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Legal Protection of Company’s Business Reputation in Serbia

Legal Protection of Company’s Business Reputation in Serbia

Serbia
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It is undisputable that the right to reputation and honour is a basic human right known to virtually every legal system and that its violation causes a non-material damage to a person.

Serbian Contracts and Torts Act explicitly prescribes the right to a monetary compensation of a non-material damage caused by a violation of the right to reputation and honour. The competent court determines the amount of such compensation by taking into account all relevant circumstances of a specific case. It is safe to say that the Serbian court practice in this regard is vast and well-established.

However, when it comes to protecting the reputation of a legal entity, things are a bit different. One can argue that a legal entity doesn’t have feelings as human beings do, nor the innate right to a reputation and honour granted to humans upon birth. As such, a legal entity doesn’t “deserve” legal protection in case its reputation is impaired, i.e. it cannot suffer non-material damages. Although this argument does make some sense, argumentation in favour of such protection is much stronger.

Let’s just think about what it takes for a company selling goods or providing services to establish itself on a competitive market. And especially nowadays, when the opportunity for tarnishing one’s good reputation is just a click away. No one can argue that building a reputation in a competitive market takes a lot of effort, time and money. Such efforts can be shattered very quickly, leaving the company in debts, or, worst-case scenario, out of business. In these cases, legal protection of company’s reputation in form of a monetary compensation is, indeed, necessary.

Thankfully, Serbian Trade Act prescribes the act of unfair competition (anticompetitive behaviour), which is defined as the act undertaken by a trader against another trader, i.e. its competitor, by which the codes of business moral and good business practice are broken, and thereby damage is, or may be inflicted to another trader (competitor). The Act recognizes some types of behaviours as acts of unfair competition, including making untrue and offensive allegations about another trader, disclosing information on another trader or their goods aiming to harm their reputation and business operations, using and disclosing a business secret without the consent of its holder in order to aggravate their position on the market, etc. It is important to note that the legal protection is not only granted in cases when damage is inflicted, but also in cases when damage may be inflicted by such behaviours.

The trader who suffers damage due to unfair competition acts is entitled not only to a monetary compensation for suffered material damages, but also for suffered non-material damages. This means that the right to reputation is also recognized to a legal entity, and such entity can file a lawsuit claiming monetary compensation for the acts which tarnished its reputation. To be specific, the Trade Act prescribes that a legal entity may file a suit due to unfair competition and demand that the court determines the act of the unfair competition, forbids further repetition of such act, orders the remedy of the consequences thereof and the compensation of damages, both material and non-material. The proceedings in these cases are considered urgent, according to the Trade Act.

However, monetary compensation for both material and non-material damages caused by the acts of unfair competition is basically reserved for the situation in which one company performs the above mentioned acts against its competitor.  This means that in case, say, soap distributor engages in act of unfair competition against a shoe maker, the shoe maker could not succeed in getting monetary compensation for suffered damages, given that a soap distributor and shoe maker cannot be considered competitors. Limiting court protection in mentioned cases solely when they involve competitors on a market is unfair and doesn’t suit the reality. It is very easy to imagine that a company engages in acts of unfair competition and tarnishes the reputation of another company, even though they are not competitors.

Besides that, the court practice in these cases is extremely scarce. It is safe to say that many Commercial Court judges in Serbia hadn’t come across a lawsuit in which a company demands compensation of non-monetary damage for the violation of right to reputation during the course of their careers. Still, this doesn’t mean that such practice is not going to be established in the near future, given that we all live and work in an IT society, which will make this kinds of lawsuits more often.

By Marija Oreski Tomasevic, Partner, Dunja Tasic, Senior Associate SOG / Samardzic, Oreski & Grbovic

Serbia Knowledge Partner

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