Albania: Albania’s New Step In Support Of Foreign Direct Investments: Special Protection Of Foreign Investors Involved In Dispute Resolutions

Last Updated: 22 February 2011
Article by Endrit Mema

Albania's attraction of foreign direct investment (FDI) has been, and remains, a major factor in its recent strong economic growth. In September 2010 the Albanian Parliament approved amendments1 to law no. 7764 dated 2 November 1993 "On Foreign Investments" (Foreign Investments Law). The amendments caused a heated public and political debate, not only because they were the first in 17 years but because they introduced a significant change to the foreign investment framework in Albania.

Unfortunately, one of the main obstacles to FDI in Albania remains disputes on real property ownership related to the restitution and compensation process of the ex-nationalized lands. The new amendments to the law aim to provide the foreign investors with a special protection to prevail such difficulties in case of disputes resolution with private parties.

Legal status of foreign investors

According to Albanian law, "foreign investor" means a (i) citizen of a foreign country, (ii) Albanian citizen who resides outside the country, (iii) legal person established under the laws of a foreign country or (iv) a "community company" or "establishment"2 that directly or indirectly seeks to or carries out an investment in Albania.

Foreign investments in Albania are granted treatment not less favourable than domestic investments and generally accepted norms of international law. Additionally, the law forbid expropriation, nationalisation or any similar measure towards foreign investments, except in special cases. Moreover, foreign investors have the right to repatriate all funds and contributions in kind related to the investment, including revenues.

Special protection to overcome difficulties

Pursuant to the Foreign Investment Law, disputes between a foreign investor and a private party can be settled either according to previously agreed modalities or through the competent court or arbitrator in Albania. The same principle is applicable in relation to disputes between a foreign investor and the Albanian state.

According to the new amendments, the Council of Ministers may grant through an ex-post decision "special state protection" to foreign investments, when a judiciary dispute raised with third private parties impedes the execution or exercise of the economic activity deriving from or otherwise related to the foreign investment. This special state protection contains the following provisions:

  • Replacement in full rights of the foreign investor by the Albanian state in a civil dispute with private third parties in accordance with article 184 of law no. 8116 dated 29.03.1996 "The Albanian Civil Procedures Code" (ACPC) as amended. This measure, however, gives rise to some uncertainties since, under article 184, in order to procede with the replacement in a dispute resolution procedure, the court must obtain the approval of all the involved parties.
  • The protection may also include the state's commitment to take over the obligations of the foreign investor sentenced by the court in favour of private third parties.

Additionally, after the foreign investor is granted the protection:

  • The court cannot rule on the confiscation or suspension of the activities on the related goods (assets) of the foreign investment. If the court has already adopted these measures, it is obliged to follow the request of the State Attorney to replace them with other measures.
  • If the court transfers the foreign investor's rights over the real property in favour of third private parties, the Council of Ministers may decide, for the public interest, to expropriate the third parties and transfer the real property to the foreign investor3.

Procedure to obtain special protection

Special state protection is not a legal right of the foreign investors; the decision to grant or refuse it is at the discretion of the Council of Ministers.

The foreign investor can submit a written motivated request and supporting documents to the ministry that covers the field related to the investment. Within 30 days from receipt, the ministry will evaluate and present the proposal for approval to the Council of Ministers.

The request for special state protection should be considered refused if the approval is not made public within 45 days. There is no obligation to explain the refusal.

Entitled investments

The Council of Ministers may grant special state protection to investments performed in the following fields:

  • public or touristic infrastructures, energy or agriculture;
  • concession agreements pursuant to law no. 9663 dated 18.12.2006 "On Concessions" as amended;
  • on real property provided to the foreign investor by the Albanian state;
  • on real property obtained by the foreign investor through regular public documents or valid acts provided by government competent bodies or public entities;
  • when an investment of not less than EUR 10 mil is foreseen.

Footnotes

1. Law no. 10 316, dated 16.09.2010.

2. These categories are described by article 49 of law no. 9590, dated 27.07.2006, "On Ratification of the Stabilization and Association Agreement between Albania and the member states of the European Communities".

3. The expropriation procedures are provided by law no. 8561 dated 22.12.1999 "On the expropriation and taking under temporary possession of private properties for the public interest".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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