Newsletter. Issue 1.

On the web-site of our law office from now on you will be able to read a newsletter that will be issued monthly (I hope it will). It is likely to appear on the site in a day or two, but you can download it right now.

The topics that have been touched in the first issue:

- The Agency for the Protection of Competition: What Can Be Expected from the Newly Created State Authority?

- The New Regulation of Limited Liability Companies Activity: What Should Existing Companies Take into Consideration? – Part 1.

All materials are presented in 2 languages: English and Russian.

To download the newsletter just click here.

The Website of the Law Office of Alexei Ghertescu

I can finally announce the launch of the website of the Law Office of Alexei Ghertescu.

Here is the link:

http://www.alg.md/

Here you will find a lot of information about our activity and the services provided.
There is still a lot of work to do and ideas to realize. However, the site is functional.

Any comments and suggestions are really welcome.

Fruitless Efforts

At the beginning of November the Parliament adopted in the 1st reading the draft law on modifications to be introduced into the Code of Civil Procedure. According to the draft art. 206-(4) of the Code has been proposed to be excluded from the Code.

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This paragraph of art. 206 provides that in case both parties (claimant and respondent) have not appeared for judicial hearings without having presented any reasons for its failure to appear and neither party asked the court to hold the hearings his absence the court postpones the case examination. In case of repeated non-appearance the court takes the case off the list of cases examined by it.

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The draft law providing exclusion of the above paragraph is supposed to reduce the time of cases examination by courts and to oppose intentional retardation of cases by parties.

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Recently President Voronin presided at the meeting with heads of law-enforcement and judicial bodies. He stated that retardation of examination of cases has become "the national sport" and may create problems at the European Court of Human Rights. According to him certain cases last for several years harming the interests of citizens, state, diminishing the trust in state authorities, damaging the image of the country as a whole. The President has demanded the acceleration of cases examination.

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In the Informative Note to the Draft Law signed by the deputy Minister of Justice Mr. Nicolae Esanu the exclusion of para. (4) of art. 206 of the CCP is intended to eliminate artificial retardation of cases because of ungrounded failure of parties to appear before the court. The authors of the draft say that the possibility to take the case off on the first hearing in case of the parties' unmotivated absence will permit to accelerate examination of cases by Moldovan courts.

But is this the real problem? And can it be solved that way? This whole story reminds me of attempts to treat consequences of a disease instead of its cause.

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At the moment the court has the right to quit proceedings on the case and take it off on the first hearing if the claimant has not appeared for the hearing after being duly informed, has not presented any motivated reasons for its non-appearance and has not asked the court to examine the case in his absence. And respectively the court has the right to examine the case on the second hearing in case of respondent's repeated absence with the latter one having been properly informed having not presented any grounded reasons for its non-appearance.

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So, Moldovan courts have all legal possibilities to examine cases on the first or second hearing. However, that rarely happens. First, a lot of cases need a lot time to be properly examined. It sometimes takes 5, 6, 7 or more hearings. And that is OK.

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The main problem is that a lot of cases are very often postponed because of the parties' failure to appear before the court. A couple of years ago I had a case that had been postponed about 6 or 7 times because of the other party's non-appearance. So, why does that problem regularly recur? And why it won't be solved at all by the above mentioned modifications into the Code of Civil Procedure? The answer is so simple that our authorities should feel ashamed as the problem can be so easily resolved.

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The scourge of Moldovan judiciary that often causes too long cases examination is that the litigating parties... ARE NOT PROPERLY NOTIFIED BY COURTS about the date and time of judicial hearings!!!

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So, what usually happens? The court sends a notification by ordinary mail without any confirmation of receipt. Than the party does not appear on the respective date and later on says that she was not duly informed about the hearings. And even in case when such a party has received the notification the court has no evidence that that party has been duly informed. And it must defer the case examination. And the same situation may repeat time after time. Even if the court takes the case off the absent party can then easily reinstate the case without even appealing to the upper courts by submitting a motion stating therein that she has not been notified about the hearing. Sometimes the cases last for very long periods of time because of this silly (I cannot name them otherwise) failures to inform the parties about the examination of the case.

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The cost of solution of the problem is just a couple of leis that should be paid for the notice of receipt. Such a notice comes back to the court and serves as an evidence of due notification of parties about the time and date of judicial hearings. That's it. There is no necessity in any modifications of the Code of Civil Procedure, no system changes, no parliamentary debates. Just summonses with notices of receipt.

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I forsee your question: if the solution is so simple than why the problem still exists? The majority of judges say that courts have no money for this, that can't simply afford this notices of receipt annexed to their letters with summons sent to parties. In order to inform a party judges sometimes oblige the other party to send a summon with such a confirmation. And though it helps sometimes in conrete cases this is not a solution because it is not the obligation of parties to a litigation to inform each other, its the obligation of courts.

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Thus, instead of spending senselessly a lot of time for finding solution, preparing draft laws, debating them and passign through the Parliament, making other fruitless efforts and finally having no results wouldn't it better to find sources to let courts do what they have to do according to already existing rules...

Agency for Protection of Competition Demonstrates Its Activity - follow-up

Just a follow-up to my previous post.

Viorica Carare, the General Director of the Agency, told to journalists that within half a year during which the Agency exists it received 60 claims and there have been decisions taken on 31 of them.

What regards the most famous of them (Bomba supermarket and Sun Communications) she said that she had nothing to add to the information that had been previously communicated. So, this is the very problem that I told recently. We know absolutely nothing about the Agency's activity and the way how it takes its own decisions what has led to a number of very negative reactions in media. And the head of the Agency still considers that there's no necessity to provide any additional information...

And yesterday (on October 30) there was a press-conference organized by the Foreign Investors Association of Moldova. It was stated during the press-conference that the Association had always stood for creation of the Agency for Protection of Competition. However, because of the lack of experience of the Agency's employees it has taken a series of illegal decisions and goes beyond its authority.

For instance, in summer the Agency obliged all notaries to get its approvals when authorizing all contracts of sales of shares in limited liability companies what contradicted to legislation that required such control only over the companies with a dominant position in the market.

The FIA also mentions that when determining a company's dominant position the Agency uses its own methodology that has no legal power because it has not been passed through an expert evaluation and published in the Official Monitor.* And the most serious is that the Agency tries to legalize those abuses by lobbying amendments into the Law on Protection of Competition...

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* the Official Monitor (Monitorul Oficial) - the official edition where all legal acts adopted by all public authorities in Moldova are published. Under Moldovan laws all legal normative acts should be published in the Official Monitor to enter into force.

Agency for Protection of Competition Demonstrates Its Activity

Introduction.

As my permanent readers know I periodically recur to the issues related to development of competition law in Moldova and activity of the newly created National Agency for Protection of Competition. A lot of different opinions have been expressed since February this year when the Agency's Board members were approved. For several months there were almost no information on its activity. However, autumn showed that the Agency is not going to remain a mystery anymore. In September-October period the Agency adopted several prominent decisions that have attracted significant attention and raised a lot of questions.

Orange.

The first decision that attracted media's attention was the declaration of Orange-Moldova as a mobile operator holding a dominant position in the market. The former Voxtel company renamed in spring 2007 into Orange - an internationally known brand name - according to the official data takes a market share of 64.5 % as to the number of clients and 70 % of the number of transactions.

Further developments.

After Orange it looked that the Agency was going to examine the cases of other companies that took dominant positions in their respective markets like Union Fenosa or Moldtelecom. However, this wasn't the case. Instead of being engaged in getting things put in order in noncompetitive market (fixed telephony, energy, etc.) in the end of October the Agency fastened its eyes on some other areas that resulted in a number of "loud" decisions and actions:

1. Sun Communications.

The Agency took a decision to fine the Sun Communications company, the largest cable TV operator in Moldova, to the sum of 2.5 mln lei (about USD 220 thousand). According to the General Director of the Agency (cited by the Infotag news agency) the Sun Communications with the help of the Acces-TV company intended to oust its competitor - the CTC-Alfa company out of the Chisinau market.

A 30-thousand fine was imposed on Acces-TV. The amount of penalties was determined following the companies' profits.

The Sun Communications' representative stated that the Agency's accusations harmed the image of the company. At the moment the decision is studied by lawyers and the Company reserves its right to appeal against it to a competent judicial authority.

2. The supermarket "Bomba".

The "Bomba" supermarket is one of the leading retail chains of electric household appliances. It was fined by the National Agency for Protection of Competition to the sum of 9 mln lei (about USD 780 thousand). According to the Infotag agency the ground for the Decision was the fact that the company having got the authorization to open only one outlet in Chisinau in fact has opened 7 shops in the capital and 1 in Balti thereby violating the Law on Protection of Competition. The Agency also mentions the lack of an agreement between the main shop, to which the authorization was granted, and other shops of the chain.

The just mentioned decision was followed by some accusations in media that it had been "stimulated" by a big Ukrainian retail company being alleged to clear the market away.

3. The Union of Sugar Producers of Moldova.

Within the same period of time the Union of Sugar Producers of Moldova (hereinafter - the Union) accused the Agency of attempts to discredit the organization and put it under pressure, as well as of blockading the organization's activity for 5 months. According to the Union's statements the Agency has not examined since May 18 its application to review the new version of the organization's articles of associations.

Despite the fact that the application was annexed with all documents provided by law the Agency required to present additional documents, financial and statistical reports that had nothing with the application's subject-matter. The Deputy General Director of the National Agency stated for the media that the Agency may demand the liquidation of the Union because the presented documents contain certain evidences of violation of fair competition rules, in particular, the amendments to the articles of association that provide creation of a special aid fund for enterprises.

According to the Union the actions by the Agency are provoked by the Union representatives' participation in examination of the new version of the Law on Protection of Competition, who repeatedly pointed out that the amendments elaborated by the Agency do not conform to democratic and market principles.

Reflections and Conclusions.

So, as you see the activity of the Agency so far has been fairly controversial. And it has prompted a number of questions and ruminations about the prospects and problems related to the Agency's future activity:

1. Lack of information.

So far, I think the main problem about the Agency has been the lack of information about its activity and decisions adopted by it. The general public still knows very little about the above mentioned controversial decisions. No access to the texts of decisions, no information about the facts and grounds following which those decisions have been adopted and evidences that support the facts.

The involvement of competition authorities into companies' activities may have a very significant impact upon the whole economy. This impact may be both positive and negative. Taking into consideration that the very notion of fair competition and antitrust regulation is very new and uncommon for Moldova any action of the Agency may have a deep resonance in society and cause very negative reaction even if the actions of the Agency would be legal and sound.

And this is actually what has happened. The Agency's decisions were quite shocking both because of the amount of penalties imposed on companies (that are really huge for Moldova, and the Agency has not still explained why the penalties are so big and how they have been calculated) and because of the lack of information about the facts and evidences.

Therefore, the Agency must explain in details almost every step it takes. Only in such conditions there will be enough confidence in legality of the Agency's actions and a high level of transparency will be secured. At the moment the transparency is probably the Agency's weakest point.

2. Inconsistency.

The second problem that follows the first one is inconsistency in the Agency's activity. After the declaration of the Orange's dominant position it could be expected that the Agency would attend to the natural monopolies' activities.

As I previously stated it wasn't the case. Instead of this the Agency placed the emphasis on particular cases of alleged violations. I'm not saying it should not have done this. What I say is that it looks (at least for me) a bit inconsistent. And consistency is crucial at the moment for the Agency as it is only in the process of building its reputation. By the moment the Agency seems to have started with a series of scandals what is probably not the best way of creating a trustful image.

3. The prospects for the nearest future.

The way the Agency started its activity may lead to two different conclusions: it was either lack of experience (what is normal and can be changed in the nearest future) or their actions were a result of negligence and lack of professionalism (what is much worse).

I'm not saying here about the allegations that the Agency lacked impartiality when adopting the above decisions. I cannot assert it without any strong evidence. However, the activity of the Agency must be improved in order to avoid such allegations in future (or at least to diminish grounds for them). I also hope that the Agency will not turn into another source of collecting funds for the public budget by imposing huge penalties. We do not need another "tax inspection".

What is evident is that in the nearest future the role of the Agency may become very important in regulating the Moldovan market. The business community will face the necessity to follow the Agency's instructions that may be both complicated and strict. A number of disputes and litigations may as well arise as a result of the Agency's decisions. That will definitely send a challenge to lawyers working in the field of business law. The legal professionals in Moldova are not still used to notions and regulations of competition/antitrust law and the ones who will get used to them will definitely have certain market advantages...

When an Opinion Matters...

... After that officials often decide to resign. Whether he should have done it or not, the reaction was not the one that should have followed...

Recently a big scandal in Moldovan judiciary and media erupted because of a dissent opinion of one of the European Court of Human Rights's judges. Judge Bonello presented his partly dissenting opinion in the case of Flux (No. 2) vs. Moldova, in which he severely criticized Moldovan judiciary system and the President of the Moldovan Supreme Court of Justice, judge Ion Muruianu. And although the Court in this case declared inadmissible the claims concerning the alleged lack of independence and impartiality of judge Muruianu the Bonello's dissenting opinion aroused a deep resonance in Moldovan media and shaked public opinion.

Most newspapers commented this opinion.

"The judge from Malta after studying several independent reports on the state of justice in Moldova draws a conclusion on the evident dependence of judges on political powers. In his opinion "the telephone justice" is widely spread in the Republic and courts often pronounce their judgments to please political conjuncture... This is the very case when critics cannot be disregarded... Certainly, Ion Muruianu is unlikely to be dismissed from his post, however, his professional reputation was stricken destructively. And in his person the whole judicial system that he is expected to reform and administer is under a blow" (Kishinevskii Obozrevateli)

In order to understand what is this scandal all about I would like to cite several paragraphs from judge Bonello's partly dissenting opinion (the whole text of the judgment in this case and the opinion may be found here):

1. In this case the Court could have voiced its views on the pathology of an administration of justice. It did not.

14. I would have expected the Court to pounce on this opportunity to give hope to the people of Moldova. To let out some timid whispers for justice politically untainted... . I would have been gratified had the Court asked how often judge I.M., and other candidates for the heroes of the resistance award, found against the ruling party or its exponents in politically sensitive lawsuits. It would seem that the administration of justice in Moldova respects a number of precepts. I looked for them in Article 6 and could find none of them there.*

15. All this alarms me profoundly. I have this old-fashioned prejudice against judges approximately impartial. I respond with inconstant passion to the credo of some politicians that judges fit nicely everywhere, but best of all in their pockets. I find bland, if not inconsequential, the doctrine that justice must not only be done, but should manifestly be seen to be done. Far more relevant, to me, is the doctrine that, for control-freaks to rule undisturbed, injustice should not only be done, but should manifestly be seen to be done.

16. Judge I.M.'s career crashed - from minor district judge to President of the Supreme Court in a span of time shorter than it takes to say 'the party is always right'. In an otherwise bleak panorama, it is comforting to note that the sacrifice of judges who align their energies with the welfare of the ruling political class, does not always cripple their careers.

"The situation is strange enough: usually the Strasbourg judges in their dissenting opinions and public discussions do not step beyond the limits of legal issues and aspire to avoid commentaries with political implications" (Logos press).

I do not make any assertions regarding the Supreme Court's President professionalism or impartiality or his political dependence. What I think is more important that an ECHR's judge makes a statement that any judge does in extremely seldom cases (if makes any). And this should be a major concern both for Moldovan justice and Republic's government. Instead, judge Bonello found himself under critics from the part of Moldovan judiciary.

The head of the Supreme Court's press-service Mr. Gutu stated that "a judge, a colleague cannot permit himself to criticize another judge. He is neither acquainted in person with Mr. Muruianu nor made any inquires about him. And as a result he takes for gospel what was presented to him by others" (TV7).

Meanwhile, judge Muruianu seems not to care about all these statements. In his interview to Kishinevsckii Obozrevateli he told:

"The judgment is pronounced by the Court and not by one person. If the European Court considers there was no violation and one judge does not agree with this he has the right to provide his dissenting opinion. Unfortunately, our media is not concerned with the common decision of the court and only presents a dissident opinion of a single judge. I do not care about this. I am strongly convinced that the judicial system in Moldova is absolutely independent, judges know their work and decisions are taken in strict conformity with law. We take care of our reputation and we have a sharp sense of honour and dignity.

The ECHR's decisions are obligatory for us. But these are the judgments that have a legal force but not dissenting opinions, in which the conclusions on dependence of Moldovan judiciary system and existence of so called "telephone justice" are made".

He was also supported by the Supreme Council of Magistrates that expressed its concern about "increased accusations of the judicial system of Moldova". In its statement, sent to Infotag, the Council recognizes the human right to freedom of expression and criticism of judicial instances. However, at the same time the courts must be protected from disrespect manifestations toward the justice.

The council is also concerned with the European Court of Human Rights judge Giovanni Bonello's statement that there is allegedly pathology in administering justice in Moldova.

The Council considers that the judge made this erroneous conclusion on the basis of certain essays in mass media, where the ЕСHR' decisions are interpreted in a speculative way. The allegations by the respectable judge are based on a superfluous impression and on fragmentary data and present a distorted and incorrect image of the Justice in Moldova. It spoke out in the defense of the justice image and the judicial corps, so that the right for freedom of expression should not offence the judicial system".

"Erroneous conclusion on the basis of certain essays in mass media", "a superfluous impression and fragmentary data that present a distorted and incorrect image of the Justice in Moldova".

Let see what judge Bonello speaks about these media essays and fragmentary data:

"11. I am attaching as an appendix brief summaries of several external reports on the state of the judiciary in Moldova, all highly negative and startling. For reasons of balance I wanted to include reports from other authoritative sources denying that the independence of the judiciary in Moldova is a stretcher case. I found none."

And what are those sources of fragmentary (according to the Supreme Council of Magistrates) data? As we can see from the Appendix to the dissenting opinion these are US Department of State, Council of Europe's Commissioner for Human Rights, International Commission of Jurists, International Helsinki Federation for Human Rights. Definitely, these are organizations that cannot be trusted in any way.

An interesting opinion about this situation was expressed by the actual ECHR's judge representing Moldova, Mr. Pavlovschi, in his interview to Logos Press. According to him, judge Bonello is a person of high moral and a highly qualified lawyer who has encyclopaedic knowledge. His opinion is respected and reckoned in the European Court. There exists an opinion that the present speaks with the language of judicial decisions and the future speaks with the language of dissenting opinions. They permit to open slightly a secret curtain of judicial deliberation.

"The national authorities must thank judge Bonello for such opportunity. Instead, I see how many of their representatives launched a large-scale campaign to discredit him. I find such an approach counter-productive. Moldovan authorities, as I think, have to show more tolerance to other people's opinions, especially when we talk about an European Court's judge. First of all this refers to the Supreme Council of Magistrates - the body, whose one of the main tasks is to protect legitimate interests of judges."

"I know very well and respect Mr. Muruianu. I have no doubts in his professionalism and impartiality as a judge. However, I need to make a remark. According to the European Court's practice impartiality can be subjective and objective. From subjective point of view Mr. Muruianu's impartiality raises no doubts. The Objective impartiality implies how an act of justice is perceived by people. And here judge Bonello found a problem that he decided to make public. Even if somebody did not agreed with him it would be impossible to disagree with his words that "justice must not only be done, but should manifestly be seen to be done". In his dissenting opinion judge Bonello used the documents that had not been argued or contested by the Government. And this sense, even though the majority of judges did not supported him, he had a full right to raise the issue of existing, in his opinion, shortcomings of Moldovan judicial system in the light of objective impartiality".

I think this is an excellent approach. Instead of trying to blame someone we all, and first of all the authorities, had to rethink the current situation in our judiciary. This dissenting opinion could have been a a starting point for changes. Unfortunately, it had not.

Citing again judge Bonello's opinion, "I thought this was the right time for the Court to start panicking. This a self-evident opportunity to detox an administration of justice. Instead I had to witness the Court allowing the Moldovan judiciary the widest margin of depreciation".

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All accentuations in the text of the post are mine - A.Ghertescu.

Supporting Foreign Investors - Maintaining Inequality?!.

Support of foreign investors is a very good and useful thing. But can the measures of such support create an inequality and a favourable regime for certain investors without providing them to others? And are such measures legitimate?

As you remember in my last post I told about the ECHR's judgment against Moldova basing on the Law on Foreign Investments that had already been abrogated at the moment of its pronouncement.

In 1992 the Law on Foreign Investments was enacted in Moldova. This law provided to foreign investors certain incentives and facilities. One of the guarantees of those facilities was stipulated in para. 2 of art. 43 of the Law providing the guarantees in case of changes in legislation. It stated that foreign investors and enterprises with foreign capital that had enjoyed customs, tax and other facilities were allowed to benefit from those facilities and after the new modifications having come into force.

And basing on this provision of the Law the European Court of Human Rights adopted its judgment in the case BIMER SA vs. Moldova that I wrote about.

In 2004 the Law on Foreign Investments of 1992 was abrogated by the newly adopted Law on Investments to Entrepreneurial Activity that is still in force. This law does not provide any particular incentives/facilities for foreign investors as the Law of 1992 did. And by abrogating that law it also repealed all those facilities contained in it. However, the new law contains a very interesting provision in para. 2 art. 25:

"Foreign investors that made their investments and enjoyed certain guarantees
and facilities under the Law on Foregn Investments of April 1, 1992, may still
enjoy in future all those guarantees amd facilities provided by that Law."

"So what?" - you may say.

Let me explain my view on this. Fisrt of all, I'm not sure that it is fair enough to provided certain benefits to a person without providing them to another simply because the first one started its activity earlier. And this is what actually happens. A foreign investor that made investments before the new Law has been enacted still enjoys the same privileges even after they have been abolished at the time when new-comers can't do this thereby being in a less favourable position.

Secondly, I doubt the fairness of providing to foreign investors more privileges and facilities than to the local ones. If a Moldovan company and a foreign one either make an investment of USD 1 mln, then what is the difference between these investments?

I understand an extraordinary importance of foreign investments for Moldovan economy. And I really support and welcome them. However, I suppose that the best way to attract foreign investments to Moldova is not to provide them any particular benefits, but to create the conditions for their stability and safety regardless of the political party being in power at any particular moment...

Foreign Investments in Moldova under Protection of ECHR

Last week the European Court of Human Rights pronounced its judgment on one of the biggest cases against Moldova. The Moldovan Government was obliged to pay to "Bimer" SA company EUR 520,000 (five hundred and twenty thousand euros) in respect of pecuniary damage.

What differs this case from the others against Moldova except the enormous (at least for Moldova) amount of the award?

The particularity of the present case is that the ECHR recognized the breach by Moldovan authorities of the guarantees to foreign investors in Moldova provided by Moldovan law, and as a result the breach of Article 1 of Protocol No. 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms (the ECHR's judgment on the present case is available in English here).

The Bimer company was owned by Moldovan, American and Bahamian investors. Its main activity was trade activity at duty free shop and bar at the Leuşeni Customs Office. The licences to operate the bar and the shop were issued in accordance with the Presidential Decree of 1994 and they did not contain any provisions as to their duration.

In 2002 the Parliament made an amendment to the Customs Code by which duty free sales outlets were thenceforward restricted to international airports and on board aircraft flying international routes and following these amendment the Customs Department ordered the closure of all duty free outlets outside the area of the international airport.

The issue the parties to the dispute mostly argued about was the way the art. 43 of the former Law on foreign investments (now abrogated) providing to foreign investors the guarantees in case of changes in legislation to be applied. In particular art. 43 of the Law provided to companies with foreign capital the right to follow the legislative rules that had been modified during the 10-years period from the moment of such modification.

The Government argued that the duty-free regime enjoyed by the applicant company under the terms of its licences did not constitute “customs, tax or other incentives”, for which the 10-years favourable term applied. The European Court relying on an earlier decision of the Chisinau Court of Appeal on another case admitting the applicability of the incentives provided by law to duty free shops owned by foreign investors found "no grounds in the present case to call into question the view of the Court of Appeal ... that section 43 was applicable to the case of the present applicant and that the Order which required the immediate closure of the applicant's duty-free business at the Leuşeni Customs Office was not lawful under domestic law" (para. 58 of the judgment).

And following the previous statement the ECHR ruled that there was the violation of the Article 1 of Protocol 1 of the Convention...

So, as follows from the present ECHR's judgment the violation of guarantees provided to foreign investors may constitute the breach of the European Convention provisions and consequently may lead to BIG awards to foreign investors. And I think that the present case may be a very important signal to Moldovan authorities.

Another issue that may be of a significant interest is the applicability of advantages and guarantees provided by the Law that has already been abrogated. But I think, it is a good topic for a separate post...

Interference in Justice and Corruption among the Main Problems - ABA/CEELI Moldova

A couple of weeks ago the ABA/CEELI representative office in Moldova presented its report on indices of justice reform in Moldova within the framework of the Rule of Law Initiative (read more here-in Russian or here-in English).

It states that one of the mostly widespread opinions about Moldovan justice is that many judges are corrupt, though very few strong evidences support that opinion. However, it is mentioned that judges own expensive cars and houses that are impossible to acquire for their relatively low salaries.

Moreover, another significant problem still remaining unsolved is non-enforcement of almost half of judgments on civil and administrative cases. Unjustified delays in judicial decisions enforcement led to multiple judgments against the Republic of Moldova pronounced by the European Court of Human Rights.

Among the positive changes the ABA/CEELI mentions the increase of judges' responsibility for adopting judgments containing judicial errors.

According to the ABA/CEELI's country director in Moldova Corrine Smith the report represents the basis for the process of justice reform evaluation and is particularly important and opportune in the light of further reforms of judicial system that are planned by Moldovan authorities...

PS. As I have stated in one of my previous posts I consider it inopportune and even very dangerous to bring the judges to responsibility for decisions they adopt. First of all it contradicts to the basic principle of judicial independence and secondly it may lead to even more serious intervention and control over judicial power from executive authorities. Though, as a practicing lawyer I am highly interested in improvement of situation in Moldovan courts...

PPS. As it is stated in the report there are very few strong evidences of corruption cases among Moldovan judges. However, it reflects general view to Moldovan courts as being extremely corrupt. And this seems to be even more dangerous for judicial system - the existence of "anti-judicial" public opinion not supported by any strong evidences, what leads to distrust from the part of Moldovan people.

PPPS. The report is still unavailable at the ABA/CEELI web-site, so I can't provide any more information and analysis than it is presented in the news agencies articles...

Can Microsoft Be the First Case for the Newly Created Competition Authority

Epigraph.

Friday's Logos Press Economic Review comes up with an article called "From whom to protect competition?" The article's author, Irina Covalenco, provided a review of opinions expressed during the round table organized on June 19 by the Economic Council attached to the Prime Minister jointly with the National Agency on Protection of Competition (hereinafter- the Agency).

A lot of doubts were expressed regarding the prospects of the Agency's efficient activity. And it was told that puting aside all those douts we have to wait for the first serious case of anti-monopoly investigation...

The beginning of the story

...About a half a year ago or so the big campaign against software piracy started in Moldova. There were a lot rumors about massive inspections carried out by police and AGEPI (the Agency for Intellectual Property) representatives in order to reveal facts of illegal use of software products. It was also said that this campaign was initiated by the Moldovan representative office of Microsoft Corp. (read more in Russian here and here). And though the state officials stated that the goal was to check the legality of use of all software products, the main product to be controlled was considered MS Windows operating systems.

The basic objection of business structures and individual users against this campaign was (and still is) the price of Microsoft products. It is told to be too high for Moldovan software market.

The case to intervene?..

And here it may seem to be the possibility to intervene for the newly created National Agency for Protection of Competition. There is almost no competition in the market of operating systems in Moldova. Microsoft products hold almost the total monopoly position. Certainly there are other products like Linux, for instance. However, very few ordinary users know about it and are ready to use it. Moreover, many important programs are compatible only with Windows. For example, at the beginning of the year we called to one of the Moldovan banks to know if their system "Client-Bank" (the system providing the possibility to make bank transfers through electronic network by using digital signatures; the system is widely spread among many moldovan companies) is compatible with Linux. The answer was: "No, the system was made only for Windows"...

So, we have a product that takes almost a monopolistic position in the market. And we have a lot of complaints about its price (I'm not asserting whether it is expensive or not for our market, this is the issue to be decided by competent specialists and authorities).

Now let's see what the law says.

Under art. 20, para. (2)-a) of the Law No. 1103 of June 30, 2000 "On Protection of Competition" the Government has the right to regulate prices in order to prevent cases of abuses of the dominant position in the market.

And this gives to the Agency the right to intervene in order to investigate whether there are the signs of an abuse of the dominant position by Microsft corp. or not by etablishing the current prices for its products...

So, do you think this may be the first big case for the Agency, or not?...

The Law Office of Alexei Ghertescu

Dear readers of my blog,

The reason the new posts hadn't appear here for almoast two months was taking all necessary steps for launching my solo practice. As far as these actions have been successfully completed I can now make an official statement in this regard:

The Law Office of Alexei Ghertescu has started its activity.

The Office is located in the centre of the Chisinau city at the following address:

of. 331, 6 Cosmonautilor str.
Chisinau, Republic of Moldova
MD-2005

You can contact us via:
tel./fax: (+373 22) 24-30-20
mob.: (+373) 697-99-0-11
e-mail: al-lex@rambler.ru

or by visiting our office from Monday to Friday between 9 AM and 6 PM.

Looking forward for mutually beneficial cooperation,

Yours truly,
Alexei Ghertescu

attorney at law

Finding "Protection" from Your Employees - Part 2.

I’m really sorry for such a long standstill in my blog. The reason of it you’ll know in the next post…

In my last post I promised to continue and come up with ideas on how to resolve some employment-related problems. Alexander Culiuc and Alex Railean in their comments guessed precisely the topics that I was going to talk about further. That means that I’ve touched upon really significant issues both for employees and employers. So, let me continue…

Insure your investments.

In order to be successful in your business you usually need the employees around you that are highly competent and trained for achieving the goals you set before your organization. The present day reality is such that it’s not enough anymore to find a highly competent employees. Your team members need a permanent improvement of their skills. And wise employers always make investments in this process of raising the level of their employees’ skills and knowledge. But they also want to be sure that their investments won’t be spent in vain. You as an employer may want that either your trained employees to work for you for a certain period of time or to recover all money and efforts invested into them in case they leave you. Let’s find out how we can do it…

Alexander Culiuc described in his comment to the previous post one of the most widely spread mechanisms: employers provide sponsorships for their employees so that they could pass the studies and gain certain knowledge and skills required by employers under condition that employees either work for their employers for a certain period of time or return back the costs of their studies paid by employers. A very attractive scheme, isn’t it? But we need clear legal frames for it.

Art. 214 of the Labour Code provides the right of employees for professional training. It may be realized by signing additional contracts to a labour contract: a contract of professional qualification or a contract of continuing professional training.

The contract of professional qualification (art. 215 of the Labour Code) is a special contract concluded in a written form under which an employee undertakes to pass a course of professional training organized by an employer in order to obtain a professional qualification. At the level of an enterprise such training may be carried out by an instructor or an instruction expert appointed by the employer from among the qualified employees having a professional experience and a permission received in accordance with procedures established by law.

The law (paras. (3) and (4) of art. 216 of the Labour Code) does not provide a clear definition of the contract of continuing professional training. However, following the definition of the contract of professional qualification I consider that we may interpret the former one in the same way with a remark that a contract of continuing professional training is concluded for a longer period of time. At the same time we have to take into consideration certain limitations imposed by para. (4) of art. 218 of the Labour Code. In case of employees passing a continuing professional training the following is forbidden:
- work in heavy, damaging or dangerous conditions;
- overtime work;
- night work;
- detachments not related to the training.

The legal provision that can be of the most interest for employers is contained in para. (2) of art. 214 of the Labour Code, which states that an employee who has passed a course of professional training or an internship can not resign during the certain period of time stipulated in the contract of professional training except for the cases specified in the contract.

So, as we’ve clarified earlier you can’t simply retain your employees for a certain period of time, BUT if you provide some training to them you can agree that your employees have an obligation to work for you for a certain period of time. The law doesn’t say how long this period may be. It should be agreed upon between employer and employee in their contract. However, this period should be reasonable and commensurable with the training provided to employee. The last statement is not directly stipulated in the Labour Code, however, it is important and may be taken into consideration by court in case of a dispute.

Then, the following question may arise: What if an employee after having got necessary training and signed an additional agreement that obliges him to work for the current employer for a certain period of time refuses to do this? Can any sanctions, penalties be applied in such cases? The law doesn’t give a direct and clear answer. At the same time it doesn’t prohibit to include a term into the contract under which the employee undertakes to recover the costs of training borne by the employer. As far as the Labour Code prohibits employers to charge the lost profit from employees and in order to avoid possible disputes regarding the amount of compensation I would advise to assess the costs of training in advance and to indicate the sum in the contract.

Now let’s see if there are any other schemes of recovering the investments made into employees.

Art. 214, paras. (3) and (4) provide that if the initiative of participation in any form of professional training organized outside of the enterprise with interrupting of the work comes from an employee, the employer may examine employee’s written request together with the employees’ representatives. And within the period of 15 days the employer takes a decision under which conditions he may permit the employee to pursue his professional training and whether the employer is going to cover (partly or in full) the related expenses and costs.

At the same time the law doesn’t prohibit employers and employees to sign contracts of loan according to general provisions of civil law. In this case they would sign a loan contract for a specified purpose, and namely the loan provided by employer to employee on order that the latter one could pursue professional training.

According to art. 871 of the Civil Code the repayment of loan is subject to the terms stipulated in the contract. As far as in case of a loan agreement the parties have a wider possibility to determine the terms of the contract it is more convenient for employers than a traditional professional training contract regulated by the Labour Code.

In the loan agreement the parties are free to choose the terms of repayment, the obligation to pay interest in case of a breach of contract. Thus, it gives more flexibility than the means provided by the Labour Code. In order to ensure this mode it is recommended to ask for a request from an employee to provide him the possibility and necessary resources to pursue the professional training…


Keeping secrets…

Another aspect (different from the issues of training of the employees) that is of a great interest for many employers is how to preserve your secrets in case of an employee leaving for your competitors. I mean the issues that arise in regard to Non-Disclosure Agreements and Non-Compete Clauses. Let’s see if such agreements and clauses are enforceable under Moldovan labour law.

Using a simple definition of a Non-Disclosure agreement contained in Wikipedia “it is a contract through which the parties agree not to disclose information covered by the agreement”. In Moldova the issues of trade secrets protection are governed by the Law on Commercial Secret (No. 171 of 06 July, 1994) and by the Labour Code.

Art. 53 of the Labour Code stipulates that confidentiality as a contract clause means that the parties agreed within the labour contract validity period and not more than 3 months (not more than 1 year for employee that have occupied chargeable positions) after its termination not to disclose the data and information they knew during the execution of the labour contract in accordance with the rules of internal order, collective or individual labour contract.

Para. 2 of art. 53 states that non-observance of confidentiality entails the compesantion of damages caused by the party in fault.

The Code does not provide the definition of a chargeable position (functie de raspundere). Therefore, it should be determined in every particular case taking into consideration the employee’s position, his/her responsibilities and obligations and the level of access to confidential information.

In order to bring a former or actual employee to responsibility for diclosure of confidential information it is very important to create a clear and effective mechanisms of protecting and accessing confidential information. This may imply the adoption of rules and instructions on evaluating the levels of confidentiality, procedures of ensuring the information protection, its transmission and non-disclure, etc. Without these mechanisms (the elaboration of which should be delegated to competent lawyers, either in-house or outsourced) the non-disclore agreements may be unenforceable…

In what regards Non-Compete Clauses, or Covenants not to Compete (that represent a clause ”under which one party (usually an employee) agrees to not pursue a similar profession or trade in competition against another party (usually the employer)”) we face certain legal impediments.

The reason to sign such agreements with employees is evident for employers. However, they encounter the same guarantees provided to employees by the labour legislation – the prohibition of limitation of employees rights (even if an employee agrees to such a limitation). The case of Non-Compete Clauses may be and are likely to be viewed by the courts as such a limitation of the right to the freedom of labour. And this circumstance will lead to unforceability of such clauses…


PS. Certainly, the issues of employers’ “protection” from their employees are much broader. I touched upon only a couple of them (in order to consider all of them I’ll have to right a book) that I was asked about by the blog readers.

If you are interested in other labour law related issues let me know, so that I could come up with new posts on them…

Finding “Protection” from Your Employees

About 2 weeks ago or so I got an interesting e-mail from one of the readers of my blog who asked me about measures that could be taken by employers under the Moldovan legislation to protect themselves from “employees walking away from positions (normally of in-depth knowledge of confidential business information but also as straightforward as taking part of the customer-base with him out of the door) and taking up either employment with competing businesses or setting up a competing business”.

I told him that this problem affected many companies (both local and international ones) and promised to touch upon this subject in my blog. And now (though with some delay) I decided to keep my word and to post on that issue and try to investigate it, even in a little broader context than we have discussed it.

What is the essence of the problem?

First of all, let me outline the main hot problems relating to the discussed issue. When you hire a person you usually do the following things (in different combinations and proportions, of course): teach him the way how the work is done (particularly, if you deal with the beginners), provide different training and study opportunities, i.e. you make investments into your employees hoping that those investments would bring certain benefits to your company after a time. And certainly you don’t want people being taught by you leave you immediately after this, for instance, being hired by a competitor company.

Or we may take another example that represents a more serious problem. You’re left by an employee who had access to some insider information (no necessity to describe all possible consequences).

In other words you don’t want to “cherish a snake in your bosom” (NB. Is this proverb has the same meaning as it has in Russian?)

So, are there any ways to feel yourself protected in such situations or at least to diminish possible damage? This is the topic of my today’s post.

Whose side does the law take?

The modern Moldovan labour/employment legislation inherited to a considerable degree many Soviet traditions in providing to employees all possible and impossible means of protection of their rights. The laws (and most of all the Labour Code) regulating the labour relationships between employees and their employers set a row of very strict rules that all employers (regardless of type of ownership – the public or private one) must observe. And although the law stipulates certain provisions to protect employers from illegal actions and abuses of rights from the part of employees the general spirit of the labour legislation is likely to be called pro-employees.

The same situation may be observed in courts. With all things being equal you have very little chance of winning a case if you are an employer.

Anyway, you have to meet all these challenges and use all possible means provided to employers by law. Let’s look at some of them…

Long-term retention of your employees: is it possible?

One of the questions that are most frequently asked by employers is how to make their employees to work for them during the long periods of time. The question easy to understand but hard to answer.

Articles 43 and 44 of the Moldovan Constitution provide to every person in Moldova the right to a free choice of labour and set the prohibition of forced labour. Many lawyers consider the employment contracts terms limiting the right of an employee to resign at any moment as infringement of the aforementioned Constitutional principles. Moreover, employees can’t relinquish their rights under art. 64 para. (2) of the Labour Code that declares invalid any agreement that is directed to renunciation or limitation of employees’ rights.

According to art. 54 of the Labour Code the labour contracts are usually concluded for unlimited periods of time. This rule was stipulated in order to complicate ungrounded dismissals using the terms of contracts containing the period of their validity. So, this provision is intended to bring certain stability for employees and to make their position more secured in the face of changeable mood of their employers. Article 55 of the Labour Code provides a number of cases when the labour contracts are permitted to be signed for certain fixed periods of time (but for no more than 5-years terms) for carrying out the works that have a temporary character.

But what if you wish to sign a contract providing that your employee would be bound to work for you not less than for a period of time stipulated in the contract (e.g., not less than 2 years)? Such situation is not foreseen in arts. 54 and 55 of the Labour Code mentioned above. The contract in this case is signed in fact for an unlimited term (because employees may work 5-10-20 years, BUT not less than 2 years) and provisions of arts. 54 and 55 are observed.

Moreover, para. (3) of art. 6 of the Labour Code stipulates that nobody can be forced to work at a certain place of work during his entire life. Does this rule mean that it is permitted to set in employment contracts the obligatory terms for employees for the periods less than “entire life”? I’d like to think so, BUT…

Article 85 of the Labour Code provides that an employee has the right to resignation that is the right to dissolve a labour contract signed for an unlimited period of time. And there are no exceptions to this rule. The only obligation for employees in this case is to inform the employer about the resignation 2 weeks in advance. This is the right of employees stipulated by the Code and as I have already mentioned they “don’t have the right to give up this right”.

So, as we can see the Moldovan legislation does not provide a possibility for employers to hold their employees on their positions and to not let them go…

If employers don’t have the right to retain employees for certain fixed terms can there be any other means to secure their interests? This is the question that I’m going to answer in the next post here in my blog. To be continued…