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Supporting Foreign Investors - Maintaining Inequality?!.

By Alexei Ghertescu

Support of foreign investors is a very good and useful thing. But can the measures of such support create an inequality and a favourable regime for certain investors without providing them to others? And are such measures legitimate?

As you remember in my last post I told about the ECHR's judgment against Moldova basing on the Law on Foreign Investments that had already been abrogated at the moment of its pronouncement.

In 1992 the Law on Foreign Investments was enacted in Moldova. This law provided to foreign investors certain incentives and facilities. One of the guarantees of those facilities was stipulated in para. 2 of art. 43 of the Law providing the guarantees in case of changes in legislation. It stated that foreign investors and enterprises with foreign capital that had enjoyed customs, tax and other facilities were allowed to benefit from those facilities and after the new modifications having come into force.

And basing on this provision of the Law the European Court of Human Rights adopted its judgment in the case BIMER SA vs. Moldova that I wrote about.

In 2004 the Law on Foreign Investments of 1992 was abrogated by the newly adopted Law on Investments to Entrepreneurial Activity that is still in force. This law does not provide any particular incentives/facilities for foreign investors as the Law of 1992 did. And by abrogating that law it also repealed all those facilities contained in it. However, the new law contains a very interesting provision in para. 2 art. 25:

"Foreign investors that made their investments and enjoyed certain guarantees
and facilities under the Law on Foregn Investments of April 1, 1992, may still
enjoy in future all those guarantees amd facilities provided by that Law."

"So what?" - you may say.

Let me explain my view on this. Fisrt of all, I'm not sure that it is fair enough to provided certain benefits to a person without providing them to another simply because the first one started its activity earlier. And this is what actually happens. A foreign investor that made investments before the new Law has been enacted still enjoys the same privileges even after they have been abolished at the time when new-comers can't do this thereby being in a less favourable position.

Secondly, I doubt the fairness of providing to foreign investors more privileges and facilities than to the local ones. If a Moldovan company and a foreign one either make an investment of USD 1 mln, then what is the difference between these investments?

I understand an extraordinary importance of foreign investments for Moldovan economy. And I really support and welcome them. However, I suppose that the best way to attract foreign investments to Moldova is not to provide them any particular benefits, but to create the conditions for their stability and safety regardless of the political party being in power at any particular moment...

Full post as published by LAW IN MOLDOVA on August 01, 2007 (boomark / email).