We have previously written about branches and representative offices of foreign legal entities in this article: ‘Distinctive features of the establishment and business operation of representative and branch offices of foreign companies in the Republic of Serbia’. 

Now, through a few questions, we present an overview of current case law related to branches. 

Can a branch be convicted for an economic offense? 

Article 567 of the Company Law stipulates that a branch of a company is a separate organizational part of the company operating in the Republic of Serbia through which the company conducts its business. It does not have the status of a legal entity and acts in the name and on behalf of the company. The company is fully liable for the obligations towards third parties arising from the activities of its branch. 

If a branch does not have the status of a legal entity, can it be convicted for an economic offense? According to the decision of the Commercial Appellate Court Pkž 178/23 of February 21, 2024, it was determined that the first-instance judgment significantly violated the provisions of the procedure from Article 438, Paragraph 3 of the Criminal Procedure Code because the court improperly applied provisions of the Code related to the party status. The contested ruling was issued against the branch of the company, but the branch does not have the status of a legal entity and acts on behalf of the company. To proceed with the case, the indictment must correctly determine the accused legal entity. 

In the decision of the Commercial Appellate Court Pkž 286/19 from August 6, 2020, it was determined that a branch does not have the status of a legal entity and cannot be treated as the accused legal entity in economic-criminal proceedings. Information about the branch may be significant for specifying the place and time of the offense, as well as other elements related to the factual description of the act, and possibly determining the person responsible for committing the economic offense. 

Does a branch of a foreign legal entity have party capacity? 

This issue was addressed in the decision of the Commercial Appellate Court Pž 765/21 from June 10, 2021. Since a branch of a foreign legal entity does not have the status of a legal entity, if the defendant in a lawsuit is indicated as the branch, the court must first decide on the defendant’s status—whether the branch of the legal entity is recognized as a party in the sense prescribed by Article 74, Paragraph 4 of the Civil Procedure Law. 

Although the branch of a foreign legal entity does not have the status of a legal entity, the provision of Article 74, Paragraph 4 of the Civil Procedure Law allows the court to recognize party status for forms of organization that do not have party capacity if it determines that, considering the subject of the dispute, they meet essential conditions to acquire party capacity, especially if they own property that can be enforced. 

Can bankruptcy be initiated against a branch of a foreign legal entity? 

As stated in the decision of the Commercial Appellate Court Pvž 111/21 from August 15, 2021, a branch of a legal entity does not have the status of a legal entity, including a foreign legal entity. Therefore, bankruptcy proceedings cannot be initiated against the branch of a foreign legal entity. The court determined that the first-instance court correctly noted that the provisions of the Bankruptcy Law related to international bankruptcy, when it concerns a secondary bankruptcy procedure, stipulate that a proposal for recognition of the foreign procedure must first be submitted. The main bankruptcy procedure is assumed to have already been initiated against the parent company abroad, and after recognition of the main foreign procedure, the procedure can be carried out to liquidate the debtor’s assets in the Republic of Serbia. 

Does the Personal Data Protection Law apply to the processing of personal data carried out by a branch or representative office of a foreign controller or processor that does not have its headquarters in the Republic of Serbia, and where the conditions for applying Article 3, Paragraph 4 of the Law are not met? 

When a foreign legal entity, through its branch or representative office in the Republic of Serbia, processes personal data, the Personal Data Protection Law applies. This is stated in Publication No. 6: “Personal Data Protection: Opinions and Views of the Commissioner” (No. 071-01-982/2021-03). 

Although neither the branch nor the representative office has the status of a controller or processor of personal data, as this status belongs to the legal entity of which the branch or representative office is a part, this does not mean that the Personal Data Protection Law does not apply. According to the Commissioner’s publication, to ensure the realization of the right to personal data protection in Serbia, the concept of “headquarters” used in the Personal Data Protection Law must be interpreted in the context of Regulation (EU) 2016/679 of the European Parliament and Council of April 27, 2016, on the protection of individuals with regard to the processing of personal data and the free movement of such data. As mentioned in Recital 22 of the Regulation, the ‘headquarters’ refers to the effective and real conduct of activity through stable arrangements, regardless of the legal form of these arrangements. The same conclusion is stated in the guidelines of the European Data Protection Board No. 3/2018 on the territorial application of the Regulation. 

Therefore, if a foreign legal entity, through its branch or representative office in the Republic of Serbia, processes personal data, our Personal Data Protection Law applies. This is further mentioned in Article 95, Paragraphs 5 and 7, which prescribes that the responsible person in the representative office or business unit of a foreign legal entity can be penalized for violations stated in Paragraphs 1 and 2 of the same article.

If a party in the proceedings is a foreign legal entity with a branch in Serbia, is service of process performed at the branch’s address or the address of the foreign legal entity’s headquarters? 

The answer to this question can be found in the answers and questions of the Commercial Courts established during a session of the Commercial Appellate Court’s Department for Commercial Disputes held on November 19-20, 2019, and during a session of the Department for Economic Offenses on November 20, 2019. 

Although Article 133, Paragraph 3 of the Civil Procedure Law stipulates that service of process to foreign legal entities with a representative office in Serbia can be made to their representative office, this provision is interpreted to mean that service of process to foreign legal entities with a branch in Serbia can be made to the branch. A branch does not have the status of a legal entity, so it acts on behalf of and for the account of the company; the branch’s representative, registered according to the law, is considered the representative of the entire company. 

Is the court of the Republic of Serbia competent in a dispute between two foreign legal entities if the defendant has a registered branch in Serbia and the dispute concerns obligations arising in Serbia? 

In the decision of the Commercial Appellate Court Pž 1845/19, the competence of the court of the Republic of Serbia was confirmed in the case, in accordance with Article 55 of the Law on Resolving Conflicts of Laws with the Laws of Other Countries. In this case, the dispute concerned obligations arising in Serbia, and the defendant had a registered branch in Serbia that created the obligation. 

The Commercial Appellate Court ruled that to establish the competence of the court of the Republic of Serbia, in accordance with Article 55 of the Law on Resolving Conflicts of Laws with the Laws of Other Countries, it is not a condition that the plaintiff is a resident or a domestic legal entity. The branch represents a stronger form of commercial presence than a representative office, so the first-instance court correctly concluded that the objection to the existence of the court’s competence in the Republic of Serbia was unfounded. 

Note: This text does not constitute legal advice but reflects the personal opinion of the author.