An official website of the United States Government Here's how you know

Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Georgia

Executive Summary

Georgia, located at the crossroads of Western Asia and Eastern Europe, is a small but open market that derives benefits from international trade, tourism, and transportation. While it is susceptible to global and regional shocks, the country has made sweeping economic reforms since 1991 that have produced a relatively well-functioning and stable market economy. It ranks seventh in the 2020 World Bank’s Ease of Doing Business index and twelfth in the Heritage Foundation’s 2020 Economic Freedom Index. Fiscal and monetary policy are focused on low deficits, low inflation, and a floating real exchange rate, although the latter has been affected by regional developments, including sanctions on Russia, and other external factors, such as a stronger dollar. Public debt and budget deficits remain under control. However, global challenges posed by COVID-19 and measures needed to mitigate the spread of the virus have placed significant pressure on the domestic currency and the local economy.

The Georgian government’s “Georgia 2020” economic strategy, initially published in 2014, outlines economic policy priorities. It stresses the government’s commitment to business-friendly policies, such as low taxes, but also pledges to invest in human capital and to strive for inclusive growth across the country. The strategy also emphasizes Georgia’s geographic potential as a trade and logistics hub along the New Silk Road linking Asia and Europe via the Caucasus.

Overall, business and investment conditions are sound. However, some companies have expressed an increasing lack of confidence in the judicial sector’s ability to adjudicate commercial cases independently or in a timely, competent manner, with some business dispute cases languishing in the court system for years. Other companies complain of inefficient decision-making processes at the municipal level, shortcomings in the enforcement of intellectual property rights, lack of effective anti-trust policies, selective enforcement of economic laws, and difficulties resolving disputes over property rights. The Georgian government continues to work to address these issues and, despite these remaining challenges, Georgia ranks high in the region as a good place to do business.

The United States and Georgia work to increase bilateral trade and investment through a High-Level Dialogue on Trade and Investment and through the U.S.-Georgia Strategic Partnership Commission’s Economic Working Group. Both countries signed a Bilateral Investment Treaty in 1994, and Georgia is eligible to export many products duty-free to the United States under the Generalized System of Preferences (GSP) program.

Georgia suffered considerable instability in the immediate post-Soviet period. After regaining independence in 1991, civil war and separatist conflicts flared up along the Russian border in the Georgian territories of Abkhazia and South Ossetia. In August 2008, tensions in the region of South Ossetia culminated in a brief war between Georgia and Russia. Russia invaded and occupied areas of undisputed Georgian territory. Russia continues to occupy these Georgian regions, and the central government in Tbilisi does not have effective control over these areas. The United States supports Georgia’s sovereignty and territorial integrity within its internationally recognized borders and does not recognize Abkhazia and South Ossetia regions of Georgia as independent. Tensions still exist both inside the occupied regions and near the administrative boundary lines, but other parts of Georgia, including Tbilisi, are not directly affected.

Transit and logistics are a priority sector as Georgia seeks to benefit from increased East/West trade through the country. The Baku-Tbilisi-Kars railroad has boosted Georgia’s transit prospects. The Anaklia Deep Sea Port project, however, has faced multiple delays and extensions since its initial contract in 2016. The government terminated its contract with the Anaklia Development Consortium in 2020, asserting the consortium did not mobilize the capital necessary to implement the project. However, the government said it remained committed to the construction of a deep sea port in Anaklia and planned to retender the project. Logistics and port management companies in Poti have started development and expansion of Poti Port, currently the largest port in Georgia. Pace Group launched a $120 million project to develop a new port terminal at the site of the former Poti Shipbuilding Factory. Additionally, APM Terminals announced plans in 2019 to create a deep-sea port in Poti.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 44 of 180 https://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 7 of 190 https://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 48 of 149 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 35 million USD https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2018 4,440 USD https://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Georgia is open to foreign investment. Legislation establishes favorable conditions for foreign investment, but not preferential treatment for foreign investors. The Law on Promotion and Guarantee of Investment Activity protects foreign investors from subsequent legislation that alters the condition of their investments for a period of ten years. Investment promotion authority is vested in the Investment Division of Enterprise Georgia, a legal entity of public law under the Ministry of Economic and Sustainable Development. The Investment Division’s primary role is to attract, promote, and develop foreign direct investment in Georgia. For this purpose, it acts as the moderator between foreign investors and the Georgian government, ensures access to updated information, provides a means of communication with government bodies, and serves as a “one-stop-shop” to support investors throughout the investment process. (http://www.enterprisegeorgia.gov.ge/en/about ).

To enhance relations with investors, in 2015 Georgia’s then-Prime Minister created an Investors Council, an independent advisory body aimed at promoting dialogue among the private business community, international organizations, donors, and the Georgian government for the development of a favorable, non-discriminatory, transparent, and fair business and investment climate in Georgia (http://ics.ge ). The Business Ombudsman, who is a member of the Investors Council, is another tool for protecting investors’ rights in Georgia (http://businessombudsman.ge ).

Limits on Foreign Control and Right to Private Ownership and Establishment

Georgia does not have an established interagency process to screen foreign investment, but relevant ministries or agencies may have the right to review investments for national security concerns in certain circumstances, as outlined below. Foreign investors have participated in most major privatizations of state-owned property. Transparency of privatization has been an issue at times. No law or regulation authorizes private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control. Cross-shareholder or stable-shareholder arrangements are not used by private firms in Georgia. Georgian legislation does not protect private firms from takeovers. There are no regulations authorizing private firms to restrict foreign partners’ investment activity or limit foreign partners’ ability to gain control over domestic enterprises.

There are no specific licensing requirements for foreign investment other than those that apply to all companies. The government requires licenses for activities that affect public health, national security, and the financial sector: weapons and explosives production, narcotics, poisonous and pharmaceutical substances, exploration and exploitation of renewable or non-renewable substances, exploitation of natural resource deposits, establishment of casinos and gambling houses and the organization of games and lotteries, banking, insurance, securities trading, wireless communication services, and the establishment of radio and television channels. The law requires the state to retain a controlling interest in air traffic control, shipping traffic control, railroad control systems, defense and weapons industries, and nuclear energy. For investment projects requiring licenses or permits, the relevant government ministries and agencies have the right to review the project for national security concerns.  By law, the government has 30 days to make a decision on licenses, and if the licensing authority does not state a reasonable ground for rejection within that period, the government must approve the license or permit for issuance. Per Georgian law, it is illegal to undertake any type of economic activity in Abkhazia or South Ossetia if such activities require permits, licenses, or registration in accordance with Georgian legislation. Laws also ban mineral exploration, money transfers, and international transit via Abkhazia or South Ossetia. Only the state may issue currency, banknotes, and certificates for goods made from precious metals, import narcotics for medical purposes, and produce control systems for the energy sector.

Other Investment Policy Reviews

In January 2016, the World Trade Organization (WTO) concluded its second Trade Policy Review of Georgia. In this review, WTO members reiterated their approval of Georgia’s broadly open, transparent, and predictable trade and investment regimes. Members noted that, during the review period, Georgia undertook an impressive range of reform initiatives aimed at streamlining, liberalizing, and simplifying trade regulations and their implementation. The review lauded Georgia’s trade openness and its commitment to the multilateral system through its responsible contribution to the work of the WTO.

WTO members commended Georgia for ratifying the WTO’s Trade Facilitation Agreement and the related notification to the WTO of Category A, B and C commitments. Members also noted that Georgia was an observer to the Government Procurement Agreement and was assessing the prospects for joining the Agreement. Members welcomed the announcement that Georgia was considering joining the expanded Information Technology Agreement, which would constitute a significant step forward for attracting further investment. See more at: https://www.wto.org/english/tratop_e/tpr_e/tp428_crc_e.htm 

Business Facilitation

Registering a business in Georgia is relatively quick and streamlined, and Georgia ranks second in registering property among countries assessed in the World Bank’s 2020 Doing Business Report. Registration takes one day to complete through Georgia’s single window registration process. The National Agency of Public Registry (NAPR) (www.napr.gov.ge  – webpage is in Georgian only), located in Public Service Halls (PSH) under the Ministry of Justice of Georgia, carries out company registration. The web page of the PSH (http://www.psh.gov.ge/main/page/2/85 ) outlines procedures and requirements for business registration in English. For registration purposes, the law does not require a document verifying the amount or existence of charter capital. A company is not required to complete a separate tax registration as the initial registration includes both the revenue service and national business registration. The following information is required to register a business in Georgia: bio data for the founder and principal officers, articles of incorporation, and the company’s area of business activity. Other required documents depend on the type of entity to be established.

To register a business, the potential owner must first pay the registration fee, register the company with the Entrepreneurial Register, and obtain an identification number and certificate of state and tax registration. Registration fees are: GEL100 (around USD35) for regular registration, GEL200 (USD70) for expedited registration, plus GEL1 (bank fees). Second, the owner must open a bank account (free).

Georgia’s business facilitation mechanism provides for equitable treatment of women and men. There are a variety of state-run and donor-supported projects that aim to promote women entrepreneurs through specific training or other programs, including access to financing and business training.

Outward Investment

The Georgian government does not have any specific policy on promoting or restricting domestic investors from investing abroad and Georgia’s outward investment is insignificant.

3. Legal Regime

Transparency of the Regulatory System

Georgia’s legal, regulatory, and accounting systems are transparent and consistent with international norms, and the Georgian government has committed to achieving even greater transparency and simplicity of regulations for these systems.

In Georgia, the lawmaking process involves Parliament (drafting and consideration) and the President (signing). Under Georgia’s constitution, the following subjects have the right to initiate legislation: the President, the government, members of Parliament, a committee, faction, the representative bodies of the Autonomous Republics of Abkhazia and Adjara, and groups of at least 30,000 voters.

A subject who does not have the right to launch a legislative initiative does, however, have the right to submit a “legislative proposal,” which should be a well-reasoned address to Parliament advocating for the adoption of a new law or of changes/amendments to existing legislation. According to Article 150 of the Law on Parliament, the following can submit a legislative proposal: citizens of Georgia, state bodies (except the establishments of the executive branch of government), the representative and executive bodies of local self-government, political and public unions registered in Georgia according to the established rule, and other legal entities.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations, except their entitlement for participating in the law-making process prescribed by the above law.

Publicly listed companies are required to prepare financial statements in accordance with IFRS – International Financial Reporting Standards.

Draft bills or regulations are available for public comment. NGOs, professional associations, and business chambers actively participate in public hearings on legislation.

The government publishes laws and regulations in Georgian in the official online legislative herald gazette, the Legislative Messenger, ‘Matsne’ (www.matsne.gov.ge ). Another online tool to research Georgian legislation is www.codex.ge , or the webpage of the Parliament of Georgia, www.parliament.ge .

General oversight of the executive branch is vested in the parliament. The new Constitution, which entered into force in December 2018, and subsequently adopted new Parliamentary Rules and Procedures aim to strengthen Parliament’s oversight role. Under its strengthened role, public officials are obliged to respond to Parliament’s questions and government institutions submit annual reports. However, local watchdog organizations continue to raise concern that one party controls all branches of government, undermining checks and balances. Independent agencies, such as the State Audit Office, the Ombudsman’s office, including the Business Ombudsman, and business associations also provide an oversight function. Georgia maintains an active civil society that frequently reports on government activities.

Information on Georgia’s state budget and debt obligations was widely and easily accessible to the general public, including online, and considered generally reliable. Georgia’s State Audit Service reviewed the government’s accounts and made its reports publicly available. The International Monetary Fund (IMF) reported in its Regional Economic Outlook  on the Middle East, North Africa, Afghanistan, and Pakistan, published in October 2019, that Georgia had successfully implemented fiscal reforms. The report states, “Fiscal transparency, measured by the Open Budget Index, has improved markedly. Tax revenues rose and the efficiency of revenue collection has been higher than among peers….The adoption of flexible fiscal rules helped foster fiscal discipline, limited the rise in public debt, and reduced volatility of government expenditure.”

Georgia has six types of taxes: corporate profit, value added, property, income, excise, and dividend. The tax on corporate profits is 15 percent. However, in January 2017, the government adopted a corporate profit tax scheme that exempts undistributed, reinvested, or retained corporate profits from income taxation. Georgia’s value added tax (VAT) rate is 18 percent, tax on personal income is 20 percent, and dividend income tax is five percent. There are no dividend or capital gains taxes for publicly traded equities (a free float in excess of 25 percent). Georgia imposes excise taxes on cigarettes, alcohol, fuel, and mobile telecommunication. Most goods, except for some agricultural products, have no import tariffs. For goods with tariffs, the rates are five or 12 percent, unless excluded by an FTA.

Detailed information on the types and rates of taxes applicable to businesses and individuals, as well as a payment calendar, is available on the webpage  of Georgia’s Revenue Service.

In 2019, the Georgian government introduced new regulations to simplify the tax regime and streamline processes for small businesses. The new legislation decreased turnover tax from five percent to one percent for small businesses and defined small business as those with less than GEL 500,000 (USD 185 thousand) annual turnover, a fivefold increase from the previous GEL 100,000 (USD 31 thousand) threshold. In addition, the new regulations allow small businesses to pay taxes by the end of month, instead of requiring advance payments. For medium and large businesses, the reform introduced an automatic system of VAT returns and activated a special system whereby entrepreneurs can pay VAT returns in five to seven business days by filling out an electronic application.

Enterprise Georgia, a state agency under the Ministry of Economic and Sustainable Development, operates the Business Service Center in Tbilisi, which provides domestic and foreign businesses with information on doing business in Georgia. The Business Service Center facilitates an online chat tool for interested individuals (http://www.enterprisegeorgia.gov.ge/en/SERVICE-CENTER ). Additionally, the Investor’s Council provides an opportunity for the private sector to discuss legislative reforms, economic development plans, and actions to spur economic growth with the government. Different commercial chambers, such as the American Chamber of Commerce (www.amcham.ge ), International Chamber of Commerce (www.icc.ge ), Business Association of Georgia (www.bag.ge ), Georgian Chamber of Commerce and Industry (www.gcci.ge ), and EU-Georgia Business Council (http://eugbc.net ) remain important tools for facilitating ongoing dialogue between domestic and foreign business communities and the government.

International accounting standards are binding for joint stock companies, banks, insurance companies, companies operating in the insurance field, limited liability companies, limited partnerships, joint liability companies, and cooperatives. Private companies are required to perform accounting and financial reporting in accordance with international accounting standards. Sole entrepreneurs, small businesses, and non-commercial legal entities perform accounting and financial reporting according to simplified interim standards approved by the Parliamentary Accounting Commission. Shortcomings in the use of international accounting standards persist, and qualified accounting personnel are in short supply.

The Law of Georgia on Free Trade and Competition provides for the establishment of an independent structure, the Competition Agency, to exercise effective state supervision over a free, fair, and competitive market environment. Nonetheless, certain companies have dominant positions in pharmaceutical, petroleum, and other sectors.

Public finances and debt obligations are transparent, and Georgia’s budget and information on debt obligations were widely and easily accessible to the public through government websites including the Ministry of Finance’s site (www.mof.gov.ge ). Georgia’s State Audit Office (www.sao.ge ) reviews the government’s accounts and makes its reports publicly available.

International Regulatory Considerations

Georgia’s Association Agreement of 2014 with the European Union introduced a preferential trade regime, the DCFTA, which increased market access between the EU and Georgia based on having better-aligned regulations. The agreement is designed to introduce gradually European standards in all spheres of Georgia’s economy and sectoral policy: infrastructure, energy, the environment, agriculture, tourism, technological development, employment and social policy, health protection, education, culture, civil society, and regional development. It also provides for the approximation of Georgian laws with nearly 300 separate European legislative acts.

The DCFTA should promote a gradual approximation with European standards for food safety, establish a transparent and stable business environment in Georgia, increase Georgia’s potential to attract investment, introduce innovative approaches and new technologies, stimulate economic growth, and support the country’s economic development.

Georgia has been a WTO member since 2000 and consistently meets requirements and obligations included in the Agreement on Trade Related Investment Measures (TRIM). Since WTO accession, Georgia has not introduced any Technical Barriers to Trade. In January 2016, Georgia ratified the WTO Trade Facilitation Agreement (TFA).

Legal System and Judicial Independence

Georgia’s legal system is based on civil law and the country has a three-tier court system. The first tier consists of 25 trial courts throughout the country that hear criminal, civil, and administrative cases. Two appellate courts, Tbilisi Appeal Court (East Georgia) and Kutaisi Appeal Court (West Georgia), represent the second tier. The Supreme Court of Georgia occupies the third, or the highest, instance and acts as the highest appellate court. In addition, there is a separate Constitutional Court for arbitrating constitutional disputes between branches of government and ruling on individual claims concerning human rights violations stemming from the Constitution.

Georgia does not have an integrated commercial code. There are a number of different laws and codes (Tax Code, Law on Entrepreneurs, and Law on Insolvency) that regulate commercial activity in Georgia. There are no specialized courts, such as a commercial court, to handle commercial disputes. The Ministry of Justice’s Public Service Halls provide property registration.

The independence of Georgia’s judiciary and political inference in the judicial system remain concerns. Freedom House’s 2018 Freedom in the World Report stated that “despite ongoing judicial reforms, executive and legislative interference in the courts remains a substantial problem, as does corruption and a lack of transparency and professionalism surrounding judicial proceedings.” In addition, delays in adjudicating cases and backlogs in Georgian courts remain problematic. International experts are providing Georgian officials with assistance aimed at improving judicial efficiency. The recommendations in the fourth wave of judicial reforms passed in 2019 included legislative changes, streamlining case management, increasing the number of matters resolved by non-judges, improved data exchanges, and implementing balanced caseload.

Regulations and enforcement actions are appealable and are adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

The U.S.-Georgia Bilateral Investment Treaty (BIT) guarantees U.S. investors national treatment and most favored nation treatment. Exceptions to national treatment have been carved out for Georgia in certain sectors, such as maritime fisheries, air and maritime transport and related activities, ownership of broadcast, common carrier, or aeronautical radio stations, communications satellites, government-supported loans, guarantees, and insurance, and landing of submarine cables.

Georgia’s legal system is based on civil law. Legislation governing foreign investment includes the Constitution, the Civil Code, the Tax Code, and the Customs Code. Other relevant legislation includes the Law on Entrepreneurs, the Law on Promotion and Guarantee of Investment Activity, the Bankruptcy Law, the Law on Courts and General Jurisdiction, the Law on Limitation of Monopolistic Activity, the Accounting Law, and the Securities Market Law.

Ownership and privatization of property is governed by the following acts: the Civil Code, the Law on Ownership of Agricultural Land, the Law on Private Ownership of Non-Agricultural Land, the Law on Management of State-Owned Non-Agricultural Land, and the Law on Privatization of State Property. Property rights in extractive industries are governed by the Law on Concessions, the Law on Deposits, and the Law on Oil and Gas. Intellectual property rights are protected under the Civil Code and the Law on Patents and Trademarks. Financial sector legislation includes the Law on Commercial Banks, the Law on National Banks, and the Law on Insurance Activities.

There is no one-stop-shop website for investment that provides relevant laws in English.

Competition and Anti-Trust Laws

The Georgian Law “On Free Trade and Competition” of 2005 that governs competition is in line with the Georgian Constitution and international agreements.

The agency in charge of reviewing transactions for competition-related concerns is the Competition Agency, an independent legal entity of public law, subordinated to the Prime Minister of Georgia. The agency aims to promote market liberalization, free trade, and competition (www.competition.ge ). Georgia has also signed a number of international agreements containing competition provisions, including the EU-Georgia Association Agreement. The DCFTA within the AA goes further than most FTAs, with elimination of non-tariff barriers and regulatory alignment, as well as binding rules on investments and services.

Expropriation and Compensation

The Georgian Constitution protects property ownership rights, including ownership, acquisition, disposal, and inheritance of property. Foreign citizens living in Georgia possess rights and obligations equal to those of the citizens of Georgia, with the exception of certain property rights (see Section 5). The Constitution allows restriction or revocation of property rights only in cases of extreme public necessity, and then only as allowed by law.

The Law on Procedures for Forfeiture of Property for Public Needs establishes the rules for expropriation in Georgia. The law allows expropriation for certain enumerated public needs, establishes a mechanism for valuation and payment of compensation, and provides for court review of the valuation at the option of any party. The Georgian Law on Investment allows expropriation of foreign investments only with appropriate compensation. Amendments to the Law on Procedures for Forfeiture of Property for Public Needs allow payment of compensation with property of equal value as well as money. Compensation includes all expenses associated with the valuation and delivery of expropriated property. Compensation must be paid without delay and must include both the value of the expropriated property as well as the loss suffered by the foreign investor as a result of expropriation. The foreign investor has a right to review an expropriation in a Georgian court. In 2007, Parliament passed a law generally prohibiting the government from contesting the privatization of real estate sold by the government before August 2007. The law is not applicable, however, to certain enumerated properties.

The U.S.-Georgia BIT permits expropriation of covered investments only for a public purpose, in a non-discriminatory manner, upon payment of prompt, adequate and effective compensation, and in accordance with due process of law and general principles of fair treatment.

Expropriation disputes are not common in Georgia, although under the previous government (before 2012), reputable NGOs raised cases of illegal revocation of historic ownership rights in Svaneti, Anaklia, Gonio, and Black Sea-adjacent territories. Under the previous government there were cases of property transfers that lacked transparency and allegedly were implemented under coercion.

Dispute Settlement

ICSID Convention and New York Convention

Since 1992, Georgia has been a member of the International Centre for Settlement of Investment Disputes (ICSID Convention) and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). As a result of these international obligations, Georgia is bound to accept international arbitration and recognize arbitral awards. The Ministry of Justice oversees the government’s interests in arbitrations between the state and private investors.

Investor-State Dispute Settlement

Georgia has signed bilateral investments treaties (BITs) with 32 countries  including the United States. Georgian investment law allows disputes between a foreign investor and a government body to be resolved in Georgian courts or at ICSID, unless a different method of dispute settlement is agreed upon between the parties. If the dispute cannot be heard at ICSID, the foreign investor can also submit the dispute to ad-hoc international arbitration under United Nations Commission for International Trade Law (UNCITRAL model law) rules. The right to use ICSID or UNCITRAL model law is provided for under the U.S.–Georgia BIT.

There were reports of lack of due process and respect for rule of law in a number of property rights cases. NGOs also reported several cases in which groups claimed the government improperly used taxes on property to pressure organizations.

Although the constitution and law provide for an independent judiciary, there remain indications of interference in judicial independence and impartiality. Judges are vulnerable to political pressure from within and outside of the judiciary.

Disputes over property rights at times have undermined confidence in the impartiality of the Georgian judicial system and rule of law, and by extension, Georgia’s investment climate. The government identified judicial reform as one of its top priorities, and Parliament has passed a series of reforms aimed at strengthening judicial independence. While reforms have improved the independence of the judiciary, politically sensitive cases are still vulnerable to political pressure. The High Council of Justice is currently dominated by a group of anti-reform judges. Civil society asserts this group applies pressure on judges in politically sensitive cases. The government recently adopted additional judicial reforms focused on improving judicial discipline rules and regulating the operations of the High School of Justice and High Council of Justice.

Over the past 10 years, there have been over a dozen investment disputes involving U.S. citizens. As of 2019, five of those disputes were still ongoing, while the rest were resolved through arbitral awards or out-of-court settlements.

Local courts recognize and enforce foreign arbitral awards issued against the government.

There is no substantial history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Georgia’s arbitration law went into force on January 1, 2010. Georgia has enacted legislation based on the UNCITRAL Model Law. Domestic private arbitration firms, such as the International Arbitration Center (www.giec.ge ), operate in dispute resolution between two private parties.

Bankruptcy Regulations

The Law of Georgia on Insolvency Proceedings regulates rehabilitation and bankruptcy. The law defines two types of creditors: secured and non-secured. Creditors can file a court claim for opening an insolvency proceeding, given certain conditions are satisfied (conditions vary, depending on the outstanding debt amount and the delayed days of repayment).

Creditor meetings are held in court and chaired by a judge. The creditor meeting can decide several issues, including the appointment of a supervisor of the bankruptcy or rehabilitation proceedings, and the appointment of a member of the facilitation council.

Secured creditors: Secured creditors must make unanimous decisions on approving a debtor’s new debts, the encumbrance of the debtor’s property, and suretyship. If there are no secured creditors, the creditor’s meeting is authorized to make the same decisions. The secured creditors, in a creditor’s meeting, may suspend enforcement of the material conditions of the agreement with the bankruptcy or rehabilitation supervisor or on the definition of the terms of the rehabilitation. After the debtor’s property is sold on auction, secured creditors have first priority for being repaid. All secured creditors must approve the rehabilitation plan and plan amendments. New equity investment in the debtor’s company is only possible if there are prior consents from all secured creditors and the rehabilitation supervisor.

Non-secured creditors: Non-secured creditors are satisfied only after all secured creditors are satisfied (unless otherwise agreed by all creditors unanimously). Non-secured creditors do not have voting rights for the rehabilitation plan approval.

The priority system shall not apply to creditors whose claim is secured by financial collateral.

Foreign creditors: The law provides additional time for foreign creditors to file claims. Creditors may file claims to the court and request to declare the agreements made by the insolvent debtor voidable and/or request reimbursement of damages, if such agreements inflicted damages to the creditor.

The Law of Georgia on Insolvency Proceedings only incurs criminal liabilities in cases where the debtor does not provide information about its obligations, assets, financial situation and activities, or ongoing disputes in which the debtor is involved; or provides such information with intentional delay, or provides falsified information.

The Debt Registry of the National Agency of the Public Register is Georgia’s credit monitoring authority.

According to the World Bank’s 2020 Doing Business Report , Georgia’s score of 40.5 in the category of Resolving Insolvency is above the regional average, and the Law of Georgia on Insolvency Proceedings entered into force in 2017 made insolvency proceedings more accessible for debtors and creditors, improved provisions on treatment of contracts during insolvency, and granted creditors greater participation in important decisions during the proceedings. According to the Law on Insolvency Proceedings, it should take no more than 225 days to complete liquidation proceedings. However, in practice, it often takes two years to complete the process because parties do not always comply with statutory deadlines.

5. Protection of Property Rights

Real Property

Georgia ranks high in the World Bank’s Doing Business 2020 report in general, but especially in the category of “registering property.” Processes to register property are streamlined, transparent, and take one day to process at Public Service Halls.

In June 2017, the Parliament adopted a legislative amendment that placed a moratorium on the sale of agricultural land to foreign citizens and stateless persons. Under the amendment, foreigners, legal entities registered abroad, and legal entities registered by foreigners in Georgia were not able to purchase agricultural land in Georgia. Furthermore, the new Constitution that came into force in December 2018 determined that agricultural land can only be owned by the state, self-governing entities, citizens of Georgia, or a group of Georgian citizens. The Constitution also states that exclusions may be specified in organic law, which requires votes from at least two-thirds of Parliament to pass. Parliament is considering a draft law that would provide an exception to the constitutional ban.

Mortgages and liens are registered through the public registry and information can be obtained from the webpage www.napr.gov.ge .

The government has taken multiple steps to regulate land titling, including facilitating simplified procedures, free registration campaigns, and mediation services. The National Public Registration Agency reported that from August 2016 through February 2019, 300 thousand hectares of land were registered under the land reform project, increasing the share of titled land to 45 percent. Unclear or unregistered titling bears the potential to hamper investment projects.

Property ownership cannot revert to other owners when legally purchased property stays unoccupied.

Intellectual Property Rights

Georgia acceded to the World Trade Organization (WTO) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 2000. The Ministry of Economy and Sustainable Development is responsible for WTO compliance. Georgia is a member of the World Intellectual Property Organization (WIPO) and is party to the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. The legal framework for protection of intellectual property rights (IPR) in Georgia is approximated to international standards. Six laws regulate IPR in Georgia: the Law on Patents, the Law on Trademarks, the Law on Copyrights and Neighboring Rights, the Law on Appellation of Origin and Geographic Indication of Goods, the Law on Topographies of Integrated Circuits, and the Law on IP-Related Border Measures. Georgian law now provides protection for works of literature, art, science, and sound recordings for 50 years.

The National Intellectual Property Center of Georgia (Sakpatenti) provides legal protection for IPR in Georgia since it issues protective documents on invention, utility models, trademarks, design rights, geographical indications and appellation of origin, new animal breeds and plant varieties, and ensures the deposit of copyrighted works. The Revenue Service, which is part of the Ministry of Finance, is responsible for enforcing the IPR of holders listed in the Register of Intellectual Property Subject-Matters of the relevant service. The Revenue Service is also responsible for border control and can halt the import or export of items suspected of being counterfeit based on the register data. According to the Law, goods may be held for 10 working days, which may be extended by the Revenue Service for another 10 working days. The Law of Georgia on Border Measures Related to Intellectual Property allows for the destruction of counterfeit goods pending a court decision.

Infringement of IPR, including industrial property rights, copyrights, performers’ rights, rights of makers of databases, trademarks, or other illegal use of commercial indications can incur civil, criminal, and administrative penalties. Depending on the type and extent of the violation, penalties include fines, corrective labor, social work, or imprisonment.

Sakpatenti is an active and engaged partner of the United States in educating the public on IPR issues. Sakpatenti coordinates the government’s approach to the enforcement of IPR under the Interagency Coordination Council (Council) for IPR Enforcement. The Council is an efficient platform for government institutions to exchange their views on IPR enforcement issues. Georgia is improving its enforcement of IPR, but some problems persist, including the widespread use of unlicensed software and the availability of pirated video and audio recordings and other unlicensed content available online. The U.S. government Commercial Law Development Program continues to provide assistance to Sakpatenti and other government entities to build capacity to deal with IPR-related issues effectively.

With the aim of improving domestic legislation and harmonizing it with international standards, Sakpatenti has engaged in proposing amendments to existing legislation regulating IPR. For example, Sakpatenti continues work on the draft law “On Appellations of Origin and Geographical Indications of Goods” in the framework of an EU-funded Twinning Project on “Establishing Efficient Protection and Control System of Geographical Indications (GIs) in Georgia.” The proposed legislative amendments address the state-controlled mechanism for the registration of appellations of origin and geographical indications, , obligation to use registered appellations of origin or geographical indications, define legal mechanisms to protect appellations of origin and geographical indications against infringement, and procedural specification for conducting substantive examinations of applications for appellations of origin and geographical indications.

In 2019, the Investigation Service of the Ministry of Finance of Georgia initiated 12 cases based on of Article 196 of the Criminal Code of Georgia governing unlawful use of trademark (service marks) or other commercial designations, six of which were initiated ex officio. As a result of these actions, the Georgian government seized 36,907 items of counterfeit goods worth approximately USD 53,000. Also in 2019, the Customs Department of Georgia issued 140 suspension orders on various goods entering Georgia, allowing them to confirm the legitimacy of the goods. In 102 cases, the rights holder and the purchaser of the goods agreed to destroy the infringing items. In 10 cases, the rights holder filed a lawsuit in court, and in the remaining cases the Customs Department was unable to prove the goods were counterfeit and so released the goods. The total value of the destroyed goods was around USD 51,000.

Georgia is not included in USTR’s Special 301 Report or the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

8. Responsible Business Conduct

While the concept of Corporate Social Responsibility (CSR) is not highly developed in Georgia, it is growing. Most large companies engage in charity projects and public outreach as part of their marketing strategy. The American Chamber of Commerce in Georgia has a Corporate CSR committee that works with member companies on CSR issues. The Global Compact, a worldwide group of UN agencies, private businesses, and civil society groups promoting responsible corporate citizenship, is active in Georgia. The Eurasia Partnership Foundation launched a program on corporate social investment to promote greater private company engagement in addressing Georgia’s development needs.

The Georgian government undertook an OECD CSR policy review in 2016 based on the OECD Policy Framework for Investment. The report states that Georgia engages regularly with the OECD. Georgia participates in the OECD Eurasia Competitiveness Program, which works with countries in the region to unleash their economic and employment potential. Georgia participates in the OECD Anti-Corruption Network for Eastern Europe and Central Asia, which provides a regional forum for promotion of anti-corruption activities, exchange of information on best practices, and donor coordination. Georgia is a member of the Task Force for the Implementation of the Environmental Action Program (EAP Task Force), which aims to address the heavy environmental legacy of the Soviet development model. Additionally, the Support for Improvement in Governance and Management (SIGMA) program, a joint initiative of the EU and the OECD, has provided assistance to Georgia since 2008, to strengthen public governance systems and public administration capacities. Georgia participates in the OECD Committee on Fiscal Affairs’ Base Erosion and Profit Sharing (BEPS) Project.

Georgia is not a party to the Extractive Industries Transparency Initiative (EITI) and/or Voluntary Principles on Security and Human Rights despite extractive manganese, gold, and copper ore industries operating in Georgia. Among the local tools promoting CSR principles and policies in such industries are commercial chambers, the Public Defender’s office, the Business Ombudsman under the Prime Minister’s Office, sectoral trade unions, and Georgia’s Trade Union Confederation (GTUC).

9. Corruption

Georgia has laws, regulations, and penalties to combat corruption. Georgia criminalizes bribery under Articles 332-342 of the Criminal Code. Senior public officials must file financial disclosure forms, which are available online, and Georgian legislation provides for the civil forfeiture of undocumented assets of public officials who are charged with corruption-related offenses. Penalties for accepting a bribe start at six years in prison and can extend to 15 years, depending on the circumstances. Penalties for giving a bribe can include a fine, a minimum prison sentence of two years, or both. In aggravated circumstances, when a bribe is given to commit an illegal act, the penalty is from four to seven years. Abuse of authority and exceeding authority by public servants are criminal acts under Articles 332 and 333 of the criminal code and carry a maximum penalty of eight years imprisonment. The definition of a public official includes foreign public officials and employees of international organizations and courts. White collar crimes, such as bribery, fall under the investigative jurisdiction of the Prosecutor’s Office.

Georgia is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Georgia has, however, ratified the UN Convention against Corruption. Georgia cooperates with the Group of States against Corruption (GRECO) and the OECD’s Anti-Corruption Network for Transition Economies (ACN).

Following its assessment of Georgia in June 2016, the OECD released a report in September 2016 that concluded Georgia had achieved remarkable progress in eliminating petty corruption in public administration and should now focus on combating high-level and complex corruption. The report commends Georgia’s mechanism for monitoring and evaluating the implementation of its Anti-Corruption Strategy and Action Plan, as well as the role given to civil society in this process. It also welcomes the adoption of a new Law on Civil Service and recommends that the remaining legislation to implement civil service reforms is adopted without delay. The report notes that the Civil Service Bureau and Human Resources units in state entities should be strengthened to ensure the implementation of the required reforms. The report highlights Georgia’s good track record in prosecuting corruption crimes and in using modern methods to confiscate criminal proceeds. It recommends that Georgia increase enforcement of corporate liability and the prosecution of foreign bribery to address the perception of corruption among local government officials. The full report is available at: http://www.oecd.org/corruption/anti-bribery/Georgia-Round-4-Monitoring-Report-ENG.pdf .

Since 2003, Georgia has significantly improved its ranking in Transparency International’s (TI) Corruption Perceptions Index (CPI) report.

Transparency International (TI) ranked Georgia 44th out of 180 countries in the 2019 edition  of its Corruption Perceptions Index (the same rank as Costa Rica, the Czech Republic, and Latvia).

While Georgia has been successful in fighting visible, low-level corruption, Georgia remains vulnerable to what Transparency International calls “elite” corruption: high-level officials exploiting legal loopholes for personal enrichment, status, or retribution. Although the evidence is mostly anecdotal, this form of corruption, or the perception of its existence, has the potential to erode public and investor confidence in Georgia’s institutions and the investment environment. Corruption remains a potential problem in public procurement processes, public administration practices, and the judicial system due to unclear laws and ethical standards.

Resources to Report Corruption

Government agencies responsible for combating corruption:

Anti-Corruption Agency at the State Security Service of Georgia
Address: 72, Vazha Pshavela Ave.
Tel: +995-32-241-20-28

Prosecutor’s Office of Georgia
Mr. Gocha Gochashvili,
Head of Division of Criminal Prosecution of Corruption CrimesAddress: 24, Gorgasali Street, Tbilisi
Tel: +995-32-240-52-52
Email: ggochashvili@pog.gov.ge

Ministry of Justice of Georgia
Secretariat of the Anti-Corruption Council
Address: 24, Gorgasali Street, Tbilisi
Tel: +995-32-240-58-04
Email: ACCouncil@justice.gov.ge

Business Ombudsman’s Office
Mr. Mikheil Daushvili, Ombudsman
Address: 7, Ingorokva street
Hotline: +995 32 2 282828
Email: ask@businessombudsman.ge

Non-governmental organization:
Ms. Eka Gigauri
Director
Transparency International
26, Rustaveli Ave, 0108, Tbilisi, Georgia
Telephone: +995-32-292-14-03
ekag@transparency.ge

10. Political and Security Environment

The United States established diplomatic relations with Georgia in 1992, following Georgia’s independence from the Soviet Union in 1991. Since independence, Georgia has made impressive progress fighting corruption, developing modern state institutions, and enhancing global security. The United States is committed to helping Georgia deepen Euro-Atlantic ties and strengthen its democratic institutions.

In August 2008, tensions in the region of South Ossetia culminated in a brief war between Georgia and Russia. Russia invaded and occupied areas of undisputed Georgian territory. Russia continues to occupy these Georgian regions, and the central government in Tbilisi does not have effective control over these areas. The United States supports Georgia’s sovereignty and territorial integrity within its internationally recognized borders and does not recognize the Abkhazia and South Ossetia regions of Georgia as independent. While South Ossetia and Abkhazia – which Russian troops and border guards have long occupied without Georgia’s consent – have declared independence, only Russia, Nauru, Nicaragua, Syria, and Venezuela recognize them as independent states. Tensions still exist both inside the occupied territories and near the administrative boundary lines (ABL). A Russian military build-up along the South Ossetia ABL dramatically escalated tensions in August 2019. In addition, Russian “border” guards regularly patrol the ABLs and have increasingly detained people trying to cross the ABLs. A number of attacks, criminal incidents, and kidnappings have occurred in and around the ABLs as well. While none of the activity has been anti-American in nature, there is a high risk of travelers finding themselves in a wrong place/wrong time situation. In addition, unexploded ordnance from previous conflicts poses a danger near the ABL of South Ossetia. However, other parts of Georgia, including Tbilisi, are not directly affected.

Per Georgian law, it is illegal to undertake any type of economic activity in Abkhazia or South Ossetia if such activities require permits, licenses, or registration in accordance with Georgian legislation. Laws also ban mineral exploration, money transfers, and international transit via Abkhazia or South Ossetia.

Violent street protests are uncommon, but there were significant clashes in June 2019 when protesters attempted to enter Parliament. Hundreds were injured, including some who suffered severe eye injuries due to police use of rubber bullets. Generally, police have fulfilled their duty to maintain order even in cases of unannounced protests.

11. Labor Policies and Practices

Georgia offers skilled and unskilled labor at attractive costs compared not only to Western European and American standards, but also to Eastern European standards. Skilled labor availability in the engineering field remains underdeveloped. The official unemployment rate was 11.6 percent in 2019, according to State Department of Statistics, but actual unemployment is considerably higher given significant underemployment in the working population, especially in rural regions where subsistence farmers are considered employed for statistical purposes and job creation has remained a particular challenge. Some investment agreements between the Georgian government and private parties have included mandates for the contracting of local labor for positions below the management or executive level.

Georgia’s Labor Code defines the minimum age for employment (16), standard work hours (40 per week), and annual leave (24 calendar days). The law allows for other wage and hour issues to be agreed between the employer and employee. The amendments to the Labor Code in July 2013 defined the grounds for termination and severance pay for an employee at the time of termination, including the payment term. An employer is obliged to give compensation of not less than one month’s salary to an employee within thirty (30) days. Additionally, an employer is obliged to give the dismissed employee a written description of the grounds for termination within seven days after an employee’s request. The Labor Code also prescribes rules for paying overtime labor (over 40 hours), which must be paid at an increased hourly rate.

The Labor Code specifies essential terms for labor contracts, including: the starting date and the duration of labor relations, working hours and holiday time, location of workplace, position and type of work, amount of salary and its payment, overtime work and its payment, the duration of paid and unpaid vacation and leave, and rules for granting leave. The code states that the duration of a business day for an underage person (ages 16 to 18) should not exceed 36 hours per week. Regulations prohibit interference in union activities and discrimination of an employee due to union membership. The Labor Code amendments mandate the government to reestablish a labor inspectorate to ensure adherence to labor safety standards. The labor inspection program under the Ministry of Labor, Health, and Social Affairs, employs 25 labor inspectors, although in 2019 the government increased the number of inspectors to 100 to deal with increasing demand, and the vacancies are still to be filled. In 2018, Parliament passed the Occupational Safety, and Health (OSH) Law, that gave the government power to make unannounced inspections in some circumstances in companies operating among “hard, harmful, hazardous, and increased danger” occupations. Subsequent amendments that entered into force in September 2019 allowed unannounced inspections across all sectors of the economy. Employees are entitled to up to 183 days (six months) of paid maternity leave, which can last up to 24 months when combined with unpaid leave. The state subsidizes leave taken for pregnancy, childbirth, childcare, and adoption of a newborn. An employer and employee may agree on additional compensation. The Labor Code permits non-competition clauses in contracts; this provision may remain in force even after the termination of employment.

Employees are entitled to up to 183 days (six months) of paid maternity leave, which can last up to 24 months when combined with unpaid leave. The state subsidizes leave taken for pregnancy, childbirth, childcare, and adoption of a newborn. An employer and employee may agree on additional compensation. The Labor Code permits non-competition clauses in contracts; this provision may remain in force even after the termination of employment.

The government adopted a new law in 2018 establishing an accumulative pension scheme, which came into effect as of January 1, 2019. The pension is mandatory for legally employed persons under 40, while for the self-employed and those above the age of 40 enrollment in the program is voluntary. Each employee, employer, and the government must each make a contribution of two percent of the employee’s gross income to an individual retirement account. As for the self-employed, they will make a deposit of four percent of their income, and the state will match another two per cent. Employees pay a flat 20 percent income tax. The state social security system provides a modest pension and maternity benefits. The minimum monthly pension is GEL 220 (USD 73). The average monthly salary across the economy in 2019 was GEL 1,217 (around USD 420). The minimum wage requirement for state sector employees is GEL115 (USD 40) per month. Legislation on the official minimum wage in the private sector has not changed since the early 1990s and stands at GEL 20 (USD 7) per month, but is not applied in practice and is not being used for reference.

The law generally provides for the right of most workers, including government employees, to form and join independent unions, to legally strike, and to bargain collectively. Employers are not obliged, however, to engage in collective bargaining, even if a trade union or a group of employees wishes to do so. While strikes are not limited in length, the law limits lockouts to 90 days. A court may determine the legality of a strike, and violators of strike rules can face up to two years in prison. Although the law prohibits employers from discriminating against union members or union-organizing activities in general terms, it does not explicitly require reinstatement of workers dismissed for union activity. Certain categories of workers related to “human life and health,” as defined by the government, were not allowed to strike. The International Labor Organization noted the government’s list of such services included some it did not believe constituted essential services directly related to human life and health. Workers generally exercised their right to strike in accordance with the law.

Georgia has ratified some ILO conventions, including the Forced Labor Convention of 1930, the Paid Holiday Convention of 1936, the Anti-Discrimination (Employment and Occupation) Convention of 1951, the Human Resources Development Convention of 1975, the Right to Organize and Collective Bargaining Convention of 1949, the Equal Remuneration Convention of 1951, the Abolition of Forced Labor Convention of 1957, the Employment Policy Convention of 1964, and the Minimum Age Convention of 1973.

Information on labor related issues is also available in the State Department’s annual reports: Human Right Report: http://georgia.usembassy.gov/officialreports/hrr.html. Child Labor Report: http://www.dol.gov/ilab/reports/child-labor/georgia.htm .

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 17,700 2018 17.6 https://data.worldbank.org/
country/georgia
Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, other
Foreign Direct Investment Year Amount Year Amount
U.S. FDI in partner country ($M USD, stock positions) 2019 99 2018 N/A https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host Country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP 2019 108 2018 108 https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

* Source for Host Country Data: GeoStat (Georgia National Statistics Department)

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment (2018) Outward Direct Investment
Total Inward 18,258 100% Total Outward N/A 100%
Azerbaijan 3,998 21.9% N/A N/A N/A
UK 2,498 13.7% N/A N/A N/A
Netherlands 1,750 9.7% N/A N/A N/A
Cyprus 1,270 6.7% N/A N/A N/A
Turkey 1,095 6% N/A N/A N/A

Source: IMF

The IMF data on Direct Investment are inconsistent with Georgia’s Statistic Agency’s published data for 2018. The IMF report does not include two countries listed in Georgia’s published data for 2018, the United States and China, in fourth and fifth place, respectively.

Table 4: Sources of Portfolio Investment
Data not available.

Investment Climate Statements
Edit Your Custom Report

01 / Select A Year

02 / Select Sections

03 / Select Countries You can add more than one country or area.

U.S. Department of State

The Lessons of 1989: Freedom and Our Future