Category: Moldova

Through its 11 November 2021 law (“Law 175/2021“), the Moldovan Parliament passed certain amendments to existing legislation with the goal of digitalising the national economy. As a result, the norms implemented have made it simpler to establish, operate and sell companies in Moldova.

Law 175/2021 entered into force on 10 January 2022.

What’s new?

No need to authenticate (notarise) the constitutive documents of limited liability and joint-stock companies

Constitutive documents no longer need to be authenticated (notarised). The constitutive documents of Moldovan limited liability and joint-stock companies must be approved and signed by all founders. E-signing (with qualified advanced signatures) and e-filing are also options.

Accordingly, the validity of the constitutive documents of Moldovan limited liability and joint-stock companies is no longer conditional on their authentication.

Similarly, any amendment to the existing constitutive documents will not require authentication.

Sale/transfer of shares in limited liability companies does not require authentication (notarisation)

Like the norm that existed until now for joint-stock companies, as of 10 January 2022, sale and other transfers of shares (părți sociale) do not require authenticated (notarised) form. The transfer will occur in simple written form and be signed by all parties.

Besides facilitating share transactions and saving notary and stamp duty costs, the amendment also simplifies the process of instituting a pledge over shares in Moldovan limited liability companies, which will no longer involve the authentication (notarisation) of the pledge agreement.

No need to submit the managing director’s signature specimen

When appointing a managing director in a Moldovan limited liability company, the founders/shareholders are no longer required to submit the managing director’s signature specimen to the local trade register (Public Service Agency).

Similarly, when appointing a liquidator for the purpose of voluntary company dissolution, the shareholders are no longer required to submit a signature specimen.

E-filing now possible

An application (containing the full package of documents required pursuant to the law) for the state registration of any amendment to existing data in relation to a company included in the State Register of Companies (Registrul de Stat al persoanelor juridice) kept by the Public Service Agency (Agenția Servicii Publice) must be in Romanian and can be submitted either (a) entirely electronically, being signed with a qualified advanced electronic signature in accordance with the requirements of local legislation on e-signatures and e-documents (qualified advanced electronic signatures from the EU being recognised in Moldova for this purpose), (b) physically, or (c) by post with confirmation of receipt.

NB: As of the date of this LI, the Public Service Agency is still in the process of implementing the e-platform that would enable electronic submissions, while today applicants can remit their requests by email.

The application must be made by the founder(s)/shareholder(s) personally, or through duly empowered representatives whose powers are attested through an authenticated power of attorney, or through an e-PoA issued by means of the Register of PoAs (Registrul împuternicirilor de reprezentare).

The obligation to legalise and apostille/super-legalise copies of documents issued abroad for the purpose of state registration and to procure their translation into Romanian remains.

Decisions and extracts issued electronically

Decisions passed by the local trade register, as well as extracts from the State Register of Companies, will be issued in all cases in electronic form, in compliance, where applicable, with the legislation on e-signatures and e-documents, except where the issuance of the original paper document is requested by the applicant or required by law.

Online payment enabled

All payments in relation to services by the local trade register will be carried out either via the Government Electronic Payment Service or by bank wire.

Conclusion

Law 175/2021 introduces novelties into the Moldovan legislation that have already been implemented by some neighbouring countries. Although the changes may raise questions about certain practical risks associated with them, they will likely have a positive impact and attract new business to Moldova. This law not only creates significant time and money savings for businesses, but also allows them to act remotely, a huge advantage in the post-Covid world.

By Vladimir Iurkovski, Office Managing Partner, and Adriana Otean, Schoenherr

During the COVID-19 pandemic, one of the biggest challenges for Moldovan SMEs proved to be access to financing solutions. A financial gap spread nationally across different sectors and industries.  Moldovan banking institutions became reluctant to finance SMEs and sole entrepreneurs, while the existing solutions often proved to be expensive and inaccessible.

The business, especially the small business, is in high demand of alternative financing solutions. The existing options, mainly limited to contributions from the founders and financing through traditional financing instruments offered by banks and non-banking lending organizations, are not appropriate.

Worldwide, the need for alternative methods of financing, the development of IT, and social networks have led to the emergence and development of unconventional financing instruments, one of them being crowdfunding. The interest in participating in alternative financing has been noticed on both sides – the business and the investors. Nevertheless, in Moldova, it was not possible due to the absence of an adequate legislative framework.

Back in 2016, the Law on SMEs No. 179 introduced in premiere the definition of crowdfunding. However, it lacked vision and sufficient detail. The presented concept covered only the reward-based crowdfunding services, where an investor can pay for a service/ product in advance without expecting other financial benefits (interest, shares, equity, or dividends) in exchange for the investment.

Crowdfunding services such as loan-based and investment-based crowdfunding were not regulated and remained out of the law.

Acknowledging the importance of alternative financing solutions, a Draft Law on Crowdfunding No. 150/MEI/2021 was developed and proposed to the Moldovan Parliament for adoption. The draft law was elaborated in line with the standards of the EU Regulation 2020/1503 on European crowdfunding service providers for business.

Once adopted, the incorporation and authorization of crowdfunding services providers and the creation of crowdfunding platforms in the Republic of Moldova will be possible. The business will have the opportunity to attract funding or accumulate investments of up to EUR 1 million for their projects through crowdfunding platforms. The investments will be able to be collected from a multitude of investors – both national and foreign.

Among others, the new draft law was designed to address some of the current concerns that severely affected the trust of the local investors that lost their life savings caused by a wave of Ponzi schemes back in the 90s. 

The draft law envisages a more robust investor protection mechanism. It introduces authorization and supervision procedures and establishes clear rules on the conditions of the crowdfunding activity, the participants in the crowdfunding process, applicable principles, and other related matters.

The draft law requires the investor to permanently have prudential guarantees of at least MDL 500,000 (approximately EUR 25,000). The suppliers may not promise investors the success of their projects, any profits, or recovery of investments. Also, the suppliers have a due diligence obligation to verify the projects proposed by developers and adequately inform investors of their findings. Moreover, the suppliers shall always keep the investors informed about the investment risks, including the risk of losing their entire investment.

Under the draft law, the operation of the crowdfunding mechanism, including the execution of the agreements and all transaction-related documents, will have to take place electronically and remotely, provided secure means of identification are used. All payments within the crowdfunding process will occur exclusively by bank transfers or alternative payment instruments offered by payment providers.

Nonetheless, only two types of crowdfunding are envisaged by the draft law: (i) peer-to-peer consumer lending or peer-to-peer business lending (crowdlending), and (ii) investment-based crowdfunding.  Other forms of crowdfunding remained unregulated, unfortunately.

The pandemic crisis showed us all that the business needs more flexible and affordable financing instruments. The initiative to design and implement an adequate regulatory framework for crowdfunding is an excellent response by the Moldovan authorities. By receiving the necessary boost to their cash flow, smaller businesses will have the opportunity to develop further or launch new projects, from which the entire domestic economy will benefit.

By Marina Zanoga, Head of Banking & Finance, and Nicolina Turcan, Associate, ACI Partners

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Cobzac & Partners has successfully represented the interests of CB Eximbank JSC before the Supreme Court of Justice of the Republic of Moldova in a dispute with Avicomagro.

According to Cobzac & Partners, “on December 29, 2021, the Supreme Court of Justice of the Republic of Moldova admitted an appeal filed by the lawyers from Cobzac & Partners in the interest of CB Eximbank JSC in litigation initiated at the beginning of 2017. In 2010 a credit agreement was concluded between Eximbank-Gruppo Veneto Banca SA and Avicomagro LLC, by which Avicomagro received a loan of USD 375,000, which was to be repaid by September 23, 2012. The loan was guaranteed by a pledge, the mortgage value of the property being established by mutual agreement, in the amount of MDL 4,788,000.”

According to the firm, “the debtor did not fulfill its obligations and the bank filed a claim against it regarding the exercise of the pledge, and by the decision of the Centru Court from November 7, 2012, it was ordered the dispossession of Avicomagro and the forced transfer for sale in possession of the bank of the pledged real estate. Subsequently, the bank sold the real estate at the price of MDL 2.3 million, but the accumulated amount was not enough to pay the entire debt. As a result, the bank filed a lawsuit against Avicomagro regarding the collection of a sum of USD 1.45 million, and by the decision of the Supreme Court of Justice issued on December 29, 2021, the court ordered the collection of USD 1,006,348.88  from the debtor for the benefit of the bank.”

Cobzac & Partners’ team included Managing Partner Daniel Cobzac, Managing Associate Ana Iovu, and Independent Attorney Gheorghe Sclifos.

Through its 11 November 2021 law (“Law 174/2021“), the Moldovan Parliament approved the rules on control of investments into sectors important for the security of the state. Law 174/2021 applies equally to local and foreign investors and entered into force on 19 November 2021.

What are the relevant sectors?

These are as follows: (a) activity in the hydrometeorological and geophysical field; (b) radioactive waste management; (c) operation of energy (including electric energy, natural gas and petroleum products), transport, water and sewerage, aerospace, defence, election infrastructure; (d) exploitation (exploatarea) of artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, quantum and nuclear technologies, nanotechnologies and biotechnologies; (e) production of protection for cryptographic information; (f) production and purchase for the purpose of resale of state secret protection means; (g) production of explosive materials for industrial use and distribution activities; (h) aviation security activities; (i) design, production, maintenance and operation of aircrafts and of components; (j) design, production, maintenance and operation of systems and components used in air traffic management and provision of air traffic services; (k) design, maintenance and operation of air/heliports, including of safety equipment; (l) management of airports, bus-ports, rail traffic, inland waterways, ports and quays for waterway traffic; (m) television broadcasts / audio-visual services; (n) supply of networks and/or fixed or mobile electronic communication services; (o) supply of services in national ports; (p) services of geologic study of subsoil’s resources and/or exploration of natural resources; (q) production, export, re-export, import of weapons, ammunition and military equipment, products, technologies and services that can be used in manufacturing and use of nuclear, chemical, biological and missile weapons; and (r) administration of state’s public registers, information security.

Additionally, the Government is empowered to determine which assets are important for the security of the state and which will fall under the scope of Law 174/2021.

Which transactions fall under the scope?

Investment operations (transactions) (by any person(s)) which, by any means, directly or indirectly, individually or jointly, including as ultimate beneficial owner(s), in relation to any relevant sector, directed/intended: (a) holding control (control criteria being determined pursuant to the Civil Code), purchase/obtaining or increase of qualified share participation in a company, including in a company already with investment in a sector; (b) entering into certain types of concession agreements, as further regulated; (c) entering into a public-private partnership, as further regulated; (d) entering into investment agreements with the Moldovan Government, as further regulated; (e) entering into asset sale purchase transitions that are part of or belong to companies with investments in a relevant sector and with a value equal to at least 25% of the asset value of the respective companies (pursuant to their last financial statement); and/or (f) entering into, on behalf of and/or for the account of a company with investments in a relevant sector, into one or several linked financial transactions (loans/credits or assistance) with persons from other states and which are directly or indirectly controlled by governments of other states.

Where, when and how to apply

Prior to investing in a relevant sector, any potential investor is obliged to obtain approval from the Council for Promotion of Investment Projects of National Importance (the “Council”), composed of the prime minister, the country’s key ministers and heads of various public authorities.

The investor’s application must be accompanied, among others, by (i) information on the share capital of the investor and its ultimate beneficial owner(s), (ii) the value of the investment, (iii) information on countries of operation and main business partners, (iv) financial statements for the last three years, (v) information on source of funds, (vi) the date of planned investment, (vii) criminal record certificates in relation to shareholders / ultimate beneficial owner(s), and (viii) a statement on the intention to invest individually or in concert. All documents will likely need to be filed in due form, i.e. apostilled, translated and the like. Law 174/2021 empowers the Government to set additional mandatory documents.

Applications are reviewed within 45 days of receipt, while in the first 30 days the Council can solicit supplementary information from the applicant. So far, there is no indication in Law 174/2021 that an application can be filed electronically.

The Council can either admit or reject an application, or issue a conditional approval, while setting the deadline to fulfil the condition (which should not exceed 90 days after receipt of conditional approval).

What are the risks and sanctions involved?

Entering into or carrying out transactions without the prior approval of the Council may lead to the following legal consequences (depending on the precise transaction being implemented):

• Council’s decision to suspend the investor’s voting right, right to summon a general meeting of shareholders, right to include questions on the agenda of the general meeting of shareholders, propose members to management bodies, receive dividends / net income, etc.; and/or
• Council’s decision to suspend ongoing transactions.

Upon receiving the Council’s decision(s), the investor can opt to: (a) apply for prior approval (within a term, as regulated) with the Council, or (b) sell its participation held or terminate the ongoing transaction(s). If a third party takes control over the investment in a relevant sector following the initial investor’s option to sell as mentioned herein / change of control mechanisms but without prior approval from the Council, the Government will have at least six months after learning about the change in control to demand the termination of the transaction and the recovery of damages (regardless of substantive law applicable to the transfer).

Failure by the investor to exercise the above-mentioned options in a timely manner will lead to (a) the duty of the local management to annul the investor’s shares in that company and issuance of new shares of the same class/value (with consecutive communication of such measures implemented to the Council), and/or (b) a decision from the Council to the investor to terminate the ongoing transaction(s) within 30 days of receipt and recovery of damages by the investor.

Decisions of the Council are subject to recourse with the administrative court, but until a final and irrevocable judgment is made, their effect cannot be suspended by the court or a court procedural ruling.

Conclusion

Law 174/2021 appears to be an attempt to transpose the EU’s FDI mechanics in Moldova. Still, the scope of the law also covers investors from Moldova. As of today, investments in these sectors from Member States like Malta are impossible. The text leaves margins for interpretations and requires more detail in certain parts to reduce the “stress” it may already have caused.

By Vladimir Iurkovski, Office Managing Partner, and Viorica Cornescu, Schoenherr

The year 2021 is expected to be a long-awaited turning point for the Moldovan electric energy market.

The wholesale electricity market rules, developed with the support of the Energy Community Secretariat, will enter into force on October 2, 2021. According to the Electric Energy Market Rules, approved by the Moldovan National Agency for Energy Regulation (NAER), the new design of the energy market will include the bilateral market, day-after and intra-day markets, and markets for balancing and ancillary services.

Traditionally, the transportation and distribution systems’ operators and universal service suppliers organize their acquisition tenders before April 1, when the annual contracts expire. This year, the tenders were organized according to the new acquisition rules, adapted by the NAER according to the new market design. As several features of this new design are not in place before October, the tenders ran into numerous hurdles, revealing the weaknesses of the Moldovan electricity market. In this respect, the Energy Community Secretariat characterized the Moldovan electricity market as a sector with minimal sources of electricity, few market players, state-owned companies supported by the government, parallel negotiations and dealings, uncompetitive behavior, and lacking in transparency.

Moldova’s electricity sector is characterized by the dependence on one source, a gas-fired power plant (MGRES) in the breakaway eastern region, while not being interconnected with the European Network of Transmission System Operators (ENTSO-E). MGRES holds 84% of the total installed electric energy production capacity in Moldova, making it the only local producer capable of balancing the system.

On the other hand, although Moldovan and Ukrainian transmission infrastructures were originally constructed as parts of a single interconnected system and operate synchronously, differing legislation and the lack of adequate cross-border mechanisms have prevented their full integration. In July 2019, Ukraine launched a new electricity market model, similar to the one to come into force in Moldova in October, as scheduled under the new Ukrainian Electricity Market Law of 2017.

To allow for the market entrance of plentiful baseload energy from Ukrainian nuclear power plants, the leading Moldovan energy supplier, Premier Energy, made use of new rules and invited separate offers for baseload and peak-load (including balancing) power. Unfortunately, the absence of the balancing power market in Moldova and of the metering solutions for it led to the commercial impossibility to import balancing power, without laying unreasonable commercial burden and risks on market operators. NAER not addressing this issue in due time left MGRES as the only competitor able to balance the system.

At the same time, the market rules do not allow the energy suppliers to sell electric energy to customers without having a balancing power arrangement in place. Consequently, MGRES’s dominant position on the balancing energy market automatically gave it a strong bargaining position on the bilateral contracts market. In some observers’ opinion, MGRES abused that bargaining power to strongarm Premier Energy and other market participants into buying energy from it.

The Moldovan competition authority will undoubtedly look into what happened during the tender, and whether the flawed regulation or anticompetitive behavior is to blame. But what is increasingly clear is that no competition policy can be more efficient than actual physical access to the grid for electric energy producers and suppliers.

What is also clear is that significant market access problems will persist beyond 2021. For the reliability of supply and for effective competition to exist on the market, the Moldovan energy grid needs stable infrastructure connections with the European one. An asynchronous interconnection with Romania is planned, as an interim solution, before the final synchronization. From a strategic point of view, considering a common setup, a joint Moldovan-Ukrainian integration into ENTSO-E would be the most desirable outcome for both energy markets.

In the short run, specific urgent transitional mechanisms are needed to enable a smooth transition towards the new market rules and ensure that all local and Ukrainian suppliers of electric energy, including balancing energy, have legal and physical access to the market. Particularly, common rules for managing cross-border flows with Ukraine, that would allow for commercially viable balancing power imports, should be agreed upon. Finally, the national energy market regulator may wish to look into the Procedures for Electric Energy Acquisitions, including lessons learned from the Premier Energy acquisition tender and others.

By Emil Gutu, Competition Manager, ACI Partners

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.

BizLaw.md, a Romanian-language portal dedicated to business law in the Republic of Moldova, is celebrating its fifth anniversary. We spoke with its founder, Efrim Rosca & Asociatii Managing Partner Oleg Efrim, to learn more about the project and his plans going forward.

CEELM: What’s BizLaw.md?

Oleg: BizLaw is a media platform about business and business law. I wanted to support the emergence of a media resource that professionally addresses the business field and offers specialists a place where they can discuss professional issues. BizLaw is one of the first appearances of the specialized niche press, speaking simply about complicated issues. This is where business people with their daily problems can find solutions from specialized lawyers. Both business people and specialists in law can find out about important initiatives of the Government and other decision-makers, and about changes in business regulations, right from the stage of their initiation.

CEELM: When did you initiate this project and what was the thinking behind it?

Oleg: I started this project at the beginning of 2016. I am a loyal consumer of specialized law portals in the region from Romania, Ukraine, and Russia. I have always been jealous of colleagues in these countries for having access to such information. And at a certain moment, I decided to start a similar project in Moldova. I did this out of a desire to have a quality media product about business and business law, and a desire both to stimulate professionals to train and contribute to the training of their colleagues and to make my own contribution to the promotion of a legal culture in our country.

CEELM: And how did the Moldovan legal market react to it?

Oleg: In less than no time, BizLaw became a reference name on the market. In its debut year, BizLaw was named Trademark of the Year in the Republic of Moldova. Public reactions highlighted the need for specialized information resources.

CEELM: What about the potential for a conflict of interest or a possible bias towards the law firm that you manage? How do you deal with concerns on that front?

Oleg: Indeed, fellow lawyers are reluctant about the fact that the partners of a law firm are also the owners of the BizLaw portal. But we are not involved at all in Bizlaw’s editorial policies, which are decided by journalists. Bizlaw’s equidistant policy is followed daily by our news consumers.

Moreover, any company or law firm that is ready to share the costs with us can become our partner in the project. The invitation is public. In its first year, BizLaw offered free partnerships to the largest law firms in the Republic of Moldova. This meant that the site was available for any professional – not just from the field of law – to appear on BizLaw in video or written formats. All expenses in this regard were borne by BizLaw.

CEELM: How large is the editorial team today and how has the focus of the publication evolved over time?

Oleg: The BizLaw team consists of four journalists working full time for the portal. The whole team has extensive practical experience, and, in their professional past, they have all interacted with the regulatory process. It is a wonderful team, which does its job every day and doesn’t get tired of generating new ideas, which maintains the public’s interest in Bizlaw.

CEELM: What was the most-read story over the last five years – and, in your opinion, why was it so popular?

Oleg: Experience shows that the most-read stories are those that refer to the regulations in labor law, those related to social insurance, and those that highlight all kinds of curiosities in the legal world. The most-read news of all time is an article entitled “Stupid Questions of Lawyers During Trials. Real Examples,” which registered over 236,000 unique visitors. An article about the entry into force of sanctions for non-compliance with anti-Covid measures gathered over 115,000 unique views. News about the law itself and legislative amendments gather fewer views, as that is of interest exclusively to professionals.

In general, the figures recorded by BizLaw in terms of views – even if it is a niche site, with a specific audience – could easily compete with those recorded by other generalist news sites. This proves that BizLaw has captured the attention not only of business and legal professionals, but also of the general public.

CEELM: Looking back, what is it about the project that you are proudest of?

Oleg: I am proud to say that in the five years since its launch, BizLaw has occupied a well-deserved place in the media market. We are one of the main providers of business news in the Republic of Moldova and about business law. The biggest media outlets trust and quote our news. The video tips recorded by BizLaw are shown on TV channels. One of the BizLaw projects – Martorii lui Justinian (Justinian’s Witnesses) – is a tool for promoting the new Moldovan Civil Code and a source of training for lawyers interested in civil law.

And Bizlaw’s success has also been noticed abroad. In 2019, the Romanian Society of Legal Sciences offered me a Diploma of Appreciation for outstanding contributions to the popularization of legal information in the business environment.

Even if the project is not profitable (yet), I like what BizLaw does and what it looks like every day.

CEELM: What would you like to do that you have not gotten around to yet?

Oleg: My business partner and I expect to stop spending money on the maintenance of this project. We expect that in the foreseeable future the project will bring in enough money to cover our expenses and continue to delight readers with quality news and interesting projects.

CEELM: Where do you see the project five years down the line? How are you looking to develop it?

Oleg: I would like BizLaw to be one of the many specialized news portals in five years, and to continue to provide quality content. We will continue to develop new products to ensure our sustainability.

This Article was originally published in Issue 8.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Turcan Cazac has advised Gedeon Richter Plc. on the sale of its Moldovan subsidiaries Gedeon Richter-Retea Farmaceutica SRL and Rihpangalfarma SRL to the Felicia Group. Brodsky Uskov Looper Reed & Partners advised the buyer.

Financial details of the transaction were not disclosed.

Gedeon Richter and the Felicia Group are Hungarian and Moldovan biopharmaceutical companies, respectively.

According to Turcan Cazac, following the transaction “Gedeon Richter will no longer operate branded retail pharmacies in Moldova.”

Turcan Cazac’s team included Managing Partner Alexander Turcan, Partners Vadim Taigorba and Ana Galus, Associate Mihai Gutu, and Junior Associate Catalina Birsanu. 

Brodsky Uskov Looper Reed & Partners’ team consisted of Partners Ivan Turcan and Svetlana Mantaluta.

Recent reforms in Moldovan legislation will promote the real estate industry and simplify the country’s tax regime. The strong commitment that Moldovan authorities have recently demonstrated to attracting foreign investment has led to significant reform. In addition, the country’s geopolitical position and its attractive labor force make Moldova of new interest on the world’s tax map. 

Moldova has signed Double Taxation Conventions with 36 countries, as well as Free Trade Agreements with CIS countries, on the one side, and with the WTO, CEFTA (Central European Free Trade Agreement) and EU, on the other. In this respect, it is also worth noting the Association Agreement between Moldova and the European Union.

In reference to real estate it is important to mention that several modifications of the Moldovan Civil Code that are very important for the development of the agricultural sector entered into force on March 1, 2019.

Moldovan laws currently prohibit foreign investors (both individuals and legal entities) from buying agricultural and forest lands. As a result, foreign investors who wish to make use of such property generally do so via Moldovan companies that are under their control or enter into rent or servitude agreements for 99 years. There are no limitations on purchases of other kinds of real estate.

There is no VAT on purchases of land plots and residential properties.

The following tax rates on real estate apply at the beginning of 2021: a) for housing real estate (flats and individual houses, fields relating to the property), the maximum rate is 0.3% of the taxable base, and the minimum rate is 0.05% of the taxable base; b) for agriculture land with buildings located on it, the maximum rate is 0.3 % of the taxable base, and the minimum rate is 0.1 % of the taxable base; and c) real estate designated as other than housing or agricultural is taxed at 0.1% of the taxable base.

The tax reporting period is one year.

Current Moldovan legislation provides a good level of protection to real estate owners. Ownership of real estate, like other rights on immovable property such as mortgages, servitudes, leases, etc., should be registered at the Public Services Agency. Information in the registry is public.

Purchasing or mortgage transactions of real estate should be concluded in written form and authenticated by a local Moldovan notary.

Leases may be concluded in simple written form as well. Contracts concluded for a term more than three years should be registered at the Registry.

These modifications to the Civil Code brought new options to mortgage and development market.

The average price of real estate in Chisinau – the Moldovan capital – is EUR 600-700 EUR per square meter. Many lots are available for sale at lower prices (between EUR 300- 500 EUR per square meter) but require capital reparation.

In summary, Moldovan legislation in general and in real estate in particular have evolved significantly during last 20 years. The implementation of the best European practices in the field has provided additional protection to the owners and investors and has created a significantly transparent real estate market.

The last five to seven years have seen increased interest from investors from neighboring Romania and Ukraine, often purchasing land in order to use it for growing crops, especially for biofuels or for various oils. 

Regarding the construction of real estate, we note that this sector has significant reserves for development.

By Ivan Turcan, Partner, Brodsky Uskov Looper Reed & Partners

This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Cobzac & Partners has successfully represented Latvia’s SIA Fertco fertilizer distributor in its attempt to obtain the partial annulment of an arbitral award in Moldova’s courts.

According to Cobzac & Partners, Fertco entered into a USD 2 million contract to sell fertilizer to an unnamed Moldovan company. According to the firm, “due to prolonged delays in payment, SIA Fertco notified the buyer that it was suspending the delivery of the goods until [it received] full payment for the goods already delivered. After that, SIA Fertco filed a … claim with the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Republic of Moldova, request[ing] the collection of the debt in a total amount of about EUR 1,060,200. In the arbitration proceedings, the defendant filed a counterclaim requesting the collection of damages from SIA Fertco due to the suspension of delivery of the goods, amounting to EUR 1,336,639.”

According to Cobzac & Partners, “surprisingly, the Court of Arbitration satisfied partially the claim of our client and the counterclaim of the Moldovan company and finally, ruled that SIA Fertco had to pay an amount of EUR 624,202 in damages.”

With the assistance of Cobzac & Partners, Fertco then challenged the award in the Moldovan courts, claiming “both a violation of the arbitration procedure and a violation of the legal order of the Republic of Moldova and of principles and good morals.” Ultimately, the firm reported, “although the first instance court rejected the request for annulment of the arbitral award, by Decision of the Chisinau Court of Appeal of April 22, 2021 the appeal declared by SIA Fertco was fully satisfied and the arbitral award was annulled in the part in which the claims of SIA Fertco were rejected and in the part in which the claims of the local company were admitted.”

According to the firm, “the case was not an ordinary one because it was about an arbitral award issued by an arbitration tribunal and the local judicial courts could overturn it only in case of serious errors that infringed the principles of civil law. The ruling issued by the Chisinau Court of Appeal creates a precedent that the local arbitration courts will have to take account of in the future.”   

Cobzac & Partners’ team was led by Managing Partner Daniel Cobzac and included Senior Associate Pavel Digori and Associate Alina Gaja. The team was also assisted by independent attorney Gheorghe Sclifos.

“Finally, there has been some positive movement on the political scene,” says Gladei & Partners Managing Partner Roger Gladei, referring to Moldova’s Presidential elections last November. “President Maia Sandu’s win marked the beginning of a new political era for Moldova,” he says. “At least that’s the sentiment in the streets.” As the presidency is expected to make a dramatic 180 degree turn towards the West, President Sandu presents a strong contrast to the previous, more Russia-friendly administration.

“The President’s first serious move has been to appoint a new Prime Minister candidate,” Gladei says. In addition, President Sandu’s office has strongly advocated for the country to hold a general election, as the common perception, he says, “is that the current parliament is morally corrupt and has no legitimacy anymore. The question is not whether or not early elections will happen — the sole question is when, either this spring or this autumn.” In the meantime, the president has nominated Natalia Gavrilita – a graduate of Harvard Kennedy School and a short-term Minister of Finance back in 2019, when Sandu herself was Prime Minister – for Prime Minister.

“The big question though,” Gladei says, “is whether this nomination is for real or is a political trick, designed to trigger a general election.” If Gavrilita is not confirmed twice by the Parliament, Gladei says, then-President Sandu could dismiss the Parliament and call for early elections. “Oil to the fire was poured by President Sandu’s own Party of Action and Solidarity, which stated – quite clearly and publicly – that it does not intend to support Gavrilita for Prime Minister.”

Regardless of the political stand-off with the Parliament, Gladei says that Sandu has inspired a wave of optimism among the people of Moldova –  especially with her turn to the West. “The first official trips she took after assuming office were to Brussels and Kiev – as opposed to former President Dodon, who went straight to Moscow,” he says. Gladei hopes that Moldova will “do its homework” now and implement the agenda of its Association Agreements and DCFTA with the EU. “This would be a major thing and would indicate a strong incoming legislative agenda, which would, in turn, stimulate business,” Gladei says, pointing out that a significant number of legislative actions in recent years have been more aimed at settling political differences between prominent parties than facilitating economic growth.

“The business community of Moldova has, hitherto, gotten used to being left to its own devices,” Gladei says. “Too many previous governments’ promises that they would ‘most certainly take care of problems,’ ended up being dead letters on a piece of paper.” By contrast, he says, President Sandu has, even while Prime Minister, shown a vivid interest in the business community’s needs. “Business associations, including AmCham, where I am a Board member, met with then-Prime Minister Sandu and business was positively surprised with the manner in which she had immediately taken note of complaints and instructed her counselors to take actions on the spot,” he recalls. “Expectations are high that this will continue at a stronger pace now that she is President.”

Businesses are also expecting more from the Government in terms of support in facing the challenges of the pandemic. The previous government’s response was, Gladei says, perceived as “reactive and rather weak (including due to the failure to obtain the promised large-ticket Russian sovereign loan), while the new government may count on a more robust budgetary support from IMF and other development partners.“

Struggling businesses have, somehow, been staying afloat in Moldova, Gladei says. “The biggest deals of note in 2020 are, still, the sale of Glass Container Group to Vetropack and of Moldcell to CG Cell Technologies back in March 2020 – which we had to do while wearing masks, in completely new territory.” He sighs. “There were no guidelines or frameworks that would accommodate doing business during the pandemic; we were left to our own devices.” 

Still, Gladei feels optimistic about 2021 and believes that “foreign investments, particularly FDIs, will increase in numbers, incentivized by the promises for better investment protection and business climate, radiating from the new political elite.”  He says that infrastructure and project finance transactions are expected to gain momentum too and that the “announced EBRD investment in Vestmoldtransgaz, which is still making us burn the midnight oil, should allow Moldova to diversify its gas supply and strengthen its energy independence.” Gladei firmly believes that new investors will come to Moldova as well, but it will be “the new Moldova.”