Month: July 2026

A Six-Year Government Blunder – A Two-Month Deadline for Businesses

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Nearly 1,000 Lithuanian carriers have recently received a demand from the State Tax Inspectorate (VMI) to pay road user fees for vehicles registered in Lithuania. Paradoxically, the government itself acknowledges that the situation arose due to a long-standing legal loophole and an unclear division of responsibilities among agencies, yet it has decided to shift the financial consequences of these errors onto businesses.

Carriers are being urged to pay taxes covering a period of as long as six years within an extremely short timeframe. To make matters worse, the government has not accurately calculated the amount each company owes—it has left that task to the businesses themselves. Companies must independently calculate their debt, report it, and pay it within just two months.

The government’s communication itself raises additional questions. Carriers received the demands from the State Tax Inspectorate, but the letter itself states that if payment is not made by October 1, 2026, it will not be the State Tax Inspectorate but the Lithuanian Transport Safety Administration (LTSA) will file a lawsuit to recover the debts. At the same time, it is the LTSA that is publicly urging carriers to fulfill their obligations as soon as possible. This division of roles among government agencies sends a contradictory message to the business community and resembles a means of exerting pressure rather than a clear, consistent, and cooperative dialogue with the government.

Egidijus Langys, managing partner at AVOCAD and an attorney, emphasizes that the very idea of tax collection is not in dispute—taxes must be paid. However, the method chosen by the state to correct its own mistakes raises serious doubts.“The government publicly acknowledges that a legal loophole existed for many years, along with an unclear division of responsibility among institutions. However, having admitted its mistake, it is acting as if the business community were responsible for it. Even more questions arise from the fact that the State Tax Inspectorate (VMI) is sending the demand, while the letter itself warns that the Lithuanian Taxpayers’ Association (LTSA) will take the matter to court. Such communication does little to foster trust in the government—on the contrary, it creates additional tension and pressure on businesses,” he notes.

According to the attorney, in such situations, the government should demonstrate leadership and take responsibility not only through words but also through decisions. “If a mistake has been developing for six years, it’s hard to understand why businesses are given just two months to correct it. This is not a dialogue with the business community—it is an ultimatum. Such a practice is difficult to reconcile with the stated goal of creating a stable, predictable, and investment-friendly business environment.”

Government agencies state that the debt may be paid in installments, but only in cases where the company can prove that it is experiencing financial difficulties.

According to E. Langis, this model essentially punishes those who work steadily and responsibly. “A paradoxical situation arises—if a company is doing well, it is required to pay off a six-year debt accumulated due to the government’s mistakes within two months. If it’s doing poorly, it can request a payment plan. This is neither fair nor proportionate. The government’s mistakes should not be financed solely at the expense of businesses.”

The attorney points out that this story is not just about a specific tax or the transportation sector. “The state has the right to collect the taxes owed to it. There is no dispute about that. However, in a state governed by the rule of law, the means by which this is done are no less important. When the state itself acknowledges that the system has failed, the responsibility cannot be unilaterally shifted solely onto taxpayers. In such situations, it is essential to seek proportionate solutions rather than immediately threatening legal action,” the lawyer emphasizes.

According to Langis, a logical solution would be to grant businesses a realistic transition period that would correspond to the extent of the government’s own inaction. “If the government has been unable to properly administer this tax for six years, it would be fair to allow the debt to be repaid over a reasonable, extended period. This would be neither a privilege nor state aid. It would simply be a basic acknowledgment of responsibility for its own mistakes and respect for businesses, which cannot be forced to be the sole financiers of the government’s inaction.”

Recently, the government has repeatedly acknowledged that, in certain areas, loopholes in legislation or poor administration have led to situations whose consequences are subsequently passed on to businesses. This practice raises increasing doubts about the consistency and predictability of government agencies’ actions, as well as their ability to take responsibility for their own mistakes.

“Businesses can plan investments, expansion, and job creation only when they can trust the government. When the government, six years later, presents a bill for its own acknowledged mistakes, sets a two-month deadline, and accompanies all of this with threats of legal action, it sends a very dangerous signal. Trust in the government is built not through pressure or an atmosphere of fear, but through responsible, clear, and proportionate decisions. Businesses do not expect privileges, but rather the same level of integrity and responsibility that the government demands of them,” the attorney notes.

 

Unilateral Construction Work Acceptance and Transfer Certificate: Protection or Risk? 

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In the construction sector, it is not uncommon for work to be completed and the project to be in actual use, yet the contractor still has not received payment. The reason is that the client delays or refuses to sign the work acceptance and transfer certificate, thereby delaying final payment.

However, does such conduct mean that the contractor is left without legal protection? Lithuanian law provides a mechanism to protect a contractor who has fulfilled its obligations in good faith—the unilateral work acceptance and transfer certificate.

“A unilateral work acceptance and transfer certificate is not an exception or a loophole. It is a legal instrument designed to protect the contractor in cases where the client unreasonably delays acceptance of the work or payment. However, it may only be used in strict compliance with the requirements of the law,” notes Augustas Platūkis, a lawyer at AVOCAD.

Why is the work acceptance and transfer certificate so important?

In construction contracting relationships, the work acceptance and transfer certificate is one of the most important documents. It is this document that confirms that the contractor has delivered the results of the work and that the client has accepted them.

From this point on, significant legal consequences arise—the client is obligated to pay for the work performed, the warranty period begins, responsibility for the results of the work is transferred, and other rights and obligations provided for in the contract and by law come into effect.

Typically, such a document is signed by both parties. However, in practice, there are often situations where the client deliberately avoids accepting the work and thereby delays payment to the contractor.

How do clients delay the acceptance of work?

In practice, such situations take various forms. For example, a client:

  • ignores the work acceptance and transfer certificates sent by the contractor;
  • points out alleged or minor defects in the work;
  • claims that not all of the work specified in the contract has been completed;
  • begins to voice complaints—which had never been raised before—regarding the organization of work or safety violations;
  • refuses to sign the document on the grounds that the letters of guarantee, insurance documents, or other formal documents have not yet been submitted.

In such situations, a paradoxical situation usually arises—the work has in fact been completed, but due to the client’s actions, the contractor is unable to receive the compensation to which it is entitled.

For example, according to the lawyer, the engineering systems installed in the business center are already operational, and the building’s employees use them every day; however, the client has not signed the work acceptance and transfer certificate for several weeks or even months, citing ever-changing formalities as the reason. In such cases, it is important for the contractor to know that the law provides a means to protect their right to payment.

Unilateral Work Acceptance and Transfer Certificate – Legal Protection Granted to the Contractor

The legislature has established a mechanism that protects the contractor from unfair actions by the client. However, an AVOCAD attorney warns that one must exercise one’s rights prudently and proportionately. In a case heard by the Supreme Court of Lithuania, it was determined that the work performed by the contractor had quality defects, which did not relieve the client of the obligation to accept the completed work under Article 6.694(6) of the Civil Code, as the defects could have been remedied and the client used the work for its intended purpose. On the other hand, the contractor did not exercise its right to sign the acceptance certificate unilaterally and, having assessed the client’s conduct as a material breach of contract, unilaterally terminated the contract and dismantled the work product.

The Court of Cassation recognized that, in the case at hand, the contractor failed to receive payment for the work performed not only because of the client but also because of its own actions; therefore, it ruled that the termination of the contract was unlawful.

According to Augustas Platūkis, if one of the parties refuses to sign the work acceptance and transfer certificate, a note regarding the refusal is made on the certificate, and the other party signs it. This results in a unilateral work acceptance and transfer certificate.

In practice, there is still a view that such an act has no legal significance, but this is not true.

Does a unilateral act have legal effect? “The short answer is yes. Consistent case law recognizes that a unilateral work acceptance and transfer act that has been properly drafted and submitted to the client has the same legal force as an act signed by both parties. It remains valid until a court declares it invalid,” he says.

This means that, pending a court decision, the party that has not signed the document is subject to all the legal consequences that would have arisen had it signed the document. Therefore, if the client fails to pay for work transferred by a unilateral act, the contractor has the right to file a lawsuit and seek a judgment for the debt arising from the work performed. Properly completing the unilateral handover procedure significantly increases the contractor’s chances of successfully enforcing its right to payment.

“Case law is consistent—a properly drafted unilateral work acceptance and transfer certificate has the same legal force as a document signed by both parties. Therefore, both contractors and clients should understand that refusing to sign the certificate does not, in and of itself, negate its legal consequences,” says Augustas Platūkis, a lawyer at AVOCAD.

When can a unilateral act be signed?

It is important for the contractor to understand that a unilateral act is not a means of circumventing the standard work acceptance and handover procedure. This tool may be used only in accordance with the requirements established by law.

First, the contractor must properly notify the client that the work has been completed and that the contractor is ready to hand over the results.

There are two possible scenarios:

  • the client ignores the contractor's notice and fails to appear to accept the work;
  • The client refuses to sign the work acceptance and transfer certificate without providing a valid reason.

In both cases, the contractor may be entitled to draw up a unilateral statement, but only if the client’s refusal is not based on grounds provided for by law.

When does the client have the right to refuse to accept the work?

The law provides an exhaustive list of cases in which a client’s refusal to accept the work is considered legitimate:

  • the contractor missed the deadline for completion of the work, and as a result, the work became meaningless to the client;
  • the results of the mandatory tests or control measurements are negative;
  • defects in the work have been identified that cannot be remedied and that prevent the building or other result of the work from being used for its intended purpose;
  • It is clear that the work has not been completed.

If the client’s refusal does not fall under any of the cases provided for by law, but the client still refuses to sign the document, the contractor has the right to sign it unilaterally and clearly note that the client refused to sign it.

Can a unilateral act be revoked?

According to the lawyer, the law ensures a balance between the interests of both parties. “If the client believes that a unilateral act was drawn up without justification, they have the right to go to court and request that such an act be declared invalid. However, it is important to note that it is the client who bears the burden of filing a lawsuit to challenge such a document,”

Thus, a unilateral work acceptance and transfer certificate is not a privilege of the contractor or a means of circumventing the client’s rights. It is a mechanism provided for by law, designed to ensure the fair performance of the contract and to protect the contractor from unjustified refusal to accept the work and artificial delays in payment.

Swiss arbitration tribunal upheld a basketball club's right to terminate a contract due to a player's concealed injury   

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Can a professional athlete join a club while concealing a past injury, be unable to compete at full capacity, and still demand the full salary stipulated in the contract? The Basketball Arbitral Tribunal (BAT), based in Switzerland, provided a precedent-setting answer to this question.  On July 21, 2026, the international basketball arbitration tribunal completely dismissed a claim of more than 50,000 against the Jonava basketball club, which plays in the LKL , recognizing that the club had lawfully terminated the contract after it became clear that the player had concealed a knee injury he had sustained prior to his arrival.

What’s more, the arbitration panel ordered the player himself to cover not only all arbitration costs but also to reimburse the club for its legal expenses. This ruling may be significant in resolving similar professional sports disputes in the future. The Jonava Sports Club was represented in this dispute by attorneys Eimantas Čepas and Egidijus Langys of the law firm AVOCAD.

The injury became apparent after arriving in Lithuania

The dispute arose after the Jonava club signed a one-season contract with the American basketball player in the summer of 2025. Shortly after arriving in Lithuania, the player began complaining of knee pain. An MRI scan conducted at the club’s initiative revealed that the injury was not new—chronic knee damage dating back several months was detected.

An independent forensic medical expert’s report, commissioned by the club, confirmed that the injury had been sustained well before the contract was signed and before the player arrived in Lithuania. The expert also stated that, given the nature of the injury, the athlete could not have failed to feel pain, swelling, and knee instability, and therefore must have been aware of his condition. This conclusion became one of the most important pieces of evidence in the case.

Nevertheless, the player demanded that the club pay him the full salary stipulated in the contract for the season—45,000 U.S. dollars plus interest—claiming that the contract had been terminated without just cause.

The arbitration tribunal dismissed all claims

After several months of proceedings, the BAT issued a ruling that was entirely in the club’s favor—it rejected all of the player’s claims. Furthermore, the arbitration panel ruled that the claimant must bear all costs of the arbitration proceedings. He was also ordered to reimburse the Jonava club for the legal expenses it incurred.

Eimantas Čepas, an attorney at AVOCAD who led the club’s defense in arbitration, says that this case is significant not only because of its financial value. “In international sports law, clubs often find themselves in a weaker position when disputes arise over professional athletes’ contracts. In this case, we were able to prove a fundamental principle—a professional athlete must also act in good faith and may not conceal circumstances that are of decisive importance to the conclusion of the contract. “A professional athlete’s dishonest conduct may result in the athlete losing the right to rely solely on the formal provisions of the contract in the event of a dispute. This is an important message for the entire professional sports sector,” the attorney notes.

According to Egidijus Langis, managing partner at AVOCAD and attorney-at-law, this case is significant for the broader practice of sports law. “This victory demonstrates that meticulously gathered medical evidence, a professionally formulated legal position, and consistent procedural work make it possible to successfully defend the interests of Lithuanian clubs even in the highest-level international arbitration. It is likely that this case will be cited in the future as one of the most important precedents in assessing players’ obligation to disclose information about their health status,” he emphasizes.

Karolis Vaškevičius, head of the Jonava basketball club, which plays inthe LKL, emphasizes that this decision has far greater significance for the club than just the financial outcome. “We are sincerely grateful to the team of attorneys for their exceptional professionalism and principled defense of our interests. We believe this is a historic victory not only for the Jonava club but also for professional sports in Lithuania as a whole. The international arbitration tribunal has clearly confirmed that clubs have the right to expect honesty from professional athletes, and that concealing material facts is not permitted.”

This decision strengthens the legal protection of Lithuanian sports clubs in international disputes and sends a clear message to the professional sports community: fairness in contract negotiations is not a mere formality, but one of the most important rules of professional sports.

 

Warranty Service Turns into a Traffic Accident: What to Do If a Car Entrusted to a Service Center Was Damaged?

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For many drivers, car warranty service is associated with safety and trust. It’s only natural to expect that a vehicle entrusted to an authorized dealership will be professionally inspected, repaired, and returned in the same condition as when it was dropped off. But what should you do if, while the car is in for warranty service, it is involved in a traffic accident and is damaged by a service center employee?

The Supreme Court of Lithuania recently examined precisely this type of situation. In the case, a consumer took a new car to an authorized service center for a warranty inspection of the brake system. During a test drive on the street, a service center employee was involved in a traffic accident, and the car was damaged. The consumer decided that he no longer wanted the car, unilaterally terminated the sales contract, and demanded a full refund of the purchase price as well as compensation for damages.

However, the court did not agree with this position. As Mantas Baigys, an attorney with the AVOCAD law firm, points out, this ruling clearly distinguishes between two situations that are often confused—the application of a guarantee and compensation for damages.

“If a car has a manufacturing defect or some other quality issue, the consumer can exercise the rights provided by the warranty. However, if the car was damaged after it was delivered to the buyer—even during warranty service—the warranty terms alone no longer cover such a situation,” says M. Baigys.

In this case, the courts determined that the car was delivered to the buyer in good condition. The defects that arose later were not related to a manufacturing defect or a defect covered by the warranty—they were caused by a traffic accident resulting from the actions of a service center employee. Therefore, according to M. Baigio, such a dispute should be assessed primarily not as a problem with the quality of the item sold, but as a matter of compensation for damages.

What can a car owner demand?

 Although the consumer in this case was unsuccessful in his claim to terminate the sales contract and recover the full price of the car, this does not mean that he is left without protection. The service center is liable for the actions of its employees; therefore, in such cases, a claim for compensation for the damages incurred may be filed. “The court essentially ruled that the service center cannot avoid liability. However, this liability arises not because the warranty was breached, but because damage was caused to another person’s property. In such cases, the consumer has the right to demand full compensation for the damages,” comments M. Baigys. In practice, this may include car repair costs, a decrease in market value, the cost of a rental car, or other losses incurred as a result of the incident. In each case, it is important to assess whether the proposed solution truly compensates for all the damages incurred, rather than just the most obvious repair costs.

According to M. Baigio, in such situations, one should not rush to sign documents confirming that there are no further claims against the service provider. “If this is a matter of compensation for damages, the consumer has the right to demand full compensation for their losses. Therefore, before accepting an offer from a service center or insurance company, it’s worth making sure that it covers not only the car repairs but also other actual consequences,” the attorney notes.

The most important thing is to choose the right way to protect your rights

 This ruling by the Supreme Court of Lithuania is significant because it serves as a reminder that the mere fact that a car was damaged during warranty service does not, in and of itself, entitle the buyer to rescind the purchase and sale agreement and demand a full refund of the price paid for the car. If the car was of satisfactory quality at the time of sale and the damage was caused by a subsequent traffic accident, the dispute should generally be resolved through a claim for damages.

On the other hand, this does not mean that the consumer must accept any offer made by the service provider. By entrusting their car to a professional service provider, the consumer has a reasonable expectation of getting it back safe, in good working order, and without any loss of value due to the service provider’s actions. Therefore, the damage caused by the service provider must be assessed realistically, and the compensation must be adequate. “In such situations, what matters most is not an emotional decision, but a carefully chosen legal course of action. A demand for a full refund of the car’s purchase price may seem logical to the consumer, but legally it may not necessarily be justified. Meanwhile, a properly formulated claim for damages can be significantly more effective,” concludes M. Baigys.

Could you face a harsher penalty if you appeal the fine?  

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The Code of Administrative Offenses of the Republic of Lithuania provides that the investigation of administrative offenses and the adjudication of cases are based on fundamental procedural principles—the presumption of innocence, equality before the law, proportionality, due process, expediency, and the prohibition against worsening a person’s situation solely because they have appealed a decision (non reformatio in peius). This principle is one of the most important guarantees of the right to defense for a person facing charges. Its essence is that a person should not be afraid to defend their rights simply because filing an appeal might worsen their situation. If that were the case, the process itself would no longer comply with the principles of justice and fairness.

“The principle ofnon reformatio in peiusensures that a person is free to exercise the right to appeal a decision that they consider unlawful or unfounded. A person’s legal situation cannot be worsened simply because they filed an appeal,” notes Domantas Velykis, an attorney with the AVOCAD law firm.

This principle must be observed at all stages of the proceedings in an administrative offense case—in the court of first instance, on appeal, and during the reopening of the case, as well as when the case is remanded for a new trial. However, it is important to note that the prohibition against worsening a person’s situation is not absolute.

A court of first instance may only worsen the situation of a person subject to administrative liability if a complaint has been filed by the victim. In the appellate instance, this may be done only if the appeal is filed by the authority that issued the decision in the administrative offense case through non-judicial proceedings, the authority whose official conducted the investigation of the administrative offense, or the victim.

In other words, if only the person subject to administrative liability appeals the decision, the court may not, based solely on this appeal, impose a more severe penalty or otherwise worsen that person’s legal situation. However, if the victim or an institution also files an appeal, the court has the right to issue a harsher decision—for example, to impose a more severe administrative penalty or to overturn a more lenient sanction.

How is it determined whether a person's situation has worsened?

When assessing whether the principle ofnon reformatio in peiuswas violated, the comparison is not between the theoretical possibility of reaching a different decision and the actual procedural decisions that were made.

The analysis examines whether the new solution:

  • restricts a person's rights to a greater extent;
  • imposes additional obligations or restrictions;
  • provides for stricter administrative liability;
  • imposes a more severe administrative penalty or administrative sanction;
  • finds the person, against whom the case was dismissed, guilty;
  • awards a higher amount of damages or otherwise worsens his legal position.

As D. Velykis points out, mere assumptions that the situation could have been worse are not enough—a violation of the principle must be established in practice by comparing the specific decisions that were made.

Lithuanian Supreme Court: The situation worsened even after one restriction was lifted

In a recent case before the Supreme Court of Lithuania, the court considered a case in which the police fined an intoxicated driver 800 euros, suspended his driver’s license for six months, and prohibited him from driving vehicles not equipped with alcohol-interlock devices for twelve months. The individual appealed this decision, requesting that the period of the driving suspension be reduced to three months and that the prohibition on driving vehicles without alcohol ignition interlock devices be lifted.

The district court overturned the ban but, at the same time, extended the period of the driving suspension from six to twelve months. The regional court upheld this decision. The Supreme Court of Lithuania ruled that the case had been heard solely on the basis of an appeal filed by the person subject to administrative liability, and therefore the court had no right to worsen his situation. Although one administrative sanction was overturned, the extension of the driving suspension to twelve months effectively constituted a more severe restriction of the person’s rights.

Consequently, the Supreme Court of Lithuania found that the principle ofnon reformatio in peiushad been violated, determined that there had been a fundamental violation of procedural law, and overturned the decisions of both the district and regional courts.

“This ruling reaffirms that the right to appeal a decision cannot result in the risk of facing harsher consequences. This is one of the most important procedural safeguards ensuring a person’s right to an effective defense,” concludes Domantas Velykis, a lawyer at AVOCAD.