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 Central Procurement Agency of the Ministry of Finance, Labor, and Transfers to procure goods and/or services on its behalf. All tenders are advertised in Albanian and Serbian, and for 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. An e-procurement platform supported by USAID handles all procurements, which has greatly enhanced transparency. The PPRC publishes contract award information on its website ( https://e-prokurimi.rks-gov.net/Home/ClanakItemNew.aspx?id=327 ). The National Audit Office conducts annual procurement audits of all Kosovo ministries, municipal authorities, and agencies that receive funds from the Kosovo consolidated budget. The Procurement Review Body (PRB), an independent administrative body, is responsible for handling appeals related to government procurement.
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, which rarely extends to the broader issues of investment climate. The Kosovan government 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 government requires Environmental and Social Impact Assessment studies for many projects, especially those with a large environmental or social footprint, such as in the energy and mining sectors.
The Assembly publishes draft laws on its website ( http://www.kuvendikosoves.org/shq/projektligjet-dhe-ligjet/ ). 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 all laws and most rules and regulations in the Official Kosovo Gazette ( https://gzk.rks-gov.net/ ) and on the Kosovo Assembly’s website. The government is currently working to annul, amend, and update all secondary legislation that is outdated or that might otherwise contradict primary legislation. The Kosovan government is also working on publishing all secondary legislation in the Official Gazette and relevant ministerial websites. The Law on Public Financial Management and Accountability requires a detailed impact assessment of any budgetary implications before new regulations can be implemented. The Ministry of Finance, Labor, and Transfers regularly publishes detailed reports on Kosovo’s public finances and debt obligations. Despite the regulatory requirements, some businesses and business associations complain that regulations are still passed with little substantive discussion or stakeholder input.
The Kosovo Assembly approved the Law on Inspections which aims to reform and modernize inspections based on internationally accepted principles. Inspections conducted under this law aim to protect the public interest, including public health, public safety, and the environment.
International Regulatory Considerations
Kosovo is represented in CEFTA by the United Nations Mission in Kosovo (UNMIK) and is pursuing EU integration. Through its 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.
Kosovo is a signatory to the July 2017 Multi-Annual Action Plan for a Regional Economic Area in the Western Balkans Six and its subsequent Common Regional Market Action Plan . 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, the judiciary lacks sufficient subject-matter expertise to effectively handle complex economic issues and issues remain in court efficiency, backlog, and sentencing procedures. While complainants have the right to challenge court decisions, regulations, and enforcement actions in the regular court system, as well as the Constitutional Court, many analysts view Kosovo’s courts as politically influenced by the executive branch, with special treatment or “selective justice” for high-profile, well-connected individuals. Kosovo court conviction rates generally match regional averages, but the rate falls considerably when filtered for high-profile corruption cases.
In January 2022, the Kosovo Assembly unanimously adopted the Law on the Commercial Court, which establishes a special court for handling business disputes fairly, efficiently, and predictably. The Commercial Court aims to improve the business enabling environment by reducing opportunities for corruption and building investor and private sector trust in the judiciary. USAID supported the Kosovo Ministry of Justice in developing the law through an inclusive and participatory process with the judiciary, commercial law experts, practitioners, academics, businesses, and civil society representatives. After a period of internal organization, case transfer, recruitment of key personnel and other logistical and operative procedures, the Commercial Court is now functional, although fully staffing the court remains a challenge.
Significant amendments to the Criminal Code and the Criminal Procedure Code, aligned Kosovo’s criminal justice legislation with EU standards. The Criminal Code contains penalties for tax evasion, bankruptcy, fraud, intellectual property rights offenses, antitrust, pyramid schemes, securities fraud, money laundering, and corruption. The Special Prosecution of the Republic of Kosovo (SPRK) handles high-level cases of corruption, organized crime, terrorism, money laundering, etc. The Pristina Basic Court Special Department adjudicates the cases brought forward by the SPRK, and the Appellate Court Special Department handles the appeals against the decisions of the Pristina Basic Court Special Department.
Kosovo’s civil legal system provides for property and contract enforcement. The Commercial Court has jurisdiction over 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 rights across the entire territory of Kosovo. Even with the establishment of a Commercial Court, commercial cases can still take anywhere from six months to several years to resolve.
The Law on Enforcement Procedures permits claimants to use bailiffs licensed by the Ministry of Justice to execute court-ordered judgments. In addition, the Laws on Arbitration and Mediation have helped to address impediments to alternative dispute resolution and to enforcing arbitral awards.
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 laws are available to the public in English, as well as Kosovo’s official languages (Albanian and Serbian) on the Kosovo Assembly’s website ( http://www.kuvendikosoves.org/shq/projektligjet-dhe-ligjet/ ) and on the Official Gazette website ( http://gzk.rks-gov.net/default.aspx ).
Laws of particular relevance to foreign investment include:
- The Law on Foreign Investment: provides a set of fundamental rights and guarantees to ensure protection and fair treatment in strict accordance with accepted international standards and practices. Please note that as of March 2023, the Kosovo Assembly is working on a draft Law on Sustainable Investments, which, if approved, will supplant the Law on Foreign Investment.
- The Law on Business Organizations: regulates the registration and closure of a company and the rights and obligations of shareholders, authorized representatives, and others included in the business management structure.
- 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: increases access to finance for all MSMEs in Kosovo to grow employment, boost local production, and improve the trade balance.
- The Law on Foreign Trade, and the Law on Anti-Dumping and Countervailing Measures: provides a set of principles and rules on trade, as well as provisions for government interventions in cases of dumping and countervailing measures.
Competition and Antitrust 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 Industry, Entrepreneurship, and Trade is responsible for the implementation of the Law on Antidumping and Countervailing Measures. In September 2018, Kosovo’s Assembly approved the Law on Safeguard Measures on Imports, which allows the trade minister to impose a provisional safeguard measure for up to 200 days.
Expropriation and Compensation
Articles seven and eight 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 government or municipal expropriation of private property when such action is in the public interest; articles five through thirteen of the Law 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. Expropriations, in part due to competing claims arising from the history of conflict with Serbia, can be highly politicized and controversial.
ICSID Convention and New York Convention
In 2009, Kosovo became a party to the International Centre 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. Based on amendments to the Law on Contested Procedure, Kosovo adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which makes the New York Convention applicable in Kosovo
Please note that as of March 2023, the Kosovo Assembly is working on a draft-law on sustainable investments, which, if approved, will supplant the Law on Foreign Investment, and could change provisions related to international arbitration.
Investor-State Dispute Settlement
Kosovo’s courts recognize international arbitration awards. As of March 2022, Kosovo, through the Law on Foreign Investments, grants foreign investors the right to settle investment dispute either in domestic courts or international arbitration. U.S. Embassy Pristina is not aware of any extrajudicial action against foreign investors.
The Commercial Court has jurisdiction over investment disputes involving state-owned enterprises (SOEs). Post is not aware of any records detailing the frequency with which domestic courts have ruled in favor of SOEs.
Over the past 10 years, at least three foreign investors have brought publicly known claims against Kosovo. In 2013, the London Court of International Arbitration (LCIA) determined Post & Telecom Kosovo owed an Israeli company $9.8 million for breach of contract. In July 2016, the International Court of Arbitration in Paris awarded an Austrian printing company $5.6 million for Kosovo’s illegal termination of a contract to manufacture passports. In June 2015, a German company brought a case before ICSID related to the failed privatization of Kosovo’s telecom company; the arbitral tribunal ruled that it had no jurisdiction over the dispute. As of March 2023, foreign investors have sued Kosovo in several new cases, including in the fields of energy, telecommunications, and the financial sector.
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.
Please note that as of March 2023, the Kosovo Assembly is working on a draft Law on Sustainable Investments, which, if approved, will supplant the Law on Foreign Investment and could change provisions related to international arbitration.
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. There has been no instance of voluntary compliance by the government of Kosovo or other public entities with arbitral awards; all known cases have involved 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 several mediators.
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.