Major developments in 2018 and 2019 have affected the growth of the agricultural industry and agribusiness in Moldova. Key among these developments was the March 1, 2019 adoption of the restated Moldovan Civil Code, which significantly affected the parts of the Moldovan legal framework relevant to businesses.
The Civil Code is the most comprehensive and detailed legislative act in the area of private law in the Republic of Moldova. This organic law regulates the status of persons, property, obligations, inheritance, and private international law. Adopted in 2002, it entered into force on June 12, 2003, and it has undergone only minor amendments in the 15 years since. This legislative policy was intentional, in order to ensure stability of the private law in the Republic of Moldova. The Law to Modernize the Civil Code and to Amend Certain Legislative Acts that entered into force on March 1, 2019 (the “Law”) is a significant step forward and a major effort to modernize the national legal infrastructure, in order to bring it in line with current regulatory regimes elsewhere in Europe and the rest of the world.
In this regard, the latest legislative developments on the international and European levels have been studied and considered, in particular the Draft Common Frame of Reference (DCFR) of the European Union and the civil codes of jurisdictions such as Germany, France, Romania, Italy, the Czech Republic, and Hungary, as well as the recently-amended Russian Civil Code.
The Law was adopted to bring the private law in the Republic of Moldova more in-line with European and international developments, more accurate and predictable, to better protect the validity of the contracts, to enhance the freedom of contract in B2B transactions, and to improve consumer protection in B2C transactions, among other things. Among the many novelties is the introduction of the law of trusts (fiducia).
In addition, and in part due to the reform of the Civil Code, 2019 has also been significant for the development of Moldovan agribusiness in terms of redefining the ability of companies in the sector to finance their development. Although the Moldovan finance market is fairly limited (with Moldovan banks and lending companies only making traditional financing products available), Moldovan laws and practice do not significantly limit or discourage the ability of companies to seek financing abroad.
Acting on this basis, the Trans-Oil Group of Companies – the single largest Moldovan agricultural business group (involving over fifteen companies in Moldova, as well as several in Switzerland and Cyprus) – has made, through an Irish subsidiary, a USD 300 million secure Eurobond issuance on the Irish Stock Exchange. The settlement date of the issuance was April 9, 2019, with the Eurobonds maturing on April 9, 2024. This Eurobond issuance is the first of its kind for Moldova and its implementation involved a number of novel legal issues and solutions.
The bulk of transactional documents in the issuance were not governed by Moldovan law. The effects of such documents would be recognized in Moldova, however, by virtue of Moldova’s private international law, which, after the reform of the Moldovan Civil Code, implements the EU Rome I Regulation and the favorable regime instituted thereby. In particular, the new provisions have largely done away with the poorly-defined concept of “mandatory provisions of law” of Moldova, which, due to its broadness, could easily limit the effects of contracts governed by foreign law. A significant portion of the security documents put in place to secure the issuance were governed by Moldovan law, but with a much heavier degree of reliance on legal concepts and institutions existing under English law than is usual for cross-border financing transactions. These instruments also benefitted significantly from the reform of the Moldovan Civil Code and its greater allowance for customized contractual structures and provisions. Although complex and unusual, the transaction structure was possible to implement in Moldova. Furthermore, the guarantees and security put in place by Moldovan guarantors for the purposes of the Eurobond were approved by the National Bank of Moldova, under Moldovan currency control laws, demonstrating that the implementation of such a novel financing solution is indeed possible, which should raise local awareness of and stimulate interest in the Eurobond as a financing instrument.
By Octavian Cazac and Vadim Taigorba, Partners, Turcan Cazac
This Article was originally published in Issue 6.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.