Legal Reform in FYR Macedonia

Overall, the legal framework in FYR Macedonia is adequate to support the Bank’s proposed interventions, though further reforms are needed in some areas. FYR Macedonia is an example of an EBRD country of operations where access to finance would benefit from targeted legal changes in order to further develop into a system that would fully cater for the needs of modern finance transactions.

 

Access to Finance

Improving access to finance, especially for SMEs and MSMEs especially involved in the rural sector is a key part of the EBRD’s country strategy for FYR Macedonia (2010 – 2013).
Although a general secured transactions system is functioning well, some modifications of the Law on Contractual Pledges would be welcome in order to reflect the needs of modern business transactions (e.g. pledge over bank account). In addition, facilitating factoring transactions by the implementation of regulations and legislation for factoring might help to improve overall access to finance by making factoring services more transparent and legally certain.
FYR Macedonia is an example of an EBRD country of operations where access to finance would benefit from targeted legal changes in order to further develop into a system that would fully cater for the needs of modern financial transactions.
 
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 FYR Macedonia.
 
 
 

Capital Markets

There are several important laws and regulations that regulate FYR Macedonia’s primary and secondary debt capital markets activity. The Civil Code (General Part) contains general provisions relating to property and proprietary rights, including the classification of securities. The Law on Securities sets the basic regulatory framework for activity in the securities market. The Law on Investment Funds regulates investment activities of funds, including mutual funds; the Company
Law relates to issuance of equities and bonds by joint stock companies. There are several important laws and regulations that regulate FYR Macedonia’s primary and
secondary debt capital markets activity. The Civil Code (General Part) contains general provisions relating to property and proprietary rights, including the classification of securities. The Law on Securities sets the basic regulatory framework for activity in the securities market. The Law on Investment Funds regulates investment activities of funds, including mutual funds; the Company
Law relates to issuance of equities and bonds by joint stock companies. MSE should focus on connecting with other Balkan exchanges to increase its attractiveness for both issuers and investors. In terms of suggested legal reform efforts, FYR Macedonia should continue harmonizing its legal framework with acquis communautaire as required during the accession process. In terms of money markets, as of 2012 there are ISDA netting opinions for 57 jurisdictions but not for FYR Macedonia, which could address issue of netting and close-out netting as a long term recommendation.
 
 

Contract Enforcement and Judicial Capacity

The EBRD Judicial Decisions Assessment found court judgments in commercial law matters in FYR Macedonia to be reasonably predictable, although this varied according to subject matter and the state of the underlying legislation and institutional frameworks. The quality of court judgments in commercial matters was variable, based in part on the experience of judges with the underlying law and practice. For instance, quality was higher in cases dealing with the land title register, which has a more established tradition in the country, resulting in judges being more familiar with its workings. By contrast, decisions dealing with company shareholdings and related institutions such as the stock exchange were of lower quality, as these substantive areas are still relatively new for judges in the country. The speed of justice in the country was faster than in a number of other countries in South East Europe, although many courts still suffer from backlogs and certain types of matters tend to make up a significant percentage of court lists. Steps have been taken recently to address this, such as the introduction of a fast-track procedure for simple debt collection.
 
 
 

Corporate Governance

The principal legislation on corporate governance in FYR Macedonia is found in the Law on Trade Companies (2004) (the “TC Law”); the Securities Law (2005); and the Banking Law (2007), all as amended. There is also a separate mandatory banking regulation on Basic Principles of Corporate Governance in Banks. The Securities and Exchange Commission of the Republic of Macedonia also enacted a number of secondary legislation further regulating corporate governance of listed companies.
The Corporate Governance Code approved by the Macedonian Stock Exchange (“MSE”) in 2006, applies to companies listed on the MSE. Though voluntary in nature, the ‘comply-or-explain’ principle imposes an obligation on the companies to explain the level of compliance with the best practice provisions and the reasons for non-compliance. The Code is accompanied by scorecards for one and two tier companies. The objective of the scorecards is an evaluation of the degree of application of the Code. However, the application and publishing of the scorecards is not clear, as their enforceability and use do not appear to be mentioned in any regulation. The MSE also prescribed the Listing Rules for the companies which set out the basic conditions that have to be met for the listing on the small and medium enterprise official market. The 2007 EBRD corporate governance assessment rated corporate governance in FYR Macedonia to be in medium compliance with the OECD Principles, with the major weaknesses found in the transparency and disclosure section.
 
 
 

Debt restructuring and bankruptcy

The main legislation governing insolvency proceedings of businesses (including individual entrepreneurs) in FYR Macedonia is the Insolvency Act of 2006 (as amended).
Based on the results of the assessment, a developed legal framework appears to exist for the IOH profession in FYR Macedonia, which prima facie, displays a number of strengths. Nevertheless, such framework would benefit from further improvements to address certain important areas of weaknesses and thus improve IOH capacity and performance.
 
 
 

Electronic Communications

The main legal basis for electronic communications regulation is the Law on Electronic Communications, which was adopted in 2005 and has been amended several times since. FYR Macedonian legislation on electronic communications is generally aligned with the European Union (EU) 2003 regulatory framework. Efforts to ensure full alignment of legislation with the EU 2009 regulatory framework are believed to be underway but as yet remain incomplete. The main deficiencies of the legislative framework relate to provisions for interconnection and infrastructure access, as well as those applying to spectrum management. In the EBRD Telecommunications Regulatory Assessment 2008, the telecommunications regulatory framework of FYR Macedonia scored well, showing full compliance with international standards in all but two dimensions, the latter showing minor deficiencies.
 
 
 

Energy and resource efficiency

As part of its EU accession bid, FYR Macedonia has undertaken considerable efforts to create a sound policy and regulatory framework for the energy efficiency sector. However, the existing framework remains quite basic and requires further efforts, specifically by creating sound and predictable secondary legislation. There is no specific energy efficiency law in FYR Macedonia, with the Energy Law, containing provisions regarding energy efficiency, being the centrepiece of legislation in the sector. The Energy Law is complemented by several implementing regulations (“rulebooks”), including a rulebook on marking the energy efficiency on the household appliances and a rulebook on energy efficiency of buildings.
 
 

Energy legal and regulatory reform

FYR Macedonia performs reasonably well with respect to its electricity sector. The recent EBRD energy law reform dimensions assessment project has shown with regards to the country’s electricity legislation that public service obligations is the key weakness, with the regulatory independence and regulatory autonomy being the key strengths of the country’s electricity legislation. In September 2009 the Government issued an Action Plan for compliance of the national legislation with the EU legislation on electricity and natural gas. New amendments of the Energy Law and other bylaws are under preparation in order to increase ERC’s competences, market competition and security of supply.
 
 

PPP/Concessions

Public procurement in FYR Macedonia is regulated by the Law on Public Procurement adopted on December 3rd 2007, published in the official Gazette of R.M. No.136/07; 130/08) as amended (PPL) and secondary legislation issued by the national regulatory body - Public Procurement Bureau (PPA), a central government body established within the Ministry of Finance. The latest amendments took place in 2011 and introduced an integrated electronic public procurement platform covering all national contracting entities covered by the PPL.
 
The FYR Macedonia PPL provides for modern and uniform public procurement regulation, in accordance with the 2004 EU Directives, with procurement methods suitable for different contract types. In the EBRD 2010 assessment regulatory framework in FYR Macedonia scored moderately well among the EBRD countries of operations, with a compliance rate of 65 per cent to the assessment benchmark. Tenders, open and restricted, are the default procurement methods; the contracting entity may apply direct contracting and negotiated procedures only in limited situations where the law allows. PPL establishes the mandatory electronic procurement procedures and enforces transparency of the contracting entities procurement decisions. Overall, the national public procurement policies are well developed and in compliance with current international best practice. The PPL regulates pre-tendering, but post-tendering phases of the procurement process, including contract performance management remains unregulated. The latest
amendments improved transparency safeguards, but integrity instruments are still not fully compliant with international standards. Based on the EBRD 2012 self-assessment results, implementation of eProcurement tools has been reported as successful; except for pre-qualification systems and e-catalogues, the FYR Macedonia eProcurement framework is comprehensive.
 
 
 

Public Procurement

Public procurement in FYR Macedonia is regulated by the Law on Public Procurement adopted on December 3rd 2007, published in the official Gazette of R.M. No.136/07; 130/08) as amended (PPL) and secondary legislation issued by the national regulatory body - Public Procurement Bureau (PPA), a central government body established within the Ministry of Finance. The latest amendments took place in 2011 and introduced an integrated electronic public procurement platform covering all national contracting entities covered by the PPL.
In the EBRD 2010 assessment regulatory framework in FYR Macedonia scored moderately well among the EBRD countries of operations, with a compliance rate of 65 per cent to the assessment benchmark. Tenders, open and restricted, are the default procurement methods; the contracting entity may apply direct contracting and negotiated procedures only in limited situations where the law allows.
Further, based on the EBRD’s 2012 self-assessment results, implementation
of eProcurement tools has been reported as successful; except for pre-qualification systems and e-catalogues, the FYR Macedonia eProcurement framework is comprehensive.