Category: Moldova

This Legal Monitoring Report includes the latest and most relevant amendments to the national legislation for forward-looking businesses. This month, several amendments were made to the Law on State Aid, Law on Consumer Protection, Law of Protection of Trade Secrets, as well as to the Customs Code and Law on Energy. The Report also outlines changes to the IT parks activity, as well as recent adjustments to the minimum and average salary in the economy for 2024.

Relevant legislative provisions in connection with the State of Exceptional Situation

Decision(s) issued in relation to the Exceptional Situation

By Decision No. 274 dated 21 September 2023, Parliament decided to extend the emergency state on the entire territory of the Republic of Moldova for a period of 60 days, starting on 2 October 2023.

I Commercial and Corporate 

Law(s):

• Amendments to Taxi Companies’ E-management Platforms

The amendments bring improvements to the regulation of the activity of e-platforms for the management of road transport by taxi. The amendments regulate, among other measures, the prohibition of the use of e-management platforms by road transport operators that are not registered in the Republic of Moldova.

Additionally, road transport operators providing taxi services may connect to the e-management platforms only for transport units holding an excerpt from the State Transport Register.

• Amendments to the Contravention Code on Taxi Companies’ E-management Platforms

The use of e-management systems on the territory of the Republic of Moldova by legal entities not registered in the Republic of Moldova is punishable by a fine of up to 500 conventional units.

The same sanction applies to the use of e-management systems in breach of the legal rules, or late or intentionally erroneous submission of the information on the list of vehicles and drivers who have operated at least one taxi journey via the electronic systems.

Draft law(s):

• VAT Deductions on the Use of the Business Payment Card

The taxable entity is entitled to deduct the amount of VAT paid on goods and services if it provides tax receipts issued by the cash register and control equipment connected to the automated information system “Electronic sales monitoring”.

The deduction will be valid for purchases, the value of which in each voucher does not exceed MDL 2,000 including VAT, and which does not exceed more than MDL 10,000 for a tax period, provided that the payments are made by means of a business payment card.

• VAT on Returned Local Goods

Local goods previously exported using the postal services and returned within 3 months of the export date in the same condition are exempt from VAT without the right to deduct. If the VAT on these goods has been refunded when the goods were exported, the taxpayer is obliged to calculate and declare the amount of VAT for the month in which the goods were returned.

• Harmonization of Guidelines on Alcoholic Beverage Production Industry

The draft law aims at adapting the national legislation in the field of alcoholic production to the EU acquis. The amendments mainly concern the transition to the EU classification of alcoholic beverages produced in Moldova.

At the same time, alcoholic beverages produced and marketed under the category “alcoholic beverages” and “hard alcoholic beverages” shall be assigned to the category “spirits”.

Moreover, the draft law seeks to safeguard the geographical traits of spirit drinks and regulate the use of ethyl alcohol and agricultural distillates in the production of alcoholic beverages.

II. Environment

Draft law(s):

– Obligation to Keep Records of the Use of Plant Protection Products and Fertilizers

The draft law aims to impose requirements on agricultural producers conducting treatments with plant protection products and fertilizers, and on legal entities offering services in the plant protection sector, to record the use of such in the Plant Protection Product and Fertilizer Use Registers.

IV. Digitalization

Law(s): 

• Digital Transformation Strategy of the Republic of Moldova

The document sets out Moldova’s digital transformation priorities for 2023-2030. Focusing on priorities for cooperation with the business sector, the state aims at:

• Developing favorable conditions for the ICT sector and the start-up community;
• Increasing the number of joint projects between private and state institutions;
• Attracting digital business and foreign investment to Moldova;
• Attracting qualified IT specialists and investors from the European Union to the virtual IT park.
• Promotion of Entrepreneurship and Increasing Competitiveness

The program outlines key actions to foster the entrepreneurial framework and aligns the state’s priorities with the objectives detailed in the European Union’s 2030 Agenda for Sustainable Development. The document aims at improving the regulatory framework for the business environment, facilitating access to finance, and increasing the competitiveness of local products and services, including on foreign markets, as well as promoting entrepreneurial culture.  

Draft law(s): 

• Digitisation of Tax Control

The draft law aims to digitise tax control procedure. Thus, the State Tax Service shall not require the submission of paper documents provided that the necessary documents are sufficient and can be submitted in the form of an electronic document, or scanned copies certified by qualified electronic signature. 

IV. Other amendments that may affect the Company

Draft law(s): 

• Sale of Wine Produces from Own Grapes in Guesthouses 

According to the draft law, in guesthouses, tourist villas, rural houses and holiday villages providing catering services, wine produced from own grapes may be sold at retail or served to consumers provided that the requirements on the conditions for the production and quality of the wines are met. 

By Domnica Bejan, Junior Associate, and Laurentiu Racu, Legal Assistant

As of October 22, 2023, a number of significant legal amendments come into effect regarding the relationships between shareholders and founders of commercial companies in the Republic of Moldova. These amendments introduce essential reforms to the Limited Liability Company Law No. 135/2007 and aim to enhance the business environment, facilitate investments, and strengthen shareholder relationships.

These legislative amendments represent a significant step in the reform of the relationships between shareholders and founders of commercial companies in the Republic of Moldova, as well as alignment with international best practices in the regulation of commercial entities and the standards of the European Model Companies Act.

This information outlines the most significant legal changes:

Shareholders’ Agreement Conclusion 

One of the major changes involves the introduction of a new provision regarding the shareholders’ agreement. This provision allows shareholders to enter into agreements that regulate the exercise of rights within the company, including voting on company decisions and the transfer of ownership interests, the assumption of obligations such as voting in a specific manner, the coordinated management of the company’s actions, or abstaining from certain actions. The content of the shareholder’s agreement is typically confidential. The company will be informed about the existence of a shareholders’ agreement and its most relevant provisions. Interested parties may notify the state registration authority in order to enable  legal instruments such as buy-sell options, the drag-along and tag-along options, and the contractual pre-emption right.

Purpose of the Company Identification

According to the amendments, in addition to the goal of profit and increasing the company’s value, companies can now declare non-lucrative purposes, such as those related to social entrepreneurship.

Squeeze Out Possibility

The law has been supplemented with Article 47¹, which allows minority shareholders to withdraw from the company without the consent of the majority, and without being obliged to sell their ownership interests.

Regulations on Abandoning the Proportionality Rule 

The amendments allow shareholders to set in the Articles of Association a different ratio between the value of the ownership interest (i.e. share) and the associated rights. This change allows for the diversification of contributions from each shareholder and encourages investors with limited financial resources to participate in commercial companies.

Incentive Capital

The concept of “incentive capital” for employees has been introduced, allowing them to participate in the financial benefits of the company or become fully-fledged shareholders. This measure aims to motivate employees with outstanding performance and increase productivity.

Simplification of Company Formation and Elimination of the Maximum Number of Shareholders

The incorporation procedure for companies has been simplified by establishing the Articles of Association as the sole founding document. Additionally, the maximum number of shareholders for limited liability companies has been eliminated, providing more flexibility in the ownership structure.

Right to Choose Statutory Changes

Shareholders now have the right to decide which changes to the company’s data will be included in the Articles of Association and which will only become binding through a general meeting of shareholders registered in the State Register of Legal Entities.

Changes in Assets and Share Capital

The legal changes include acceptance of contribution to the share capital with intellectual property rights, the conversion of a pecuniary obligation into a contribution to the share capital, and clarification of the procedure for increasing the share capital through additional contributions.

Liberalization of Certain Rules 

Shareholders now have the option to choose alternative solutions regarding proportionality between the value of the ownership interest (i.e. share) and associated rights, distribution of net profit, intermediate payment of dividends, and other aspects.

Shareholder Rights and Good Faith Exercise of Rights

Shareholders’ access to information and documentation has been expanded, and rules regarding expulsion from the company and shareholder liability have been adjusted to ensure fair treatment. Another significant change concerns Article 11 of Law No. 135/2007, which now includes a general provision regarding the exercise of rights in good faith and the assurance of equal treatment among shareholders.

The most important legal amendments will be addressed in separate articles by ACI Partners.

By Nicolina Turcan, Associate, ACI Partners

Amendments to the law on gas, the corporate legal framework, as well as proposed amendments to the tax code all indicate the existence of a vibrant legislative landscape in Moldova, according to Dolea & Co Partner Sorin Dolea. To top it all off, Moldova also recently registered a financial market milestone: its first corporate bond transaction.

“The recent amendments in Moldova’s gas law are intriguing from two perspectives,” Dolea begins. “Firstly, they encourage the storage of natural gas, which is a strategic move towards energy security. However, there are some controversial provisions, such as the ‘exit fee’ which discourages competition in the gas supply market. Such provisions have sparked debates within the industry,” he explains.

Moving on to specific corporate law matters, Dolea shares more insights into the amendments regarding joint-stock companies and limited liability companies. “The amendments to the law on joint-stock companies and LLCs aim to establish new rules governing relationships between shareholders,” he says. “One noteworthy addition is the specific provision allowing arbitration agreements to be concluded between shareholders, promoting arbitration as a means of resolving corporate disputes. These changes are significant for the business community seeking efficient dispute resolution mechanisms,” he explains. Moreover, he stresses that “the new law on LLCs brings fundamental changes, especially with respect to share structures and distribution of dividends.”

In addition, Dolea also mentions a set of proposed changes to the tax code. “The new tax code, currently in draft form, represents a shift in the approach of Moldovan legislators towards tax law,” he reports. “While I won’t delve into specific details, these changes are significant and can have wide-ranging implications for individuals and businesses alike.”

Furthermore, Dolea mentions that Moldova recently saw a milestone: its first-ever transaction involving corporate bonds on the Moldova Stock Exchange. “This was a historic moment for Moldova’s financial market,” he says. “This development signals a growing diversification of investment opportunities in the country’s markets.” 

Finally, speaking of interesting market shake-ups, Dolea turns his attention to the energy sector. “Moldova is undergoing a major transformation, particularly in the realm of renewable energy,” he says. “Although the market tends to liberalize, Moldova still faces a number of challenges throughout this process. One of them is the current ban on the issuance of gas supply and trading licenses, which keeps any new potential gas suppliers and traders away from Moldova. However, the process of transitioning from Eastern to Western energy sources is irreversible, and this is essential for energy security and sustainability.”

In conclusion, Dolea shares that he feels the Moldovan “business community has shown remarkable resilience and adaptability. While these legal changes would once have been considered ‘force majeure,’ they are becoming part of the new normal.”

On 26 May 2023 the Parliament of Moldova passed Law No.°126, which among other things implements certain novelties to the Moldovan Law on Notarial Procedure. Those relating to electronic notarisation will enter into force when the technical conditions referred to in the law are in place, but not later than 23 June 2026.

Once entered into force, a notarial deed (act) perfected by electronic means will also be of public authority (i.e. similar to paper-based deeds), will be presumed to be legal and true, will hold probative force and, where applicable in accordance with the law (e.g. mortgage with enforcement formula), will be immediately enforceable. The notary’s qualified electronic signature affixed to an electronic notarial deed (act) will replace the notary’s stamp and handwritten signature.

Issuance of notarial acts by remote communication will also be possible subject to the following conditions:

• all concerned participants agree;
• concomitant e-presence of all participants (i.e. parties to a legal document and the notary); and
• the presence of an uninterrupted visual and audio feed.

Under the new legislation, a notary may refuse to perfect electronic notarisation if they have doubts about the identity of the applicant or participants, if they believe that the parties’ intention requires their physical presence, or if a risk as to the nature, purpose or value of the transaction is identified. The notary will identify participants through electronic means based on the currently existing legislation (Law No. 124/2022).

Certain types of acts will be excluded from the electronic notarisation procedure, such as certification that a person is alive, appointment (in cases set by law) of a custodian or administrator of the succession estate, securing evidence, authentication of wills, receiving handwritten wills and other paper documents for storage, acts of protest of bills of exchange and of cheques in case of non-payment.

There are still some things left to be implemented, such as technical matters and registers, that require investments from the authorities, notaries and even participants, not to mention changes to the legislation on simpler identification of foreigners, including companies. In addition, the centuries long perception of notaries that in writing is better needs to be overcome. But despite these hurdles, once implemented electronic notarisation will stimulate transactions and help position Moldova as an advanced jurisdiction in the field. Inevitably there will be many interpretations on how to implement the new procedure in practice, which will be of interest to stakeholders.

By Andrian Guzun, Attorney at Law, Schoenherr

Moldova’s legislative landscape is undergoing a period of significant transformation driven by the government’s efforts to align with EU acquis, with key developments including amendments to limited liability company laws, the introduction of contactless business legislation, data protection changes, and comprehensive judicial reforms, according to Stratulat Albulescu Partner Sabina Cerbu.

“Moldova’s legislative process has been intense, as of late, with the government making concerted efforts to align its regulations with EU standards,” Cerbu begins. “The recent regional conflicts have heightened the urgency to make our market appealing to investors. To that end, we are implementing measures to streamline business processes, encouraging digital and contactless business operations,” she explains.

One of the significant legislative changes Cerbu mentions relates to limited liability companies and could change the way these do business in a major fashion. “The amendments to the LLC law, set to take effect in 2024, introduce several key changes. First and foremost, they grant greater flexibility in profit distribution among founders, a welcomed development for the business community,” she stresses. “Minority shareholders, those with less than 50% ownership, can now withdraw without the consent of other associates, while the new law allows for disproportionate distribution, which would facilitate attracting investments without giving up voting rights.” Additionally, Cerbu points out that, for the first time, the Moldovan legislative landscape “now regulates shareholders’ agreements, providing more freedom to founders in managing their businesses. The introduction of ‘phantom stock agreements’ is also notable, providing innovative tools to incentivize loyal employees.”

Moreover, Cerbu reports that a new “contactless business” legislation, enacted in the summer, “primarily addresses KYC procedures. There have been substantial discussions, particularly concerning its implementation in the banking sector, to ensure customer access to this instrument,” she reports. Also this summer, Cerbu says they had the chance to witness how the recent changes related to “data protection and the transfer of personal data abroad” are enforced in practice. “These changes have simplified the procedure for data transfer, aligning with international standards. However, awareness of these changes remains a challenge, and there is a need for education and compliance efforts,” she explains.

All of these changes, according to Cerbu, play alongside the wider idea of comprehensive judicial reform in the country. This “judicial reform package encompasses civil and criminal proceedings, aligning Moldova with EU standards and anti-corruption policies. Compliance with these reforms is essential as Moldova works toward EU accession.”

Finally, Cerbu reports that the renewable energy market is a hot topic in Moldova. “Investors are eager to understand the conditions and facilities offered by the government, as well as the regulatory framework governing this sector. The legal landscape is evolving, and it’s an exciting time for those looking to invest in renewable energy in Moldova,” she concludes.

One of the main recent buzzwords in Moldova is AML compliance at the convergence of securities and banking which strictly follows the recommendations of the report from the fifth evaluation round of the MONEYVAL Committee of the Council of Europe, in order to transpose the provisions of Directive 2018/843 of the European Parliament and of the Council of May 30, 2018, as well as updated provisions of the Financial Action Task Force Recommendations.

On July 1, 2023 entered into force the updated internal legislative framework in the field of preventing and combating money laundering by introducing, completing and clarifying the existing legal provisions on: beneficial owner; politically exposed persons (PEPs); virtual currency, virtual currency service provider activity, legal construction and providers of service for trusts, companies and other entities or legal constructions; application of precautionary measures regarding customers based on electronic identification; new subjects of AML compliance – bailiffs, authorized administrators, virtual currency providers and crowdfunding service providers; new methods of control – unannounced check and planned check.

Firstly, including the beneficial owner in AML compliance is essential, due to the reason that it helps to identify the individuals who ultimately own or control a legal entity or financial transaction and also, by understanding the beneficial owner, financial institutions and regulatory authorities can assess the risk associated with a particular transaction or relationship. Further, by subjecting PEPs to enhanced due diligence and monitoring, financial institutions can mitigate the risks associated with their involvement in illicit financial activities. As well, including fiduciaries as a subject to AML regulations is a pivotal point, as they must establish robust compliance programs to understand the source of funds and the purpose of financial transactions.

Secondly, including virtual currency and virtual currency provider activity in AML compliance is crucial due to the inherent characteristics of these digital assets. Accordingly, many regulatory and supervising authorities of other EU member states (e.g central banks and national agencies supervising the financial sector) do not recognize virtual currencies generated by “blockchain” technologies as a legitimate payment instrument, and the reason is that virtual currencies can be used for anonymous transactions, allowing individual to conceal their identities and move funds across borders without traditional banking oversight.

Furthermore, the new legal amendments enlarge customer precautions, resulting from the fact, that it is possible to identify and verify customers through electronic means, through the lens of the latest technical developments that would allow secure remote electronic identification. Also, a new requirement was introduced for document and information retention, necessary to comply with customer and beneficial owner safeguards, including, if available, information obtained through electronic identification means, relevant trust services or any other regulated secure, remote or electronic identification process, recognized, approved or accepted by the national authorities authorized by law, including copies of identification documents, archive of accounts and primary documents, business correspondence, results of analyses and research carried out regarding the identification of complex and unusual transactions, for a period of five years from the termination of business relationship or from the date of an occasional transaction.

The State Tax Service has a new competence to create, manage and update the Register of safe deposit boxes of individuals and legal entities. This competence was attributed due to the need for immediate access by the AML authority and other authorities to the information regarding the identity of the owners of the value boxes. Moreover, the reporting entities have the obligation to make a report of results of the evaluation in their own field of activity of the risks of money laundering and financing of terrorism, approved by the management person responsible for ensuring the compliance of policies and procedures with legal requirements regarding the prevention and combating of money laundering and terrorist financing within the reporting entity.

Naturally, the alignment of the Moldovan AML Compliance to the EU standards ensures the necessary premises for the inclusion of the Republic of Moldova in the single euro payments area, according to the criteria established by the European Payments Council.

By Vlad Roibu, Senior Associate, Constantin Cretu, Junior Associate, Gladei & Partners

The Legal Monitoring Report deals with amendments to the Law on Joint Stock Companies and the Compulsory Licensing Mechanism, ratification of the Agreement on the Transportation of Goods, and approval of Legal Framework on Cuber Security, the FISCALIS Agreement and Ecolabel Regulations.

RELEVANT LEGISLATIVE PROVISIONS IN CONNECTION WITH THE STATE OF EXCEPTIONAL SITUATION

Decision(s) issued in relation to the Exceptional Situation

By Decision No. 133 dated 26 May 2023, the Parliament extended the state of emergency on the entire territory of the Republic of Moldova for a period of 60 days, starting on 4 June 2023.

 

LEGAL AMENDMENTS CHANGING GENERAL ASPECTS OF THE BUSINESS

This Section includes information on legal acts implementing new rules or amendments, published in the Official Journal of the Republic of Moldova, referring to corporate, employment, and social, tax and customs, environment, etc matters. This Section shall also include draft legal acts of any direct or indirect relevance to the Company; as well as the temporary legislative measures approved pursuant to the state of emergency in the Republic of Moldova.

Commercial and Corporate

Law(s):

Amendments to the Law on Joint Stock Companies 

The purpose of the amendments is to supplement the law with a special provision regulating the work of the company’s supervisory bodies, which include the audit committee and the supervisory board.  

In public interest companies, the establishment of an audit committee is mandatory, which shall act in accordance with the provisions of the law, the company’s articles of association, and the rules of procedure of the company’s audit committee.

Improving the Compulsory Licensing Mechanism

The law provides for additional cases in which the compulsory patent license may be granted. Thus, the court of law may grant the compulsory patent license on the ground of failure to exploit or insufficient exploitation of the patent, to serve the public interest, for the purpose of redressing an anti-competitive practice, or in case of inventions in the field of semiconductor technology and for the purpose of exploiting dependent patents and patents for plant varieties.  

Draft law(s):

Amendment of the Law on Internal Trade

The trader will purchase and ensure the presentation on the shelf of food products from the short food chain at a minimum of 50% of the linear length of the commercial shelf. 

The draft law also provides for the publication on the trader’s website of the available local products in a separate section entitled “Local Product – Made in Moldova”.

 

Fines for Infringements in the Activity of Legal Entities

Legal entities that have obtained income by incorrectly reflecting production costs, the selling price of goods, the volume of construction work carried out and the charges for services performed will be subject to a fine of up to 20% of the equivalent of such income.

Legal entities that have applied commercial surcharge for socially important products that exceed the legally established limit will also be subject to a fine.

 

Employment and Social

Draft law(s):

Amendments to the Labor Code 

The draft law provides for the right and conditions to paternity leave, ensuring the father’s active participation in the upbringing of the adopted child. The father of the newborn, as well as of the adopted child will be entitled to 15 calendar days of paternity leave.

The proposed law further regulates the leave conditions for employees who adopted children or were granted family’s guardianship or custody.

 

Tax and Customs

Law(s):

Ratification of the Agreement on the Transportation of Goods 

The Agreement aims at overcoming transport blockages faced by Moldovan road transport operators, by using alternative routes for transporting Moldovan goods, in particular agricultural products, within the territory of EU states.

Approval of FISCALIS Agreement 

Under this Agreement, the Republic of Moldova benefits from support to improve the functioning of the internal market, promote competitiveness and fair competition. The primary aim is to protect the financial and economic interests of Signatory States, including against tax fraud and tax evasion.

 

Draft law(s):

Amendments to the Tax Code

The 18% tax rate of taxable income will be established for banking and non-banking legal entities for the period 2023-2025. It is also proposed to exclude the provision which requires banks, savings and loan associations and issuers of corporate securities to withhold a 7% on interest paid to resident individuals.

VAT Reimbursement Requirements

The amount of deducted VAT that has accrued on the accounts for at least three years will be reimbursed to the settlement account of the legal entity that requested the refund.

The VAT refund will be processed within 15 days of the refund application date, and within 30 days after the application submission date for taxpayers who filed a disagreement against the control act.

 

Environment

Law(s):

Approval of the Ecolabel Regulation

 The Regulation aims at establishing a voluntary eco-labelling scheme, ensuring the promotion of products and services with a reduced environmental impact compared to other products or services in the same category. The Regulation provides for requirements for certification bodies and the procedure for verifying the conformity of products and services.

Draft law(s):

Environmental Pollution Charges

The draft law sets pollution charges for certain categories of packaging waste that were not previously charged, such as composite packaging. At the same time, the draft law provides for the exemption of up to 100% of the environmental pollution charge for those economic agents that reach the collection and recovery targets set out in Appendix No. 2 of Government Decision 561/2020.

 

Digitalization

Law(s):

Legal Framework on Cyber Security 

The law aims at establishing a uniform minimum level of security for networks and information systems used in the delivery of essential services by public and private sector legal entities.

The law also focuses on creating risk and vulnerability management practices in both sectors to ensure interoperability in crisis management. The legal provisions of the Cyber Security law will enter into force on 1 January 2025.

 

OTHER AMENDMENTS THAT MAY AFFECT THE COMPANY

Law(s):

Regulation on Requirements for the Installation of Vehicles Filling Stations 

The installation standards for all new and old motor vehicle filling stations with primary petroleum products, liquefied petroleum gases, and compressed natural gas are established by the Government Decision No. 259 dated 3 May 2023. 

Any economic agent who designs, builds, assembles, and operates refuelling stations for motor vehicles shall adhere to the Regulation, independent of ownership or organizational structure.

 

Disclaimer:

The information contained in this Report is provided for informational purposes only and should not be considered as a legal advice on any matter. Though we have exercised our best endeavours to identify and present you with up-to-date and relevant details on the respective matters, the information contained herein, at any time, shall not be considered or construed as comprehensive or completely updated. Do not act or refrain from acting upon this information without seeking professional legal counsel. The content of this Report is based solely on the information sourced from publicly available sources and does not cover tax or accounting matters. Other than presenting this information, we will not be expected to investigate or conduct appraisal and/or verify continuing validity and accuracy of the respective information.

 By ACI Partners Legal Team

Nicoara: First, congratulations on winning the Deal of the Year award in Moldova!

Crasnobaev: Thank you! I am delighted that our successful collaboration has been recognized by this fascinating award.

Nicoara: Tell us a bit about CET-Nord and its operations.

Crasnobaev: The Joint Stock Company CET-Nord is an enterprise with full state capital and represents an entity of public interest at the national level. The company is also the largest supplier of thermal energy and produces electricity in cogeneration in the north of the Republic of Moldova, providing approximately 65% of the population of the city of Balti with thermal energy. It should be noted that JSC CET-Nord is the first thermal energy unit in the Republic of Moldova that has built and put into operation a cogeneration station with internal combustion engines in the country.

Nicoara: The winning deal involved an EBRD Loan to CET-Nord. What were the specifics of the deal that you can share?

Crasnobaev: On December 24, 2021, the European Bank for Reconstruction and Development (EBRD) concluded a loan agreement with the Republic of Moldova for the financing of Phase 2 of the Balti District Heating project by granting a EUR 15 million loan.

In order to achieve the effectiveness conditions and those preceding the disbursement of financial means within the Balti District Heating project, on March 30, 2022, JSC CET-Nord initiated the procedure for selecting a law firm with experience in providing legal services on the territory of the Republic of Moldova – having the obligation to prepare and submit to the EBRD a legal opinion confirming that the Action Plan developed by to the Project Entity included all the necessary legal steps to obtain the release of the JSC CET-Nord accounts under seizure and the removal of any restrictions on these accounts that had been applied in relation to the historical natural gas debt, as well as the clarification of any other matters that the EBRD may reasonably request.

After the selection of the Gladei & Partners law firm, as well based on the legal opinion delivered to the bank by your team, on July 28, 2022, JSC CET-Nord managed to pay the historical debt to the natural gas supplier, thanks to the component for the refinancing of the historical debt offered by the EBRD.

Nicoara: What is the financing intended for?

Crasnobaev: The EUR 15 million investment represents an EBRD loan of which EUR 8.5 million were allocated for an investment component and the remaining EUR 5.5 million for the mentioned refinancing component of the historical debt towards the natural gas supplier.

The main investment component of the Balti District Heating project, Phase 2, consists of the installation of individual thermal points (ITP) in 166 housing blocks and the construction of thermal networks with horizontal distribution in 296 housing blocks. In total, it is estimated that about two thirds of the consumers in the Balti municipality will benefit from these services.

Other investment components are intended to optimize operational costs, automated control, and monitoring, increase the operating life of machinery and equipment, as well as reduce thermal energy losses through: (1) construction of a thermal energy accumulator; (2) modernization of water treatment facilities within the Chemical Section; (3) implementation of the SCADA system for the distribution of the thermal agent and the provision of the thermohydraulic modeling software.

Nicoara: What were the most complicated aspects of the deal?

Crasnobaev: We could consider the refinancing component of the historical debt towards the natural gas supplier and its payment as the most complicated phase of the deal since this step was preceded by a complex process related to the conclusion with the creditor of an agreement transaction on the execution conditions. The aim was to obtain the necessary guarantees in order to cancel all the insurance measures applied to the movable and immovable assets and the bank accounts of JSC CET-Nord. At the same time, a goal was to obtain guarantees that no late interest or penalties would be calculated in connection with the settlement of the historical debt formed according to the executive document in the foreclosure procedure.

Nicoara: And, in contrast, what did you feel ran particularly smoothly?

Crasnobaev: Thanks to a successful collaboration between the Gladei & Partners law office, JSC CET-Nord, and the EBRD, the Balti District Heating project successfully entered into effect. At the same time, the procedure for the disbursement of financial means for the refinancing of the historical debt conditioned the avoidance of the repeated application of seizures and the blocking of the company’s bank accounts.

The payment of the historical debt to the gas supplier allowed the company to choose its own vector of development and to adapt its services according to international standards and the requirements of Balti municipality consumers. 

Nicoara: What’s next for CET-Nord, once this project is concluded?

Crasnobaev: We will continue to focus on delivering quality services, rehabilitating the domestic hot water supply service, and attracting new consumers by offering modern heating solutions, with the installation of individual thermal points.

We believe that, with the increase in thermal load, production costs and tariffs will decrease and, by ensuring the competitiveness of the centralized heating service, we will be able to develop an efficient, comfortable, safe, and ecological heating system. 

This article was originally published in Issue 10.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here. 

There is much optimism in Moldova, following the country being awarded EU candidate status, the adoption of a comprehensive digitalization package, and the investments in IT and energy driving the economy forward, according to Gladei & Partners Partner Iulian Pasatii.

“The recent European Political Community Summit is keeping everyone abuzz,” Pasatii begins. “With Moldova finally getting a candidate status, the entire country is feeling a strong pro-EU vibe. This has resonated with the markets as well, and we have seen a stunning increase of investor interest and appetite flowing into Moldova.” According to him, “swaths of interesting M&A projects are in the pipeline across all sectors which only spells excitement for the future.”

Moreover, Pasatii reports that the country has recently seen its parliament adopt the “Digitalization 2.0 package, a comprehensive all-out reform that seeks to push Moldova into its next evolutionary stage by overhauling a dozen legislative acts and laws. The package primarily aims to improve the legal framework from a purely digital perspective, introducing many improvements to the e-commerce, digital filings, and data protection fields”, Pasatii outlines. “Right now, it is possible to set up a company in Moldova without ever having to set foot in it,” he says, quickly adding that “this, of course, should not be a reason not to visit – it really is a beautiful country!”

Additionally, the Digitalization 2.0 package has, as Pasatii puts it, finally harmonized the Moldovan legal framework to that of the EU when it comes to an important area – the GDPR, particularly from the data processors’ angle. “Previously, many businesses have expressed concerns over the fact that Moldova had not fully harmonized with the GDPR, a crucial data protection framework. However, with the package in place, we are finally fully aligned,” he says. “Businesses can finally rest assured knowing that, for example, data processors and subprocessors are treated uniformly in Moldova and the EU. With this gap finally being bridged, we are ready to take the next step in our economic development,” Pasatii explains. “Following the pandemic and the war in Ukraine, the economy has taken a bit of a downturn, but things are finally looking up.”

Still, Pasatii does stress that the reverberations of the pandemic are still being felt. “Some of the pandemic-induced hardships are still around – and the economy feels it – but the most important thing here is that there is optimism, finally,” he shares. “We are on a strong growth pattern and, with the ever-growing number of helpful investments and grants from the country’s institutional partners, there is reason to remain hopeful.”

Finally, Pasatii shares his take on the main business sectors that are driving this market optimism forward. “Aside from the traditionally strong performing sectors – real estate and agriculture – we have recently witnessed a strong uptick in activity in the IT sector as well as the energy sector,” he says. “Many tech companies have started setting up local subsidiaries and representative offices in Moldova recently, and the effects are being felt almost daily. Also, the energy sector has been pretty fruitful lately – following the energy crisis of last year, things are finally looking up and there are quite a few investments that stand to revamp the landscape,” Pasatii concludes.

Recently, a series of substantial developments in the data protection area and several eloquent guidelines have been operated and published by the Moldovan Personal Data Protection Authority (PDPA). Below is an overview of the most important matters to be considered both by data controllers and data processors operating on the territory of the Republic of Moldova.

On 10 January 2022, a new law amending the Personal Data Protection Law No. 133/2011 (PDP Law) has been enacted, aligning the PDP Law to the provisions of the European Union’s General Data Protection Regulation (GDPR).

Particularly, a new legal regime has been introduced for the cross-border transmission of personal data, allowing a free movement of data between Moldova, the EEA states and the countries ensuring an adequate level of personal data protection, as per the list of countries approved by PDPA. This list currently comprises Andorra, Argentina, Canada, the Faroe Islands, Guernsey, the State of Israel, the Isle of Man, Japan, Jersey, New Zealand, the Republic of Korea, Switzerland, Uruguay, and the United Kingdom of Great Britain and Northern Ireland.

A pivotal case comes out when personal data is transmitted to a country outside of the list of EEA states or the list of countries approved by PDPA as complying with the adequacy criteria. In this case, data controllers shall have a legal basis for such transfers, either by having as a ground a legal exception (inter alia if such processing is carried out according to a treaty Moldova and the destination country are parties of; based on data subject’s consent for such a transfer) or if the transfer is based on standard contractual clauses (SCC) concluded between the Moldovan controller/processor and the controller/processor located in a country not party to the EEA or not listed by PDPA as complying with the adequacy criteria.

On 22 April 2022, PDPA has approved the template of SCC – as a further innovation for the Moldovan data protection legal framework. The SCC were developed to implement Article 32 of PDP Law, with provisions establishing appropriate guarantees for all parties involved (both for its signatories and the data subjects affected), including opposable rights of data subjects and effective remedies concerning cross-border transmissions of data from controllers to controllers, from controllers to processors, and from processors to controllers.

The substantive difference between the EU and Moldovan SCC is that the latter cover only three transfer scenarios, namely controller-to-controller, controller-to-processor, and processor-to-controller, without processor-to-processor scenario covered. Therefore, it falls on the parties’ responsibility in this last scenario – 2 processors – to safeguard adequately their and data subjects’ rights by concluding the pre-approved SCC amended mutatis mutandis.

The Moldovan SCC are structured in 4 sections and 17 modular clauses characterized by flexibility, as the parties can tailor clauses to their particular data processing activities. The most important SCC provide:
• guarantees for the protection of personal data transmitted abroad;
• obligations of the processors relating to the fulfillment of the contract;
• rights of data subjects;
• liability of the parties for damage caused to the data subjects following non-compliant data processing;
• remedies available to data subjects in case of violation of data processing and storage provisions;
• obligations of the data importer in case of access of public authorities and the obligation of the data importer;
• the exclusive competence of Moldovan courts concerning all disputes arising from the SCC;
• a “docking clause” allowing additional parties to join the contract in the future.

Section 4 of the SCC states that the data exporter is entitled to suspend any data transfers when the contractual clauses have been infringed by the importer and in case there are no remedies, the contract may be terminated by the exporter after one month.

Further, two important annexes have the purpose to corroborate the principles of transparency and accountability to the SCC.

The first annex is divided into two sections: (1) first relates to specific information on the transfers that must be carried out (including names, addresses, and activities associated with the data transfer), and (2) the second covers description of the transfer, which shall categorize the transferred data, frequency, data retention period, purpose, and nature of processing.

The second annex includes technical and organizational measures that shall guarantee the security of personal data processed – these shall be implemented by the importer in order to ensure an adequate level of data protection.

As a novelty in the Moldovan data protection legal framework, it now falls within the responsibility of PDPA to ensure an uniform and predictable practice of SCC implementation, as well as to ensure the Moldovan practice is inspired from the international (in general) and European (in particular) best practices in this field.

By Iulian Pașatii, Partner, Constantin Crețu, Junior Associate, Gladei & Partners