Transparency of the Regulatory System
The Law on Public Procurement delegates procurement authority to budgetary units (i.e., ministries, municipalities, and independent agencies) except when the government specifically authorizes the Ministry of Finance’s Central Procurement Agency to procure goods and/or services on its behalf. All tenders are advertised in Albanian and Serbian, and for the most important projects, also in English.
The Public Procurement Regulatory Commission (PPRC) oversees and supervises all public procurement and ensures that the Law on Public Procurement is fully implemented. The PPRC publishes contract information on its website (https://e-prokurimi.rks-gov.net/Home/ClanakItemNew.aspx?id=327). The National Audit Office conducts annual procurement audits of the various Kosovo ministries, municipal authorities, and agencies that receive funds from the Kosovo consolidated budget. The Procurement Review Body, an independent administrative body, is responsible for hearing appeals related to government procurement. As of 2019, an e-procurement platform is fully operational all procurements are handled through it, which has greatly enhanced transparency.
The Kosovo Assembly is responsible for rule-making and regulatory actions, while government ministries and agencies draft and authorize secondary legislation (i.e., implementing regulations). Municipal assemblies and mayors have regulatory authority at the local level. The Government of Kosovo is working to align all legal, regulatory, and accounting systems in Kosovo with EU standards and international best practices. Publicly-listed companies are required to comply with international accounting standards.
The Assembly publishes draft laws on its website. The relevant committees also hold public hearings on proposed laws, including investment laws. The 2016 regulation on the Minimum Standards for Public Consultation Process clarifies the standards, principles, and procedures for consultations during the drafting of legislation. Kosovo has developed an online platform for public comments (http://konsultimet.rks-gov.net/ ) and publishes rules, regulations, and laws in the official Kosovo Gazette (https://gzk.rks-gov.net/ ) and on the Kosovo Assembly’s website (http://www.kuvendikosoves.org/?cid=2,191 ). The Ministry of Finance regularly publishes detailed reports on Kosovo’s public finances and debt obligations.
Kosovo’s Better Regulation Strategy 2014-2020 is a government initiative to implement a smart regulatory system with sound implementation and effective communication. The Law on Public Financial Management and Accountability requires a detailed impact assessment of any budgetary implications before new regulations can be implemented.
In spite of the strategy and regulatory requirements, regulations are often passed with little substantive discussion or stakeholder input.
International Regulatory Considerations
Kosovo is a CEFTA member and is pursuing EU integration. Through the Stabilization and Association Agreement (SAA) with the EU, Kosovo is working to harmonize its laws and regulations with EU standards. Kosovo is not a member of the WTO.
As of July 2017, Kosovo is also a signatory of Multi-Annual Action Plan for a Regional Economic Area in the Western Balkans Six . This action plan aims to increase regional integration in the fields of trade, investment policy, labor force mobility, and digitalization.
Legal System and Judicial Independence
In 2016, the Kosovo Assembly amended the constitution to enhance the independence of the judiciary in line with EU requirements. Despite significant reforms and improvements in court efficiency, backlog, and sentencing procedures, the judiciary currently lacks sufficient subject-matter expertise to effectively handle complex economic issues. While complainants have the right to challenge court decisions, regulations, and enforcement actions in the regular court system, as well as the constitutional court, Kosovo’s courts are viewed as politically influenced by the executive branch, with special treatment or “selective justice” for high-profile, well-connected individuals. For example, while Kosovo court conviction rates match regional averages, the rate falls considerably for high-profile corruption cases.
Kosovo’s civil legal system provides for property and contract enforcement. The Department for Economic Matters within the Basic Court of Pristina has jurisdiction for the entire territory of Kosovo economic disputes between both legal and natural persons including reorganization, bankruptcy, and liquidation of economic persons; disputes regarding impingement of competition; and protection of property rights and intellectual property. A similar department within the Court of Appeals holds jurisdiction over “disputes between domestic and foreign economic persons in their commercial affairs” and addresses all appeals coming from the Pristina Basic Court’s Department for Economic Matters. Department for Economic Matters Commercial cases can take anywhere from six months to three years to resolve.
The Law on Enforcement Procedures permits claimants to utilize bailiffs licensed by the Ministry of Justice to execute court-ordered judgments. In addition, the Laws on Arbitration and Mediation have helped to address key impediments to alternative dispute resolution and to enforcing arbitral awards.
Significant legislation overhauling the 2004 Criminal Code and the Criminal Procedure Code, developed by the United Nations Mission in Kosovo (UNMIK), went into force in 2013 and was amended in 2018. This legislation brought Kosovo’s Criminal Law in compliance with the EU Convention on Human Rights, updating definitions and best practices. The Criminal Code contains penalties for tax evasion, bankruptcy, fraud, intellectual property offenses, antitrust, securities fraud, money laundering, and corruption offenses. The Special Department of the Special Prosecutor of the Republic of Kosovo handles high-level cases of corruption, organized crime, terrorism, etc.
Laws and Regulations on Foreign Direct Investment
Foreign firms operating in Kosovo are entitled to the same privileges and treatment as local businesses. Kosovo’s commercial laws are available to the public in English, as well as Kosovo’s official languages (Albanian and Serbian) on the Kosovo Assembly’s website (www.assembly-kosova.org/?cid=2,191 ) and on the Official Gazette website (http://gzk.rks-gov.net/default.aspx ).
Laws of particular relevance include:
- Law on Strategic Investments: authorizes fast-track negotiations between the Government and private companies in targeted sectors and grants the government the option of ceding state-owned real estate for the purpose of developing and executing strategic investment projects.
- The Law on Late Payments in Commercial Transactions: discourages late payments and regulates the calculation of interest on late payments.
- The Law on Bankruptcy: regulates all matters related to the insolvency of business organizations; the provisions for the protection, liquidation and distribution of the assets of a bankrupt debtor to its creditors; and the reorganization and discharge of debt for qualified business organizations.
- The Law on Prevention of Money Laundering and Combating Terrorist Financing: enabled Kosovo to join Egmont Group, an inter-governmental network of 152 Financial Intelligence Units whose members exchange expertise and financial intelligence to combat money laundering and terrorist financing.
- The Credit Guarantee Fund Law: increased access to finance for all micro- and SMEs in Kosovo in an effort to increase employment, boost local production, and improve the trade balance.
Competition and Anti-Trust Laws
There are two main laws that regulate transactions for competition-related concerns: The Law on Protection of Competition and the Law on Antidumping and Countervailing Measures.
The Competition Authority is responsible for implementing the Law on Protection of Competition, but generally lacks the human resources to conduct thorough investigations. The Trade Department of the Ministry of Trade and Industry is responsible for the implementation of the Law on Antidumping and Countervailing Measures. In September 2018, Kosovo Assembly approved the Law on Safeguard Measures on Imports, which allows the Trade Minister to impose a provisional safeguard measure up to 200 days.
From 2016 through April 2019, there were 21 complaints on antidumping, of which MTI investigated five and approved antidumping measures for two.
Expropriation and Compensation
Articles 7 and 8 of the Foreign Investment Law limit expropriation to cases with a clear public interest and protect foreign investments from unreasonable expropriation, guaranteeing due process and timely compensation payment based on fair-market prices. The Law on Expropriation of Immovable Property permits expropriation of private property by the government or municipalities when such action is in the public interest. Articles 5 through 13 of the Law on Expropriation of Immovable Property define expropriation procedures. An eminent domain clause limits legal recourse in cases arising from the expropriation and sale of property through the privatization of state owned enterprises.
There is no history of expropriation outside of uncontroversial, undisputed expropriation for works in the public interest, such as roadway construction.
ICSID Convention and New York Convention
In 2009, Kosovo became a party to the International Center for Settlement of Investment Disputes (ICSID) Convention and has incorporated the Convention into national law.
There is no specific legislation providing for the enforcement of the ICSID Convention, but in accordance with the Law on Foreign Investments, investors may contractually agree to arbitration or other alternative dispute resolution mechanisms. Kosovo is not a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Law.
Investor-State Dispute Settlement
Kosovo’s courts recognize international arbitration awards. There is no history of extrajudicial action against foreign investors.
The Commercial Department of Pristina Basic Court has jurisdiction over investment disputes involving SOEs. There are no records available detailing the frequency with which domestic courts have ruled in SOEs’ favor.
Kosovo is a party to ICSID. Over the past ten years, three foreign investors have brought claims against Kosovo. Kosovo’s state-owned telecom company lost two cases before the London Court of International Arbitration (LCIA), one of which involved a foreign investor. In 2013, the LCIA determined Post & Telecom Kosovo owed an Israeli company USD 9.8 million for breach of contract. In July 2016, the International Court of Arbitration in Paris awarded an Austrian printing company USD 5.6 million for Kosovo’s illegal termination of a contract to manufacture passports. In June 2015, a German company filed a case before ICSID related to the failed privatization of Kosovo’s telecom company, but the arbitration court ruled that it had no jurisdiction over the dispute.
International Commercial Arbitration and Foreign Courts
The Foreign Investment Law stipulates that investors may utilize the following alternative dispute resolution mechanisms:
a) The ICSID Convention if both the foreign investor’s country of citizenship and Kosovo are parties to said convention at the time of the request for arbitration;
b) The ICSID Additional Facility Rules if the jurisdictional requirements for personal immunities per Article 25 of the ICSID Convention are not fulfilled at the time of the request for arbitration;
c) The United Nations Commission on International Trade Law (UNCITRAL) Rules. In this case, the appointing authority would be the Secretary General of ICSID; or
d) The International Chamber of Commerce Rules.
Arbitration services are available at arbitral tribunals within the Kosovo Chamber of Commerce and American Chamber of Commerce in Kosovo. Kosovo’s Arbitration Rules are based on model rules derived from the 2010 United Nations Commission on International Trade Law (UNCITRAL) Model Rules for Commercial Arbitration and are consistent with international best practices. The Law on Foreign Investment favors the use of arbitration. To utilize this option, the law requires that the disputed agreement/contract include an arbitration clause.
Foreign arbitral awards and judgments are enforceable in Kosovo. Recognition and enforcement of foreign arbitral awards is more efficient than recognition and enforcement of judgements and recognition and enforcement of arbitral awards is limited. There has been no case of voluntary compliance by the Government of Kosovo or other public entities with arbitral awards; all of the cases have gone through some form of judicial process.
Additionally, in accordance with the Law on Mediation, Kosovo courts recognize mediation centers and one is operated by the American Chamber of Commerce in Kosovo. The Ministry of Justice has adopted the rules leading to the creation of mediation services and has trained and certified a number of mediators. For more information, visit http://www.kosovo-arbitration.com .
The Law on Bankruptcy regulates bankruptcy and insolvency procedures and specifies provisions for the protection, liquidation, and distribution of the assets of a bankrupt debtor to its creditors and the reorganization and discharge of debt for qualified business organizations. Under the law, foreign creditors have the same rights as domestic investors and creditors when launching and participating in bankruptcy proceedings.
In early 2006, Kosovo created a credit registry. The Central Bank of Kosovo manages it. It serves as a database for customers’ credit history and aims to help commercial banks and non-banking institutions assess customers’ creditworthiness. Banks and non-banking institutions are required to report to Credit Registry of Kosovo, and only authorized banking and non-banking institution personnel can access it. In addition to the Credit Registry of Kosovo, the Ministry of Trade and Industry offers a Pledge Registry Sector, a mechanism that records data for collateral pledges.