Category: Kosovo

Kosovo is accelerating its energy transition, SEPA integration, and corporate transparency, aligning with EU standards to boost investment, competition, and economic stability, according to Nallbani Law Office Managing Partner Delvina Nallbani.

“Kosovo is making strides in its renewable energy transition, aiming to add 1,300 megawatts of new capacity by 2031,” Nallbani begins. “Lignite power plants continue to struggle to meet electricity demand, which has driven the government to introduce competitive auctions for renewable energy projects. These auctions replace the previous system of direct negotiations with investors. The country held its first 100-megawatt solar auction through competitive bidding in 2024, and plans in the future to conduct regular solar and wind auctions through long-term Power Purchase Agreements..”

Nallbani also highlights that “the recently adopted Law on the Promotion of Renewable Energy Sources establishes transparent and competitive bidding criteria, where bids are evaluated primarily on price, and those exceeding the set price threshold are disqualified.” According to her, “investors can benefit from ‘privileged producer status,’ which grants access to government-backed financial support schemes. To support renewable energy investments, Kosovo has introduced two financial assistance mechanisms: contracts for difference which ensure financial balance between a reference price and a fixed price, and premium contracts, which provide a fixed premium above market prices to ensure financial stability.” The duration of these contracts, according to Nallbani, “varies by energy type – wind projects typically range from 15 to 20 years, while solar projects have contract terms of 12 to 15 years.”

Another major development, Nallbani stresses, “is Kosovo’s efforts to join the Single Euro Payments Area, a key step toward aligning with EU regulations. The Central Bank of Kosovo has initiated the process, which will harmonize local regulations with EU standards on banking, anti-money laundering, and payment services. Currently, banks dominate Kosovo’s financial sector, but SEPA membership is expected to open the market to new players, including electronic money institutions.” Nallbani believes that this expansion “will boost competition, reduce reliance on cash transactions, and make cross-border payments more efficient. SEPA membership will also benefit businesses engaged in exports by lowering transaction costs and increasing the attractiveness of Kosovo’s financial services.” The accession process involves two main steps, she emphasizes: “Kosovo must first be accepted into SEPA, and then service providers can apply to join SEPA payment schemes. While the exact timeline depends on EU institutions, Kosovo’s financial providers, particularly banks, must comply with the new regulations at least one month before applying for SEPA scheme participation.”

Lastly, Nallbani draws attention to a law establishing a beneficial ownership registry. “The law, which came into force in September 2024, requires all business organizations, registered entities, and NGOs to disclose their beneficial owners. The registry will be administered by the Kosovo Business Registration Agency, creating a centralized database of ownership information.” Under the law, she notes, “a beneficial owner is defined as an individual who ultimately owns or controls at least 25% of a company’s shares. The Registry must be operational within one year of the law’s effective date – December 7, 2024, while existing entities will have 60 days to comply once the registry becomes operational. Previously, the companies were required to disclose their ownership only to banks when opening bank accounts, but this new law ensures comprehensive reporting to a public authority.”

Kalo & Associates has advised the European Bank for Reconstruction and Development on a partnership with Raiffeisen Bank Kosovo under the Norway Western Balkans Growth Support Program.

According to Kalo & Associates, “this regional initiative aims to enhance access to finance for small and medium-sized enterprises through an unfunded portfolio guarantee of up to EUR 25 million. With this transaction, RBKO becomes the first EBRD partner financial intermediary in a loss risk cover arrangement under the program. Through this partnership, EBRD will cover up to 50% of the credit risk on RBKO’s EUR 25 million loan portfolio.”

The Kalo & Associates team included Special Counsel Jona Bica Kacinari and Senior Associate Leonora Beka-Mehmeti.

Bratschi has successfully represented Mabco Constructions in an ICSID investment arbitration against the Republic of Kosovo.

According to Bratschi, Swiss-based construction company Mabco Constructions “has successfully secured a favorable award in an investment arbitration dispute against the Republic of Kosovo. The arbitration was administered by the International Centre for Settlement of Investment Disputes in Washington, DC.”

The firm explains that “the dispute arose from the failed privatization of the Grand Hotel, a landmark hospitality establishment in the center of Prishtina, Kosovo. Mabco Constructions SA, after financially contributing to the privatization of the Grand Hotel, was subsequently deprived of its stake in the project and the associated investment. In response, the company initiated arbitration proceedings in early 2017 under the bilateral investment treaty (BIT) between Switzerland and Kosovo, seeking compensation along with applicable interest and costs.”

The Bratschi team included Managing Partner Sandra De Vito and Lawyers Elisa Aliotta and Sami Salihu.

Kosovo has recently adopted Law No. 08/L-265 on the Register of Beneficial Owners, a key piece of legislation aimed at enhancing transparency and preventing financial crimes. Officially published on November 22, 2024, in the Official Gazette of Kosovo, this law not only addresses regulatory gaps but also lays the foundation for a transparent and trustworthy business environment in Kosovo, aligning it with the practices of European Union member states. 

Law No. 08/L-265 introduces a Central Register of Beneficial Owners, creating an accessible and transparent database for information on individuals who ultimately control or benefit from legal entities. The main objectives of the law include:  

• Transparency: The law requires businesses to disclose their ultimate beneficial owners (UBOs). This requirement aims to provide clear and accessible data on ownership and control, eliminating the possibility of concealing the true decision-makers behind legal entities.
• Compliance with EU Standards: By integrating elements from Directive (EU) 2015/849, the law aligns Kosovo’s regulatory framework with European Union standards on anti-money laundering (AML) and combating the financing of terrorism.
• Prevention of Financial Abuse: Through mandatory ownership disclosure, the law seeks to deter and address financial abuses such as money laundering, tax evasion, corruption, and other illicit activities.
• Accountability: The law imposes strict penalties for non-compliance, emphasizing its mandatory nature. This creates a deterrent effect while reinforcing accountability among entities and their stakeholders.

The law applies to a wide range of entities operating in Kosovo, ensuring a comprehensive approach to ownership transparency. These include: 

• Corporate Entities: Limited liability companies (LLCs), joint-stock companies, and partnerships.
• Foreign Companies: Branches and representative offices of international businesses.
• NGOs and Trusts: Non-governmental organizations, foundations, and similar entities.
• Investors: Legal persons or individuals holding immovable property or investments in Kosovo.

Exemptions: Sole proprietorships, political parties, and religious organizations are not subject to this law.  

Key Obligations for Businesses 

To meet the requirements of the law, businesses must fulfill the following obligations:  

1. Disclosure of Ownership Details

Entities are required to submit comprehensive information about their UBOs, including: 

• Full name and identification details.
• Percentage of ownership or voting rights.
• Method of control, whether direct or indirect.

2. Updating Registers

Entities must notify the Kosovo Business Registration Agency (ARBK) of any changes in ownership within 30 days. This ensures the Register reflects accurate and up-to-date data. 

3. Ensuring Accuracy

Businesses are responsible for verifying the accuracy of all submitted information, maintaining a high standard of data integrity. Failure to comply with these obligations may lead to administrative penalties, including fines and suspension of services by ARBK. 

The law balances transparency with privacy, clearly defining access rules: 

• Unrestricted Access: Government agencies, such as the Financial Intelligence Unit, have full access to the Register for monitoring and enforcement purposes.
• Restricted Public Access: Members of the public may access certain data if they demonstrate a legitimate interest, ensuring that sensitive personal information is adequately protected.

Businesses operating in Kosovo must adapt quickly to these changes. The law introduces immediate compliance requirements and ongoing obligations to maintain accurate records. Non-compliance not only risks penalties but could also harm reputations in an increasingly transparent global business environment. 

The Kosovo Business Registration Agency (ARBK) is tasked with managing the Register. Obliged entities that fail to comply will face penalties, which may include fines ranging from €500 to €5,000 for entities and up to €1,000 for individuals, as well as suspension of services for continued non-compliance. 

This legislation complements broader reforms in Kosovo’s legal landscape, such as the proposed Law on Business Organizations, which focuses on digitalization and improved corporate governance. Together, these laës enhance Kosovo’s business environment, signaling its readiness to integrate into the global economic community.  

Law No. 08/L-265 is more than a compliance measure—it is a milestone in Kosovo’s journey toward becoming a transparent and responsible jurisdiction for international and domestic businesses. By aligning with EU directives and global best practices, the law positions Kosovo as an attractive destination for investment.

By Sabina Lalaj, Partner, and Majlinda Karaj, Associate, Lalaj & Partners

RPHS Law has advised Swinto on the sale of the majority of its shares to Virtus Invesco Partners. ICL Legal advised the buyers.

Swinto is a non-banking financial institution licensed by the Central Bank of Kosovo. 

Virtus Invesco Partners focuses on enterprise and holding company management.

The RPHS Law team included Partner Mentor Hajdaraj and Senior Managing Associate Klit Shala.

The ICL Legal team included Managing Partner Mehmet Berisha, Partner Attorney Rafet Ferizi, and Senior Legal Associates Nita Dragusha and Jeton Ulaj.

Kalo & Associates has advised Starlink on establishing its business in Kosovo.

Starlink is a satellite internet service company.

According to Kalo & Associates, Starlink’s entry into Kosovo is expected to enhance digital connectivity and accelerate the digital transformation of the nation, especially benefiting rural communities with reliable, high-speed internet access. 

The Kalo & Associates team included Special Counsel Jona Bica Kacinari, Senior Associate Leonora Beka-Mehmeti, and Associate Brikena Mujku.

Inlex Managing Partner Shkumbin Asllani reports on the country’s ambitious goals for economic growth outlining Kosovo’s recent legislative efforts to promote renewable energy, attract investments, and develop capital markets while remaining cautiously optimistic, noting that implementation could face challenges.

“Recently, the Kosovo government has introduced a new law aimed at promoting the use of renewable energy sources,” Asllani begins. The law sets the foundation of a Renewable Energy Support Fund, designed to “cover the costs of a support scheme. This competitive scheme will be implemented for privileged producers who use renewable energy sources through feed-in premiums and feed-in tariffs. Moreover, the government has set ambitious new national targets – to increase renewable energy production to 35% by 2031,” Asllani outlines.

To facilitate this energy transition and achieve such a goal, Asllani reports that “the government plans to conduct four auctions for competitive schemes by 2025 with support from the USAID and the IFC. The first auction has already been completed, won by a consortium led by a member of the Kosovo diaspora. The initial project is currently in the initial development phase. Clearly with the new law passed in May 2024, things are moving quickly,” he says.

While the law is a positive step, Asllani says he remains somewhat pessimistic about its implementation. “Historically, the issue hasn’t been the legislation itself but the execution – problems with agencies, grid connections, and bureaucratic hurdles have been persistent obstacles. In addition, the government is facing a shortage of public officials – about 3,000 vacancies – which hampers the government’s ability to implement structural reforms effectively,” he explains. High inflation and low wages make it challenging to attract talent to public service, and these factors could impede the successful rollout of renewable energy initiatives.

Moreover, Asllani reports that there have been changes made to the personal income tax law. “In September 2024, amendments to the Law on Personal Income Tax were adopted. The new law changes key aspects of the tax system by introducing brackets with lower rates.” As he explains, for annual incomes up to EUR 960, the tax rate is 0%. Incomes between EUR 960 and EUR 3,000 are taxed at 4%, and those between EUR 3,000 and EUR 5,000 at 8%. Incomes above EUR 5,000 are taxed at a maximum rate of 10%. “This policy aligns with the adoption of a new minimum wage law, set at EUR 350, aiming to benefit the most vulnerable in our society.”

Additionally, a new Law on Sustainable Investment was adopted. “This law replaces the previous Law on Foreign Investments and clarifies who is considered an investor, inter alia affirming that a foreign investor is a person who does not have citizenship of Kosovo.” Asslani adds that the new law is “tackling a practice we’ve had with arbitration proceedings initiated by Kosovars with dual citizenship. It introduces stricter criteria for personal jurisdiction and it overhauls the legal remedies available to foreign investors,  mandating the government to consent on a case-by-case basis to arbitration procedures. The law also provides multiple avenues for resolving claims through domestic court proceedings, mediation, or arbitration – which aligns Kosovo’s approach with other Balkan countries, aiming to increase protection and make arbitration more effective.”  

Finally, Asllani also reports that the “Ministry of Finance shared a draft concept for developing the legal framework for capital markets.” This document analyzes the current financial framework, identifies existing gaps, and offers key recommendations, including “adopting a Capital Markets Law to establish clear rules for regulation and investor protection, and an Investment Funds Law to allow investment funds to register and operate in the country,” Asslani concludes.

The Assembly of the Republic of Kosovo approved the new Bankruptcy Law no. 08/L-256 on July 11, 2024, which was published in the Official Gazette on August 6, 2024, and will enter into force 15 days from the date of publication.

The new bankruptcy law represents a significant shift in the legal landscape, addressing longstanding challenges and enhancing the effectiveness of bankruptcy procedures. Below is an expert review highlighting the key updates and their implications, compared to the previous legal framework:

Expansion of Creditor Initiation Rights

One of the most notable changes is the revised requirement for creditors to initiate bankruptcy proceedings. Previously, at least two creditors were needed to file for bankruptcy, which often posed challenges in coordinating multiple parties, resulting in fewer initiated cases. The updated provisions simplify this process by allowing a single creditor to initiate proceedings if the debt exceeds €30,000. This change is expected to significantly increase the number of bankruptcy cases, making it easier for creditors to seek redress and for courts to manage insolvency cases more effectively.

Establishment of the Chamber of Insolvent Administrators

The recent legislation introduces provisions for the establishment of a Chamber of Bankruptcy Administrators, formalizing its status and defining its organizational structure, including reporting procedures and disciplinary measures. This addresses gaps in the previous legal framework, where the absence of a structured body led to inconsistencies and inefficiencies in bankruptcy administration. By implementing this framework, the law aims to enhance clarity, accountability, and efficiency in the handling of bankruptcy cases.

Continuation of Bankruptcy Procedures After Debtor’s Death

A critical update ensures the continuation of bankruptcy procedures in the event of an individual debtor’s death. Previously, the law lacked clarity on this matter, leading to uncertainties in the courts. The revised legislation presumes that the rights and obligations of a deceased debtor are inherited by their heirs in accordance with inheritance laws, ensuring the smooth continuation of bankruptcy procedures despite the debtor’s death.

Asset Sale Procedures and Maximization of Value

The updated law specifies the rules for asset sales during liquidation, with a strong emphasis on maximizing value. Public auctions, conducted in line with enforcement procedure provisions, are now mandated to ensure transparency and accountability in asset sales. This update is a significant improvement over previous guidelines, which often resulted in lower returns for creditors. The new provisions are designed to enhance the efforts of administrators to achieve higher sale values for assets, providing better returns for creditors.

Harmonization with the Commercial Court Law

The jurisdiction of courts has been aligned with the Law on the Commercial Court, ensuring consistency and coherence in handling bankruptcy cases. In the past, inconsistencies between different legal frameworks often led to confusion and delays. The revised law addresses this by detailing payment procedures for secured creditors and incorporating feedback from World Bank/IFC experts. New rules now allow secured creditors to sell collateral themselves and include compensation mechanisms for delays in asset sales by administrators.

Clarification of Documentation and Administrative Expenses

The updated legal framework clarifies the documentation required to initiate bankruptcy cases, aligning with the Law on Business Organizations. Previously, incomplete documentation often caused delays. Moreover, the new provisions allow debtors to deposit funds into a trust account to cover administrative expenses if the bankruptcy estate is insufficient, addressing issues related to delayed payments to bankruptcy administrators—a common problem under the old system.

Final Report and Fees Regulation

The revised law introduces a requirement for administrators to submit final reports, a provision that was previously absent. This change addresses issues of ambiguity and procedural delays. Additionally, the regulation of administrator fees has been revised, removing specifics from the law itself and enabling regulation through by-laws, aligning with practices in other professions. This allows for greater flexibility and responsiveness to changing circumstances.

Supervision and Disciplinary Measures

The Chamber of Bankruptcy Administrators will be officially established with a mandate derived from the updated legislation, under the supervision of the Ministry of Justice. This move introduces supervision and control mechanisms for bankruptcy practitioners, comparable to those applied to other legal professionals, ensuring uniform standards of accountability and competence. The previous framework lacked such structured oversight, leading to varying standards in the practice of bankruptcy administration.

Conclusion

The recent updates to bankruptcy law represent a comprehensive overhaul aimed at improving the efficiency, transparency, and fairness of bankruptcy proceedings. By addressing previous challenges and incorporating international best practices, these changes are poised to significantly impact the legal landscape, benefiting creditors, debtors, and the judicial system as a whole.

By Vjosa Shkodra and Njomeza Zejnullahu, Managing Partners,  Lex Business

Baker McKenzie has successfully defended Kosovo Telecom in a Swiss Rules Arbitration against a Kosovar company reselling its mobile credit as well as in the subsequent challenge of the award at the Swiss Supreme Court.

Kosovo Telecom is a state-owned public company and the provider of fixed and mobile network services and internet in the Republic of Kosovo. 

According to Baker McKenzie, “in 2015, its former management entered into a partnership agreement with a Kosovar company for the resale of mobile phone credit in Kosovo. This partnership agreement was amended by multiple addenda and annexes, which were concluded under dubious circumstances and drastically shifted the commercial terms to Kosovo Telecom’s detriment. Following a change in the company’s management, Kosovo Telecom refused to further render payments under the addenda and annexes, since it considered these agreements null and void. In turn, the reseller initiated arbitration in May 2022, requesting payments of approximately EUR 1.5 million.”

Moreover, the firm reports that, following an arbitration proceeding in Geneva, an award was “granted only approximately EUR 740,000 of the claimant’s claims and, in turn, granted counterclaims of Kosovo Telecom in the amount of approximately EUR 1.7 million. The reseller challenged the award in front of the Swiss Supreme Court, based on alleged infringements of its right to be heard and Swiss public policy.”

The Baker McKenzie team included Vienna-based Partners Filip Boras and Desiree Prantl and Associate Valentin Marginter as well as Zurich-based Partner Urs Zenhausern.

Legal changes abound in Kosovo with contested advocacy laws and ongoing judicial reform, says Hodaj & Partners Managing Partner Taulant Hodaj, who highlights that despite challenges, favorable tax laws and investor-friendly policies persist in attracting businesses.

“In Kosovo, we have quite a few legal developments,” Hodaj begins. “Among others, there is a notable claim by Kosovo’s Bar Association in the Constitutional Court of Kosovo to challenge the advocacy law. The Kosovo Bar Association argues that there are no clear provisions for when lawyers’ licenses are terminated and no legal remedies to challenge decisions.”

“We are currently undergoing a judiciary reform,” Hodaj continues. “The government has made several attempts to vet judges based on the opinion of the Venice Commission, but these efforts have been challenged in the Constitutional Court. The court has ruled that the laws in question are unconstitutional, and therefore, currently no applicable laws exist.” He adds that further changes need to be made through constitutional amendments. “However, these amendments require the approval of two-thirds of the members of parliament to pass, and there is currently no political will to achieve this. As a result, the process of reforming the judiciary and judges vetting is stalled for now.”

While on the subject of the judiciary, Hodaj notes that “there is now a fully functional Commercial Court that operates efficiently with more professional judges. Moreover, a new law related to sustainable investments, recently adopted, aligns the country with international standards under the framework of the office of the Prime Minister. This law aims to enhance security for investors in Kosovo by allowing them to bypass the court and negotiate directly with the government, among other provisions. It serves as an additional tool with potential benefits,” in assuring investors.

Other laws have been approved, according to Hodaj, “including those addressing corruption and the confiscation of unjustified wealth. These laws impose stricter penalties. Until recently, confiscation wasn’t possible, but now the law related to confiscation of unjustified wealth awaits the decision from the Constitutional Court.” He adds that “although the constitutional court initially rejected it, the parliament has re-adopted it, and the legal sector is now waiting to see the outcome.”

Hodaj also draws attention to a new government-proposed law concerning banks, “which faces opposition from the banking industry and is likely to be challenged in the constitutional court. For consumers, banks currently have the freedom to increase fees and change policies, impacting many people. The government aims to empower the central bank to oversee these changes and implement a final check on fees and other policies, and increase the quality of the operation of the banking system in general in Kosovo.”

Hodaj reports the country has a new law on salaries. “This law harmonizes salaries in the public sector, addressing previous discrepancies and challenges, including various claims and concerns,” he says. “Prior to this, many different institutions were regulated differently, even when operating at the same level. The law brings more transparency to the public sector.”

Ultimately, Hodaj feels out that Kosovo has “an excellent tax law with a low income tax rate and no dividend taxes, making it attractive to start a company in Kosovo. We have a flat profit tax rate of 10%, and taxes include salary and pension contributions. This is beneficial for companies operating in Kosovo, as most of their profit isn’t taxed. Many companies are coming here to provide services and implement strategic initiatives. Despite political challenges, we are proud of our flexibility and success in attracting investors, and I don’t foresee any changes to this in the near future.”