EY GEORGIA TAX & LAW BRIEF AUGUST 2018 Decision of the Competition Agency of Georgia Concerning the Complaint Submitted by JSC Insurance Company Unison On 8 August 2018, the Competition Agency of Georgia (hereinafter - the Agency) published its decision concerning the complaint submitted by JSC Insurance Company Unison on its official website. After the inquiry and examination, the Agency found that the state-subordinated establishment operating under the umbrella of the Ministry of Regional Development and Infrastructure of Georgia - the Roads Department of Georgia, violated Article 10 of the Competition Law of Georgia while conducting electronic tenders. Violation of Article 10 of the Law implies the restriction of competition by central government, government of an autonomous republic and by local self-government authorities. The Agency noted that excluding insurance companies from the service market in state procurements based on the requirement of submitting only the advance payment warranties issued by banks, contradicts the competition legislation of Georgia and creates barrier for insurance companies to enter relevant market. According to the recommendations prepared by the Agency, organizations that commission procurement should refrain from including tender terms and requirements in tender documentation, which allow for submitting only the advance payment warranties issued by banks. Recommendations prepared by the Agency suggest that the organizations that commission procurement should make state procurement process equally accessible for banks, insurance companies and other credit institutions, as the organizations issuing bank warranties, when it comes to securing the sum issued as an advance payment. Exception is the tender announced using financial resources provided by a donor; competition legislation does not apply to these tenders and the terms and requirements thereof are defined directly by the donor organization.
Recommendations prepared by the Agency envisage the creation of a bank warranties' system for state procurements, which will minimize the overdue reimbursement of the sum provided by the warranty and decrease the risks in this regard for organizations that commission procurements. The source and date of publication: website of LEPL Competition Agency, 08/08/2018. Law of Georgia on the Office of the State Inspector On 9 August 2018, the Law of Georgia on the Office of the State Inspector, adopted by the Parliament of Georgia on 21 July 2018, was published on the website of the Legislative Herald of Georgia. The Law defines the status, principles of activities and powers and authorities of the Office of the State Inspector, as well as the procedures for the election and early removal of the State Inspector from office, together with other issues related to the exercise of its authorities by the Office of the State Inspector. Office of the State Inspector exercises control on processing personal data in Georgia. In this field, the main directions the Office works on are as follows: - Providing consultations concerning the issues related to the protection of personal data. - Examining applications in connection with the protection of personal data. - Examining (inspecting) the lawfulness of the protection of personal data. - Informing the society and raising awareness in relation to the current situation in Georgia in terms of personal data protection and significant events in this field. Powers and authorities of the Office of the State Inspector also include: - Investigation of the crimes committed by the representatives of lawenforcement authorities. - Control over investigative actions and the activities carried out in the Central Bank of Electronic Communications Identification Data. State Inspector shall be granted the authority for a 6-year term. Same person cannot be elected as the State Inspector for two consecutive terms. Office of the State Inspector shall be independent while exercising its powers and authorities and shall not be subordinated to any government authority or official. The Law became effective immediately upon publication, except for the following Articles: Articles 1 and 2; subparagraphs "a-e" and "g-j" of Article 3 paragraph 1 ; Articles 4-17; paragraphs 1-4 and 6-8 of Article 18 ; Articles 19-27; paragraph 2 of Article 28; and Article 29. Articles listed above shall enter into force on 1 January 2019. Herewith, subparagraph "f" of paragraph 1 of Article 3 and paragraph 5 of Article 18 shall be effective from 30 March 2020. The source and date of publication: Legislative Herald of Georgia, 09/09/2018.
Decree of the Government of Georgia on the Approval of the Regulations of the Legal Entity of Public Law - Pension Agency On 16 August 2018, Decree #421 of the Government of Georgia was published on the website of the Legislative Herald of Georgia. According to the Decree, LEPL Pension Agency is an independent legal entity of public law established based on the Law of Georgia on Accumulative Pension. Tasks and purposes of the Pension Agency include: ensuring proper functioning of the accumulative pension scheme; analyzing accumulative pension scheme; keeping record of the persons enlisted in the accumulative pension scheme and creating individual accounts; concluding contracts and carrying out other relevant activities prescribed by the Law of Georgia on Accumulative Pension and the legislation of Georgia. Pension Agency shall carry out its authority through its supervisory board, investments board, as well as the director, senior investment officer and structural divisions. The Decree became effective upon publication. The source and date of publication: Legislative Herald of Georgia, 16/08/2018. Order of the President of the National Bank of Georgia on the Approval of the Procedure for Registration, Cancellation of Registration and Regulation of the Credit Information Bureau at the National Bank of Georgia On 29 August 2018, Order #193/04 (dated 27 August 2018) issued by the President of the National Bank of Georgia was published on the website of the Legislative Herald of Georgia. The Order approved the procedure for registration, cancellation of registration and regulation of the Credit Information Bureau at the National Bank of Georgia. The Order defines the scope of activities of the Credit Information Bureau and provides exhaustive list of the activities that are allowed to be carried out. The Order lays out provisions concerning registration of the Bureau, as well as entering changes in the registration and cancelling the registration. The Order shall become effective on 1 September 2018. The source and date of publication: Legislative Herald of Georgia, 29/08/2018.
Order of the President of the National Bank of Georgia on Explaining Effective Interest Rate, Establishing Procedures for Estimating the Remaining Principal Amount of Loans and Rules of Taking into Consideration Commission Fee, Financial Expenses, Penalties and/or Any Other Form of Financial Sanction for the Purposes of Article 625 of the Civil Code of Georgia On 29 August 2018, Order #194/04 of the President of the National Bank of Georgia was published on the website of the Legislative Herald of Georgia. The Order entered amendments into Article 625 of the Civil Code of Georgia. According to the Order, the calculation of 1.5-fold of the current principal amount of the loan envisaged for/imposed on a borrower, as established by the 3rd sentence of Article 625.5 of the Civil Code of Georgia, shall be performed from the first day of loan overdue by a borrower. Any commission fee, financial expense (including the expenses included in the calculations of the effective interest rate) envisaged for/imposed on the borrower, as well as penalty envisaged/imposed according to the loan contract for violation of contractual terms and/or any other form of financial sanction applied against the borrower before that day, shall not be taken in consideration. According to the Order, current principal amount of the loan is the remaining principal amount of the loan as of the first day of overdue. The remaining principal amount of the loan shall not be subject to changes until the full elimination of the overdue. The Order revoked Order #2/04 (dated 13 January 2017) of the President of the National Bank of Georgia providing explanations concerning the effective interest rate and financial expenses imposed on a borrower for the Purposes of Article 625 of the Civil Code of Georgia. The Order shall become effective on 1 September 2018. The source and date of publication: Legislative Herald of Georgia, 29/08/2018. Decree of the Government of Georgia on the Approval of the Procedure for Developing and Implementing Public-Private Partnership Project On 17 August 2018, Decree #426 of the Government of Georgia was published on the website of the Legislative Herald of Georgia. Mentioned Decree defines the procedure and rules for developing and implementing public-private partnership (PPP) project. PPP may take place in any sector of public infrastructure and public services, except for mines-and-carries, oil and gas sectors and related study-development and/or scientific research works. The Decree fully regulates the PPP process, starting from the inception of the project and ending with the subsequent evaluation, which includes the following phases: a) project identification and initiation; b) project preparation; c) selection of private partner; d) project implementation; e) subsequent evaluation of the implemented project.
The Order became effective immediately upon publication. The source and date of publication: Legislative Herald of Georgia, 17/08/2018. Decree of the Government of Georgia on the Approval of the Procedure for Resolution of Disputes Related to the Selection Process Carried Out in Accordance with the Law of Georgia on Public-Private Partnership. On 30 August 2018, Decree #437 of the Government of Georgia was published on the website of the Legislative Herald of Georgia. The Decree defines the Procedure for the resolution of disputes related to the selection process carried out in accordance with the Law of Georgia on Public-Private Partnership. The Decree provides that the Dispute Resolution Council envisaged by the Law of Georgia on State Procurements shall resolve the disputes arising in connection with the selection process defined under the Law of Georgia on Public-Private Partnership. The Decree also sets relevant terms for applying to the Council: The fee introduced for submitting complaint to the Council amounts to 0,15% of the estimated value of the PPP project, with the condition it is above 22,000 GEL, but does not exceed 150,000 GEL. Immediate enforcement of the decision issued by the Council is mandatory. The decision of the Council may be appealed at the court, in accordance with the procedure prescribed by the legislation of Georgia. The Decree, except for Article 2, became effective immediately upon publication. Article 2, which defines the authority/agency resolving the disputes that arise in connection with the selection process envisaged by the Law of Georgia on Public- Private Partnership, will enter into force on 1 December 2018. The source and date of publication: Legislative Herald of Georgia, 30/08/2018.
Contact Information: Zurab Nikvashvili Partner Head of Tax & Law in Georgia and Armenia EY Georgia LLC Kote Abkhazi st. 44, 0105, Tbilisi, Georgia Office: +995 (32) 215-88-11 Zurab.Nikvashvili@ge.ey.com Dr. George Svanadze LL.M., MLB (Bucerius/WHU) Associate Partner Head of Law Practice Tax & Law EY Georgia LLC Kote Abkhazi st. 44, 0105, Tbilisi, Georgia Office: +995 (32) 215-88-11 George.Svanadze@ge.ey.com EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2018 EY Georgia LLC All Rights Reserved http://www.ey.com/georgia This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. The views of parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were expressed.