New Tajik Law on investment contracts

On 28 February 2013, the Parliament of the Republic of Tajikistan enacted the Law “On the Investment Agreement”. The Law was signed by the President on 14 March 2013. The Law provides for rules on investment contracts between the Government of Tajikistan and investors for investment projects of a “strategic” character. Such contracts are to be signed by the Government of the Republic of Tajikistan and ratified by the Parliament (Art. 12 and 13 respectively). The contract may establish rules, which are not provided for under the legislation of Tajikistan, as well as a strong grandfathering clause (Art. 6 sec. 3 of the Law). The ratification of such contracts by the Parliament elevates the special contractual regime to the level of formal legislation with a character of lex specialis. The Law foresees the possibility to agree on a very broad arbitration clause covering all disputes out of the investment contract, also in public matters (Art. 21 Sec. 2 of the Law). Tajikistan can give its consent to waive its state immunity including immunity against enforcement of arbitral awards.

The above-mentioned provisions are just examples from a long list of concessions made by Tajikistan to investors. Legislation providing for the internationalization of contracts, restrictions on sovereign rights and state immunity waivers was typical for the investment legislation of developing countries in the 1960-70s (e.g. Indonesia) and also for some post-Soviet countries in the early 1990s (e.g. Azerbaijan, Kazakhstan). The experience of these countries shows that extensive restrictions of sovereign rights very often sooner or later lead to disputes with investors. The State needs at least the right to react to changes of external circumstances and to adapt its legal framework. Investors are often not interested in such amendments and make use of the rights given to them by the State (e.g. under the grandfather clause).

The above-mentioned Law was drafted with the support of the International Finance Corporation. Probably many other international experts and organizations (e.g. UNCTAD) would advise Tajikistan to drop or at least to amend some of the provisions of this Law.

Armenia: the Customs Union v. DCFTA with the EU?

On 3 September 2013, the President of Armenia Mr. Serzh Sargsyan said at a meeting with the Russian President Mr. Vladimir Putin that Armenia would join the Customs Union of Russia, Kazakhstan and Belarus.
On the one side, this can be regarded as a reasonable step as Russia is probably the main trading partner of Armenia, and joining the Customs Union could encourage Armenia’s foreign trade activities. However, Armenia has just finished negotiations of an Association Agreement with the EU including a DCFTA Agreement. The latter has been announced to be initialed at the EU Summit in Vilnius in late November 2013.  
The problem is that in such a case Armenia would be in an FTA with the EU and at the same time a member of a customs union with non-WTO members, in which a big part of national foreign trade competencies is delegated to the customs union bodies. This combination seems to be impossible, at least as of now. Does it mean that there will be no DCFTA initialing with Armenia in Vilnius?

Ukraine and Russia: Customs formalities or political pressure?

The second half of August 2013 was not easy for Ukrainian trade with Russia: the latter has suddenly started to apply very strict control measures for Ukrainian goods at the Ukrainian-Russian border. As a result, thousands of tons of goods stood at the border and waited for completion of customs administration procedures. Some Ukrainian sources called this “an economic war against Ukraine”, but both Russian and Ukrainian officials said it was just a difficult situation with customs administration. The situation was deescalated after political contacts at the highest level had taken place. It is reported that the customs is working in a normal regime, also for Ukrainian goods. 

A little bit earlier, the production of a big Ukrainian candy producer was tested and prohibited for sale in Russia (as tests indicated that there were dangerous substances in the sweets).  There were also other disputes between Russia and Ukraine earlier this year.

Many experts believe that Russia wanted to show Ukraine that it could lose the big Russian market if it did not pursue its cooperation with the Customs Union (of Belarus, Kazakhstan, and Russia) and instead strengthened cooperation with the EU. The best position for Ukraine would be to intensify cooperation with both trade partners. This, however, seems not to be easy: if Ukraine joined the Customs Union, an EU-Ukraine Association Agreement with DCFTA would not be possible. Will Ukraine be able to balance these interests?