The financial and corporate team at Boga & Associates in Pristina looks at the impact of Kosovo’s new Foreign Investment Law
The Kosovo Parliament has adopted a new foreign investment law (no. 04/L-220 ‘On Foreign Investment’), published in the Official Gazette no. 01/2014 and entered into force on January 24 2014.
The new law repealed the former foreign investment law (no.02/L-33) and law on the support of small and medium enterprises (no.02/L-05), as amended.
With the adoption of this law, several changes have been introduced with the aim of achieving improvement in the business climate and business conditions for foreign investors. Also the law seeks to ensure foreign investors that their investments will be protected and treated fairly and in accordance with the accepted international standards and practices.
The law defines the foreign investor is defined as a foreign person that has made an investment in the Republic of Kosovo. The definition of the foreign person (i.e. foreign citizens and foreign legal persons) is expanded including also the citizens of the Republic of Kosovo residing abroad (Diaspora).
Foreign investment is considered to be any asset owned or otherwise lawfully held by a foreign person in the Republic of Kosovo for the purpose of conducting lawful commercial activities, including but not limited to:
(i) movable and immovable property, including rights on such property such as mortgage, lien, pledge, lease or servitude;
(ii) intangible and intellectual property, including rights on such property, as well as goodwill, technical processes and knowledge;
(iii) cash, securities, commercial paper, guarantees, shares of stock or other types of ownership interests in a the Republic of Kosovo or foreign business organisation; bonds, debentures, other debt instruments;
(iv) claims or rights to money, goods, services, and performance under contract;
(v) concessions or licenses conferred by law, administrative act, or contract; and
(vi) returns yielded by an investment in the Republic of Kosovo or an investment elsewhere. Under the law is established the Kosovo Investment and Enterprise Support Agency, as the responsible body for the protection and promotion of foreign investments.
The minimum capital amount that has to be contributed by a foreign investor, directly or indirectly, to a business organisation established in Kosovo in order to be considered as foreign investment organisation is reduced to 10% by the new law, from the previous minimum of 25%. The other criterion for business organisation to be considered as foreign is the control over the organisation. Such control must be exercised by one or more foreign investors on the basis of a written contract, rights to exercise a majority of the organization’s voting shares or similar ownership rights, or rights to appoint the majority of supervisory bodies.
The new law stipulates that the Republic of Kosovo shall provide fair and equitable treatment to foreign investors and their investments in Kosovo with any local investor and local investments. The Republic of Kosovo shall also provide foreign investors and their investments with full and constant protection that shall not be less favorable than treatment, protection and security that is required by generally accepted norms of international law.
Any public authority that violates or otherwise fails to respect rights and guarantees established by law for foreign investors and their investments shall be liable to pay compensation for losses and expenses incurred as a consequence of such violation or failure. The amount of such compensation shall be equal to the fair market value of the concerned losses and expenses, determined as of the date they were incurred.
The equal treatment of foreign and domestic investors is also foreseen in the event of armed conflict and other civil unrest regarding the compensation or other settlement for their investment.
The foreign investment shall not be subject to any form of expropriation or nationalisation directly or indirectly or any other equivalent measure. The exemption from the above rule is foreseen in cases of special public interest, which are established by law. In that case, expropriation or nationalisation shall be applied to foreign investors without discrimination and with immediate, adequate and effective compensation pursuant to legal procedures.
Pursuant to the provisions of the law a foreign investor in the course of its business regarding the investment has the right to convert local currency into a freely convertible currency, and to convert any freely convertible currency into local currency. Further, a foreign investor has the right to transfer freely convertible currency in and out of Kosovo, including, but not limited to, amounts received in an exchange transaction. This transfer may only be restricted through impartial, equal and non-discriminatory implementation of laws of general character, including those relating to the payment of fees, taxes, fiscal obligations, facilitating the control of criminal activity and court decisions.
The foreign investor has the right to address the court or arbitration for compensation of damages incurred as a result of any act or omission attributable to the Republic of Kosovo, which is directed against foreign investor and constitutes a violation of applicable law in Kosovo or general norms of international law.
The law has introduced the concept of tacit consent. This guarantees the right to foreign investors to undertake business activity of a certain type, without obtaining approval from the competent body, if an approval or rejection of the application is not given within the timeframe contemplated by the legislation in force. The law provides to the foreign investor the right to require that the investment dispute be resolved through a procedure agreed upon between the foreign investor and the Republic of Kosovo.
In the absence of such an agreed procedure, a foreign investor has the right to require that the dispute is resolved, either through litigation before a court of competent jurisdiction in the Republic of Kosovo or through local and international arbitration.
Sabina Lalaj
Senior associate
Boga & Associates
Pristina
About the author
Sabina is a senior associate at Boga & Associates, which she joined in 2008.
She specialises in commercial companies, project financing, real estate, public procurement, concessions, privatisation and banking law. She is involved in providing legal advice to numerous project financing transactions on concessions and privatisations, with a focus on energy and infrastructure, both in Albania and Kosovo.
She has also been involved with legal due diligences and legal assistance to commercial companies operating in the energy, telecommunications, pharmaceutical and real estate sectors.
Sabina graduated in Law at Tirana University in Albania (2000) and obtained a Master of Art in South East European Studies (2001) at the National & Capodistrian University of Athens, Greece.
Sabina is fluent in English and Greek.
Delvina Nallbani
Associate
Boga & Associates
Pristina
About the author
Delvina is Associate at Boga & Associates, which she joined in 2012.
Her practice in mainly focused in providing legal advice to clients on a wide range of corporate, business and banking matters. She also provides assistance in advising investors on a number of transactions including mergers and acquisitions, and privatizations.
Delvina graduated in Law at the University of Zagreb, and she has passed the bar exam in Kosovo.
She is fluent in Croatian and English.
