{"id":48234,"date":"2025-05-09T16:28:19","date_gmt":"2025-05-09T16:28:19","guid":{"rendered":"https:\/\/my.legal500.com\/developments\/?post_type=legal_developments&p=48234"},"modified":"2025-05-09T16:28:19","modified_gmt":"2025-05-09T16:28:19","slug":"the-cee-winter-shutdown-cee-legal-matters-2023","status":"publish","type":"legal_developments","link":"https:\/\/my.legal500.com\/developments\/thought-leadership\/the-cee-winter-shutdown-cee-legal-matters-2023\/","title":{"rendered":"The CEE Winter Shutdown (CEE Legal Matters, 2023)"},"content":{"rendered":"

With numerous reports of energy-related business shutdowns, we reached out to local experts across CEE to understand what different markets have been dealing with, in terms of work and production stoppages, and look into the broader impact.<\/strong><\/p>\n

<\/p>\n

The energy crisis in 2022 took its toll on energy-intensive companies and deeply affected many other businesses. The major factor behind it, according to Penteris Senior Partner Andrzej Tokaj, is \u201cthe high price of commodities \u2013 reflected in rising food and energy prices, leading to the increased operating costs of companies.\u201d<\/p>\n

\u201cSimply put, the Russian invasion of Ukraine means that the Slovak economy is exposed to potential serious gas supply disruptions, as approximately 85% of its natural gas is imported from Russia,\u201d Havel & Partners Partner Ondrej Majer says, with ACI Partners Managing Partner Igor Odobescu adding that\u00a0\u00a0energy-related shocks in Moldova have resulted in a sharp rise in natural gas prices: \u201cthe average price paid by consumers, not including power plants, has increased sixfold in one year.\u201d<\/p>\n

Consequently, the markets in different countries are coping with the increased energy prices and potential scarcity of resources in different ways. Some markets have already seen temporary or indefinite shutdowns being announced.<\/p>\n

Energy-Intensive Industrial Production Grinds\u00a0to a Halt<\/strong><\/p>\n

In Poland, \u201cthe industries that consume the most energy in their operations have been hit the hardest,\u201d Tokaj notes, adding that those energy-intensive sectors \u201cinclude the paper industry, fertilizers and the nitrogen compounds industry, and those producing cast iron and iron alloys.\u201d According to Tokaj, \u201cto date, the most high-profile production stoppage on the market has been at the chemical giant Grupa Azoty, which, in August, decided to suspend or reduce production at some of its plants due to the high gas prices.\u201d\u00a0\u00a0He explains that Grupa Azoty \u201cis Poland\u2019s largest chemical industrial company.\u201d Until now, \u201cthe production of melamine, a chemical compound used in the adhesives, paints and varnishes, automotive, and textile industries, has not resumed,\u201d he adds.<\/p>\n

\u201cIn Moldova, building materials manufacturing is, so far, the industry most affected by the higher gas prices,\u201d Odobescu reports. \u201cAt least two major players \u2013 the biggest brick and insulation materials manufacturer and the only significant porcelain tile producer \u2013 have announced production stoppages for an undetermined period.\u201d According to Odobescu, \u201cbesides that, local authorities in the breakaway eastern region have reportedly limited the supply of gas and electricity to the only steel factory in Moldova, halting production.\u201d<\/p>\n

Majer highlights that, in Slovakia, the factories in the metallurgical, automotive, chemical, glass, and food industries are experiencing the most acute problems: \u201cone of the major aluminium smelters [\u2026] discontinued its operation at the beginning of autumn. In the summer, a diversified Central European ferroalloy producer also had to discontinue its operations and dismissed approximately 150 employees. It is currently unclear when these companies will restart their operations.\u201d According to Majer, both companies belong to the largest metallurgical players in Slovakia.<\/p>\n

Kavcic Bracun & Partners Managing Partner Matej Kavcic highlights that Slovenia\u2019s \u201cmetals industry, non-metallic mineral production, and paper production account for almost half of all the energy consumed in Slovenia, especially electricity,\u201d with the \u201cmetals industry among the top manufacturing industries in terms of both turnover and exports.\u201d Companies in the metals industry \u201chave announced a reduction in production,\u201d he reports, \u201cwith Slovenia\u2019s biggest metals producer, the SIJ Group, announcing it will reduce production volumes by about one-third in September due to the extremely high energy prices and the uncertainty of customers accepting such price conditions.\u201d According to him, \u201cit is also expected that overall production will be about 40% lower in the fourth quarter of 2022\u201d and, while those companies informed the public that there will be no redundancies for the time being, they \u201chave introduced shorter working-hours and temporary paid layoffs.\u201d<\/p>\n

Serbia has also seen some shutdowns, Gecic Law\u00a0Partner Ognjen Colic notes, highlighting that \u201cthe factory in Novi Sad, part of the American Lear Corporation, has suspended work due to the situation in Ukraine. According to a management letter to employees, there were problems with the supply of components for production and customer orders, which led to the production stoppage.\u201d He says that \u201capproximately 2,500 workers were employed by this factory, which ceased operation\u201d and, \u201ctherefore, the impact is significant.\u201d<\/p>\n

According to Cobalt Partner Elo Tamm, in Estonia, the food production sector has been vocal that high energy prices are affecting its ability to continue production. Even worse, \u201cpermanent production stoppages and lay-offs have been announced in the furniture production and wood industry,\u201d she notes.<\/p>\n

Transport, Hospitality, Retail, and Small Businesses\u00a0Under Pressure<\/strong><\/p>\n

In Croatia, Cipcic-Bragadin Mesic & Associates Partner Marina Mesic reports that \u201ctransport companies were most affected by the increase in fuel prices, where fuel prices directly affect the growth of input costs the most, since they make up 20 to 50% of their total variable costs.\u201d<\/p>\n

And the crisis also seems to be impacting sectors that are traditionally not considered energy intensive. \u201cSmaller businesses that may be affected by the increase in energy prices are those in the hotel, restaurant, arts, entertainment, recreation, and other services sectors, also hairdressers, and beauty salons, amongst others,\u201d Tokaj notes, highlighting that these industries are struggling, as they \u201chad already been affected by restrictions introduced in connection with the COVID-19 pandemic.\u201d Kavcic agrees, saying that \u201cthe rising costs of energy are also affecting the Slovenian tourism and leisure industries that consume a lot of energy, like ski-resorts, spas, etc.\u201d<\/p>\n

According to\u00a0KCG Partners\u00a0Founding Partner Eszter Kamocsay-Berta, the most affected companies in Hungary include \u201cshopping malls, restaurants, theatres, kindergartens, and spas, where large spaces need to be kept warm.\u201d Many restaurants are likely to opt for a temporary winter shutdown, she says, \u201cbut, in reality, this can be a very dangerous move, as they are unlikely to be able to keep their workers or lure them back when they reopen. 20 to 25% of Hungarian hotels are planning temporary closures in the first half of 2023.\u201d Kamocsay-Berta reports that measures such as turning off \u201cthe evening outdoor lighting in restaurants before closing time\u201d and \u201cgoing digital, avoiding the energy costs of operating buildings,\u201d are also frequently applied.<\/p>\n

A Metered Government Response<\/strong><\/p>\n

The measures introduced by CEE governments range from price caps and subsidies to temporary export bans.\u00a0\u00a0\u201cDue to high energy prices and limited energy sources, the Polish government has introduced several regulations providing solutions for citizens, vulnerable parties, and energy companies so that, based on supplements and compensation, the final energy price is lower, known as the government energy\u00a0shield<\/em>,\u201d Tokaj says.<\/p>\n

In Serbia and Hungary, price caps have been introduced on some basic foodstuffs. \u201cRegulations that limit the prices of oil derivatives have also been adopted in Serbia, which, as a result of global market activity, last for a brief period and are subject to change,\u201d Colic reports. \u201cThe government also set limits to the price of electricity for businesses, to run at EUR 95 per megawatt-hour from September 1 to December 31.\u201d In addition to foodstuff price caps, Hungary\u2019s government \u201chas also imposed a 25% saving on gas consumption in state institutions and state-owned companies, except for hospitals and residential institutions,\u201d Kamocsay-Berta notes.<\/p>\n

Other than energy price caps, among the measures introduced in Croatia \u201care the reduction of the VAT rate on gas and some agricultural products, subsidies for the price of gas for households, changes in the system of benefits for the socially disadvantaged, one-time benefits for pensioners, and some others,\u201d Mesic reports.<\/p>\n

And Tamm notes that, while Estonia\u2019s government \u201chas instituted regulated energy prices for residents and SMEs, there have been no significant measures to help industrial and other businesses cope with high energy prices.\u201d<\/p>\n

Meanwhile, in Moldova, the state also provides compensation and subsidies to ease the burden on companies. \u201cTo prevent shutdowns caused by high energy prices, monetary payments to compensate for increased natural gas prices were approved in March 2022,\u201d Odobescu notes. Similarly, Slovenia\u2019s government \u201cintroduced three different types of aid available to beneficiaries, namely: basic economic aid, special economic aid, and aid for energy-intensive businesses,\u201d Kavcic points out. And in Slovakia, Majer reports an act was adopted allowing companies to request \u201csubsidies covering additional costs caused by increases of gas and electricity prices,\u201d and, additionally, \u201ca special aid scheme was designed for electricity-intensive companies, which are allowed to request compensations.\u201d<\/p>\n

Majer and Odobescu both highlight that other special measures have been introduced to prevent potential shutdowns caused by energy scarcity. According to Odobescu, \u201cnatural gas reserves were created, for the first time ever, by the state-owned energy trader. The gas is stored in Ukrainian and Romanian gas storage facilities and is sufficient to cover more than one month of consumption during the winter.\u201d<\/p>\n

Finally, Colic points out that temporary export bans were also introduced in Serbia in 2022, with the government banning the export of certain goods, including \u201cwood, gas, milk, oil, wheat, corn, and flour.\u201d Odobescu adds that \u201cas a response to the electricity deficit in Moldova, a temporary ban on crypto-mining activities was also ordered.\u201d<\/p>\n

Author: Eszter Kamocsay-Berta<\/em><\/strong><\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-48234","legal_developments","type-legal_developments","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments\/48234","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments"}],"about":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/types\/legal_developments"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/media?parent=48234"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}