MINAET-SINAC

This section provides a short summary of laws and legal regulations in Latvia binding at the date of this Prospectus that, in the Company’s opinion, are relevant for carrying out waste management business activities by the Group. Please note that the selection of legal provisions has been made at the sole discretion of the Company and this does not purport to be a complete overview of the relevant regulatory systems. Please note that laws and regulations are subject to changes and amendments, and the information contained herein is not updated following the issuance of the Prospectus. Investors are advised to make their own investigation and obtain independent legal advice should they wish to incorporate regulatory information into their investment decisions.

Environmental and other Licenses and Permits

The Group Companies operate in the environment management sector and in particular in the waste management, including waste collection, transport, reloading, storage, sorting and, trading, as well as waste recycling. However, one of the Group Companies LZP maintains the major producers’ responsibility system in Latvia, which ensures the management of packaging waste, waste electric and electronic equipment and waste of goods harmful to the environment. Pursuant to the general principles provided in the Waste Management Law of the Republic of Latvia, dated 28 October 2010, as amended (the “Waste Management Law”), waste management should not negatively affect the environment and should be performed in such a way which would not threaten human life and health. Accordingly, the operations of waste management companies are subject to various mandatory environmental and licensing requirements. In addition, operations of waste managers are subject to the so-called strict liability, i.e. in case of environmental damage or imminent threat of damage to environment occurred, waste managers would be liable for environmental damage or imminent threat of damage irrespective of their fault.

Pursuant to the definition provided in the Waste Management Law, waste is any object or substance, which the holder discards or intends or is required to discard. For regulatory purposes 3 groups of waste may be separated: (i) household waste, (ii) hazardous waste, and (iii) waste packaging and goods harmful to the environment, including without limitation waste accumulators, used vehicles and waste electrical and electronic equipment. Any activities with waste in Latvia may be performed only in accordance with the provisions of the Waste Management Law and secondary legislation adopted on the basis of this law. For the purposes, inter alia, of ensuring of establishment of a rational packaging waste management system in the state and thereby reducing the undesirable impact of packaging waste on the environment the legislator has adopted the Packaging Law of the Republic of Latvia, dated 20 December 2001, as amended (the “Packaging Law”). However, waste packaging should be managed in accordance with the requirements of the Waste Management Law.

In accordance with the Waste Management Law, waste management includes the collection, storage, transport, recovery and disposal of waste, supervision of such activities, after-care of disposal sites (landfills) after their closure, as well as trade with recyclables and mediation in the waste management. The collection, reloading, sorting, recovery or disposal of waste should be permitted only in places equipped for these purposes. Prior to commencement of performance of the relevant waste management activities the waste manager should obtain a permit from the State Environmental Service for collection, transport, reloading, sorting and storage of waste. Procedure for issue of permits is prescribed in the Regulations on Procedure for Issue and Annul of Waste Collection, Transportation, Reloading, Sorting or Storage, as well as on State Duty and Payment of it approved by the Latvian government. The permit may be issued for the term of 10 years or for a shorter term, if requested by the waste manager. In case a waste manager performs transportation of animal by-products and derived products not intended for human consumption, the waste manager should comply with the conditions set by the 21 October 2009 European Parliament and Council Regulation (EC) No 1069/2009 laying down health rules as regards animal by-products and derived products not intended for human consumption and repealing Regulation (EC) No 1774/2002 and the waste manager should be registered with the Food and Veterinary Service. Whereas if a waste manager performs other activities which fall within the category of polluting activities, a separate permit for performance of category A, B or C polluting activities should be obtained in accordance with the Law on Pollution of the Republic of Latvia, dated 15 March 2001, as amended (the “Law on Pollution”). If a waste manager receives a permit for performance of category A or B polluting activities and requirements of waste collection, reloading, sorting or storage are included in this permit, the waste manager should not be obliged to receive a separate permit for waste collection, reloading, sorting or storage.

Pursuant to the Waste Management Law, the responsibility for waste management is divided in two levels – regional level and state level. Local municipalities are responsible for organisation of household waste management in the territory of the respective municipality. The state is responsible for organisation of hazardous waste management.

The municipalities should, inter alia, (i) organise the management of household waste, including household produced hazardous waste, in conformity with the binding regulations of the municipality regarding management of household waste, taking into account the state waste management plan and regional plans within the administrative territory thereof; (ii) issue binding regulations regarding the management of household waste within the administrative territory thereof, determining the division of such territory into municipal waste management zones, the requirements for waste collection, also for the minimum frequency of household waste collection, transport, reloading and storage, as well as the procedures according to which payments for such waste management should be made; (iii) organise a separate waste collection within the administrative territory thereof in compliance with the state waste management plan and regional plans. Municipalities should in accordance with the procedures specified in the regulatory enactments regulating public procurement or public- private partnership, select a waste manager, which will perform collection, transportation, reloading and storage of household waste in the relevant household management zone. Waste producers (e.g. households) should enter into a contract with the selected waste manager. Only the waste producer, which has been exempted from paying the Natural Resources Tax (as described further in this section), is entitled to enter into a contract with the waste manager selected by the waste producer itself.

In case of application of a public procurement procedure for selection of a household waste manager the municipality and the waste manager should enter into the contract for a term not shorter than 3 years and not longer than 5 years. The contract based on a public-private partnership may be entered into for a term not exceeding 20 years. According to the transitional provisions of the currently effective Waste Management Law, the contracts concluded for a definite period of time prior to 26 July 2005 without undergoing public procurement procedure, should end on the date determined in the contract; the contracts granting rights to provide waste management services concluded with municipality prior to 26 July 2005 without determining their validity and contracts entered into or extended after 26 July 2005 without applying the regulatory enactments regarding public procurement have to be terminated no later than by 1 July 2013 and the municipality should select a municipal waste manager in accordance with the procedures specified in the regulatory enactments regulating public procurement or public-private partnership. When the waste manager has been selected, municipal authorities should conclude waste management contracts with the selected entity and should terminate the former waste management contracts no later than one month after the new contract of the municipality with the selected waste manager comes into force.

In parallel collection of separate waste goods in Latvia are facilitated by application of the exemption from the NRT payments for packaging and goods harmful to the environment. According to the Natural Resources Tax Law of the Republic of Latvia, dated 15 December 2005, as amended (the “Natural Resource Tax Law”) packaging and disposable tableware and accessories (including electrical and electronic equipment), as well as goods harmful to the environment and vehicles are the objects of the NRT. The NRT in relation to management of goods harmful to the environment should be by paid by a person, who first in the territory of the Republic of Latvia: (i) sells goods harmful to the environment, or (ii) for ensuring of economic activities uses goods harmful to the environment. However, in relation to packaging and disposal tableware and accessories the NRT should be paid by a person, who first in the territory of the Republic of Latvia: (i) sells goods in packaging; (ii) upon provision of a service, attaches packaging to the product; or (iii) in public catering and retail trade sells disposable tableware and accessories which are manufactured from plastic (polymers), paper, cardboard, composite materials thereof (laminates) with polymer or metal components and metal foil.

Tax rates are provided in the Waste Management Law for each type of goods and packaging either for item or for kilogram of them. However, the law provides that a taxpayer should not pay the NRT for packaging or disposable tableware and accessories and for goods harmful to the environment, if the tax payer ensures fulfilment of the norms for recovery specified in the regulatory enactments regarding environment protection or has entered into agreement with the manager, which in turn has entered into an agreement with the Ministry of Environment Protection and Regional Development and the Latvian Environmental Protection Fund Administration regarding participation in the waste recovery system.

On 3 November 2009 the Latvian Government has adopted two regulations on the procedure for exemption from payment of the NRT for goods harmful to the environment, including waste electrical and electronic equipment,

Latvia adopted the Cabinet Regulations No. 1294 Order of exemption of payment of the natural resources tax for goods harmful to the environment and the Cabinet Regulations No. 1293 Order of exemption of payment of the natural resources tax for packaging and disposal tableware and accessories. Pursuant to those regulations, the manager should co-ordinate with the Latvian Environmental Protection Fund Administration a waste recovery plan with the maximum term of 3 years on the grounds whereof the respective waste recovery system should be implemented. Prior to expiration of the indicated maximum term of 3 years a new waste recovery plan should be coordinated with competent authorities and the term may be extended for additional 3 years (the number of such extensions is currently not limited).

A tax payer is entitled to enter into a contract on the management of one kind of goods harmful to the environment or waste packaging and disposal tableware and accessories only with one waste manager at a time. The manager of waste packaging and disposal tableware and accessories may be changed once a year, however, the manager of goods harmful to the environment – not more frequently than once a quarter.

Production Facilities and Technological Processes

Collection, reloading, sorting, storage, recovery or disposal of waste should be permitted only in places equipped for these purposes. Licenses and permits for certain processes of waste management are valid only for the places specified in the respective license or permit, and particular activities cannot be performed in other places. Waste items dangerous to environment can be collected, only if a company owns specific equipment for storage and/or utilization of such waste.

According to the Waste Management Law, waste management should be performed ensuring that it does not negatively affect the environment, inter alia, does not cause threat to the water, air, soil, as well as plants and animals, does not cause a nuisance through noise or odours, does not negatively affect the countryside and specially protected nature territories or pollute or litter the environment.

Fire, Health and Safety Regulation

Facilities and equipment (including storage facilities, manufacturing units, waste collection and transportation vehicles) used by the Group may be considered as hazardous facilities and place of work with increased risk, and therefore they are subject to various fire, health and safety requirements.

Fire safety

According to the Latvian Fire Safety and Fire-fighting Law of the Republic of Latvia, dated 24 October 2002, as amended, and secondary regulatory enactments, the management board of the company is responsible for fire safety in the company. The management board of the company may delegate individual obligations in relation to fire safety to a responsible employee. The company should have instructions applicable in case of fire, as well as fire safety instructions. In a company employing more than 10 employees a responsible person and persons developing instructions applicable in case of fire and fire safety instructions must have completed specific educational programs accepted by the state authorities. Evacuation plans should be developed for facilities and premises, where more than 50 persons may be present at the same time. Prior to commencement of operation of a newly constructed facility, the permit from the State Fire and Rescue Service (the “SFRS”) must be obtained. If a fire safety violation occurs, the SFRS may impose fines, oblige the entity to eliminate the shortages or apply preventive measures on the relevant entity (including suspension of its operations, manufacturing facilities, or use of buildings, premises and equipment).

Health and safety

The management of waste involves employees performing certain hazardous tasks, such as collection and transportation of waste materials, working with potentially dangerous substances, operating storage and transportation facilities, loading and unloading potentially dangerous materials, operating manufacturing equipment, etc. Each of these tasks can raise the risks of accidents at workplace. Companies, operating in Latvia and employing employees, are subject to various requirements in relation to safety of workplace.

According to the Labour Protection Law of the Republic of Latvia, dated 20 June 2001, as amended, an employer is obliged to organise a labour protection system, which includes internal supervision of the working environment, evaluation of the working environment risks, establishment of an organisational structure of the labour protection (appointing responsible person in relation to labour protection, development of labour

protection documents, including, development of labour protection instructions), consultation with employees in order to involve them in the improvement of labour protection. The State Labour Inspectorate (the “SLI”) monitors correspondence of operations of employers to the labour protection and safety requirements. The SLI has the power to inspect the work process, working environment and labour protection measures of a company at any time. The SLI also has wide powers to apply remedial measures, including, to issue warnings and orders to employers or possessors of dangerous equipment requiring elimination of inconsistency with labour safety requirements and to suspend all activities of a company, the operations whereof do not comply with the applicable law and regulations regarding labour safety. The SLI is authorised to impose fines on employers for violation of applicable regulations.

Price Controls

As from 18 November 2010 pursuant to the new Waste Management Law, the Latvian Public Utilities Commission (the “LPUC”) is obliged to approve the tariffs for disposal of household waste in waste landfill sites and waste dumps. Municipalities approve the binding regulations regarding fees for household waste management (except for household waste recovery) to be paid by waste producers or waste holders. On the basis of the procedures provided for in the binding regulations, municipalities determine the fees for household waste management (except household waste recovery) by their decisions, and such fees include: (i) payment for collection, transport, reloading, storage, maintaining of separate waste collection, sorting and reloading infrastructure objects in compliance with a contract, which has been entered into with the waste manager, (ii) the tariff for the municipal waste disposal in landfill sites and waste dumps approved by the LPUC; and (iii) NRT for disposal of waste in the amount specified in the regulatory enactments. The waste manager determines its fees for collection, transport, reloading, storage, maintaining of separate waste collection, sorting and reloading infrastructure objects in a competitive manner with an aim to be selected in accordance with the public procurement procedure for entering into a contracts on household waste management with municipalities. Municipalities are entitled to adjust these fees due to changes in the tariff for the municipal waste disposal in landfill sites and waste dumps approved by the LPUC or in the natural resources tax for disposal of waste in the amount, specified in the regulatory enactments.

Pursuant to the Waste Management Law, during the transition period (until municipalities have entered into a contracts on household waste management with waste management companies selected in accordance with the public procurement procedures), the fees for household waste management should comply with the last tariff approved by the LPUC for household waste management which has been determined prior to 18 November 2010. Municipalities are entitled to adjust the tariff for household waste management due to the changes in the tariff for the municipal waste disposal in landfill sites and waste dumps approved by the LPUC or in the natural resources tax for disposal of waste in the amount specified in the regulatory enactments.

Antimonopoly Laws

Under Competition Law of the Republic of Latvia, dated 1 October 2001, as amended, a market participant (including all entities connected to it by virtue of control) or several market participants jointly having position of economic strength which enables them individually or jointly to significantly hinder, restrict or distort competition in any relevant market for a sufficient period of time by acting with full or partial independence from competitors, clients, suppliers or consumers are considered to have an individual or collective dominant position in the relevant market. Although Latvian laws do not provide for a particular market share in the relevant market at which a dominant position should be presumed, determining of the market share is an important criterion for establishment of a dominant position under the law. The Latvian Competition Council (the “LCC”) and courts when analysing dominance of a market player in the relevant market refer to the European Court of Justice (the “ECJ”) case law in relation to the market shares as one of the criteria for establishment of dominance. A market participant having market share of 50% in the relevant market is presumed to have a dominant position in the relevant product market, unless it can prove that significant competition exists in that relevant market and that it is subject to such competition. A company with a market share of 35% or less can still be recognised as having a dominant market position if such company does not face high competition in relation to the relevant market, for example, due to low market shares of its competitors. Being in a dominant position is not itself punishable. However, the law applies additional restrictions on companies in a dominant position and the LCC reviews the activities of such companies with particular scrutiny. Potentially dominant companies should regularly perform self-evaluation of their positions in the relevant