Legal Reform in Albania

Over the last decade, Albania has adopted a number of significant reforms aiming to support investment. The legislative frameworks for public-private partnerships, corporate governance, insolvency, and secured transactions are relatively advanced.

Concerns remain however, in particular in connection with law enforcement through the courts, which do not enjoy a high level of public confidence. In addition, specific areas of legislation still lag behind, for example in the energy sector, including both renewable energy and energy efficiency.

 

Access to Finance

In Albania security over movable assets is governed by the Law No. 8537/1999 on Securing Charges Law and the established regime reflects most of the modern secured transactions principles. It provides that a charge can be created over present or future intangible or tangible movable property as a security for one or more present or future obligations of the chargor or another third party. The secured obligation may be conditional and need not be a monetary obligation but must be capable of being valued in money. The charge agreement must be concluded in writing and contain a description of the collateral. The law has been recently amended by Law no 10185/2008 and Law no 10185/2009.

Amendments introduced the possibility to authorise private entities to serve as administrators (intermediaries) of the Albanian Register of Securing Charges and made the register fully accessible to the public. In general, the law is clear, comprehensive, and provides the right flexibility to accommodate relatively sophisticated transactions. A drawback lies with the priority of secured creditors as priority may be lost to some employee, social security and state claims.

In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for Albania.

 

The security market is not developed in Albania, and the only market is the market of government debt instruments (T-bills and bonds). Shares are exchanged by registering ownership changes in the companies’ registers. Privatised companies which have been registered with the Share Registration Centre register their shareholder transactions at the Centre. Government bond and money markets remain at early stages of development. Benchmarks remain to be developed further in Albania’s money market whilst activity in the interbank market and currency forward markets remains very limited or absent. No corporate bonds have been issued in the last six years.

 

 Corporate Governance

Overall, the Albanian corporate governance framework has recently improved but space for further improvement remains, especially in ensuring that provisions in the law are well understood and implemented. The country lacks a functioning stock exchange and an authority that can act as champion for the promotion of corporate governance. The banking sector in Albania is well developed and banks can be in a position to be promoting good corporate governance. This can be achieved by encouraging banks to assess and monitor the quality of corporate governance of their corporate borrowers as a critical part of their on-going credit risk management.

The EBRD assessment carried out in 2007 also highlighted that the banking law requires banks to be organised under a two-tier system, with the steering council in charge of oversight of management.
 
 

Albanian Bankruptcy Law (No.8901 of 23 May 2002), as amended by Law No. 9919 of 19 May 2008 and Law No. 10137 of 11 May 2009 (the “Bankruptcy Law”) are the primary pieces of Albanian insolvency legislation. The Bankruptcy Law provides for three options: (i) the adoption of a reorganisation plan aimed at the survival of the debtor as a going concern; (ii) the sale of the debtor; and (iii) the liquidation of the debtor. The Bankruptcy Law is available for companies that are unable to pay their debts in due time or which are overloaded with debts.

The EBRD Insolvency Sector Assessment (the “Assessment”) completed in late 2009 concluded that the Albanian insolvency law framework was of good quality, showing that it is in “high compliance” with international standards.
 
 

 

Dispute Resolution

The judicial system of Albania comprises trial courts (of first instance), courts of appeal and the Supreme Court. Trial courts hear a variety of cases in the first instance (civil, commercial, criminal and administrative). There are six appellate courts of general jurisdiction that try appeals against the decisions of the trial courts and sit in panels consisting of three judges. The Supreme Court has jurisdiction in the first instance for certain cases established by law and hears appeals against the decisions of the lower courts. The Supreme Court also issues guidelines for purposes of unification and harmonisation of judicial practices.

Despite a number of measures and initiatives undertaken in recent years, the system lacks the required level of efficiency. Improvement of the judicial system is one of the key requirements established by the EU for accession, a fact which continues to drive local interest in judicial reform. The importance of judicial reform in accession negotiations was underscored in the most recent EU Progress Report.

 

 

Electronic Communications

Albania began liberalising its electronic communications sector in 1998, with full formal liberalisation being achieved in 2007. In the EBRD Telecommunications Regulatory Assessment 2008, the telecommunications regulatory framework of Albania scored relatively well, showing full compliance with international standards in regulatory independence dimension, close to full compliance in the market access (radio) dimension, with certain deficiencies shown in the remaining four dimensions

The electronic communications sector in Albania is governed by the Electronic Communications Law, 2008, as amended and supplemented by implementing regulations.

 
 
 
Communications Regulatory Development Project:

This project, requested by the Minister of Public Works and the Agency for Communications and Postal Regulation (AKEP), assisted the Ministry of Public Works (subsequently transferred to the Ministry for State Reforms and Parliamentary Relations) and the regulator (AKEP) with revision of policy and law, institution building and technical implementation of an EU consistent regulatory framework. Project inception with the ministry and the AKEP took place in Tirana in May 2008. Practical implementation work began in mid-June 2008 and progressed successfully to a conclusion during the first half of 2010. This project was jointly funded by the EC and the EBRD.

 

Energy Regulation

The Government and Ministry of Industry and Energy (the Ministry) are responsible for policy-setting in the energy sector and the Energy Regulatory Authority (ERE) is responsible for regulatory implementation. ERE was first established in 1995; in 2003, new primary legislation for the power sector (Law on Power Sector) was adopted, and recently updated in 2008. In June 2008, ERE’s regulatory authority was extended to the gas sector and a new gas law was enacted, though as a practical matter Albania has a minimal gas supply and a negligible gas market.
Albania performs reasonably well overall with respect to the quality of its energy (electricity and natural gas) sector. The recent EBRD energy law reform dimensions assessment has shown with regards to the country’s electricity legislation that private sector participation and market framework are the key weaknesses, with regulatory independence being the key strength; in the gas sector, the major deficiencies have been found in the private sector participation, network access and market framework, while regulatory independence has showed only minor deficiencies as compared to international best standards.
 
 
 

PPPs/Concessions

Even though a general policy framework for improving the legal environment and promoting PPP may not be easily identified in Albania, the way the Government recently approached concession legal framework reform illustrates its interest in promoting and using PPP in its infrastructure and services. The 2006 Albanian Law “On Concessions” (the “Law”), as amended reflect many of the best international standards and is very close to the UNCITRAL PFI Guide recommendations. In the recent EBRD PPP Legislative Framework Assessment, Albania’s legal framework scored as being in “high compliance” with international standards. With the dimensions of the selection of a private party and definitions and scope of the law having been identified as the main strengths of the country’s concessions legislation, while the dimension relating to security and support issues having been identified as its main weakness According to the Assessment, implementation of the PPP/concessions laws has been rated as achieving “high effectiveness” as compared to international standards, with the PPP law enforcement being a stronger pillar and the institutional and policy frameworks being the weaker pillars.
 
 
 

Public Procurement

Public procurement in Albania is regulated by Law No. 9643 dated 20 January 2006 “On Public Procurement” (the “PPL”), as amended, and the Decision of Council of Ministers No. 1 dated 10 January 2007 “On Public Procurement Regulations”, as amended, and other secondary laws, issued by the national regulatory body – the Agency for Public Procurement of Albania - in order to provide instruments incorporating an eProcurement system in Albania. The latest amendments took place in 2010 and introduced an integrated electronic public procurement platform covering all national contracting entities. In order to facilitate the European Union association, the Albanian PPL has been harmonised with the EU public procurement policies and is based on transparency and competition principles in alignment with the 2004 EU public procurement directives. In the EBRD 2010 assessment regulatory framework in Albania scored high among the EBRD countries of operations, with a compliance rate of 83 per cent to the assessment benchmark.