inconsistent with the Insolvency Law. Creditors must file claims to participate in the process.

If the bonds are secured, theoretically the security agent should participate in the process as a secured creditor. However, the agent’s role and powers in insolvency remain unclear and would need to be tested in practice.

The issuer’s assets will be liquidated, and creditors’ claims satisfied in the statutory order:

• First, costs of insolvency proceedings and certain priority claims (e.g., employees, tax authorities),
• Then, bondholder claims to the extent of principal amounts.

If proceeds are insufficient, claims are satisfied proportionally. Assets serving as collateral are sold separately, and proceeds are distributed among secured creditors.

Common Risk Factors That Can Complicate Recovery:

Before investing, it is critical to review bond documentation and identify potential risks, such as:

• No decision-making mechanism for bondholders is set in the bond documentation,
• No regular reporting obligation by the issuer (especially in private placements),
• Collateral located in foreign jurisdictions requiring cross-border enforcement,
• Foreign issuer, foreign law and courts applicable — increasing costs and unpredictability,
• Vague or ambiguous issuer obligations and representations,
• Security agent roles defined too broadly or superficially,
• No limits on additional debt issuance or creating new security over existing assets,
• No change-of-control restrictions.

Conclusion

The recovery process following a bond default is complex and full of practical and legal challenges. Investors must remain informed and proactive.

Thorough review of bond documentation — especially risk disclosures — is essential before investing, to avoid entering into problematic or high-risk debt instruments.

The ability to assess risks in advance is the best protection against uncertain recovery outcomes.

New Employment Regulation Updates – More Opportunities for Employee Motivation

Attracting and retaining skilled, engaged employees remains one of the biggest challenges for Latvian businesses and organisations. As work models evolve, employees no longer feel tied to a single workplace. They seek not only competitive salaries but also greater flexibility and additional benefits. To meet these expectations, employers need supportive legal framework that allows them to attract and motivate talent effectively.

A number of employment law and tax regulation changes have recently come into force, with more amendments on the horizon. Here’s what employers need to know.

Foreign Language Requirements – Now More Restricted

Amendments to the Labor Act, effective October 2024, significantly limit employers’ ability to require foreign language skills from employees. Under the new regulations, foreign language proficiency cannot be deemed necessary for performing job duties if the work is related to the domestic market, such as manufacturing or local services. Exceptions apply only if foreign language proficiency is an objective and justified requirement, such as roles involving cooperation with foreign business partners, clients etc.

The aim of these changes is to protect the Latvian language and prevent unnecessary foreign language requirements, especially in professions like retail workers, where knowledge of Russian has often been implicitly expected. However, determining when a foreign language is “objectively necessary” remains “a grey area”, potentially creating challenges for employers.

Many businesses in Latvia, especially international corporations, have foreign board members and executives. While these individuals frequently operate in an international setting, not all employees interact with foreign stakeholders. As a result, these amendments may complicate recruitment and operational processes for some companies.

Employers should carefully review internal policies, employment contracts, and job descriptions to ensure compliance with these new language restrictions.

Standardized Personal Income Tax Rate for salaries and increased Tax-Free Minimum

As of this year, a single Personal Income Tax (PIT) rate of 25.5% applies to salaries (previously 20% and 23%), simplifying tax calculations. For foreign employees, who are working in Latvia and paying State Social Security Contributions abroad, the PIT rate has been increased to 33% if their monthly salary exceeds EUR 8,775.

A positive change this year is the removal of the variable non-taxable minimum, which was previously calculated by the State Revenue Service (SRS) based on past income. As of 2025, a flat non-taxable minimum of EUR 510 applies to all employees. This threshold will increase to EUR 550 in 2026 and EUR 570 in 2027.

For employees earning up to EUR 4,000 gross per month, net salaries have increased due to these reforms. Additionally, employees no longer need to update their tax registration details—the non-taxable minimum is now automatically applied based on the employer’s records.

Another significant improvement for pensioners. The pensioner’s non-taxable minimum has been increased from EUR 6,000 to EUR 12,000 per year. Working pensioners can also split their tax-free allowance of EUR 1,000 per month between their pension income and employment income for better tax optimisation.

Increased tax benefits for employee’s expenses and allowances

One of the key tools for attracting and motivating employees is covering expenses such as transportation, meals, healthcare, and other expenses, along with various allowances.

From 2025, employers with a collective agreement can receive significant tax benefits for transport, accommodation, and relocation expenses, including public transport, fuel, and rent costs. These new benefits have been added to previously available PIT exemptions for meal and healthcare expenses.

The total tax-free limit for these benefits is calculated based on the average number of employees in the company, multiplied by EUR 700, the new annual benefit amount per employee (previously EUR 480 per year). This flexible approach allows employers to compensate higher expenses for employees who need it most, using the unused portion from those who do not utilize these benefits.

The previous conditions for applying the exemption have been retained in the law:

• The total tax-free benefits cannot exceed 5% of the company’s gross salary fund.
• The employer must have at least six employees.
• The employer must not have any tax debts.
• The company must have been operating for at least one year as of December 15 of the previous tax year.
• The employer must not have been found guilty of violations related to employee employment regulations.
• The employer must have been engaged in economic activity for at least one year.

Additionally, starting this year, a new requirement has been introduced stating that employers must retain external supporting documents providing the related expenses.

The employer must ensure that these expenses are included in the collective agreement, and the company must have clearly defined conditions for covering expenses (e.g., internal regulations on this matter). Expense reimbursement must be economically justified, and the company must be able to explain and prove it.

The company is required to record these expenses, retain supporting documents, and submit an individual report to the SRS for each employee. Additionally, the employer must monitor the total expense limit to ensure it is not exceeded.

Regarding allowances, the tax-free limits have been increased as follows:

• Tax-free employer gifts – increased from EUR 15 to EUR 100 per tax year.
• Childbirth allowance – increased from EUR 250 to EUR 500.
• Funeral allowance – increased from EUR 250 to EUR 500.

Childcare Leaves Rights Extended to Board Members

Effective from late 2024, amendments to the Commercial Act grant board members  leaves related to childcare. Previously, only employees were entitled to leaves related to childcare, leaving board members without legal protection.

Under the new amendments, board members can now take:

• Prenatal and Maternity a leave,
• A leave for a father, adopter and other person,
• Childcare leave,
• Child carer’s leave,
• As well as a leave without remuneration if an adopted child, foster child or ward needs to be cared for.

During eaves related to childcare, board members’ mandates will be suspended, and a temporary board member can be appointed. These amendments aim to improve work-life balance also for board members.

More Amendments on the Horizon

Additional Labor Act amendments are currently under discussion. Future updates may include:

• Mandatory remuneration payments via bank transfers
• Clarifications on overtime and idle time pay
• Adjustments to flexible work time tracking
• Reducing protectionism for trade union members
• The possibility of a four-day workweek for employees who accumulate additional work hours over four days working week.

These reforms aim to enhance employee well-being, while also giving businesses clearer regulatory guidelines and some flexibility.

How will these changes impact your business?

Reach out to Ellex in Latvia experts Irina Rozenšteina and Madlena Drozdova to ensure compliance and optimize your HR policies.

Ellex Baltic Fintech Legal Outlook 2025: navigating new regulatory landscapes

Ellex Baltic Fintech Legal Outlook offers a comprehensive overview of the most significant legal developments and market trends expected to shape the fintech sector in Estonia, Latvia and Lithuania during 2025. Involving insights from leading legal experts in fintech, this publication highlights key regulatory changes (including MiCAR, DORA, FiDA, PSD3/PSR, CCD II, AI Act) as well as country specific initiatives, and elaborates on their impact to the local fintech markets. 

Estonia, Latvia and Lithuania have developed sophisticated and vibrant fintech sector and are go-to jurisdictions for internationally known market participants. While Estonia and Lithuania have sustained their position as key fintech markets for some time, Latvia is also actively reclaiming its spot among leading European fintech markets.

You can start reading or download the full report here. 

Estonia: a tech-savvy fintech haven

Estonia enters 2025 as one of the key markets for fintech companies with its robust digital infrastructure and thriving startup culture.

“Well-developed tech sector has played a key role in attracting fintech companies and new innovative solutions to Estonia and, therefore, for shaping the fintech sector. Estonia has kept its vibrant environment for innovative solutions also by refraining, in most parts, from overregulating the fintech sector with additional level of interstate legislations. During 2025 fintech companies in Estonia, as in other EU member states, will continue to be affected by new and more stringent regulations either imposing licensing obligations or insisting a review of existing operations. This requires fintech companies to have a good overview and a clear plan for adopting new requirements in order to stay compliant. In this continuous wave of new regulations it is important that Estonia, as technology flagship, keeps showing as an example of open mind towards digital innovation in financial sector,“ writes Anneli Krunks, Head of Fintech at Ellex in Estonia.

In 2025 the main focus will most likely remain on MiCAR and DORA.

• In the light of MiCAR becoming applicable in the end of 2024, it can be expected that Estonian VASPs will start with CASP licensing already in 2025 despite long transition period in Estonia (until 1 July 2026). This would be mainly driven from the fact that the CASP license can be passported throughout the EU and would allow businesses to expand without regulatory uncertainty. However, it shall remain to be seen how many companies intend to obtain the CASP license under MiCAR in Estonia on a first-time basis.

• As DORA became applicable in January 2025 and it is expected that the monitoring on compliance with DORA by the competent authorities will become more active in 2025. It is therefore wise for fintech companies to prepare beforehand for such inquiries.

As to the other regulations, 2025 will also shed some light on the plans of transposing CCD II to the Estonian legislation. From the Estonian perspective the CCD II shall play an important role in reshaping the BNPL market in Estonia as the CCD II narrows the scope of BNPL schemes out regulatory scope. Also, in the light of adoption of the EU AML Package, which will have significant effect on the Estonian interstate legislations, it can be expected that the legislator and competent authorities will soon start with the implementation process. The payment and e-money institutions in Estonia are eagerly waiting the release of the new versions of PSD3 and PSR.

Latvia: reclaiming its fintech leadership

After years of plateau, Latvia is striving to become a top fintech destination in 2025, supported by strong political backing and innovative regulatory initiatives.

“Latvia is taking steps to establish itself as a key player in the fintech landscape. Thus, financial supervisory authority – the Latvijas Banka, has opened its retail payments system to fintech, as well as has put in place attractive support mechanisms such as the Innovation Centre and Regulatory Sandbox. We have also seen strong support from politicians, who were willing to adopt the law setting forth arguably the most attractive CASP supervisory fees in the region and introduce amendments to existing laws allowing payment of share capital in crypto. On top of that, we have the availability of a highly skilled tech workforce, relevant educational programmes, well-established startup ecosystem, and robust digital infrastructure,” writes Zane Veidemane – Berzina, Associate Partner at Ellex in Latvia.

In 2025 the focus will most likely remain on MiCAR and DORA.

• In the light of MiCAR becoming applicable in the end of 2024 and transition period ending on June 30, 2025, Latvian VASPs are expected to start licensing process shortly. Considering the attractive supervisory fees and supportive attitude of the supervisory authority Latvijas Banka, it is expected that VASPs from other jurisdictions will also consider licensing in Latvia rather than in their current countries of registration.

• As DORA became applicable in January 2025, it is expected that the monitoring on compliance with DORA by the competent authorities will become more active in 2025. It is therefore advisable for fintech companies to prepare beforehand for inquiries by the competent authorities.

As to the other regulations, considering the dense presence of non-bank lenders in Latvia, we can undoubtedly expect that transposition of CCD II in Latvia will be in the spotlight despite consumer lending already being very strictly regulated in Latvia. Preparation for application of the EU AML package should also be closely monitored by fintech as establishment of aligned rules and supervisory practices across the EU might result in positive changes locally in Latvia.  

Most importantly, though, the fintech companies should actively engage in preparation of the new Latvian FinTech Strategy. The process is coordinated by Latvijas Banka, with the first draft expected by end of Q1 2025.

Lithuania: a resilient fintech ecosystem

Lithuania remains as one of the key players in the European fintech landscape, boasting a high concentration of licensed electronic money institutions and payment service providers. On the other hand, supervisory initiatives and guidance oftentimes precede the regulatory framework in the EU.  As MiCAR approaches implementation, Lithuania’s fintech companies are adapting to new regulations while balancing compliance requirements for 2025 with ongoing innovation.

“Lithuania is actively aligning its regulatory framework with MiCAR, allowing current VASPs one of the shortest grandfathering periods to operate under existing licenses until July 1, 2025. CASPs must meet enhanced governance and operational resilience requirements, establish a substantial local presence, and navigate a competitive licensing process. The Bank of Lithuania has published clear guidelines for CASP licensing, encouraging early applications, “ writes Ieva Dosinaitė, Partner at Ellex in Lithuania.

DORA, fraud prevention and even upcoming implementation of the EU AML package set the key challenges for the year. Fintech companies should monitor introduced regulations and proposed amendments closely.

CCD II will reshape the BNPL market in Lithuania, requiring companies to obtain consumer credit provider licenses and apply the same requirements to BNPL clients as to ordinary consumer borrowers. The directive aims to strengthen consumer protections while fostering a level playing field, challenging existing business models and demanding operational adjustments.

About Ellex

Ellex is a leading law firm in the Baltics, providing comprehensive legal services to fintech companies and other business sectors. With a client-focused approach and unparalleled industry knowledge, we empower businesses at the forefront of innovation to thrive in an ever-evolving digital economy. Ellex stands out with its deep expertise and proven track record in navigating the complex legal landscape of fintech, digital assets and IT law.

As our clients say, the team stands out as a premier option in the market, described as “one of the largest specialised fintech teams, having exceptional expertise and attention to details. Its fintech legal team has the full capacity and know-how to handle complicated legal issues.

Baltics dealmaking hit new highs in 2024, despite macroeconomic challenges

The Baltic M&A market recorded a total of 231 deals worth €2.1bn in 2024, a significant increase on the previous year, according to a new report published by law firm Ellex in association with Mergermarket.

In volume terms, the 231 transactions recorded by Mergermarket represents a 42% uplift from 2023. Over half (58%) of all deals announced in the Baltics in 2024 were led by domestic bidders, who also accounted for 51% of aggregate deal value – indicative of the growth of strong regional investors over recent years, both corporates and funds. Indeed, the last time that inbound deals outpaced domestic M&A in volume terms was 2018.

The rise in domestic dealmaking reflects the increasing financial strength of Baltic companies, as well as growing local private equity activity. While international investors have been more cautious due to global geopolitical uncertainties, strong local players have seized opportunities to expand regionally and strengthen their positions across the Baltics.

Deal value in the region soared by 76% year-on-year, from €1.2bn to €2.1bn. This surge was fuelled by an increase in big-ticket deals – there were seven transactions valued at €100m or more, versus just three deals of the same size the year prior. Indeed, the region’s largest deal of the year alone was worth almost as much as the 10 largest transactions announced in 2023 combined. This transaction, valued at €670m, saw Estonian investment holding company Infortar acquire 21.71% of all shares in Tallink Grupp from Citigroup Venture Capital, bringing its stake in the Estonian shipping company up to 68.47%.

Overall, Lithuania, the largest economy and most populous country in the Baltics, led the way in deal volume terms, generating 41% of the transactions announced in the Baltics in 2024. Estonia contributed 34% of regional M&A deal volume, with Latvia accounting for the remaining 25%.

“Lithuania’s record-breaking year can be attributed to its strong economic growth and competitive business environment,” said Paulius Gruodis, Partner at Corporate and M&A practice at Ellex in Lithuania. “The Lithuanian government offers a highly favourable business climate, ranking among the top EU countries for ease of doing business. Low corporate taxes, efficient regulations and incentives for foreign investment make it attractive for businesses and investors.”

In terms of sectors, technology, media & telecoms (TMT) has, for several years, been the leading light in Baltic M&A. In 2023/24, the TMT sector accounted for 21% of transaction volume and 30% of all publicly declared deal value in the Baltics. These remain the largest shares across all sectors.

Sarmis Spilbergs, M&A Partner and Head of the Technology, Media and Communications practice at Ellex in Latvia, cited a boom in green tech as one factor behind this trend. “We worked on several solar projects throughout 2024,” he said. “There are a lot of developers putting up mid-sized plants and then selling them to Scandinavian investors who are hungry for green tech. They sell quickly, and there are plenty still being built.”

Baltic TMT companies are likely to remain a point of emphasis for domestic and international investors. According to Mergermarket’s intelligence tool, of the 22 ‘companies for sale’ stories the platform is tracking in the region, four (18%) relate to TMT assets, a high point that the industry shares this year with the Baltic transportation space. Overall, the spread of sectors in the Mergermarket heat chart speaks to the Baltics’ economic diversification and bright near-term prospects.

“Everything seems to be lining up for a very good transaction year,” said Risto Vahimets, Partner and Head of Transactions at Ellex in Estonia. “Private equity cash has been stashed away, interest rates are coming down and the Baltic markets are stabilising. ”Whatever happens elsewhere in the world, the Baltics can surely rely on their reputation for resilience, history of innovation and openness to investment to drive M&A activity in 2025.

To view the report, visit: HERE

About Ellex

Ellex brings together the region’s three strongest and most highly ranked law firms from each of the Baltic states – Ellex Raidla in Estonia, Ellex Klavins in Latvia and Ellex Valiunas in Lithuania. Ellex has the largest and the most recognized Corporate and M&A team in the Baltics, leading for several years in succession by the value and number of transactions in Central and Eastern Europe. Ellex has been named the No.1 Law Firm in the Baltics by Prospera 2024. Among its most recent achievements, Ellex was awarded a Band 1 ranking by Chambers and Partners in their FinTech Guide 2025, recognized as the Baltic Legal Adviser of the Year at the Mergermarket European M&A Awards 2024, and highly recommended as the Law Firm of the Year – Northern Europe at The Lawyer Awards 2024.

About Mergermarket

Mergermarket blends market-leading human insights, advanced machine learning and 30+ years of Dealogic data to deliver the earliest possible signals of potential M&A opportunities, deals, threats and challenges.

Visit mergermarket.com.

Ellex Transaction Radar 2024: Estonian transaction market was unexpectedly sluggish in the second half of the year

Ellex Transaction Radar summarises the most relevant transaction market trends in 2024 in Estonia. The number of transactions in Estonia increased from 137 to 173 over the past year, but Latvia took the lead in terms of the number of first issues in the Baltic stock market.

In 2024, a total of 173 transactions were registered in Estonia, divided as follows:

• 67 venture capital and technology transactions;
• 13 major real estate transactions;
• 7 issues (including OTC issues);
• 86 traditional M&A transactions.

The total number of transactions in the second half of the year was 78, 49 in the third quarter and 29 in the fourth.

Although the last quarter showed a big decrease, the total result was still even better than in 2022 with 77 transactions. Surprisingly, however, there were no public offerings of shares in Estonia this year, Nasdaq Tallinn Stock Exchange did not welcome any new issuers either, giving the lead to our neighbour Latvia.

According to Risto Vahimets, partner at Ellex in Estonia, energytech remained the hottest sector in Estonia in terms of transactions. There were as many as 12 fundraisings of energy technology companies throughout the year. “Other exciting sectors to highlight are the defence industry technology sector and companies like Wayren, Frankenburg, TechSecIntel, SensusQ and medical technology with 9 funding rounds in 2024,” Vahimets added.

Partner Sven Papp noted that foreign capital interest in Estonia remained small in 2024 and this opened up many possibilities for local capital which it also took advantage of. “For example, the acquisition of the Kristiine Keskus shopping centre from Citycon or the buyout of Technopolis by Mainor Ülemiste as well as the buyout of the Trev 2 from the Vinci Group by the Trev 2 management,” said Papp.

According to Partner Gerli Kivisoo, optimists are calling 2024 the year of bonds. “The main instrument offered on all three Baltic public markets was the bond and for understandable reasons – the interest rates are favourable for the bond market. This included two transactions that are worth highlighting – the public offer of the green bonds of Liven and Eesti Energia’s hybrid bond issue. However, in terms of public offerings of shares, we ended up with zero, so Latvia got ahead of us”, said Kivisoo.

The analysis forecasts a moderate growth in the Estonian transaction market and increased investor interest by 2025.

Ellex Transaction Radar is published twice a year, shortly after the end of each half-year, analysing the background and reasons for major transactions in Estonia and forecasting possible developments in the upcoming periods.

The full market analysis is available HERE.

Corporate income tax in 2025: purchasing or renting less environmentally friendly cars will cost more

Sustainability and Taxes—two words that can send shivers down the spine of some business leaders. However, in a move to encourage companies to adopt more sustainable practices, new amendments to the Law on Corporate Income Tax took an effect on January 1, 2025. These changes increased corporate income tax rate from 15% to 16% and altered the rules for attributing costs related to the purchase and rental of passenger cars to allowable deductions.

According to expert Rūta Švedarauskienė and senior associate Laura Navickė from the law firm Ellex Valiunas, the upcoming changes will widen the gap between financial and tax accounting, increasing the workload for accounting professionals and raising the tax burden for companies that purchase or rent less environmentally friendly cars starting from 2025.

Allowable Deductions for the Purchased Car Will Depend on CO2 Emissions

Until the end of 2024, businesses were able to deduct the full cost of purchasing or renting passenger vehicles. However, as of 1 January 2025, only a portion of the purchase price of a newly purchased car will be eligible for the deduction, depending on its carbon dioxide (CO2) emissions. The lower the emissions, the larger the deductible portion of the cost (or the entire cost, if it does not exceed a specified limit):

• If CO2 is equal to 0 g/km: allowable deduction is up to €75,000.
• If CO2 is between 0 g/km and 130 g/km CO2: allowable deduction is up to €50,000.
• If CO2 is between 130 g/km and 200 g/km CO2: allowable deduction is up to €25,000.
• If CO2 is above 200 g/km CO2: allowable deduction is up to €10,000.

Additionally, the State Tax Inspectorate clarifies that the non-deductible portion of the car’s purchase price shall be gradually allocated to non-deductible expenses over the car’s depreciation period, not all at once.

For instance, if a car emitting 50 g/km CO2 is purchased in January 2025 for €100,000, only €50,000 can be deducted over six years (€8,333 annually), while the remaining €50,000 shall be attributed  to non-deductible expenses proportionately over six years.

Sustainability Becomes Important Even When a Company Rents a Car

The changes will apply not only to the purchase but also to the rental expenses. Starting January 1, 2025, when a company rents a car under a new or extended agreement instead of purchasing it, only a portion of the rental expenses will be deductible each month. This deductible portion will depend on the previously mentioned CO2 emission limits and the depreciation rate applied by the lessee, divided by 12. 

For example, if a company rents a car emitting 150 g/km CO2 under a contract signed after January 1, 2025, and applies a six-year depreciation rate for passenger vehicles, the amount of allowable deductions per month will be €347 (€25,000 (maximum allowable deduction based on CO2 emissions) ÷ 6 years ÷ 12 months). If the monthly rental expenses exceed this amount, the difference shall be attributed to non-deductible expenses for corporate income tax purposes. 

As a result, companies looking to minimize non-deductible expenses and corporate income tax will need to choose passenger vehicles more carefully based on their environmental performance. 

It is important to note that these restrictions will not apply to light goods vehicles (classified as N1) or to vehicles used for rental services, driver training, or transportation services. Furthermore, the restrictions on rental costs will not apply to rental periods of less than 30 days or to agreements made through electronic platforms (e.g., “Bolt” or “CityBee”). 

Challenges in VAT Calculation for Car Purchases

The Law on Corporate Income Tax stipulates that only the portion of non-deductible VAT calculated on the basis of deductible expenses for corporate income tax purposes can be attributed to deductible expenses. Accordingly, if the deductible expense limits for cars are restricted, situations may arise where the VAT calculated on the car’s price cannot be fully allocated to deductible expenses. 

For example, if a car emitting 50 g/km CO2 is purchased for €100,000 plus €21,000 VAT, only the VAT calculated on €50,000 can be treated as allowable deductions, amounting to €10,500. The remaining VAT portion (€10,500) should be classified as a non-deductible expenses in the first year of the car’s purchase. 

Car Sales and Corporate Income Tax

The Law on Corporate Income Tax stipulates that the income from the increase in asset value is calculated as the difference between the asset’s sale price and its acquisition cost. If the asset is subject to depreciation, its acquisition cost is reduced by the amount included in allowable deductions. 

Although it might seem that a company selling a car would have the right to deduct the entire acquisition cost (minus the accumulated depreciation) from the revenue, the position of the State Tax Inspectorate has been that only that part of the purchase price which meets the threshold for allowable deductions will be treated as the purchase price. 

For example, if a company purchases a car with CO2 emissions of 50 g/km for EUR 100 000 and decides to sell it the following month for the same amount of EUR 100 000, it will be considered that the purchase price of the car for corporate tax purposes equals EUR 50 000 and that the profit on the sale equals EUR 50 000. 

Business will not always be happy

The change will oblige companies to differentiate the accounting for cars purchased/leased from 2025 onwards, including additional calculations. Accordingly, this will increase time costs and may encourage people to stick to older cars, while forgoing the purchase of newer and greener cars. When these changes to corporate income tax were introduced, it was announced that they would raise (only!) €8 million a year for the state budget. However, these calculations did not consider the additional accounting burden on companies, and it is not clear to what extent the new regulation will actually contribute to the Green Deal objectives.  

Pro bono Work – Beneficial for an Individual or an Example for Others

Notion pro bono (from the Latin pro bono publico) means a delivery of some professional service for common benefit, free of charge. Very often this notion is attributed to law firms as they consult various clients who need legal assistance but are unable to pay for such.  This includes matters of public benefit where stakeholders, most probably, would not be able to pay for attorney’s services, while the matter itself is important to the pro bono services provider and may also leave a permanent mark in society.  The law firm I represent has carried out pro bono work since its very establishment – since the early 1990s.  This is a natural practice for us which we consider mandatory for ourselves. There are constantly lawyers at our office actively providing legal services free of charge on matters which the partners of the firm believe to be significant and therefore should not suffer or disappear from the public agenda simply because legal advice has otherwise been unavailable.  

Law firms, and Ellex is no exception here, are of course also involved in charitable projects and donate money, however the pro bono work is a special form of assistance. Why is involvement of legal counsel in pro bono projects so important?  

First, our experience and expertise allow us to defend the interests of those individuals who are in no position to do so themselves. Engagement of an experienced lawyer in such cases is more important than a cash donation. One of our examples is the support provided to an oncology patient who had encountered a discriminatory attitude from the state and a refusal from the state to be reimbursed for the expense of vital medicines. We brought an action in court because we were convinced that the competent authorities used formal reasons as an excuse without digging deeper into the substance of the matter. Our view is that the government authorities had breached the principle of equality, the duty to reasonably apply the law and to properly justify an administrative act that is unfavourable for an individual. We have prevailed with favorable judgements for the patient in two levels of court proceedings, and are now awaiting for the final word from the Senate.  

Second, certain processes of public significance can find their footing only if active likeminded people are drawn together in support, where each offers their own expertise and capacities to accomplish something worthwhile. One of the first pro bono projects for our law firm was legal support to association Dzīvesprieks [Joy of Life], which provides education and social benefits to orphans and other youth lacking financial means. Dzīvesprieks was founded in Latvia in 1994 and the idea came from Sweden – it needed support from likeminded experts who were ready to contribute in a practical manner at its early stages. 

Third, we look to initiatives for preserving cultural and historical heritage, facilitating education and business, where the expertise of a legal practitioner is needed to resolve some complicated issue. For instance, we have for years provided legal support to the Riga Richard Wagner Society with regard to its organization, raising funds and reconstruction work at the Wagner House and former opera house in the Old Town. We have supported and are still supporting Žanis Lipke’s memorial and the oldest Latvian public organisation – Riga Latvian Society. Among these types of projects it is worthwhile to mention the Kiev School of Economics for which we helped to found a support society in Latvia since the start of Russia’s invasion and war against Ukraine. In the area of education there have been significant projects like Iespējamā misija [Mission Possible] and Fonds Augst [Fund To Grow] founded by Swedbank, and Latvijas sociālās uzņēmējdarbības asociācija [Latvian Social Entrepreneurship Association] for facilitation of socially beneficial business. We engage in these initiatives with the work contributed by lawyers of our firm who prepare contracts and other legal documentation, assist in incorporation of legal arrangements and in matters of corporate governance, representing interests of clients in communication with various authorities, general legal advice, and other areas as well.  

Fourth, there are a number of international charity and social support projects where involvement of legal counsel is necessary for their adaption to Latvian society, such as the international Ronald McDonald House Charities, which has a representation in Latvia. 

I particularly enjoy long-term pro bono projects.  With such, the promoters of the project can rely on the constant availability of legal assistance while providing our firm with an opportunity to delve more deeply into the essence of the particular initiative, and to appreciate its growth, achievements and effect on the general society. The best reward for voluntary work is the opportunity to experience hands on that your contribution has reaped benefits and changed something for the better. 

The pro bono movement among legal professionals has a long history and, for example, in the USA one way that this tradition is kept alive is by introducing it as early as during the student years. I as a student had an opportunity at one point to undertake a defence, for a public benefit, of those people who could not afford it themselves under supervision of an experienced lawyer (Latvian students, future lawyers, now have similar opportunities). When I participated in the founding of a law firm in Riga, I did not have any second thoughts that pro bono will be one of the cultural dimensions of our work. I know that many legal practitioners in Latvia similarly offer pro bono assistance; however, if we look at the broader picture of the whole of the business environment – then the necessity to help those in need is not a self-evident occurrence. So ultimately, each project which involves voluntary bro bono work is not only beneficial to the particular individual or organization receiving the support, but is also a kind of example for, and encouragement to, others to chip in and to do more.

Learn more on our podcast: Espresso ar Ellex Kļaviņš

Ellex Transaction Radar 1HY: new economic cycle has started

After two years of downward trends, the transaction market has turned positively into rise – new economic cycle has started and investment courage is back! Ellex Transaction Radar summarises the most important trends of the transaction market in Estonia in the first half of the year, while also offering forecasts for potential developments in the upcoming periods. Transaction Radar is published twice a year.

Situation in Estonia

The recovery seen in the IV quarter of 2023 continues and the trend is clearly positive for the number of transactions – compared to the same period last year, there were 28 more transactions in the first six months of the year (94 vs 68).

In the first half of 2024, a total of 94 transactions were registered in Estonia, divided as follows:

• 36 venture capital and technology transactions
• 5 major real estate transactions
• 4 share issues (incl. OTC issues)
• 49 traditional M&A transactions

Global situation

Globally there have been several major transactions – five transactions worth in excess of $10 billion have been made in the natural gas and oil sector, which is an indication that although the introduction of renewable energy and a greener worldview are important, we still need fossil fuels to burn or as raw material in the chemical industry. Particularly active is ConocoPhillips who in addition to Burlington is also acquiring Marathon Oil for $22.5 billion.

Main challenges in 2024

The biggest challenge for companies in 2024 seems to be the continued uncertainty in the markets, which forces to caution with expansion plans and investments. Please read more about the challenges here page 10.

In summary, the recommendation would be that if there is intention to sell a company, now is the right time to start preparing. And if the intention is to anticipate the market as a buyer and get something for less money, you should already act quickly. There is still active interest in the renewable energy sector where consolidation as well as the sale of companies can be expected. Estonians have always been a “real estate nation” but it seems that this sector will remain in recession also in 2024. Troubled times have always given the domestic capital an opportunity for transactions over the more cautious foreign capital.

Commentary by experts Risto Vahimets, Sven Papp, Dmitri Rozenblat, Rutt Värk, Karl Rudolf Org | Ellex in Estonia.

Full report available here.

European Competition and Regulatory Law Review: Application of United Brands Test for Excessive Pricing in Digital Sector

In the latest issue of Competition and Regulatory Law Review (CoRe), Ellex experts Martin Mäesalu and Miikael Tuus discuss a recent case of the Estonian Competition Authority on excessive pricing in the digital sector.

The Estonian Competition Authority (ECA) issued two decisions on April 18, 2024, addressing potential excessive pricing in digital markets. The cases involved real-estate classifieds portals kv.ee and city24.ee, and automotive classified portal auto24.ee, both investigations were concluded with no breach findings.

Existing EU legal practice has developed a framework that could also be applied to digital sector pricing cases – the so-called United Brands test. Although said test has not been developed with digital sector cases in mind, the United Brands test could still provide a preliminary framework for assessing excessive pricing even in so called new economy cases. Developed test still leaves open the (arguably most difficult) question on how to quantify a relative (economic) value of a product or a service. On that there is not much practical guidance from neither the EU nor national level practice.

In determining the economic value of goods, account must be taken of non-cost factors such as: aspects relating to the demand for the goods and the characteristics of the goods which make them valuable. The ECA entered into this landscape with its investigations in the kv.ee/city24.ee and auto24 cases.

Read more in the CoRe issue no 2 of 2024 available here.

The European Competition and Regulatory Law Review reports on key legislative developments in the EU and its Member States and analyses important judgments that shape the field of EU competition and regulatory law, in particular those by the European Courts, international courts and tribunals, and higher national courts.

Lexxion has been offering expertise on various legal topics and niche sectors in English and German since 2000. Their core areas of competence include EU competition law, state aid law, public procurement and public private partnership law, data protection law, life sciences and environmental law, as well as exciting new projects in emerging technologies and digitalisation.

Ellex has the largest and most experienced antitrust/competition/state aid team in the Baltics. Our law experts provide both conventional and innovative legal solutions on a full range of competition, state aid and EU law issues in Estonia, Latvia, and Lithuania, and on EU level. View our experts and relevant projects related to this field here.