Category: North Macedonia

  • The Buzz in North Macedonia: Interview with Emilija Kelesoska Sholjakovska of Debarliev, Dameski & Kelesoska

    As 2022 approaches, North Macedonia finds itself in a little bit of a political commotion, however, there are signs that the country might see light at the end of the tunnel with energy investments coming in, according to Debarliev, Dameski & Kelesoska Partner Emilija Kelesoska Sholjakovska.

    “With the end of the year coming up soon, thinking back, I think that the past three months were among the most turbulent political periods for our country,” Kelesoska Sholjakovska begins. “We had local elections in October, which resulted in a significant change in the political structure of the ruling party and the opposition in terms of their municipalities seats.” 

    Kelesoska Sholjakovska says that the most challenging element was the Prime Minister’s resignation announcement and the “elections for the new president of the ruling party. The new president – the election for whom stands to end by January 2022 – will also be the new mandator for the new government.” She reports that the new government will have to deal with a lot. “There’s the ongoing pandemic, an energy crisis, and political turmoil in bilateral relations with Bulgaria that are precluding the start of EU accession negotiations – so there’s a lot to deal with.”

    On the other hand, with the political environment being so tumultuous, there were little to no legislative updates to report on, bar two laws that are in the second phase of being passed. “The first one,” Kelesoska Sholjakovska says “is the Law on Register Book Identification, with the implementation of the EU Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market, and the second one has to do with the proposed changes to VAT.”

    In terms of the business climate, Kelesoska Sholjakovska reports that the pandemic impact is still high in terms of the overall economy of North Macedonia. “Industries and companies are slowly recovering, but are also struggling to maintain their production capacities, levels of business activities, productivity, competitiveness,  and perception by foreign markets and investors,” she says. “However, the National Bank is assuring everybody that the Macedonian Denar is stable and that there are no significant changes to its exchange rates, which is a good signal for the forthcoming period.”

    Finally, Kelesoska Sholjakovska turns to major transactions of late. “The M&A market was active recently, with a few big transactions, which is a positive sign that business is moving ahead, slowly,” she says. “The government announced two major projects in the energy sector, which are designated with the status of a ‘strategic investment project.’” The first one is a German company investing in a wind park and the second one is a French investment in the construction of a solar park. “Both investments amount to approximately EUR 1 billion and, given the current energy crisis worldwide, they are certainly coming in at the right time,” Kelesoska Sholjakovska concludes.

  • North Macedonia: Transparency and Confidentiality in Competition Proceedings

    North Macedonia introduced its first competition law in 1999, however, the law that is now applicable was adopted in 2010. With this law, North Macedonia brought its harmonization of competition rules with the EU acquis closer.

    The merger review process in North Macedonia is characterized by a high degree of publicity. Transparency of the procedure exists at the earliest stages of the review process, unlike many other jurisdictions where the competition authorities usually publish only the results of their review.

    Publicity at the Early Stage of the Merger Review Process

    The Macedonian Commission for the Protection of Competition (MNCA) publishes a notice on its website for each notification of concentration delivered, on which third parties are able to submit their comments within ten days.

    The MNCA notice usually contains 1) information on the applicant(s); 2) the type of business activities carried out by the applicant(s); 3) general information on the applicant’s/applicants’ revenue in North Macedonia; 4) the relevant markets; and 5) a preliminary statement about whether the concentration falls under the scope of the Macedonian Law on Protection of Competition. Each MNCA decision is published on its website and in the Official Gazette of North Macedonia.

    Confidentiality Only Upon Request

    Previously applicable laws (the first from 1999, the second from 2005) did not regulate the issue of confidentiality/protection of trade secrets in relevant proceedings.

    The Macedonian Law on Protection of Competition treats information as a business secret – i.e., keeps it confidential – only at the applicant’s request. For this reason, parties claiming confidentiality need to flag the relevant data as a business secret. Additionally, they should substantiate the legal ground for such confidentiality. The MNCA, on the other hand, is entitled to decide whether such a confidentiality request is to be accepted.

    That said, the law gives some general guidelines urging the MNCA not to approach the matter in too extensive or too strict a manner. Specifically, the law stipulates that if the data has economic or market value, and its disclosure or use could lead to other companies gaining an economic advantage, such data should be treated as a business secret. The following should therefore be considered: the extent to which such data is publicly available, the extent of data protection in the company, and the value of said data to the company and its competitors.

    The MNCA needs to ensure that all business secrets are kept confidential. Therefore, a business secret is considered to be data that is stipulated as such, according to the law or other relevant regulation, as well as data that is 1) marked as a business secret by a relevant party in a proceeding, and 2) accepted as such by the MNCA. The relevant law, however, advises that publicly available data, data older than five years, revenues contained in annual financial or statistical reports, and data and documentation crucial for the MNCA to reach its decisions cannot be treated as business secrets.

    The MNCA’s practice runs along the same lines. For a public version of the decision to be prepared, the applicants should submit a proposal of the public version of the decision, with clear justification. If left unaddressed, it is assumed that the decision does not contain a business secret, and is, therefore, to be published in full. Hence, companies should deliver one copy of the document with secret business data included (a confidential version) and one copy without the secret business data (a non-confidential version).

    On a separate note, in misdemeanor proceedings before the MNCA’s Misdemeanor Commission, if only a confidential version is delivered, the MNCA’s Misdemeanor Commission would request delivery of a non-confidential version within three days. If no action is taken, the data is deemed not to be confidential.

    Conclusion

    The MNCA’s practice in competition proceedings runs, on one hand, along the lines of the transparency principle and, on the other, along the lines of active involvement of the parties, by only practicing confidentiality upon their request. In this manner, the Macedonian Law on Protection of Competition balances these two opposing principles.

    By Srdjan Jankovic, Head of Competition and TMC, Petrikic & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz, and Zlatko Kujundjiski, Attorney-at-Law, CMS Skopje

    This Article was originally published in Issue 8.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • The Buzz in North Macedonia: Interview with Dejvi Davidovski of Trpenoski

    Political stalemate and a prolonged election period are holding North Macedonia in a lock, preventing major legislative and business moves, according to Trpenoski Partner Dejvi Davidovski.

    Describing the political atmosphere in North Macedonia, Davidovski highlights the recently held local elections. “Given the fact that the Parliament has adjourned, seeing as how it’s election period, no major changes or updates to the legislative framework came to be,” he says “so the local elections were closely followed.” 

    Davidovski reports that the local elections resulted in no changes in the political power split and that this caused the opposition parties to raise their voices. “The opposition parties ended up in the same position in which they were before and they raised questions of legitimacy of the election process as well as regarding the position of the ruling parliamentary majority and the government, especially since the Prime Minister had already announced that he will resign,” Davidovski says. “At the moment, the political situation is uncertain, since it is still unclear whether the government will retain its Parliament majority or not, and, consequently, whether the opposition will have the opportunity to elect a new government or we’re to have snap elections.”

    With the Parliament in adjournment, Davidovski reports that a “number of reform laws and major amendments and updates to laws are stuck in parliamentary procedure processes. These would have an impact on both the practice of law and doing business,” but their fate remains uncertain until the election period ends and a new parliamentary majority is established.

    The political situation has had, as Davidovski says, a negative impact on both society in general and on doing business in North Macedonia, “due to the great influence of politics and political parties in Macedonian society.”

    Furthermore, Davidovski reports that “many business sectors are experiencing downward trends overall, due to the pandemic, but the last couple of months have seen some increase in corporate profits.” He says that this change for the better is expected to continue, at least until the end of the year. “The most active sectors are the financial and pharmaceutical sectors, where there is visible growth. Still, this growth is not accompanied by growth in the real sector,” Davidovski reports. “Additionally, in the past few months, no major projects have been announced or implemented, again, due to the country being stuck in the election period,” Davidovski concludes.

  • North Macedonia: Preparations for the Electricity Crisis

    While trying to bounce back from the COVID-19 pandemic, the world is running headlong into an energy crisis, and North Macedonia will meet the same fate. The country is facing serious electricity shortages due to the rising growth of prices on the energy exchanges in Europe. This, in turn, disables the companies that trade in electricity to comply with the agreements signed with companies and institutions to whom they supply electricity on the free market. The disbalance in the demand and supply is then covered from the reserves of the transmission system operator (“TSO”) MEPSO, who is drawing electricity from the European network, thus accruing massive debt. Meanwhile, North Macedonia is trying to increase the domestic production of electricity, by activating the third block of REK Bitola, the country’s biggest producer of electricity and coal.

    On 9 November 2021, the Government of the Republic of North Macedonia (“Government”) declared a 30-day state of crisis in the energy sector. This will enable for budget funding to be injected in the energy companies to increase their liquidity and intervene with the import of electricity, and further mitigate the consequences of the crisis as much as possible. So far, restrictive measures are not envisioned. Even though electricity prices for households are not expected to rise by the end of the year, the Energy Regulatory Commission is debating on either completely removing or significantly lowering the profit margins for energy companies during the adoption of the next decision on electricity pricing. The rationale behind such decision is to act in solidarity in a state of crisis.

    Adopting Bylaws for the State of Crisis

    Towards the end of October, the Government adopted a decree on the manner of declaring a state of crisis in cases of electricity shortages[1] (“Decree“), repealing the previous such decree, in order to align the legislation with the Energy Law adopted in 2018. The Decree more concisely defines the procedure, measures, and criteria for declaring a state of crisis. There is a new responsibility added for the licensees for performing energy activities, who will now have to bear the financial burden for implementing the measures provided in the Decree.

    Certain criteria considered when determining whether a state of crisis should be declared include, among others, the production, transmission and distribution capacities of the system in North Macedonia, the status of the regional and international energy markets and their influence on the domestic market, as well as the available quantities from domestic production and the import of electricity.

    To create conditions for rational use of electricity in times of crisis, the Decree provides for the following measures:

    1. any measures determined in the plans for acting in crisis situations, prepared by the electricity market operator, TSO and the distribution system operator;
    2. limitation of electricity consumption;
    3. providing additional quantities of electricity, including balancing energy and active power reserve.

    The financial resources needed to implement these measures are provided from the licensees for performing energy activities themselves and the Budget of North Macedonia.

    During the implementation of the abovementioned measures, the electricity market is suspended for the consumers connected to the electricity transmission network, suppliers and traders who supply electricity on the territory of North Macedonia, and they act according to the instructions of the TSO. Electricity distribution system operators, suppliers and traders of electricity are not responsible for the damages that will occur because of the implementation of those measures.

    Five degrees of restrictive measures are envisioned, depending on the percentage of the lack of electricity. Based on these degrees, the following measures, in cooperation with local municipalities, can also be implemented:

    1. turning off all flashing billboard advertisements;
    2. reducing the lighting of streets, squares, and other buildings to a minimum safety level of lighting;
    3. limiting the lighting of the shop windows to a minimum safety level of lighting; and
    4. prohibiting the use of electricity for additional heating of business and office premises.

    [1] Decree on the Criteria and Conditions for Declaring a State of Crisis in Cases of Natural Disasters, Accidents and Disruptions of Electricity Markets, Manner of Electricity Supply in Crisis and Condition and Obligations of the Holders of Licenses for Performing Electricity Activities (246/2021)

    By Veton Qoku, Attorney at Law in cooperation with Karanovic & Partners

  • North Macedonia: Investment Support for Technological Industrial Development Zones

    The Minister of Finance and the Prime Minister of North Macedonia recently presented the Plan for Accelerated Economic Development (“Plan”), intended to boost the economic development in the country and provide recovery of the economy for the period between 2022 and 2026.

    The Plan envisages private sector investments of up to EUR 8 billion, as well as the creation of 156,000 new workplaces. The Plan puts the spotlight on several areas which are considered as a priority, including, among others, green economy, digitalization, innovation and technological development. The funds for accomplishing the purposes of the Plan would be obtained mainly through the Budget of North Macedonia, international financial institutions, private investors and commercial banks.

    Several financing mechanisms and instruments are envisioned for fulfilling the purposes of the Plan, which would provide easier access to capital. One of these financing mechanisms is the Strategic Green Investment Fund for Investment Support (“SGIF”) intended for the support of investments in Technological Industrial Development Zones (“TDIZ”). The SGIF targets both foreign and domestic investors, mainly focusing on medium and large companies, encouraging investments of up to EUR 750 million in the following four years. This would result in the creation of at least 15,000 new workplaces and would significantly increase the export activities.

    The decisions for what would be considered as investment projects would be adopted by a panel of experts. The government would participate only 10% in the SGIF, whereas the rest would be financed through private capital, mainly invested by domestic and foreign banks, intended for projects and investments in green infrastructure and technologies. Return of the financing would be done through leases, royalties and other manners, and the generated income would be geared towards the TDIZ and the investors.

    Currently, two large projects which will be financed through the SGIF are in the pipeline, and a sustainability study for the creation of a special technological green development zone, possibly in Gevgelija, is being prepared.

    The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

    By Veton Qoku, Attorney at Law in cooperation with Karanovic & Partners

  • North Macedonia: Strategy for a Renewable Energy Future – Too Ambitious or Ambitiously Realistic?

    The year 2020 proved to be positive for renewable energy in the EU. Data published by Eurostat shows an overall increase in the share of energy produced from renewable sources, and the share of renewable electricity exceeded that of electricity produced from fossil fuels.

    North Macedonia relies on fossil fuels, mostly coal, and hydropower. The data for 2020 also confirms this trend, as 63.4% of the energy was produced by thermal power plants. To date, 2020 could be known as the year in which electricity production from fossil fuels reached its historically lowest point: 1.02 million gigawatt-hours from TPPs in 2020, compared to a peak of 1.58 million gigawatt-hours in 2007. At the same time, the overall share of energy produced from renewable sources has been increasing over the years. Last year, renewable energy production in North Macedonia increased by 10.1%.

    That said, and bearing in mind the EU expectations, the Government of North Macedonia adopted the Energy Development Strategy 2020-2040. The strategy sets three different scenarios – reference, moderate transition, and green. The Government has recently confirmed that it plans to implement the most ambitious, green scenario. This scenario envisages the total phasing out of coal by 2040, and 45% of total energy production coming from renewable sources. It foresees phasing out coal by 2025, which would make North Macedonia the first country in the Western Balkans to set a concrete goal to eliminate coal power before 2030. According to the strategy, solar and wind power plants are also expected to be the fastest-growing technologies for electricity production.

    Along with other Western Balkans states, North Macedonia has signed the Sofia Declaration on the Green Agenda, which commits to pursuing the target of a carbon-neutral continent by 2050, along with the rest of the EU. Both the strategy and the Sofia Declaration set the goals quite high.

    At the moment, the statistics do not appear to be in favor of the government’s ambitious plan. The share of solar energy in total energy production is only 0.6%, the share of wind energy is 2.3%, and biogas stands at 1.3%. North Macedonia only has one 36.8-megawatt state-owned wind park in Bogdanci (planned to increase to 50 megawatts), with other privately-owned ones under construction. Surprisingly, the solar potential in North Macedonia is barely tapped. Additionally, electricity losses in the grid range from 14 to 16 percent of gross national electricity consumption, and practices such as electric heating have contributed to increasing energy costs for many households, on one hand, and alarming levels of pollution, on the other. On a separate note, North Macedonia (together with Croatia and Slovakia) has one of the highest shares of imported electricity. In 2019, the total annual production of electricity was 5,447 gigawatt-hours, with 2,297 gigawatt-hours being additionally imported.

    However, the latest tenders of state-owned energy production company ESM, in cooperation with the EBRD, are promising. In June 2021, PPP agreements were signed with companies from Turkey and Bulgaria for the construction of two solar 50-megawatt plants. Private greenfield projects are also on the rise.

    As part of the EU harmonization process, North Macedonia adopted the new Energy Law in May 2018, which harmonized the energy legislation with the EU Third Energy Package in the electricity and natural gas sector, as well as with the RES Directive. However, the legal framework is still incomplete, as further laws and bylaws need to be enacted. For the Strategy not to be deemed too ambitious, besides an appropriate legal base, professional personnel and a unified practice are also of crucial importance.

    Finally, some of the most recent news is that the Government has introduced a new “environmental” tax, which is expected to be used to support investments in renewable energy production (wind, solar, and gas plants), as well as to strengthen the state’s institutional and financial capacities. The government intends to collect an additional EUR 48 million from this tax, annually.

    All the above should also have a positive impact on regional economic growth. It is safe to say that renewable energy production will be the industry with the best growth potential in North Macedonia, for years to come.

    By Marija Filipovska, Partner, and Zlatko Kujundjiski, Attorney-at-law, CMS Skopje

    This Article was originally published in Issue 8.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Cytowski & Partners Advises Howitzer and Day One Capital on USD 500,000 Seed Round

    Cytowski & Partners has advised North Macedonian advertising technology company Howitzer on its USD 500,000 seed funding round with Hungary’s Day One Capital and angel investors Mergim Cahani and Matei Pavel. The firm also advised Day One Capital.

    According to Cytowski & Partners, Howitzer enables automated and one-click-away marketing on Reddit, allowing finding and targeting potential Reddit customers and their direct contact, resulting in a 40-45% average response rate.

    Day One Capital focuses on early-stage technology investments and collaborates with entrepreneurs and technology start-ups from Europe.

    “While traditional online ads are becoming more expensive and less effective due to ad fatigue and using blockers, Howitzer shows a fresh way to reach audiences in a personalized and authentic way at scale,” Day One Capital’s Principal Bernat Nacsa commented. “Together we aim to widen the capabilities of the platform and address further underutilized social networks, such as Twitter and Discord, making Howitzer a cross-platform powerhouse of direct outreach.”

    The Cytowski & Partners team consisted of Partner Tytus Cytowski and Associates Tomiwa Ogundipe, Kunal Kolhe, and Eresi Uche.

  • North Macedonia: Proposed Novelties in the Legislation Related to Cannabis for Medical Purposes

    In recent years, the cultivation of cannabis for medical purposes has been a “hot” topic in North Macedonia. In 2016, the country regulated the procedure for the cultivation and production of hemp and hemp extracts. Since then, in line with publicly available information, over 60 approvals for the cultivation of cannabis for medical purposes have been issued.

    To further regulate this area, the Government of North Macedonia (“Government”) had prepared a new draft Law on Narcotic Drugs and Psychotropic Substances (“Draft Law”).

    As one of the most important novelties of the Draft Law is the possibility to export dried flowers obtained by cultivating cannabis for medical purposes. This will allow cannabis cultivators to place the already produced quantities of dry herbal products on the world market, provided that international conventions and legislation governing the matter are respected.

    The Draft Law also improves the efficiency of the procedure for issuance of an approval for cultivation of cannabis and envisages the establishment of a new state body – Agency for Cannabis for Medical and Scientific Purposes. The main purpose of this new body will be to conduct the administrative and expert works related to the control of cannabis cultivation, extraction, and production of cannabis and products containing cannabis for medical and scientific purposes.

    It is expected that the regular parliamentary procedure for the adoption of the Draft Law will be conducted soon. The adoption of the Draft Law will open additional business opportunities related to the cultivation, production, and trade of cannabis for medical purposes in North Macedonia, making the country an even more desired destination for investments in this sector.

    The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

    By Veton Qoku, Independent Attorney at Law in cooperation with Karanovic & Partners

  • Polenak and DDK Advise on Sale of Singular to Flutter Entertainment

    Polenak, working with DWF, has advised Singular and its owners on the sale of the company to Flutter Entertainment. Debarliev, Dameski & Kelesoska, working with Arthur Cox, advised Flutter Entertainment.

    Flutter Entertainment is a Dublin-headquartered sports betting, gaming, and entertainment holding company, operating brands such as Paddy Power, Betfair, and PokerStars.

    Singular is a business-to-business software development company with offices in North Macedonia, Georgia, and Malta.

    DDK’s team included Managing Partner Emilija Kelesoska Sholjakovska, Partner Jasmina Ilieva Jovanovic, and Senior Associate Ivo Ilievski.

  • The Buzz in North Macedonia: Interview with Gjorgji Georgievski of ODI Law

    With COVID-19 restrictions to kick in only after the municipal elections scheduled for October 17, the country is in for a long winter, according to ODI Law Partner Gjorgji Georgievski, despite the business sector doing well.

    He says the pandemic restrictions “were lifted in June, last year, and we had minor restrictions till April 2021. He reports that stricter measures will come into force after the local elections scheduled for October 17. “The Ministry of Health announced that come October there will be restrictions. I assume the timing is related to the end of the elections. The numbers are increasing, we have the worst death rate in Europe (or close to). It’s not a pleasant situation health-wise.”

    Business, on the other hand, has been good. “It’s been great,” Georgievski says. “For the past 12 months, we’ve had a large number of M&A transactions, including this summer, and we’re also supporting clients on compliance with the new data protection regulations that came into force on August 24. We got an additional six-month extension until February 2022 – where the authority will not be imposing fines just yet – but there’s a lot of work to be done.”

    Georgievski reports that energy, real estate, banking, and tech have seen a lot of activity. In the energy sector, “a number of projects are under development or will be developed shortly.” The real estate market has grown significantly compared to 2020: “real estate transactions saw a major increase – with the prices also going up, based on the price of materials and increased demand – for both commercial and residential properties.” The banks are doing well, as are insurance companies, Georgievski says, noting that Austrian GRAWE consolidated “with the acquisition of two smaller players with great positions on the market.” And investment funds are doing great, he says, “because of the low returns on bank deposits and small interest rates.” Finally, he says the tech sector is buzzing. “It’s been very bubbly, with a number of companies branching out to Macedonia. The sector is developing at a good rate and successfully: we had some M&A transactions last year, and more are in the pipeline. IT growth is the main factor buoying the Macedonian economy – other sectors may be larger, but the growth rate in IT is something else.” 

    Other sectors have not fared as well. On infrastructure, despite the announced completion of construction of new motorways and a railway corridor linking Macedonia and Bulgaria, “it’s hard to know when these projects will start moving,” Georgievski says. And hospitality is suffering, he notes: “they had the period with the curfew, restricted business hours – but now, the large percentage of the public that is unvaccinated will be unable to visit these establishments. Hospitality has been suffering since March 2020, and they may have a harder time of it this year.” 

    On legal updates, Georgievski mentions the legislation on strategic investments: “the country’s strategy is to create a favorable environment for foreign investors. We’ve seen many companies applying and receiving state aid, but more importantly, they receive full administrative support – on land issues and project permits, among others. There is a multi-sector group in the Government, which speeds up the process significantly.” 

    He mentions other amendments in the pipeline, in particular to the law regulating cannabis, “allowing small Macedonian growers to sell their crop abroad. While medicinal use of cannabis is already legal, there is also talk of legalizing recreational use further down the line.” Another new law that should have a significant impact is the law on the liberalization of payment services, implementing EU directives on electronic money. “This should allow third-party players like alternative lending providers to consider the processing of payments and create competition for a section of the banking sector – with the banks themselves also investing in their own platforms and products.” 

    Finally, Georgievski says he’s personally looking forward to “the 5G frequency tender, already announced by the regulator. There will be a bidding war.”