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Today's #Moldova is hell for investors, and not just because of #Coronavirus

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Moldova, a small Eastern European country that gained independence from the USSR in 1991, gained a reputation as a country with which it is risky to do business. Presidents and governments often change here, and each new government considers it their duty to rewrite legislation and change the rules of the game for business as they see fit. Nothing is stable here - no taxes, no requirements for investors, no conditions for receiving tenders.

Only one thing remains unchanged: Moldovan corruption, which sad fame extends far beyond the borders of Moldova. Ultimately, corruption determines everything - a change in legislation, and the adjustment of the rules of the game during the game. The corruption interests of the authorities put constant pressure on business. It is not surprising that world-famous companies that have built a successful and profitable business model in Moldova, one after another, refuse to continue working in this country, reselling their Moldovan assets to third countries.

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Today, the situation around the relationship between business and the state is close to critical. And it’s not about the coronavirus, which actually stopped the country's economy, built on the consumption and provision of services. The issue is the behavior of the authorities in this crisis period.

The power in Moldova today is associated with the name of President Igor Dodon. Dodon became president with direct political, informational, and financial support from the Kremlin three years ago. But until recently, his personal influence on the situation was insignificant. Shortly before the state of emergency in connection with the spread of the pandemic, the Socialist Party led by him formed a partnership with part of the Democratic Party and formed a government. Officially, this coalition, which is extremely unpopular in Moldova, was formed after the state of emergency was introduced, in the wake of information hysteria around the spread of coronavirus, which reduced the negative public effect of this news. In addition, the state of emergency prohibits mass gatherings.

Dodon’s influence on the government is unlimited. It is with this unofficial but decisive influence in Moldova that the cabinet’s numerous failures in countering the pandemic are associated. And - the fierce criticism of government actions.

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So, in the cabinet’s proposals to counter the coronavirus epidemic, many saw attempts to lobby for the interests of companies in one way or another connected with Dodon. The extraction of sand and stone in Moldavian quarries, the operation of duty-free shops, the sale of tobacco products - all this has nothing to do with the fight against coronavirus infection. Nevertheless, serious indulgences for businesses involved in these activities are reflected in the government's anti-crisis package. Explicitly with the help of Dodon.

Standing apart in this document is a clause obliging the concessionaire company of the International Chisinau Airport to pay half of the modernization fee paid by each passenger departing from the airport to the pandemic fund. We are talking about a fee of 9 euros. It has been charged for 22 years, starting in 1998. According to the Chisinau press, in the concession contract of the International Chisinau Airport, the government guaranteed that all airport fees and charges that existed at the time of the concession contract shall be retained by the concession company. Thus, the government simply does not have the right to manage money that does not belong to it. As it has no right to unilaterally change the terms of the contract concluded with Aviainvest. In any case, without serious international legal consequences and financial losses for the country's budget.

Surely, the lawyers in the Moldovan government are well aware of the risk of introducing this measure that violates the contractual obligations of the state. Moreover, it is devoid of any "anti-crisis" meaning in a pandemic. An airport modernization fee of 9 Euros, as already noted, is charged to departing passengers. But today, virtually no one flies from Chisinau Airport. It serves exclusively charter flights, which during the pandemic period bring home numerous migrant workers from Moldova scattered around the world. In other words, the government’s attempt to flagrantly violate its own contractual obligations under the Chisinau International Airport concession contract is financially meaningless.

So - the matter is different. Some Chisinau and international publications have already noted the unusual activity of Igor Dodon around the issue of the concession of the airport. He repeatedly spoke out for the termination of the contract, convened the Security Council, at which he talked about the "colossal damage" that was caused to the state by the concessionaire company. For this insistence of the president, someone's business interests were clearly visible.

According to one version, Dodon tried to terminate the concession contract, using his high official position to subsequently transfer the airport to the hands of Russian businessmen, who, on behalf of the Kremlin, financed his election campaign from offshore accounts. In connection with this version, surfaced the name of Igor Sechin, the former head of the presidential administration of Russia, who is one of the beneficiaries of the Novaport holding, who did not hide his interest in getting Chisinau Airport into ownership.

According to another version, behind this entire foul-smelling story lie the economic interests of the Dodon family, which are associated with another, near-Kremlin business structure, Igor Chaika, the son of the former Prosecutor General of Russia.

Thus, there is every reason to believe that today, under the guise of fighting the pandemic, we are witnessing yet another attempt to put pressure on the investor, who turned Chisinau International Airport into one of the most dynamically developing airports in the region. Apparently, the refusal of the Chisinau City Hall, led by Ion Ceban, the same party of Dodon, to approve the project for the construction of a new airport terminal should be considered in the same vein.

Of course, the company Aviainvest, which is a concessionaire of the Chisinau International Airport, intends to protect its interests. A law firm has already been hired to file a lawsuit with international arbitration. Lawyers have no doubts about the outcome of the case: such claims are always interpreted in favor of investors, not governments that violate the terms of the contract. Most likely, Moldova will suffer serious financial losses by paying fines and legal costs.

And for investors whom any Moldovan government encourages to invest in the Moldovan economy, this incident will be a clear signal: dealing with people who represent the government today should never be done.

Economy

Issuance of green bonds will strengthen the international role of the euro

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Eurogroup ministers discussed the international role of the euro (15 February), following the publication of the European Commission's communication of (19 January), ‘The European economic and financial system: fostering strength and resilience’.

President of the Eurogroup, Paschal Donohoe said: “The aim is to reduce our dependence on other currencies, and to strengthen our autonomy in various situations. At the same time, increased international use of our currency also implies potential trade-offs, which we will continue to monitor. During the discussion, ministers emphasized the potential of green bond issuance to enhance the use of the euro by the markets while also contributing to achieving our climate transition objective.”

The Eurogroup has discussed the issue several times in recent years since the December 2018 Euro Summit. Klaus Regling, the managing director of the European Stability Mechanism said that overreliance on the dollar contained risks, giving Latin America and the Asian crisis of the 90s as examples. He also referred obliquely to “more recent episodes” where the dollar’s dominance meant that EU companies could not continue to work with Iran in the face of US sanctions. Regling believes that the international monetary system is slowly moving towards a multi-polar system where three or four currencies will be important, including the dollar, euro and renminbi. 

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European Commissioner for the Economy, Paolo Gentiloni, agreed that the euro’s role could be strengthened through the issuance of green bonds enhancing the use of the euro by the markets while also contributing to achieving our climate objectives of the Next Generation EU funds.

Ministers agreed that broad action to support the international role of the euro, encompassing progress on amongst other things, Economic and Monetary Union, Banking Union and Capital Markets Union were needed to secure the euros international role.

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EU

European human rights court backs Germany over Kunduz airstrike case

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An investigation by Germany into a deadly 2009 airstrike near the Afghan city of Kunduz that was ordered by a German commander complied with its right-to-life obligations, the European Court of Human Rights ruled on Tuesday (16 February), writes .

The ruling by the Strasbourg-based court rejects a complaint by Afghan citizen Abdul Hanan, who lost two sons in the attack, that Germany did not fulfil its obligation to effectively investigate the incident.

In September 2009, the German commander of NATO troops in Kunduz called in a U.S. fighter jet to strike two fuel trucks near the city which NATO believed had been hijacked by Taliban insurgents.

The Afghan government said at the time 99 people, including 30 civilians, were killed. Independent rights groups estimated between 60 and 70 civilians were killed.

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The death toll shocked Germans and ultimately forced its defence minister to resign over accusations of covering up the number of civilian casualties in the run-up to Germany’s 2009 election.

Germany’s federal prosecutor general had found that the commander did not incur criminal liability, mainly because he was convinced when he ordered the airstrike that no civilians were present.

For him to be liable under international law, he would have had to be found to have acted with intent to cause excessive civilian casualties.

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The European Court of Human Rights considered the effectiveness of Germany’s investigation, including whether it established a justification for lethal use of force. It did not consider the legality of the airstrike.

Of 9,600 NATO troops in Afghanistan, Germany has the second-largest contingent behind the United States.

A 2020 peace agreement between the Taliban and Washington calls for foreign troops to withdraw by May 1, but U.S. President Joe Biden’s administration is reviewing the deal after a deterioration in the security situation in Afghanistan.

Germany is preparing to extend the mandate for its military mission in Afghanistan from March 31 until the end of this year, with troop levels remaining at up to 1,300, according to a draft document seen by Reuters.

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EU

Digitalization of EU justice systems: Commission launches public consultation on cross-border judicial co-operation

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On 16 February, the European Commission launched a public consultation on the modernization of EU justice systems. The EU aims to support member states in their efforts to adapt their justice systems to the digital age and improve EU cross-border judicial co-operation. Justice Commissioner Didier Reynders (pictured) said: “The COVID-19 pandemic has further highlighted the importance of digitalization, including in the field of justice. Judges and lawyers need digital tools to be able to work together faster and more efficiently.

At the same time, citizens and businesses need online tools for an easier and more transparent access to justice at a lower cost. The Commission strives to push this process forward and support member states in their efforts, including as regards facilitating their cooperation in cross-border judicial procedures by using digital channels.” In December 2020, the Commission adopted a communication outlining the actions and initiatives intended to advance the digitalization of justice systems across the EU.

The public consultation will gather views on the digitalization of EU cross-border civil, commercial and criminal procedures. The results of the public consultation, in which a broad range of groups and individuals can participate and which is available here until 8 May 2021, will feed into an initiative on digitalisation of cross-border judicial cooperation expected at the end of this year as announced in the 2021 Commission's Work Programme.

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