Constitutional Court

K248/23, Applicants: Ferat Shala and nine (9) other deputies of the Assembly of the Republic of Kosovo, Constitutional review of Law No. 08/L-209 on Sustainable Investments

Key words: institutional referral, admissible referral, Council for Strategic Investments, opportunity of special selection of investor, transitional provisions and abrogation of laws, principles of market economy and free competition, elaboration of use of property and natural resources

The Constitutional Court of the Republic of Kosovo has decided on the referral in case KO248/23, with applicants Ferat Shala and nine (9) other deputies of the Assembly of the Republic of Kosovo, submitted to the Court based on the authorizations established in paragraph 5 of Article 113 [Jurisdiction and Authorized Parties] of the Constitution of the Republic of Kosovo, regarding the constitutional review of Law no. 08/L-209 on Sustainable Investments.

The Court decided (i) to, unanimously, declare the Referral admissible; and (ii) to hold, unanimously, that Articles 21 (Council), 35 (Special selection of investor), 52 (Transitional provisions), and 53 (Abrogation) of Law no. 08/L-209 on Sustainable Investments are not in contradiction with paragraph 1 of Article 7 [Values], paragraphs 1 and 2 of Article 119 [General Principles], and paragraph 2 of Article 122 [Use of Property and Natural Resources] of the Constitution; and (iii) to, unanimously, declare that based on Article 43 (Deadline) of Law no. 03/L-121 on the Constitutional Court of the Republic of Kosovo, Law no. 08/L-209 on Sustainable Investments shall be sent to the President of the Republic of Kosovo for promulgation.

The Judgment initially clarifies that the contested Law, inter alia, reflects the purpose of promoting, supporting, and protecting sustainable investments and exports in the Republic of Kosovo, including the determination of state objectives and priority sectors for development. According to the clarifications provided, the contested Law, inter alia, determines (i) the obligations of institutions, public authorities, and investors regarding investments in the Republic of Kosovo, including the rights of investors including but not limited to the right to investment, equality before the law, respect for rights, protection from expropriation, and appropriate compensation and legal remedies; and (ii) the procedure of declaring strategic investments, including the necessary criteria for this purpose. Furthermore, the contested Law establishes the Council for Investments, which is responsible for evaluating, selecting, implementing, supervising, and deciding on strategic investment projects according to the criteria set out in the contested Law. The Judgment also clarifies that upon the entry into force of the contested Law (i) two other laws shall be repealed, namely Law no. 04/L-220 on Foreign Investments and Law no. 05/L-079 on Strategic Investments in the Republic of Kosovo; while (ii) the Investment and Enterprise Support Agency in the Republic of Kosovo shall be abolished and two new executive agencies shall be established, namely the Agency for Investment and Export under the Office of the Prime Minister and the Agency for Innovation and Support to Enterprises in the Republic of Kosovo under the Ministry of Industry, Entrepreneurship and Trade.

The Applicant deputies of the Assembly challenge the aforementioned law in its entirety, claiming its incompatibility with the Constitution but contesting three categories of articles of the contested Law, namely (i) Article 21 (Council), claiming that it violates the principles of the organization of economic relations in the Republic of Kosovo, including as a result of failure to determine by law reasonable conditions for the utilization of natural resources of Kosovo based on the obligations stemming from paragraph 2 of Article 122 [Use of Property and Natural Resources] of the Constitution; (ii) Article 35 (Special selection of investor), claiming that it violates the right to equal treatment of all investors as it creates opportunities for arbitrariness in the selection of the strategic investor through a direct negotiation procedure by the Investment Council, contrary to Article 119 [General Principles] of the Constitution; (iii) Articles 52 (Transitional provisions) and 53 (Abrogation), emphasizing that they abrogate two applicable laws, namely Law no. 04/L-220 on Foreign Investments and Law no. 05/L-079 on Strategic Investments in the Republic of Kosovo, thereby infringing the rights of foreign investors acquired based on these laws, and moreover that upon the establishment of the Agency for Investment and Export and the Agency for Innovation and Support to Enterprises in the Republic of Kosovo, the Investment and Enterprise Support Agency in the Republic of Kosovo shall be abolished, violating the rights of its public officials in the context of their employment relation status. The claims of the Applicants have been counter-argued by the Office of the Prime Minister of the Republic of Kosovo and the Parliamentary Group of the VETËVENDOSJE! Movement, emphasizing that the contested Law is in compliance with the Constitution, inter alia, because it (i) ensures equal legal rights for all investors and all domestic and foreign enterprises; (ii) sets clear rules governing an Investment Council and determining strategic investment; (iii) clarifies that all acquired rights of foreign investors based on the laws abrogated through the contested Law are guaranteed according to the laws under which they were acquired; furthermore, it (iv) specifies that all rights of officials of the Investment and Enterprise Support Agency in the Republic of Kosovo shall be respected based on the provisions of the Law on Public Officials.

In assessing the constitutionality of the contested Law, the Court initially elaborated (i) the fundamental principles of market economy according to the Constitution and the applicable legislation of the Republic of Kosovo; and (ii) to the extent it is relevant in the circumstances of the present case, the relevant principles stemming from international instruments related to the market economy with free competition, as defined through the applicable regulations of the European Union, and the principles stemming from the case law of the European Court of Human Rights and the relevant Opinions of the Venice Commission.

In applying the aforementioned principles in the course of constitutional review of the contested Law, the Judgment initially emphasizes that, based on Article 7 [Values] of the Constitution, the market economy is a value of the Republic of Kosovo, while based on Article 10 [Economy] of the Constitution, the market economy with free competition is the basis of the economic order of the Republic of Kosovo. Furthermore, and to the extent it is relevant in the context of the constitutional review of the contested Law, the Judgment highlights Article 119 [General Principles] of the Constitution, according to which, inter alia, the Republic of Kosovo shall (i) ensure a favorable legal environment for a market economy, freedom of economic activity and safeguards for private and public property; (ii) ensure equal legal rights for all domestic and foreign investors and enterprises; (iii) establish independent market regulators where the market alone cannot sufficiently protect the public interest; and (iv) A foreign investor is guaranteed the right to freely transfer profit and invested capital outside the country in accordance with the law. The Judgment also elaborates on Article 122 [Use of Property and Natural Resources] of the Constitution, emphasizing, inter alia, that (i) the people of the Republic of Kosovo may, in accordance with such reasonable conditions as  may be established by law, enjoy the natural  resources of  the  Republic  of  Kosovo,  but they may not infringe on the obligations stemming from international agreements on economic cooperation; and that (ii) limitations on owners’  rights  and  other  exploitation  rights  on goods  of  special  interest  to the  Republic  of  Kosovo  and  the  compensation  for  such  limitations  shall   be  provided by law.

In the Court’s Judgment, the principles explained above were applied in the review of each article assessed separately. Having said that, and for the purposes of this summary, the Court will clarify the main findings and conclusions regarding the most contentious issues of the contested Law based on the arguments and counter-arguments of the parties before the Court, specifically (i) the establishment of the Investment Council; (ii) the possibility of special selection of investor; and (iii) the principle of legal certainty related to the abrogation of Law no.04/L-220 on Foreign Investments and Law no.05/L-079 on Strategic Investments in the Republic of Kosovo and the abolishing of the Investment and Enterprise Support Agency in the Republic of Kosovo and the rights of the officials of this Agency.

(i) Establishment of the Council for Investments of the Republic of Kosovo

The Judgment first clarifies that Article 21 (Council) of the contested Law determines the role and responsibilities of the Council in the field of investments and exports in the Republic of Kosovo, including the evaluation, selection, implementation, supervision, and decision-making regarding strategic investment projects, as well as the approval of action plans and reports on the promotion and protection of investments and exports, paying attention, according to the provisions of the contested Law, to the removal of barriers to investments and the improvement of the economic activity environment. The Judgment also clarifies that Law no. 05/L-079 on Strategic Investments in the Republic of Kosovo, which is abrogated by the contested Law, had established an Inter-Ministerial Committee on Strategic Investments with similar competencies and responsibilities as those of the Council for Investments.

In the context of the competencies and responsibilities of the Council, the Judgment emphasizes Article 93 [Competencies of the Government] of the Constitution, according to which, inter alia, the Government promotes the economic development of the country. According to the clarifications provided in the Judgment, in exercising this competence, the Government is conditioned by respecting the principles related to the market economy stemming from the Constitution, namely (i) respecting the values of the Republic of Kosovo, including the market economy with free competition and respecting the fundamental rights and freedoms, including for economic operators, as defined in Articles 7 [Values] and 10 [Economy] of the Constitution respectively; (ii) respecting the provisions of Article 119 [General Principles] of the Constitution, according to which, inter alia, the Republic of Kosovo has the obligation to establish mechanisms whereby it shall ensure a favorable legal environment for a market economy, freedom of economic activity, and safeguards for private and public property, shall ensure equal legal rights for all investors and all domestic and foreign enterprises, and shall ensure that a foreign investor is guaranteed the right to freely transfer profit and invested capital outside the country in accordance with the law; and (iii) ensuring that the natural resources of the Republic of Kosovo shall enjoy their special protection in accordance with the law as defined in Article 122 [Use of Property and Natural Resources] of the Constitution.

Applying the Constitutional principles as above, the Judgment clarifies that the establishment of an Investment Council does not result in violation of the market economy with free competition. Additionally, its decision-making is subject to constitutional guarantees, including in the context of fundamental rights and freedoms, ratified international agreements, and other applicable laws of the Republic of Kosovo. Also, based on the competencies and functions of the Investment Council, it does not result in violation of the constitutional guarantees related to the use of property and natural resources according to the provisions of Article 122 [Use of Property and Natural Resources] of the Constitution, including applicable laws in the context of the use of property and natural resources of the Republic of Kosovo.

As a consequence, and according to the clarifications provided in the Judgment, the Court has held that Article 21 (Council) of the contested Law is not in contradiction with paragraph 1 of Article 7 [Values], paragraphs 1 and 2 of Article 119 [General Principles] of the Constitution, and paragraph 2 of Article 122 [Use of Property and Natural Resources] of the Constitution.

(ii) Special selection of investor

The Judgment clarifies that based on Article 35 (Special selection of investor) of the contested Law, the Council may publish an invitation to select the partner for the implementation of the strategic investment according to the evaluation criteria in accordance with the applicable legislation, while as an exception from this rule, the Council may select by direct negotiation a trusted company as the proposer, implementer, or partner for the implementation of a strategic investment according to the evaluation criteria established by the applicable law. According to the clarifications provided in the Judgment, the contested Law defines the general conditions for declaring a strategic investment, including in relation to employment, growth of production and export, regional development, and environmental sustainability, which are also related to the state objectives aimed to be fulfilled through the promotion and protection of investments and priority sectors for investments in the Republic of Kosovo. Moreover, the Judgment underlines the fact that the contested Law provides the possibility of additional and/or supplementary verifications of a potential investment, especially if the intended or completed investment by a foreign investor may result in violation of public order or national security.

According to the clarifications provided in the Judgment, taking into account the fact that the partners for the implementation of strategic investments are selected through a public process, while exceptionally the selection of the partner for strategic investments through the direct negotiation procedure is subject to the criteria defined in the contested Law, including the provisions of the applicable Law on Public Procurement, but also the right to a legal remedy according to the provisions of Articles 32 [Right to Legal Remedies] and 54 [Judicial Protection of Rights] of the Constitution, based on the clarifications provided it follows that in the context of Article 35 (Special selection of the investor) of the contested Law, the guarantees of paragraphs 1 and 2 of Article 119 [General Principles] of the Constitution have not been violated. Having said that, the Judgment also clarifies that this assessment does not mean the legality and/or constitutionality of the Council’s decision-making in the context of the special selection of the investor, and which may be subject to the assessment of legality by regular courts and constitutionality by the Constitutional Court according to the provisions of paragraph 7 of article 113 [Jurisdiction and Authorized Parties] of the Constitution.

As a result, and according to the clarifications provided in the Judgment, the Court has held that Article 35 (Special selection of investor) of the contested Law is not in contradiction with paragraphs 1 and 2 of Article 119 [General Principles] of the Constitution.

(iii) Abrogation of Law no. 04/L-220 on Foreign Investments and Law no. 05/L-079 on Strategic Investments in the Republic of Kosovo

The Judgment clarifies that: (i) by Article 53 (Abrogation) of the contested Law, two prior laws are repealed, namely, Law no. 04/L-220 on Foreign Investments and Law no. 05/1-079 on Strategic Investments in the Republic of Kosovo; while (ii) by Article 52 (Transitional provisions) of the contested Law, the Agency for Investments and for the Support to Enterprises in the Republic of Kosovo are abolished. The latter is replaced by two other Agencies, established based on Article 18 (Establishment of the agencies) of the contested Law, namely the Investments and Exports Agency and the Agency for Innovation and Enterprise Support in the Republic of Kosovo, functions, competencies and organization of which is also defined through the contested Law.

According to the clarifications provided in the Judgment, including the elaboration of the principles related to the principle of legal certainty in the context of the claims of the Applicants that the abrogation of the previous laws violates the rights of foreign investors acquired based on them and that the abolishing of the Investment and Enterprise Support Agency in the Republic of Kosovo results in violation of the rights of its public officials, the Judgment, inter alia, clarifies that the adoption, amendment, and/or abrogation of laws is within the competence of the Assembly of the Republic of Kosovo according to the provisions of Articles 65 [Competencies of the Assembly], 80 [Adoption of Laws], and 81 [Legislation of Vital Interest] of the Constitution, always provided that the values of the Republic of Kosovo as defined in Article 7 [Values] of the Constitution, which also includes the principle of legal certainty and the criteria of “clarity” and “predictability” of laws, are respected. According to the clarifications provided, the contested Law was issued based on the aforementioned constitutional authorizations of the Assembly, and taking into account the content of the final provisions of the contested Law, according to the clarifications provided in the Judgment, it does not result in the violation of the principle of legal certainty. Furthermore, based on the clarifications provided, the contested Law specifies that the agencies established through it, each assume the responsibilities, properties under administration, contracts, obligations to third parties and ongoing administrative procedures , and as a consequence, any right acquired based on previous laws, is subject to the guarantees of the contested Law and moreover, any legal dispute that may be related to the acquired rights of legal entities, namely economic operators, is subject to the right to legal remedy and judicial protection of rights according to the applicable laws and the provisions of Articles 32 [Right to Legal Remedies] and 54 [Judicial Protection of Rights] of the Constitution.

On the other hand, and in relation to abolishing of the Investment and Enterprise Support Agency in the Republic of Kosovo, including the status of its public officials, the Judgment clarifies, inter alia, that the establishment of Independent Agencies is within the competence of the Assembly in accordance with the provisions of Article 142 [Independent Agencies] of the Constitution. Beyond the constitutional guarantees, according to the clarifications provided, issues related to the establishment but also the merger and abolishing of Agencies, including executive ones as is the case in the circumstances of the contested Law, are regulated by Law no. 06/L-113 on the Organization and Functioning of State Administration and Independent Agencies. The latter, in the context of the abolishing of an Agency, regulates the legal consequences related to the respective public officials, as also defined by the contested Law itself that the relevant Ministry of Industry, Entrepreneurship, and Trade shall assume the respective systematization of civil servants. According to the clarifications provided, this systematization is subject to the guarantees of Law no. 08/L-197 on Public Officials, including the right to legal remedies and judicial protection of rights according to the provisions of the Law on Public Officials itself, and also Articles 32 [Right to Legal Remedies] and 54 [Judicial Protection of Rights] of the Constitution.

Consequently, and according to the clarifications provided in the Judgment, Articles 52 (Transitional provisions) and 53 (Abrogation) of the contested Law are not in contradiction with paragraphs 1 and 2 of Article 119 [General Principles] of the Constitution.

This translation is unofficial and serves for informational purposes only.