RPHS Law

The Law on Sustainable Investments Enters into Force

On September 6th, 2024, the Law No. 08/L-209 on Sustainable Investments (“LSI”) entered into force, hereby repealing the Law No. 04/L-220 on Foreign Investment and Law No. 05/L-079 on Strategic Investments in the Republic of Kosovo.

The LSI defines a comprehensive framework that regulates the rights and obligations of the institutions, public authorities, and investors in relation to investments in Kosovo. It implements international principles of responsible and sustainable investments, as well as is partially in line with Regulation (EU) 2019/452 of the European Parliament and of the Council, introducing interesting innovations.

The LSI introduces priority sectors for investment, such as manufacturing, agriculture, ICT, education, health, tourism, transport, energy, and mining, as well as setting national objectives such as increase of manufacturing and export, promotion of circular economy, increased competitiveness, empowerment of youth, women, non-majority communities and marginalized groups, regional development and environmental sustainability.

Investments in national objectives and priority sectors are eligible to benefit from investment facilitations, such as export duty exemptions, subsidies, support in research and development, access to industrial and technology parks, and reduction in administrative burden and administrative cost. Priority in accessing these facilitations is granted to strategic investment and sustainable investment achieving the national objectives, thereby expanding the spectrum of sectors that may benefit from facilitations.

Strategic investments are also subject to changes, primarily focused on the threshold of gaining the status of strategic investment, which has been lowered from at least €30 million to at least €10 million. These types of investments are practical investments in priority sectors that help to fulfil the national objectives. As such, they are eligible for investor care services, such as in administrative procedures, leasing of immovable public property for up to 99 years, and any other services as defined by the Government.

On a general note, environmental and social aspects of investment in Kosovo have obtained more attention through the LSI. Particularly, besides having to be evident in investment proposals, investments that help fulfil the national objectives of regional development and environmental sustainability are given priority in selection.

In terms of institutional structure, with the entry into force of the LSI, the Investment and Enterprise Support Agency is seized, and the Agency of Investment and Exports (AIE) and the Agency for Innovation and Support to Enterprises (AISEK) are established instead.

The AIE is established under the Office of the Prime Minister as an executive agency responsible for the promotion and facilitation of investments, investor care, review and evaluation of strategic investment requests, and promotion of exports. The AISEK is the executive agency under the Ministry for Industry, Entrepreneurship and Trade, and which is responsible for innovation and development of Entrepreneurship, development of production capabilities for export, and development of industrial-technological parks.

In addition to these two institutions, the LSI also establishes the Investment Council, in charge of evaluation, selection, implementation, supervision, and decision-making on strategic investment projects.

Lastly, the LSI introduces the Investment Complaint Panel which will review the complaints of investors against public institutions. However, other legal remedies are available for investors, such as mediation, arbitration, and courts. While arbitration was not included in the Law on Strategic Investments, the Law on Foreign Investments recognized arbitration as a legal remedy available to investors, both domestic and international arbitration. For disputes with foreign investors, the Law on Foreign Investments established a choice of several rules of procedure to govern the resolution of the dispute, such as, among others, the UNCITRAL Rules or the OEN Rules. The choice between these rules was available to foreign investors.

Unlike the repealed Law on Foreign Investments, which offered the possibility for foreign investors to unilaterally initiate arbitration procedures against Kosovo institutions, with the new Law on Sustainable Investments, arbitration will be applied only in case the parties have agreed to settle disputes in the field of investments through the arbitration procedure. Thus, through the new Law on Sustainable Investments, the arbitration is held in Kosovo or in another EU member state that is a party to the New York Convention, and unless the parties have agreed otherwise, the law applicable to the settlement of the dispute is the law of Kosovo. Whereas, the conditions and rules of the procedure are defined in advance between the two parties.

In conclusion, the Law on Sustainable Investments presents an encompassing investment, retaining core principles of investment, while introducing novelties that mark a transformative step. With such a framework, Kosovo is envisioned to be a more attractive destination for sustainable and responsible investment.