The government of the Republic of Moldova is likely to be obliged to pay a $58 million award to Komstroy, an Ukrainian energy company closely associated to now-imprisoned oligarch Veaceslav Platon.
As Law360 reports, the award was reconfirmed by the U.S. District Judge Christopher R.Cooper on 23 August, when Moldova was rejected the claim that it had “been denied due process” in an arbitration case within an ad-hoc arbitral tribunal in Paris. Back in 2013, the tribunal concluded that Moldova had violated an investment commitment under the Energy Charter Treaty (ECT) by not paying debts owned to Komstroy’s predecessor (LLC Energoalliance- based in Ukraine) on the deliverance of electric power in 1999-2000. Thus, the Moldovan government was allegedly owing around $46,5 million. The tribunal’s decision was disputed by the Moldovans at the Paris Court of Appeal, which subsequently ruled in 2016 that the ad-hoc tribunal “misinterpreted the subject debt as an “investment” under the ECT” (Case No. 14-cv-01921 (CRC)). In its attempts to find recognition of the tribunal’s decision, Komstroy asked the D.C. Court to examine the case, even though the French Cassation Court returned the case to the Appeals Court in 2018.
Notwithstanding the ongoing proceedings in Paris, the US Court ruled in late 2018 that the award can be enforceable and more importantly, its amount could be increased to nearly $58 million, considering the exchange rate from the award date.
After the ruling on 23 August, Gene M.Burd, attorney for Komstroy, told Law360 that it’s “pleased” with the US Court’s decision to determine the Paris ad-hoc tribunal’s right and scope to act upon the role demanded by Moldova and the Ukrainian energy company.
Moldova’s Justice Minister, Olesea Stamate, rushed (on 11 September, when the US court decision got out into the wild) to explain that the payment of the award can be enforceable only after the Paris Appeals Court issues a final ruling at the end of the month. As quoted by Ziarul de Garda, Stamati dismissed Komstroy’s claim as a a “scheme that was applied by some persons to milk the public budget”, describing the debts as “bogus”, “sold at double price”. In addition, the Minister announced that Moldova contested the US court decision.
As Sic.md explains in a fact checker, Moldova’s problems began back in Paris, where lawyer Victor Volcinschi was reportedly defending the position of the Ukrainian company instead of the Moldovan side. Additionally, the new law firm, Bukh Law Firm, subcontracted in December 2018, was not paid between February and April 2019 by the previous Democrat government, putting the whole defence at risk.
According to sic.md, LLC Energoalliance is associated with the more-than-controversial oligarch Veaceslav Platon and his involvement in the even more famous Russian Laundromat.
Moldova will receive two grants of about 12 million dollars from the USA
The United States will offer two grants of a total amount of $ 12 million to Moldova, under two previously signed between the USA and Moldova agreements. According to a press release of Ministry of Finance of the Republic of Moldova, the money will be offered in the form of technical assistance.
The first grant will supplement the total amount of the Assistance Agreement between the Government of the Republic of Moldova and the Government of the United States of America for a more efficient and responsible democratic governance, which amounts $ 6.6 million, reaching a total value of $ 50.8 million.
The main objective of the program is to ensure a democratic, efficient and responsible government in the Republic of Moldova, by involving citizens in the decision-making process of the Government, ensuring a more transparent and responsible judiciary, and creating conditions for local public authorities to be more involved in solving citizens’ needs.
The second grant represents a supplement to the Assistance Agreement between the Government of the Republic of Moldova and the Government of the United States of America for the increase of trade and investments in key sectors, which adds up $ 5.4 million, reaching a total value of $ 48,4 million.
The objective of the program is to increase competitiveness, improve the business climate and the regulatory framework, to increase access to finance, to improve the skills of the workforce and to fight corruption.
Recently, the US Ambassador to the Republic of Moldova, Dereck J. Hogan, emphasised that external partners want to see a Government implementing reforms, otherwise the country will be lacking financial support. “We want the current Government to continue implementing reforms in the same way. External partners insist on continuing to implement reforms. If external partners, including the US, will not see progress, of course we will stop funding,” the ambassador said.
The state budget for the next year includes a deficit of 7 billion lei. Why this could be a problem?
On November 27th, the Government of the Republic of Moldova approved the draft budget for the next year. The document displays revenues of over 44 billion lei and expenditures of 51 billion lei. Thus, a budget deficit of 7.4 billion lei was calculated, whereas a lower amount- 6.1 billion lei – was previously presented at the meeting of the National Commission for Collective Consultations and Negotiations on November 25th.
Assurances vs doubts
“The budget deficit difference of 1.3 billion lei is the equivalent of an eventual investment loan for the development of road infrastructure,” explained Minister of Finance Sergei Pușcuța. The minister explained that the deficit will be financed by loans on the internal market, issuance of securities and privatisation of public assets, yet he didn’t provide too many details about it. “The real budget deficit is 2.6 billion lei only,” added Pușcuța.
The internal state debt is expected to not exceed 25.7 billion lei, and the external state debt is forecasted to be 41.8 billion lei at the end of the next year, according to the projections made by the Ministry of Finance.
On the other hand, former Minister of Finance Natalia Gavriliță criticised the decision of the current Government, saying that it is taking irresponsible actions. “The Government increased overnight the state budget deficit to 7.4 billion lei, or 3.25% of GDP. The draft budget was approved without the Government publishing the annexes or the informative notes to the budget. The Minister of Finance avoided to specify how this deficit will be financed. These decisions, which will affect our country in the coming years, are taken with maximum irresponsibility,” the former Minister of Finance said.
The main public expenditures
The main focus of the future public expenditures are investments in infrastructure, creating jobs and increasing people’s well-being, according to an official statement made on the Government official page. That is why, a series of social projects and expenditures were approved, such as granting an unique support for people that receive a low level of pensions and allowances, increasing the cold weather allowance, pension indexation for former military corps, etc. “We are a Government that is focused on people. That is why we came up with these projects. There is financial coverage for these projects,” said Prime Minister Ion Chicu. The coverage, as the head of Government mentioned, will be provided from the estimated difference in social security revenues, which are expected to be 2 billion lei higher than the revenues in 2019.
Money from abroad
Next year, the Government expects to receive more than 8 billion lei from abroad, according to the annex to the state budget, prepared by the Ministry of Finance, out of which 109.7 million lei in the form of grants received from other states’ Governments, 1.6 billion from donations received from international organisations and 6.3 billion lei from foreign received loans.
At the same time, the US Ambassador to the Republic of Moldova, Dereck J. Hogan, emphasised that external partners want to see a Government implementing reforms, otherwise the country will be lacking financial support. “The PSRM-ACUM coalition had more potential to implement the necessary reforms. Now we expect this to be done by the current Government. […] We want the current Government to continue implementing reforms in the same way. External partners insist on continuing to implement reforms. If external partners, including the US, will not see progress, of course we will stop funding,” the ambassador said.
“Moldova has now a new government, and the need for genuine reforms remains,” stated Federica Mogherini during a speech at the European Parliament Plenary debate on eastern neighbourhood developments. So the external source of financing for Moldova remains conditioned and, therefore, is not certain.
World Bank projections
According to the World Bank economic projections for the Republic of Moldova, the budget revenues was going to reach 29.5% of GDP (66.25 billion lei), while the budget expenditures was going to represent 31.6% of GDP (70.97 billion lei) in 2020. Consequently, a lower budget deficit was expected – 4.72 billion lei. The public external debt was forecasted to raise to 146.43 billion lei, as compared to its actual value of 122.74 billion in 2018. Thus, it is not clear yet how the Ministry of Finance calculated the value of 41.8 billion lei for the state external debt and whether the values included in the state budget, as well as the Government promises to cover the budget deficit reflect the reality.
Next, there draft budget law will be examined in up to 3 readings in the Parliament, based on an explanatory statement of the Government and the reports’ presentation by specialised committees. If it’s the case, the necessary changes will be made and the state budget law will be adopted.
Moldovan Government fell as a result of the Parliament’s no-confidence vote – a full picture of events
Today, October 12th, the government led by Maia Sandu collapsed. The no-confidence motion submitted by the Party of Socialists of the Republic of Moldova (PSRM) in the Parliament was adopted by 63 Members of the Parliament (MPs) – 34 MPs were from the PSRM and 29 deputies from the Democratic Party of Moldova (DPM).
Details about the no-confidence motion here.
The contradictory declarations
Prime Minister Maia Sandu had a speech at the Parliament today, trying to defend the Government’s position.
“Deputies from the Socialist Party build their motion on false accusations about the worsening of the social and economic situation of the country. Why do you lie to people? Where do you see the worsening social and economic situation? The only worsening of the economic situation is for those who have been stopped from corruption schemes. […]
The citizens did not expect miracles in 5 months, they understand and appreciate a responsible government, made up of honest ministers, who came to these functions to make people’s lives better.
The vision of ACUM is known – we want true justice. We want efficient prosecutors and judges who make decisions in the name of law. We want those who stole the billion to go to jail. It’s simple. That is what the whole society wants,” Maia Sandu announced.
“Today, there was not only a betrayal of the Government, but also of every citizen who hoped that justice would soon be done and the life would be better,” Sandu also claimed.
President Igor Dodon made a few declarations in a press conference after the Parliament’s sitting. First of all, Dodon stated that Prime Minister Maia Sandu intentionally caused the fall of the entire Cabinet of Ministers. “Maia Sandu intentionally caused the fall of Government and the crisis of the ruling coalition to distract the citizens’ attention from the inefficient economic and social policies of the last five months. Apart from promises, Maia Sandu was not able to provide any results,” said Igor Dodon.
The head of state declared that he is ready to accept any candidacy for the position of prime minister, proposed by ACUM and PSRM, but he will not accept the candidacy of Maia Sandu again. “If the MPs from ACUM will not accept the dialogue, then their desire to cause snap parliamentary elections, in an extremely difficult period for the Republic of Moldova, becomes evident.”
At the same time, President Dodon invited all parliamentary factions to consultations for the appointment of a new prime minister tomorrow. The president of the country said he could personally submit a candidate for the position of prime minister. The head of state also gave assurances that “the Socialists do not want a coalition with DPM.”
The reactions of Moldova’s international partners
The EU Spokesperson for Foreign Affairs and Security Policy/European Neighbourhood Policy and Enlargement Negotiations, Maja Kocijancic, expressed her concern regarding the situation in the Republic of Moldova in an official statement.
“The vote of no-confidence in the government in the Republic of Moldova over questions concerning the recruitment process of the Prosecutor General sends worrying signals for the reform process in the country.
The coalition had started a number of initiatives to deliver on the key commitments made since June notably in the fields of the fight against corruption, independence of the judiciary and investigation into the banking fraud.
The need for such reforms has not gone away with the voting down of the government.
The European Union’s partnership will remain focused on delivering tangible benefits to the Moldovan citizens. In this spirit, the EU is committed to working with those in the Republic of Moldova who support the reform process that is at the core of our Association Agreement, in particular as regards fighting corruption and vested interests irrespective of the political affiliations, ensuring the independence of the judiciary and de-politicising the state institutions. We will continue to base our relationship with the Republic of Moldova on the principle of conditionality and respect for the rule of law and democratic standards,” is mentioned in the statement.
Dragoș Tudorache, the rapporteur of the European Parliament (EP) for the Republic of Moldova, also made a statement about today’s events in Moldova: “Politicians in the Republic of Moldova should never forget the only objective that matters both now and in the future: the European route of their country. […] Rapid action is therefore needed to provide the necessary assurances that the pro-European route is not derailed in any way. We are waiting for the correct signals that will follow from the negotiations in the coming days and I hope that we will not have any unpleasant surprises from the Moldovan politicians,” the EP rapporteur declared.
The President of Romania, Klaus Iohannis, argued that the socialist approach to dismiss the Government is against the long-term interests of the Republic of Moldova.
“Romania strongly supported the efforts of the Government of Chișinău, given the clear and determined commitment of the government coalition for the European path. […] In this context, Romania’s support, including financial support, will continue to focus on the interests of the citizens of the Republic of Moldova, as well as on the implementation of strategic bilateral projects, being strictly conditioned by the continuation of the essential reforms for the democratic development of the Republic of Moldova and the advancement of its European path,” it is mentioned in the official statement of the Romanian head of state.
What is happening next?
According to the law of the Republic of Moldova, after the MPs have adopted the no-confidence motion against the Executive, prime minister is obliged to submit to the head of state the resignation of the Government within a maximum of three days. The Cabinet of Ministers will be in office until the members of the new Government are appointed.
During the term of his resignation, the Government cannot make foreign policy decisions and is not entitled to legislative initiative.
The president of the Republic of Moldova is obliged to initiate consultations with parliamentary factions to form a new Government.
After consulting the MPs, the president appoints a candidate for the position of prime minister and, within 15 days from the appointment, the candidate requests the confidence vote of the Parliament on the Government’s program of activity, presenting the full list of the Cabinet of Ministers.
The deadline for forming a new Government is three months. If the Government does not get the confidence vote from the Parliament during this period, the legislative is dissolved and snap parliamentary elections are called.
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