Albania: US Overseas Investment Report 2017

Last Updated: 14 September 2017
Article by Ardjana Shehi and Irv Vaso

SECTION 1: MARKET OUTLOOK

1.1 What is the outlook for US investment into your jurisdiction over the next 12 months, given the new US administration's protectionist focus?

The outlook for US investment into Albania over the next 12 months is not promising, not because of the new US administration's protectionist focus but due to domestic reforms that still need time to show results.

1.2 Are there any industries in particular that you think are more likely to be affected by the US's new economic stance?

The petroleum industry in Albania is more likely than other sectors to be affected by the US administration's new economic stance.

SECTION 2: APPROVING FOREIGN INVESTMENTS

2.1 Explain the foreign investment approval process and approval timetable.

Foreign investment is governed by several laws and regulations; the most significant are the Albanian Constitution and Law 7764 On Foreign Investments dated November 2 1993, as amended (Law on Foreign Investments).

According to the Law on Foreign Investments, there are no specific approval processes and timetables to be followed in general by the foreign investors.

The constitution guarantees fundamental rights, such as private ownership, freedom of economic activity, free market economy, anti-monopolistic protection, free repatriation of capital and profits, and equal treatment of foreign and domestic investments and investors.

Law 10303, dated July 15 2010, established the Albanian Investment Development Agency (Aida), which is the designated national investment promotion agency.

The following tasks are assigned to Aida: to facilitate and support direct investment in Albania; to increase the competitiveness of small and medium-sized enterprises; to promote and support exports of goods and services. It conducts activities to improve the business climate, helping private companies at all stages of their economic activity, as well as intermediating with investors and state authorities. Aida may be a valuable resource for potential investors looking to invest in Albania.

2.2 Are there any investment restrictions in specially regulated sectors and is the government entitled to any special rights in these sectors?

There are no investment restrictions in any type of sectors in Albania; on the contrary, under the Law on Foreign Investments, foreign investors are granted the same treatment as nationals and do not require any additional licence or approval to invest in the country. Foreign investors are free to establish legal presence, subsidiaries, representative offices, and branches to the same extent as any domestic business may and the foreign investor shall not be subjected to less favourable treatment in terms of taxes.

According to some recent legal amendments, under article 8(a) of the Law on Foreign Investments, the Council of Ministers may grant special state protection to a foreign investment in the case that the investment is performed in public infrastructure or tourism, energy and agriculture on the basis of a state concession contract; or on immovable property granted by Albanian government; or on an immovable property upon which the foreign investor has acquired proprietary rights. The latter is on the basis of documents or public acts lawfully issued by a competent state body or public entity, and where an investor performs or plans to perform an investment for a value not less than €10 million ($11.75 million).

2.3 Which authority oversees competition clearance and give a brief overview of the merger clearance process?

The Albanian Competition Authority (ACA) is established by the Competition Law, and is composed of a commission of five members and a secretariat. The Competition Commission is the decision making body.

The Competition Law requires mandatory notification of all transactions that result in a 'concentration of undertakings' and which meet the relevant thresholds independently of whether such transaction is by way of a merger, an acquisition or a public takeover. Any joint-venture (JV) that performs the function of an independent economic unit is also subject to the Competition Law. More specifically, a concentration under the Competition Law shall be deemed to arise where a change of control on a lasting basis results from:

  • the merger of two or more previously independent undertakings or parts of undertakings; or
  • the acquisition by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings.

The creation of a JV shall not be deemed to be a JV if the scope of the JV is the coordination of competing activities between two or more independent undertakings.

Concentrations require notification with the Competition Authority if in the last financial year preceding the concentration some relevant legal conditions are met.

Procedural deadlines

The deadline for notification is 30 calendar days from the date of the conclusion of an agreement for merger, acquisition of control, creation of a JV or submission of a public bid for acquisition or exchange. A filing shall be made on the basis of the main signed transaction agreement. There are no specific rules referring to memoranda of understanding (MoUs), good faith intentions etc. The period starts to run from the next day of the agreement.

The ACA must decide whether to clear the transaction or to commence an in-depth investigation within two months of receipt of the notification. The period of two months shall begin on the first working day following the confirmation by the ACA of the acknowledgement of receipt of a proper notification; or, if the information to be supplied with the notification is incomplete, on the day following the receipt of the complete information.

The ACA may, however, extend this deadline by a further specific legal term if the participating parties commit to undertake to remedy any adverse effects of the merger to obtain clearance.

Based on the Instruction on Simplified Procedures for the Review of Concentrations, the ACA may decide to clear a transaction within a specific legal deadline in the following cases:

  1. An acquisition between undertakings on condition that none of the participating undertakings shall be engaged in the same business activity for the same product and market;
  2. An acquisition between undertakings if both the following conditions are simultaneously met:

    1. The combined market share of all the parties dealing with the same business activity in the same product or geographic market (horizontal relationship) is less than 15%.
    2. Individual or combined market shares of all parties in the concentration dealing with business activities in a product market which is an upstream or downstream market of a product market in which any other party in the concentration is engaged (vertical relationship) is less than 25%.
  3. An acquisition where both the following conditions are met:

    1. The combined market share of all the parties in the concentration being in a horizontal relationship is less than 50%.
    2. The delta of the Herfindahl-Hirschman Index (a measure of market concentration) resulting from the concentration is under 150.

The ACA may always apply the standard review periods if it judges that the concentration deserves closer investigation. On the other hand, the ACA may select not to apply the simplified review period even in those cases when clearly there are no market overlaps but the markets concerned are considered 'neighbouring markets'.

Where the ACA commences an in-depth investigation, it has an additional period to decide whether to unconditionally clear the concentration or to clear it subject to conditions or to prohibit the concentration.

If the ACA does not decide within the set deadlines (either for the preliminary phase or the in-depth phase), the Competition Law provides for the 'silence-is-consent-rule,' unless the ACA extends or suspends the above-mentioned time limits.

Notification fee (to obtain notification forms):

  • ALL7,500 ($66.5) for undertakings that acquire control with a domestic total turnover of ALL200 million to ALL1 billion;
  • ALL15,000 for undertakings that acquire control with a domestic total turnover of above ALL1 billion.

Clearance fee:

  • ALL250,000 for undertakings that acquire control with a domestic total turnover of ALL200 million to ALL1 billion;
  • ALL500,000 for undertakings that acquire control with a domestic total turnover of above ALL1 billion.

2.4 Are there further approval requirements that foreign investors should be aware of?

Foreign investors are entitled to the same rights as Albanian investors. Furthermore, according to the Law on Foreign Investments, all foreign investments have equal and unbiased treatment protection and security.

To read this Report in full, please click here.

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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