Form of State
Moldova is a Parliamentary Constitutional Republic. It gained independence from the Soviet Union in 1991 and the Constitution was signed in 1994. The legislative power is vested in a Unicameral Parliament that is elected every 4 years. The election system is pluralistic and this causes the 3-4 parties that gain enough votes to engage in Coalition governance. The executive power is vested in the Government that is divided into ministries and is headed by the Prime minister. He is elected on the recommendation of the President and vote of Parliament. The President in Moldova is legally distant from branches of power, however he is most involved in executive activities. He is also elected by Parliament on a 4-year mandate.The judicial system consists of the hierarchical court system: District Courts, Court of Appeal and Supreme Court. Also there is a Constitutional Court that is the sole institution with Constitutional jurisdiction, its main task being the review of legislative acts against the Constitution.
Moldova is a Civil law system with influences from both the French and the Germanic legal systems. According to the Constitution, in case of a discrepancy between local and international law, the latter prevails (Art. 8, of the Constitution).
Investment legal aspects
Foreign and domestic investors benefit from equal standing under Moldovan legislation and the legal framework is accessible for foreign investments. One of the primary tasks of the Government is to attract investments and create a favorable business climate for them. Moldovan law generally allows investments in any field of entrepreneurial activity on the entire territory of the Republic of Moldova, provided that national security interests, anti-trust legislation, norms of environmental protection, people’s health and public order are respected.
Free economic zones, whose residents are provided with a range of tax and customs incentives and state guarantees, are attractive for industry investment projects. There is also a series of other incentives for foreign investments such as special tax and customs regimes and other forms of Government support for investments in industrial parks and ICT related investments. According to the Moldovan Constitution, the state must ensure the inviolability of foreign investments (Art. 126/h). The Government has proven in the past to act in a uniform and consistent manner and establish well-balanced policies and legislation in order to stimulate a good collaboration with existing investors and attract new investments. The law prohibits discrimination against investments based on citizenship and provides for equitable and level-field conditions for all investors. It rules out discriminatory measures hindering the management, operation, maintenance, utilization, acquisition, extension or disposal of investments. Public authorities intending to develop a new investment policy are required to organize public consultations before implementing such policies. Investments cannot be subject to expropriation or to any other similar measures, which can directly or indirectly deprive investors of their property right or the right to control investments, unless the following conditions are met:
-The measure is undertaken for the general public good,
-The measure is not discriminatory, AND
-Preliminary and equivalent compensation of damages is given.
Investors have the right to sue public authorities for damages caused due to illegal actions and decisions.
Moldova is a member of the International Centre for Settlement of Investment Disputes. After ratifying the Convention in 2011, Moldova undertook to recognize any decision (in the form of an award) issued by ICSID. This means that any award has full effect and can be enforced in Moldova. The local judicial authorities guarantee its enforcement in the form of, for instance, pecuniary sanctions.
Private Property and Privatization
There are cases in which Moldovan public firms have been sold to and privatized by strategic investors. Example of these transactions are: the sale of a cement site to Lafarge, but also a leather processing firm, several textile processing units and wineries.
A new law on privatization was adopted in 2007 and one of its constituents was the Agency for Public Property, which carries out the state policy in the field of management and privatization of public property, post-privatization activity and exercises the functions of the owner of state property. Once this law had effect it caused changes and the emergence of a new stage in the privatization process. The diversification of the types of enterprises subject to privatization occurred and also diversification of the mechanisms of achieving private property.
The latest legal updates created an interesting possibility for investors – the public-private partnerships (PPP). This recent framework introduction became an attractive alternative to the traditional law on concessions (rent of public property). Through this new framework, the Government provides interesting opportunities for private investors to invest in public property make use of the resources available on it and gain profit within the terms of the contract.
The Government assists the Private party in the obtaining of license granting, business permits and all administrative technicalities. Moldovan infrastructure is inefficient at times and underdeveloped, and since public financial resources for Government investment are scarce, the Government is willing to accept private partnerships. Both sides divide their contribution in order to create an innovative, high quality and efficient development project. Investments can also be directed towards other kinds of Public service: healthcare, transport, environment and energetics.