With the recent amendments to the Companies Law, legislators introduced the institute of convertible loans—an eagerly anticipated option for investors and startup companies in North Macedonia.

In 2022, through amendments to the Companies Law, lawmakers provided investors (third parties) with the ability to convert provided loans into shares. This conversion process involves increasing the company’s share capital by issuing new shares or, in other words, transforming the given loan into shares.

In this article, we will outline the procedure for augmenting the share capital by issuing new shares using convertible loans in a limited liability company.

Convertible loans

The process

The procedure for increasing the company’s share capital is governed by the Companies Law and is executed through the Trade Registry maintained by the Central Registry of North Macedonia.

A loan provided by a third party (investor) intending to convert it into shares must be paid in cash. The conversion of the loan into shares must be completed no later than the end of the third year from the signing of the loan agreement.

To implement this process, the Investor and the Company are required to undertake the following steps:

How can we help you in this process?

Tosic & Jevtic, attorneys and counselors-at-law, boast extensive experience and expertise in handling various procedures before the Trade Registry. Throughout our professional journey, we have successfully navigated numerous intricate procedures for trade company modifications, including the intricate process of augmenting company share capitals through the conversion of loans into shares.

Our esteemed Law Firm comprises seasoned lawyers ready to guide and support you throughout this process. With our wealth of experience, we assure efficient and effective assistance for our clients.

Conclusion

Prior to the recent amendments to the Companies Law, the conversion of loans into shares was limited to existing shareholders of the Company exclusively.

However, with the latest amendments to the law, this option has been extended to third parties investing in a company, providing them with the opportunity to convert their loans into shares of the Company.

This development presents a favorable option, particularly for startup companies in North Macedonia, as it allows them to attract investors by offering the conversion of loans as a form of security for the investment.

Convertible Loans

Ivana Jevtic Nikolova

Overview

Despite being a relatively small country, the Republic of North Macedonia has a significant history in the exploitation of mineral resources. In the past year 2022, data indicates that the top 5 mining companies alone generated a total revenue of nearly 270 million euros, with a net profit of around 68 million euros.

While there is an increasing demand for investments in green and non-polluting industries or renewable sources, the impact of the mining sector on the economy of the Republic of North Macedonia cannot be overlooked.

The mining sector positively influences the development of the Macedonian economy. Its contribution to the GDP is approximately 2%, and it constitutes about 3.2% of the country’s exports. The sector directly employs over 8,000 individuals, offering a higher average gross salary compared to other industries. Mining wages surpass those in agriculture, forestry, and fishing by 67.1%, in manufacturing by 58%, in construction by 42.8%, and in retail trade by 45.5%.

Mining activities are often concentrated in small towns where economic development and survival are closely tied to the economic activity of these mining companies. Besides being significant employers and tax contributors, large mining companies indirectly create at least three (3) times more jobs in industries serving as suppliers to these companies.

Compensations

According to the Law on Mineral Resources (Official Gazette of the Republic of North Macedonia no. 136/12, 25/13, 93/13, 44/14, 160/14, 129/15, 192/15, 39/16, 53/16, 120/16, 189/16, and Official Gazette of the Republic of North Macedonia no. 7/19, 99/22, 129/23, and 253/23, hereinafter referred to as the “Law on Mineral Resources”), the concessionaire conducting the exploitation of mineral resources is obligated to pay:

The amount of compensation is determined according to the Tariff for Determining the Amounts of Compensation for Issuing Permits and Concessions for Detailed Geological Exploration and Concessions for the Exploitation of Mineral Resources, which, for metallic minerals, amounts to 2% of their market value.

Additionally, in accordance with Article 76 of the Law on Mineral Resources, 78% of the concession compensation goes to the municipalities where the concession activity takes place, while only 22% goes to the state budget. This distribution stimulates local development, especially in small municipalities where these funds are crucial for growth and development.

Safety and Environmental Protection

Safety at work and environmental protection are prioritized in North Macedonia, a candidate country for EU membership. This has led to a significant reduction in workplace accidents and fatalities. The mining sector in North Macedonia currently does not rank among the top 5 industries in terms of injuries and accidents at work.

According to reports from the Macedonian Association for Workplace Injuries, in 2020 and 2021, there were only 9 (nine) reports of workplace related accidents in the entire mining sector, and  in 2022 only (four) 4 workplace related accidents making it one of the safest industries due to strict adherence to training, provision of protective equipment, and compliance with safety regulations.

Regarding environmental protection, one of the major challenges in the mining sector, the Ministry of Environment in North Macedonia regularly conducts strict controls. The requirement for A-integrated environmental permits for the operation of large mining companies ensures minimal or non-existent impact on the environment. In the last 10 (ten) years, there has been no example of significant environmental damage or pollution from any company engaged in the exploitation of metallic minerals, neither in soil nor water.

Summary

While the mining sector is often considered polluting and hazardous, with the proper application of new technologies and legal regulations that enforce strict safety and environmental protection standards, the sector can contribute to sustainable and environmentally friendly growth and development in the Macedonian economy.

Our law firm has actively participated in the most significant deals in the mining sector and has been supporting major mining companies in the Republic of North Macedonia. For more information regarding investment opportunities and legal regulations, please feel free to contact us.

Mining Sector

Ivica Jevtic – Managing partner at Tosic & Jevtic law firm

The holder of a concession for the exploitation of mineral resources – the Concessionaire, during the duration of the concession granted by the state – the Grantor, may transfer the concession to another legal entity, respecting the procedure prescribed in detail by the law. The procedure for transfer of exploitation concession of mineral resources is in detail prescribed in the Law of Mineral Resources (“Official Gazette of Republic of Macedonia” no. 136/12, 25/13, 93/13, 44/14, 160/14, 129/15, 192/15, 39/16, 53/16, 120/16, 189/16 and “Official Gazette of Republic of North Macedonia” no. 7/19, 99/22, 129/23 и 253/23, hereinafter referred to as the “Law on Mineral Resources”).

According to the Law on Mineral Resources, the concession for the exploitation of mineral resources, can be transferred only entirety to another legal entity.

Аs provided in Article 47 of the Law on Mineral Resources, the procedure stars with the submission of a request for transfer of the exploitation concession by the Concessionaire to the Ministry of economy of Republic of North Macedonia.

Furthermore, the Ministry of economy prepares and sends a request for preparation of an assessment of the Concessionaire’s business venture to the Bureau of assessment within 15 days from the day of receipt of the request for concession transfer. The Bureau of assessment prepares the Assessment of the concessionaire’s business venture within 60 days from the day of receipt of the request for preparation of an assessment of the concessionaire’s business venture. The Assessment made by the Bureau of assessment is used in this procedure in order to calculate the compensation that the new Concessionaire will be obliged to pay.

After the receipt of the Assessment of the Concessionaire’s business venture, i.e. within 30 days of the day of receipt of the Assessment, the Ministry of economy prepares and sends a detailed proposal and decision for the transfer of the exploitation concession to the Government of the Republic of North Macedonia.

Within 30 days from the day of receipt of the detailed proposal and decision for the transfer of the exploitation concession from the Ministry of economy, the Government of the Republic of North Macedonia makes a Decision on the transfer of the exploitation concession. After making the Decision on the transfer of the exploitation concession to the new legal entity, the Government of the Republic of North Macedonia, as a grantor and the new Concessionaire will conclude an Agreement for transfer of the concession.

The new Concessionaire is obliged to make a payment of the compensation in the amount of seven percent of the estimated value of the exploitation concession according to the Assessment made by the Bureau of assessment, within 30 days from the day of conclusion of the Agreement for transfer of the exploitation concession with the Government of the Republic of North Macedonia. With the payment of the compensation, the procedure for transfer of the exploitation of mineral resources is finished.

Finally, in the Law on Mineral Resources, it is prescribed that automatically with the transfer of the exploitation concession, the rights and obligations arising from the issued permits and approvals by the competent authorities in the Republic of North Macedonia which are obtained by the old Concessionaire, are transferred to the new Concessionaire. With this guarantee prescribed in the relevant law, the new Concessionaire can pick up where the old Concessionaire left off, without unnecessary business interruptions.

Taking into account everything stated above, we can logically conclude that this administrative procedure is quite complex and long, and requires the consent and opinion of many competent institutions during its course. Therefore, we at Tosic & Jevtic Law Firm are at your disposal with our legal advice, tailored guidance and assistаnce in all procedures before the competent institutions.

Mineral Resources

Ljupka Naumoska Gjorgjievska

PART 2 – The NDA clause in North Macedonia

In the legal framework of Macedonia, particularly within employment law, there exists a fundamental legal obligation concerning the preservation of business secrets. This obligation is of utmost importance and is treated with significant gravity by the legislator in the realm of legal relationships between employees and employers.

This legal duty entails that employees are prohibited from utilizing, for their personal gain or disclosing to any third party, any data categorized as a business secret by the employer. Such categorization is determined by a special act established by the employer or through any other means of knowledge transfer.

As a result, employees are held accountable for any inadvertent release of a trade secret, whether they were aware of the confidential nature of the information or should have reasonably known about it. Additionally, all employees who come into contact with materials, information, and data classified as confidential are obligated to maintain strict confidentiality (NDA).

Furthermore, representatives of workers and any experts assisting them must refrain from disclosing any information related to the employer’s business interests that was shared with them in confidence, even after the termination of their mandate.

Our law firm strongly recommends that clients enact a dedicated legal instrument for safeguarding confidential information. This instrument serves to meticulously define the scope of information deemed confidential, establish explicit safeguards, delineate the prescribed marking mechanisms, and specify any unique categorizations for data warranting heightened confidentiality. Furthermore, this instrument will furnish precise guidelines and delineate circumstances under which a breach of the duty to protect confidential information is recognized, elucidating the corresponding consequences that may ensue in such instances.

Employees will receive comprehensive information regarding this obligation, and the existence of the aforementioned legal instrument will facilitate continuous reference and serve as a constant reminder of their responsibilities in this regard. This ensures that the workforce remains well-informed and cognizant of the stipulations outlined in the act, promoting adherence to the established protocols for the protection of confidential information.

In specific cases, and subject to conditions and limitations outlined by the law, there may be instances where the employer is not obligated to share information or seek consultation when such disclosure could significantly disrupt or cast doubt on the functioning of the employer, based on objective criteria.

An intriguing aspect to consider pertains to the temporal validity of this obligation under employment law. Specifically, does the obligation persist, and if so, for what duration following the termination of the employment relationship for the employee?

Addressing this, it is imperative to clearly stipulate the post-employment duration during which the obligation to protect confidential information remains in effect.

However, it’s noteworthy that the legislator does not specify any timeline regarding the duration of the employee’s obligation to maintain confidentiality after the termination of the employment relationship.

We, as a law firm, emphasize the significance of establishing a precise time frame for this obligation. It is advisable, in consultation with clients, to clearly define the duration of this commitment, even if it is intended to be indefinite.

Furthermore, the Macedonian legal system lacks clarity when it comes to outlining the consequences that may be imposed on employees who breach this confidentiality obligation. This is a significant legal gap that requires attention and resolution.

By incorporating a well-defined timeframe and consequences into the legal instrument, such as a (NDA) non-disclosure agreement, employers can establish the period during which former employees are bound by the duty to uphold confidentiality even after the cessation of their employment. This ensures a structured and legally sound framework governing the temporal scope of the confidentiality obligation beyond the termination of the employment relationship.

NDA

Ana Tosic Chubrinovski – Managing Partner

PART 1

WHAT EXACTLY IS AN NDA CLAUSE?

Generally, non-disclosure agreements, commonly called NDAs, serve as legally binding contracts between involved parties, with the primary purpose and the core meaning of those agreements being to safeguard the confidentiality of specific and sensitive information.

Its sensitivity comes from the fact that the information is the company’s valuable intangible asset, which is vital for maintaining competitiveness in the market and achieving its business objectives.

These agreements, often known by various names, such as confidentiality agreements (CAs), confidential disclosure agreements (CDAs), and proprietary information agreements (PIAs), are essential because they serve as safeguards for confidential data.

Regardless of the terminology used, NDAs share a fundamental common principle: they legally forbid any party bound by the agreement from disclosing protected information to unauthorized individuals.

Non-disclosure agreements (NDAs) can indeed be complex and require meticulous attention. It is important to emphasize that the wording within an NDA must be highly specific to ensure enforceability in a court of law. Furthermore, it’s crucial to avoid creating an NDA overly broad or excessively restrictive, as this significantly increases the risk of a court finding fault with it, especially when there are insufficient and clearly defined limitations regarding its scope and duration.

NDA Clauses in the Employment Agreement

This concept is notably similar to the inclusion of NDA clauses in employment agreements. Such clauses ensure the protection of sensitive information within the context of an individual’s employment, contributing to the overall security of a company’s proprietary knowledge.

We emphasize that NDA clauses are highly effective in safeguarding a company’s trade secrets and confidential information. However, their advantages for employers extend beyond protection and encompass TWO key benefits:

1. PREVENTION:

The inclusion of an NDA clause in Employment Agreements serves as a directive that explicitly delineates the highly sensitive and confidential information that necessitates protection. Furthermore, it outlines the potential consequences for employees who violate and breach the terms of the agreement. In doing so, employers provide unequivocal guidance on identifying and preserving their trade secrets and confidential data from the very outset. The NDA clause can also serve as a valuable resource, offering employees clear instructions on how to handle these delicate assets.

2. PROTECTION:

While the primary objective of an NDA clause is to prevent employees from divulging confidential information, it’s worth emphasizing that it also serves as a safeguard when there’s a legitimate need to share such information in the normal course of business. In scenarios where employees are required, as part of their job responsibilities, to share disclosed information with third parties, the protection of trade secrets remains intact. This occurs when third parties are also required to sign NDAs, ensuring that the confidentiality of sensitive information is maintained even during collaborative efforts.

CONCLUSION

It is crucial to emphasize that a trade secret constitutes a highly valuable asset within any business, and the unauthorized disclosure of such information can result in significant and sometimes irreparable harm. A trade secret may encompass vital data that serves as the cornerstone of the entire enterprise. Consequently, safeguarding this sensitive information is of paramount importance and is not only supported by a legal foundation but should also be consistently and diligently enforced.

The NDA clause is a pivotal provision in employment agreements due to its preventive and acknowledgment role, which serves to safeguard the business.

Consequently, it is of utmost importance to treat these agreements with the utmost seriousness and diligence.

NDA CLAUSE

Ana Tosic Chubrinovski – Managing Partner

Divorce is significant and sensitive issue that affects families worldwide, and North Macedonia is no exception. In recent years, divorces in North Macedonia have seen a notable increase, reflecting evolving social and economic factors that influence martial relationships.

In accordance with the Family Law of North Macedonia, marriage is legally regulated union of life between a man and a woman in which the interests of the spouses, the family and society are realized.

For now, in the Republic of North Macedonia, marriages between people of the same sex are still not allowed. Additionally, if a Macedonian citizen enters into a same-sex marriage in another marriages country, they are not able to register that marriage in the Civil Registry Office for births, marriages and deaths. https://uvmk.gov.mk/.

 The divorce lawsuit is one of the ways to terminate a marital union.

One of the ways to divorce is by submitting a marital agreement proposal for divorce by the spouses. In the material agreement proposal for divorce, supposes agree in the way parental rights, duties, child-rearing and child support, if applicable will be handled.

The marital agreement method of divorce is painless, practical, fast and cost-effective primarily because the process can be completed in a single court session, where spouses will affirm that they have made decision seriously, unhesitatingly and freely.

Contrary to the above, filing a lawsuit for a divorce by one of the spouses is a different method. The progress of this procedure depends on the behavior of the other spouse, whether they will acknowledge the lawsuit and accept it as such, or on the contrary, the may propose and provide evidence that may contribute to the prolongation of the process.

A common procedure that is carried out regardless of whether a marital settlement proposal for divorce has been submitted or divorce lawsuit is the mediation process.

If the married couple has minor children or children whom parental rights are extended, the mediation process is conducted by the social services center, and if not, by the court.

In order for the divorce settlement agreement to be successful, it is especially important for both spouses to be present at the mediation hearing.

The mediation process will not be conducted if:

According to the data from the State Statistical Office https://www.stat.gov.mk/, the number of divorces in 2022 shows a decrease of 17.9% compared to 2121, with a total of 1.613 divorced marriages.

Divorces in North Macedonia have become more prevalent, reflecting changing societal norms, economic pressures, and improved legal accessibility. While this trend has brought both positive and negative consequences, it highlights the need for better support systems for couples in crisis and greater emphasis on marriage counseling and education to help prevent divorces and promote healthier relationships.

If you need additional information and details about the divorces, divorces lawsuit in the Republic of North Macedonia and according to the family law legislation of the country, feel free to contact our Law Firm, we can offer you answers and appropriate solutions within the legal framework of the applicable family law legislation.

DIVORCE LAWSUIT

Marija Boceska

Management agreements as an institute are always subject of interest and discussion and are especially tempting for Managers and Companies who want to give their mutual relationship special characteristics, individually defined rights, benefits, obligations and responsibilities.

In the Macedonian legislation, the Management agreement is stipulated in the Labor Law and the Companies Law, both offering specific elements of this agreement. However, in practice, the provisions from the Labor Law in combination with part of the provisions from the Companies Law are used in order to create an agreement that best suits the interests of the parties.

According to Article 54 of the Labor Law it is stipulated that If an employment agreement is concluded by business persons – Мanagers, the parties can arrange the rights, obligations and responsibilities of the employment relationship differently, especially for:

1) the conditions and limitations of the fixed-term employment relationship

2) working hours

3) provision of daily and annual leave

4) the payment of the work and

5) the termination of the validity of the employment agreement

Additionally, in Article 55 of the Labor Law it is provided that the Manager exercises the rights and the obligations arising from the employment relationship at with the employer to whom he is appointed or elected, according to the provisions of the Labor law, collective agreement and contract for employment of business persons, i.e the Management Agreement.

The above cited provisions actually define the diversity of the Managerial Agreement itself, allowing the contracting parties autonomy in regulating this “sui generis” (employment) relationship. Namely, when concluding a Management Agreement, it is necessary to carefully arrange certain key elements of this relationship, especially appreciating that usually the intention of the contracting parties is that the certain relationship will be with special privileges, rights and responsibilities, which will be largely different from those that have the other employees of the Company.

This means that the Manager as an equal party to the contractual relationship, has the opportunity and the right to negotiate and request that certain rights and benefits be granted to him/her. These may include a substantial amount of salary and compensation for their special duties and responsibilities, annual leave in a duration of more than 30 days, flexible working hours, private health insurance for him/her and/or his/her children, life insurance, access to a company car, assistance with their children’s private school, part of the Company’s annual profit and shares in the Company.

This also entails that the Company reserves the right to require the Manager to work beyond the standard 40 hours a week, and when necessary, even outside the Company’s regular working hours. The Manager may be expected to deliver tangible results in the Company’s operations, such as achieving specific annual profit targets or overseeing the management of multiple international subsidiaries of the Company.

We can conclude that, in the simplest terms, the Management agreement is a mechanism that conditions the Manager’s reward on the Company’s success. The better and more successful the Manager will be in achieving the established goals, the greater and more numerous benefits they will be entitled to receive.

As the possibilities for negotiation and agreement are limitless, Management Agreements became increasingly appealing for both Managers and Companies, making them a growing trend in the labor law practice.

We, at Tosic and Jevtic Law Firm are here to provide You with tailored guidance, assistance, and to assist in crafting and refining a Management Agreement that suits Your unique relationship with Your permanent or potential management.

LABOR LAW

Ljupka Naumoska Gjorgjievska

INTRODUCTION

The processing of personal data via video surveillance in North Macedonia is generally subject to the Law on Personal Data Protection (Official Gazette of Republic of North Macedonia no. 42/20 and 294/21) (hereinafter as the Law) and the by-laws adopted by the Personal Data Protection Agency.

The Macedonian legislation in this area is aligned with the General Data Protection Regulation (Regulation (EU) 2016/679) and the Guidelines 3/19 on processing of personal data through video devices adopted by the European Data Protection Board.

In this text we will present the main obligations for the controllers and main requirements for lawfulness of the processing of personal data through video surveillance systems.

Defining the purposes

The Law permits processing of personal data via video surveillance systems for the following purposes:

Therefore, the controllers must first conduct an analysis to determine the purposes for which the video surveillance system is installed and determine if those purposes fall within the legal framework. The next step is to adjust the entire video surveillance system according to the purposes.

Optimization of the surveillance area

Video surveillance can only be conducted within the necessary area to achieve its objectives and it is forbidden to be in operation in wardrobes, changing rooms, sanitary units, and similar places where the interests or fundamental rights and freedoms of the data subjects would override the interests of the controllers for monitoring.

If the controllers want to conduct video surveillance of a publicly available space on a large scale, they first have to make an assessment of the impact on the protection of personal data.

Technical and organizational measures

The controllers have to apply appropriate technical and organizational measures in line with the Law and the by-laws in order to ensure protection of the personal data.

Notification

The controllers performing video surveillance are obliged to display a clear and visible notification, in a way that allows the data subjects to become familiar with the video surveillance (easily noticeable, positioned approximately at eye level, etc.).

For this purpose, the Personal Data Protection Agency has adopted a form of notification which contains basic information for the identity of the controllers and the data protection officer, details of the purposes of processing, the rights of the data subjects, etc.

However, the controllers have to provide more detailed information to the data subjects, especially information regarding the rights of the data subjects. This can be done, for example, by way of publishing an information sheet on the website on the controllers or making it available at their reception desk.

Period of storage of the recordings

The Law provides that the recordings should be stored until the set objectives are fulfilled, but not longer than 30 days. The recording can be stored for a longer period only if another law which includes protective measures and other measures for the protection of rights and freedoms of the data subjects provides for a longer period of storage.

Authorization for processing

The Law stipulates that only authorized persons may process data collected by video surveillance systems. For this purpose, the controllers must grant special authorization.

The authorized persons have to sign a declaration of ensuring the security of personal data processing via the video surveillance system.

Video Surveillance Policy

According to the Law, the controllers have an obligation to adopt Video Surveillance Policy which shall contain all the relevant information pertaining to the video surveillance.

This includes: indication of the purposes for which the personal data are processed; categories of personal data processed; technical and organizational measures to ensure the security of the personal data; persons authorized to process the personal data; storage period of video surveillance recordings; technical specifications of the equipment, placement of the video surveillance system and other information.

Periodic evaluation of the results

The Law stipulates that the controller is obliged to periodically evaluate the results achieved by the video surveillance system every two years.

The objective of this evaluation is to establish:

This evaluation should serve as a guidance on whether and how to proceed with the processing of personal data through video surveillance system.

CONCLUSION

The processing of personal data through video surveillance in North Macedonia is generally subject to the Law on Personal Data Protection and the adopted by-laws in line with the GDPR.

In order to comply with the Law, the controllers have to meet various obligations, such as: conduct an analysis and define the purposes of the processing, optimize of the surveillance area, apply appropriate technical and organizational measures, notify the data subjects of the processing, ensure that the recordings are deleted after the defined period of storage, issue authorization for the processing, adopt a video surveillance policy, evaluate the results of the processing and other obligations.

DATA PROTECTION

Elena Kuzmanovska

Tax incentivizes for the investors in Technological Industrial Development Zones and in accordance with the Law on the Financial Support of Investments

Investment Opportunities in North Macedonia and How Our Law Firm Can Assist

In 2007, the Republic of North Macedonia, a developing country, enacted the Law on Technological Industrial Development Zones (TIDZ) to encourage investments in these zones, fostering economic growth and development. Subsequently, in 2018, the government introduced the Law on the Financial Support of Investments. Both laws aim to stimulate economic growth and employment while enhancing the competitiveness of North Macedonia’s economy.

I. Investment Incentives

The government offers compelling incentives to foreign and domestic investors, including:

In terms of tax incentives, taxpayers using the zones benefit from exemptions and relief from payment of:

  1. Profit tax for ten years from the commencement of activity in the zone, but no longer than two years after the year of obtaining the work initiation decision.
  2. Profit tax for ten years from the date of receiving:
  3. Personal income tax on employees’ salaries for ten years from the commencement of activity in the zone, regardless of the number of employees, as per conditions established by the law.

These incentives have resulted in over 17,000 jobs created by foreign investors in the TIDZ. Moreover, these investors have engaged local companies in their supply chains, facilitating knowledge transfer within their respective industries.

Moreover the TIDZ and the Government are ready to invest in tailor made solutions for each investor, based on his preference and investment capacity.

II. The Law on the Financial Support of Investments

In 2018, the Macedonian Government introduced the Law on the Financial Support of Investments to attract both foreign and domestic investors. The main incentives under this law include:

III. How Our Law Firm Can Assist

Our law firm has been dedicated to assisting foreign investors in securing financial support from the government. We offer guidance in negotiating investment agreements, both within and outside the TIDZ, along with support in project financing and navigating the process of establishing companies in North Macedonia. Our services encompass legal aspects, construction, licensing, employment, structural setup, bylaws, GDPR, and compliance with domestic legislation.

For further information on the benefits and the investment pathway in North Macedonia, please contact our Managing Partner, Ivica Jevtic.

Investment

Ivica Jevtic – Managing partner at Tosic & Jevtic law firm

Should works created entirely by artificial intelligence absent human involvement be eligible for copyright protection? The United States District court for the District of Columbia says NO.

In the case initiated before the United States District court for the District of Columbia by the Plaintiff Mr. Thaller, the court ruled in the matter of whether works created entirely by artificial intelligence be eligible for copyright protection.

Case overview

Mr. Thaller, who owns a computer system he calls the “Creativity Machine” filed an application to the US Copyright Office to register a copyright claim in the work titled “A Recent Entrance to Paradise” (“the Work”). The Work was autonomously created by a computer algorithm with no human contribution. In the copyright application, the plaintiff Mr. Thaller identified the “Creativity Machine” as author of the Work with him listed as claimant as the owner of the machine stating that the Work was created as work-for-hire.

The US Copyright Office refused to register Mr. Thaller’s claim, finding that it “lacks the human authorship necessary to support a copyright claim” and Mr. Thaller had “provided no evidence on sufficient creative input or intervention by a human author in the Work”. The Copyright review board confirmed the refusal of the claim. In the letter of the Copyright Review Board, dated February 14th, 2022, the Board affirmed the refusal to register the copyright claim in the Work giving an explanation that no Work can be protected under the Copyright Act if there is no human authorship as a prerequisite to copyright protection in the United States.  In Mr. Thaller’s case the Work lacked human authorship.

As explained in the letter of the Board, after the appearance of the computers and their impacts in the copyrights led to the creation of the Commission on New Technological Uses of Copyrighted Works (“CONTU”) and their job was to study issues associated with copyrighted works and computer-related works. Their opinion on the matter was that presence of at least minimal human creative effort at the time the work is produced was needed for a Work to be copyrightable.

Displeased by the issued decisions from the Copyright office, Mr. Thaller challenged the decision of the U.S. Copyright Office Review Board before the Court. In the ruling, the Court affirms that the human authorship is a bedrock requirement of copyright and that no Work lacking human authorship can be protected under the Copyright Act.

What this means for North Macedonia

Unlike the United States, North Macedonia does not have a copyright work registry.

Under Macedonian copyright and related rights law, copyright belongs to the individual who created the work, and this right automatically vests in the author at the moment of creation. There is no formal registration process required. Therefore, no similar case as Mr. Thaller’s can be brought before any administrative body or court in North Macedonia.

However, in the past period, we have observed a growing trend in the number of court claims filed, seeking protection for copyright infringement.

Given the limited number of copyright-related cases in Macedonian judicial practice, resulting in a relatively weak legal precedent in this domain, a judgment from an American court can serve as a guiding reference for handling issues pertaining to copyright rights and artificial intelligence. Minimal human creative effort at the time the work is produced shall be needed for a Work to be copyrightable.

Artificial intelligence and copyright

Ivana Jevtic Nikolova