Annex_6-_ExPost_Evaluation_of_Trade_October_2017.PDF

PARTNERSHIPS FOR

DEVELOPMENT

EX-POST EVALUATION OF LAW NO. 2004/18 ON INTERNAL

TRADE AND LAW NO. 04/L-048 ON EXTERNAL TRADE

October, 2017

This report was produced for review by the United States Agency for International Development by short-term consultant Dr. Victor Chimienti for USAID Partnerships for Development implemented by Chemonics

International, Prime Contractor, and Crimson Capital Corp. and Policy and Management Consulting Group, Subcontractors.

PARTNERSHIPS FOR

DEVELOPMENT

EX-POST EVALUATION OF LAW NO. 2004/18 ON INTERNAL

TRADE AND LAW NO. 04/L-048 ON EXTERNAL TRADE

OCTOBER 2017

Consortium Members: Crimson Capital Corp.

Policy and Management Consulting

Group

Award No.: AID-OAA-I-12-00035

Task Order No.: AID-167-TO-14-00002

Contracting Officer’s Representative: Dardane Peja

Chief of Party: Hajdar Korbi

DISCLAIMER

The author’s views expressed in this publication do not necessarily reflect the views of the

United States Agency for International Development or the United States Government.

Table of Contents

I. Introduction

1.1. Scope of the evaluation

1.2. Purpose and objectives of the evaluation

1.3. Approach and method of the evaluation

1.4. Process of the evaluation

1.4.1. Desk research

1.4.2. Exploratory interviews

II. Background

2.1. Law No. 2004/18 on Internal Trade (LIT)

2.1.1. Objectives

2.1.2. Basic rules and principles

2.2. Law No. 04/L-048 on External Trade (LET)

2.2.1. Objectives

2.2.2. Basic rules and principles

2.2.3. Kosovo’s foreign trade regime

III. Assessment

3.1. Effectiveness

3.1.1. LIT

3.1.2. LET

3.2. Efficiency

3.3. Coherence

3.3.1. LIT

3.3.2. LET

3.4. Relevance

3.4.1. LIT

3.4.2. LET

IV. Conclusions

4.1. Conclusion No. 1: Need for substantial amendment of LIT

4.2. Conclusion No. 2: Need to revise LET and opportunity to merge it with LAD/CM and LSMI

4.3. Conclusion No. 3: No need to merge LET and LIT

V. Recommendations

5.1. LIT

5.2. LET

I. Introduction

This ex-post evaluation covers two laws that form part of the legal framework governing the trade sector in Kosovo: Law No. 2004/18 on Internal Trade1 and Law No. 04/L-048 on

External Trade2.

The process for ex-post evaluation of legislation was initiated by the Office of the Prime

Minister (“OPM”) based on the Guidelines for Ex-Post Evaluation of Legislation3 (hereafter, the “Guidelines”) approved by the Government of Kosovo (“GOK”) in July 2015. Several ministries, including the Ministry of Trade and Industry (“MTI”), have undertaken pilot initiatives to test the effectiveness of this process. The MTI has chosen the laws listed above as the first two laws to undergo such evaluation.

The results of the evaluation show that, although the laws under scrutiny are still relevant, they have been ineffective or only partially effective in terms of achieving their objectives. One of the main issues affecting the effectiveness of the Law on Internal Trade is the lack of coherence with the existing legal framework. The defective harmonization with (at least nine) other laws – which already affected the LIT when it entered into force but has gradually increased as Kosovo legal framework developed and broadened over the years – has produced several duplications. Sometimes the result of duplications is that inconsistent rules govern the same subject matter. The ambiguity and lack of clarity over a number of provisions of the Law on Internal Trade is a further reason for concern. Another important limitation, aside from the lack of harmonization and clarity of the provisions, is the approach followed in defining the scope of the law and in stipulating certain general principles, which is not necessarily in accordance with best practice. Definitions are also in need of revision.

All of this, in combination with the findings of the evaluation regarding the need to ensure that producers and suppliers receive a fair treatment from large food retailers, suggests that the provisions of the Law on Internal Trade have not been effective. In order to achieve its full potential to regulate and promote trade, the Law on Internal Trade should be subject to significant change. Not only overlaps and contradictions must be removed and ambiguities eliminated to ensure a higher degree of certainty of law in the application of the Law on

Internal Trade and other related legislation, but its rules should be modernized in line with

European best practice and expanded to include issues or matters that are currently not regulated or are governed only by outdated sub-legal acts.

The lack of effectiveness of the LET is less serious than that affecting the LIT but it urges to be equally addressed. The factors hindering the effectiveness of the LET include poorly drafted articles, including duplicative, unnecessary, ambiguous or unclear provisions, loopholes, structural issues, lack of coordination with other laws (including the LIT) and non-compliance with fundamental international (WTO) principles. The trade sector also suffers from a scattered and overly complex legal framework on special measures, which is not fully harmonized with the most recent European Union legislation.

1 Law No. 2004/18 on Internal Trade https://gzk.rks-gov.net/ActDetail.aspx?ActID=2473 2 Law No. 04/L-048 on External Trade https://gzk.rks-gov.net/ActDetail.aspx?ActID=2788 3 Guidelines for Ex-Post Evaluation of Legislation http://www.kryeministri-ks.net/repository/docs/2_Guidelines_on_Ex-post_evaluation.pdf https://gzk.rks-gov.net/ActDetail.aspx?ActID=2473 https://gzk.rks-gov.net/ActDetail.aspx?ActID=2788 http://www.kryeministri-ks.net/repository/docs/2_Guidelines_on_Ex-post_evaluation.pdf http://www.kryeministri-ks.net/repository/docs/2_Guidelines_on_Ex-post_evaluation.pdf

1.1. Scope of the evaluation

This ex-post evaluation focuses primarily on the following laws, which form part of the legal framework governing the trade sector in Kosovo:

• Law on Internal Trade (Law No. 2004/18), dated 16 June 2004 (“LIT”), as amended by Law No. 04/L-005 On Amending and Supplementing the Law No. 2004/18 On

Internal Trade, dated 23 June 2011, and

• Law on External Trade (Law No. 04/L-048), dated 14 November 2011 (“LET”), henceforth jointly referred to as the Laws.

The evaluation covers the period from the date that the laws entered into force, i.e. from 20

October 2004 in the case of the LIT (with the exception of the amendments introduced by

Law No. 04/L-005, which entered into force on 10 August 2011), and from 6 January 2012, in the case of the LET.

The evaluation covers as well other applicable legislation as necessary, which is closely related to the laws under scrutiny. In particular, the following legislation has been reviewed and/or referred to for the purpose of conducting the evaluation of the Laws (in chronological order):

• Law on External Trade Activity, 2002 (Law No. 2002/6)

• Law on Farmer’s Cooperatives, 2003 (Law No. 2003/9), as amended by Law No. 03/L-

004, 2008

• Law on Crafts, 2004 (Law No. 2004/44)

• Law on Trade of Petroleum and Petroleum Products in Kosovo, 2005 (Law No.

2004/5), as amended by Law No. 02/L-89, 2006, and by Law No. 03/L-138, 2009

• Law on Business Organization, 2007 (Law No. 02/L-123)

• Customs and Excise Code, 2008 (Code No. 03/l-109), as amended by Law No. 04/l-

099, 2012

• Law on Integrated Management and Control of the State Border, 2008 (Law No. 03/L-

065)

• Law on Food, 2009 (Law No. 03/L-016)

• Law on Customs Measures for the Protection of Intellectual Property Rights, 2009

(Law No. 03/L-170)

• Law on Economic Zones, 2009 (Law No. 03/L-129)

• Law on Market Inspectorate and Inspective Supervision, 2010 (Law No. 03/L-181), as amended by Law No. 04/L-186, 2013

• Law on Anti-dumping and Countervailing Duty Measures, 2010 (Law No. 03/L-097)

• Law on Medicinal Products and Medical Devices, 2010 (Law No. 03/L–188)

• Law on General Product Safety, 2011 (Law No. 04/L-078), as amended by Law No.

04/L-189, 2013

• Law on Production, Collection, Processing and Trading of Tobacco, 2011 (Law No.

04/l-041)

• Law on Safeguard Measures on Imports, 2011 (Law No. 04/L-047)

• Law on Consumer Protection, 2012 (Law No. 04/L-121)

• Law on Obligational Relationships, 2012 (Law No. 04/L-077)

• Law on Trade of Strategic Goods, 2013 (Law No. 04/L-198)

• Law on Anti-dumping and Countervailing Measures, 2014 (Law No. 04/L-240)

• Law on Chemicals, 2014 (Law No. 04/l-197)

• Law on Protection from Discrimination, 2015 (Law No. 05/L-021)

• Law on Services, 2017 (Law No. 05/L-130)

As foreseen by the Guidelines4, within the limits of available resources, the evaluation may also focus contextually on secondary legislation. While the adoption of secondary legislation was carefully scrutinized to assess the effectiveness of the Laws, it has not been possible to assess in depth, the administrative requirements and procedures set forth in the sub-legal acts implementing the Laws, mostly due to time constraints and lack of available data. Therefore, such assessment will have to be carried out as an integral part of the policy making and drafting stages when the political decision to redraft or amend the legislation under scrutiny is actually taken, with a view to identifying any issues that may have arisen in relation to the provisions laid down in the secondary legislation.

1.2. Purpose and objectives of the evaluation

The MTI has requested the support of USAID Partnerships for Development (PFD) to conduct an ex-post evaluation (i.e. post-implementation impact assessment) of the trade legislation currently in force, namely the LIT and the LET.

The overall purpose of this evaluation is to further support MTI and GOK to meet their obligations under the Stabilization and Association Agreement with the European Union (EU).

The specific objective is to determine whether the existing LIT and LET should be amended, repealed or replaced. To this end, it should be investigated whether the existing legislation is being properly applied, whether the objectives and anticipated effects have been achieved, and associated costs and benefits should be surveyed.

Dr. Victor Chimienti has been contracted as Expert in Ex-Post Evaluation of Legislation

(hereafter, the “Evaluation Expert”) with the mandate to support the MTI in conducting this ex-post evaluation. In line with the Scope of Work, the Evaluation Expert has produced a report containing:

• A framework ex-post analysis of the LIT and the LET based on the Guidelines for Ex-

Post Evaluation of Legislation adopted by the GOK;

4 Paragraph 44, at p. 20.

• Recommendations regarding potential amendment, repeal, or replacement of the two laws listed above and/or other legislation in force governing trade in Kosovo, and further recommendations, as needed, in regards to the improvement of GOK’s policies and legal and operational framework governing the trade sector in Kosovo, in relation to EU requirements and international best practices.

In carrying out the assignment, the Evaluation Expert’s aim was to transfer knowledge to MTI officials on the implementation of ex-post evaluation in other areas and on different pieces of legislation. The Scope of Work further specified that the evaluation report should be drafted in a format that can easily be replicated for other ex-post evaluations as needed.

As noted above, this is also the first ex-post evaluation of legislation carried out by the MTI in furtherance of the Guidelines. For these reasons, the language style adopted by this report is intentionally more ‘pedagogical’ than it would have been otherwise.

1.3. Approach and method of the evaluation

As pointed out by the OECD, in ex-post evaluation, a range of different approaches can be used. Conceptually, there are two different approaches: the ‘legal approach’ and the ‘social science approach’. Most evaluations are a mix of both. However, the approach of the evaluation to be carried out will be determined, to a large extent, by the nature of the provisions contained in the law to be evaluated. The social science approach will prevail in the evaluation of a law that is susceptible to have major social impacts; on the other hand, in the evaluation of a technical law with little or no potential impact on society the legal approach will be predominantly used.

In the legal approach, the law is considered a set of norms: rights, duties, procedures and competences with defined scope and extent. This approach looks at the operation of the law and its strengths and weaknesses through its clarity, interpretations, coherence, etc. and whether there are conflicts with other laws. By contrast, the social science approach places emphasis on law as a set of incentives or deterrents, restraints and encouragement on behavior, focused on outcome and impact, with less concentration on the legal process5. The social-science approach is based, essentially, on an ‘instrumental’ view of legislation: legislation is considered to be an instrument of social guidance and control, as a tool of ‘social engineering’, as it is said sometimes6. As social goals are best served when scientific evidence is used rigorously and comprehensively to inform policy decisions, the social science approach requires the use of quantitative research methods adopted from economic sciences that are designed to ensure objectivity and reliability. Many quantitative research methods such as probability sampling and statistical analysis provide precise estimates for study variables, such as frequencies, averages, ranges, and percentages, at a known and quantifiable degree of confidence7.

5 See OECD (2012), Evaluating Laws and Regulations: The Case of the Chilean Chamber of Deputies, and in particular Chapter 1: International Practices on ex post Evaluation, at p. 17.

6 However, not all legislation has an instrumental character; or, at least, the instrumental character of legislation is not always predominant; it is for example likely to be more important in the field of public law and policy than in the field of private law. See Council of Europe, Evaluation of Legislation - Proceedings of the Council of Europe’s legal co-operation and assistance activities (2000-2001), Council of Europe Publishing, 2001, p. 20.

7 See OECD (2012), Evaluating Laws and Regulations, cit., at p. 21.

Given the nature of the legislation under scrutiny – both Laws, especially the LIT, cannot be really considered instruments of ‘social regulation’ – and the purpose of the evaluation as outlined in the Scope of Work, which focuses primarily on recommendations for potential amendment, repeal or replacement of the Laws and/or other legislation or policies governing the trade sector in Kosovo, also with regard to EU requirements and international best practices, this report mainly follows a legal approach. This should not be read as meaning that the social-science approach is neglected; it only means that the legal approach is the leading one. Against this background, special emphasis has been given in the context of the evaluation to the ‘Coherence’ indicator, with less importance being attached to the ‘Efficiency’ indicator

(costs v. benefits), which is more suitable for social welfare regulation or legislation otherwise affecting the lives of people.

Methodologically, the present analysis largely adheres to the standard evaluation framework provided in the Guidelines, as required by the Scope of Work. However, the method of the evaluation was slightly amended to bring it more in line with international and European best practices. According to the Guidelines, the Laws should be assessed against the following indicators: Effectiveness; Efficiency; Coherence; and Appropriateness. In particular:

1. Effectiveness: Effectiveness involves identifying objectives pursued and the gathering of the necessary data to verify objective’s achievements. It raises the question: To what extent the initial objectives of the law are met?

2. Efficiency: Efficiency compares objectives and results against incurred costs. It raises the question: Were the costs involved justified/reasonable, given the changes that have been achieved?

3. Coherence: Coherence examines if there are there inconsistencies or discrepancies in the implementation of legal provisions on the ground (from one institution to another)?

4. Appropriateness: Appropriateness evaluates to what extent the legal provisions are complied with.

It should be noted, however, that the evaluation questions referred to above do not entirely reflect EU evaluation practices, which provide four indicators to be considered: Effectiveness;

Efficiency; Coherence; and Relevance8. Although the words “relevance” and “appropriateness” may be generally considered synonyms and used interchangeably, the explanation of the term

“appropriateness” that is given in the Guidelines lures the reader into the wrong assumption that appropriateness is related to legal compliance. However, this is not in accordance with

EU evaluation practices, where compliance is assessed as an integral part the ‘Effectiveness’ indicator. Moreover, as noted by the OECD, “even full compliance with a specific rule will not result in the achievement of regulatory objectives if the rule’s underlying design is flawed. Slavish adherence to regulatory details by the target group will not achieve the regulatory objectives if the policymaker did not choose appropriate policy instruments.”9 In other words, the fact that a law is complied with does not mean that it is appropriate or vice versa. A fully complied law may not be appropriate to achieve the objectives that the regulator intended to achieve or to solve the problem that it intended to solve. Conversely, a law may be an appropriate regulatory instrument despite the fact that it is not be complied with. Non-compliance may in fact be

8 See Better Regulation Guidelines (Commission Staff Working Document), SWD(2015) 111 final, Strasbourg, 19.05.2015, pp. 56-60.

9 OECD (2000), Reducing the Risk of Policy Failure: Challenges for Regulatory Compliance, p. 7.

determined by motives which are not related to the design and contents of the law. As also pointed out by the OECD, explanations for the level of (non-) compliance fall into three categories:

• The degree to which the target group knows of and comprehends the rules

• The degree to which the target group is willing to comply – either because of economic incentives, positive attitudes arising from a sense of good citizenship, acceptance of the policy goals, or pressure from enforcement activities

• The degree to which the target group is able to comply with the rules.

Government actions to promote regulatory compliance must actually take each of these into consideration.

In the light of the above considerations, Appropriateness (= Relevance) should more properly look at the relationship between the needs and problems in society and the objectives of the intervention, and should seek to understand whether the (original) objectives (still) correspond to actual needs10. In order to harmonize Kosovo’s evaluation practice with EU best practice11, the Appropriateness indicator was therefore replaced in this evaluation with the following indicator:

5. Relevance (‘actualization’) raises the questions: To what extent is the intervention still relevant? To what extent have the (original) objectives proven to have been appropriate for the intervention in question? How well do the (original) objectives

(still) correspond to the needs […]? How well adapted is the intervention to subsequent technological or scientific advances?12

Accordingly, the level of compliance of the Laws was measured within the framework of the

Effectiveness indicator, according to a consolidated practice within the EU, where the compliance test is usually conducted to assess the effectiveness of a law.

The evaluation methodology also takes into consideration the requirement that the evaluation report must be drafted in an easily replicable format in view of other evaluation exercises. For this reason, the structure of the report does not fully mirror the list of issues referred to in the Guidelines13 but is arranged with a view to bringing Kosovo’s evaluation practice in line

10 See Better Regulation Guidelines, cit., p. 58: “Relevance looks at the relationship between the needs and problems in society and the objectives of the intervention. Things change over time - certain objectives may be met or superseded; needs and problems change, new ones arise. Relevance analysis is very important – because if an intervention does not help to address present needs or problems then it does not matter how effective, efficient or coherent it is – it is no longer appropriate”.

11 EU practice is pretty much aligned with international practices. See OECD (2012), Evaluating Laws and Regulations, cit., at p. 14: “Is the law the best way to deal with the issues and problems of the subject it covers?”, and p. 18: “Are the objectives of the law still relevant or do they need to be reviewed?

In what way has the initial problem evolved? To what extent does the legislation still match the current needs or problem?”

12 See Better Regulation Guidelines, cit. p. 59.

13 Section 93 of the Guidelines provides at p. 33 that the evaluation report should:

1. Recall the objectives of the law;

2. Define the reasons, scope, mandate, rationale and method of the evaluation;

with EU standards and best practice. As a result, it is believed that the structure of the report is not only is easier to replicate but it does also reflect the most common approach to reporting practices on legislative evaluation14.

This report is structured into five Chapters. Chapter 1 defines the evaluation framework, i.e.

frames the boundaries for the ex-post evaluation. To this end, it sets the parameters of the evaluation such as the scope, purpose, method and process of the evaluation. Chapter 2 provides background information for the assessment: the first step of an evaluation is to understand the current situation of a legislative intervention. Developing a clear understanding of the context and its underlying factors involves answering the following set of questions:

What is the origin of the intervention and what were its objectives? 15 (as envisioned in the

RIA, if conducted prior to the adoption of the Laws). Chapter 3 goes into the merits of the evaluation’s assessment of the legislative intervention against the relevant indicators. Chapter

4 draws conclusions regarding the results of the assessment. Finally, Chapter 5 formulates recommendations regarding potential amendment, repeal, or replacement of the Laws and/or other legislation or policies governing the trade sector in Kosovo, in relation to EU standards and international best practices.

1.4. Process of the evaluation

Significant effort was invested during the ex-post evaluation to ensure that the stakeholder engagement activities were as inclusive and representative as possible through exploratory interviews, phone calls, emails, etc.

Given the limited timeframe of the evaluation exercise, securing adequate coverage of all potential stakeholders, including supervisory and enforcement authorities, proved challenging.

Initially, an extensive list of contact points was prepared by the PFD based on input from the

Evaluation Expert. The MTI acted as a ‘facilitator’ in the consultation process and helped supplement the list by identifying additional stakeholders. Stakeholders were also asked to refer us to other relevant ones where possible in order to augment the list.

Consultations involved the following categories of stakeholders:

• National trade ministry and institutions (MTI Legal Department, MTI Trade

Department, MTI European Integration Department, MTI Consumer Protection

Department, Kosovo Customs, etc.) – focusing on national implementation of the

Laws and assessment of their effectiveness and coherence;

3. Indicate whether and how objectives where achieved (identifying the key issues, and for each of the issues include the results of the compliance test, the performance test, and the impact test);

4. Compare the outputs and outcomes against expected effects of the law;

5. Identify unexpected effects, whether negative or positive, and the way to maximize the positive effects and overcome the negative ones;

6. Contain a set of conclusions; and

7. Contain a set of recommendations on further actions to be taken.

14 The Guidelines are “a living tool” that can be amended or enriched to reflect the emerging practices in Kosovo (Guidelines, paragraph 101 at p. 34). Point 10 of the Government’s Decision approving the Guidelines specifies that the Legal Office of the Office of Prime Minister (OPM) is responsible to review the Guidelines based on best practices and the feedbacks received from ex-post evaluations.

15 Better Regulation Guidelines, cit., p. 56.

• Supervisory authorities (MTI Market Inspectorate, Association of Kosovo

Municipalities) – focusing on inspection practice, complaint mechanism, and assessment of the effectiveness and coherence of the Laws;

• Enforcement authorities (Basic Court of Pristina: General Department, Department for Commercial Matters, and Administrative Department) – focusing on the enforcement practice and coherence of the Laws;

• Business associations (Kosovo Chamber of Commerce, Kosovo Manufacturing Club and Fuels Association of Kosovo): focusing on impacts at the level of business organizations that might not be captured or adequately reflected in other sources.

Stakeholder views and opinions are clearly identified throughout this report, and used to support the research and findings.

The following paragraphs present a brief overview of the research and data collection tools used during this evaluation and their limitations.

1.4.1. Desk research

The purpose of the desk research was to provide background information and legal analysis relevant to the scope of the report and help triangulate the information gathered from stakeholders during the interviews. Sources were primarily identified and collected by the

Evaluation Expert, and supplemented from time to time by PFD and stakeholders. All sources are referenced throughout the report. Whenever necessary and possible, conclusions emerging from the desk research were validated by the information collected through other means such as interviews, emails and phone calls.

In addition to the analysis of the Laws, related legislation and their implementing legislation, the desk research also covered expert reports produced by previous projects, such as:

• USAID BEEP, Gap Analysis of the Kosovo Legal Framework for External Trade, 22

November 2010, and

• USAID BEEP, Analysis of Law on Anti-dumping and Countervailing Measures and new Draft

Law, 27 January 2012.

No relevant piece of (legal) literature was found which could assist in the evaluation, with the exception of an academic article focusing on the single tariff policy.

A relevant data source for the evaluation of the Laws may have been the Regulatory Impact

Assessment (RIA), Concept paper or Explanatory Memorandum. While no policy or impact analysis was required when the LIT was drafted due to the weak system of regulatory governance existing at the time, this was not the case when the LET (or other more recent laws such as the amendment to the LIT) were enacted. In fact, Government Regulation No.

01/2007 On the Work of the Government, which was in force from 2007 to 2011 and was repealed by Government Regulation No. 09/201116 shortly before the adoption of the LET, 16 Government Regulation No. 01/2007 was repealed by Regulation No. 09/2011 Of Rules and Procedure of the Government of the Republic of Kosovo, which removed the RIA requirement and made some other changes to the decision-making process of the Government. The Better Regulation Strategy 2014-2020 – Regulatory Impact Assessment foresees the amendment of the legal framework to (re)introduce the RIA process for new draft legislation. However, the draft Law on Normative Acts provided already that all primary laws should be accompanied by an Explanatory

Memorandum, a document providing evidence of relevant EU legislation, a RIA, and a Financial

Impact Assessment (FIA). Following consultations with MTI, the RIA or other supporting documentation on LIT or LET could not be found.

Public consultation is an indispensable part of the RIA procedures. It may not only be an information source about the anticipated costs and benefits of a regulation, but also a source of opinions on possible improvements in the draft regulation as well as on the willingness of interested stakeholders to accept such regulation. With that in mind, Government Regulation

No. 01/2007 stipulated that the sponsoring ministry should conduct consultations with the public as a typical stage of law drafting. Since no RIA or other supporting documentation could be found, it has not been possible to include any results of public consultations in our data collection.

It is important to remember that according to the OECD, “In order to be effective, ex post evaluation requires clarity of the intended policy objectives, impact and outcome. These objectives provide a framework by which the law can be scrutinized and judged after it is implemented.

Regulatory impact assessment (RIA) is central to this process. It is during the ex-ante assessment that the problem should be properly defined and policy or regulatory objectives should be clearly established.” As noted by the OECD17, ex-ante and ex-post evaluation are closely linked. At their core, there is an important element of an evidence-based approach to policy making.

They represent different, yet interconnected steps of a ‘circular’ process. In the regulatory policy cycle, both stages have to provide feedback to each other. A strong ex-ante assessment provides elements to assess the way regulation has been implemented and whether it has achieved its original objectives. In fact, the benchmarks and assessments set out in RIAs can be used to determine the questions around which ex-post evaluation is conducted. On the other hand, a robust ex-post evaluation can lead to better understand the shortcomings of certain regulation and feed into the RIA of future legislation or amendments. Moreover, ex-post evaluation helps improve the quality of RIA as it can be used to assess the extent to which RIA benchmarks and assessments have proved accurate. The role of the executive is crucial in this work. It is the government that has chosen the benchmarks identified in the RIA and it is the government which has formulated the assessments of the impacts of proposed legislation and subsequently given its assent to such legislation. It is therefore incumbent on the executive that it places a high priority and makes resources available to ensure that RIAs are as comprehensive and useful as possible18.

A similar limitation can be found in relation to the practice of the Assembly related to the exercise of its oversight function. According to the Article 4.4 of the Constitution of the

Republic of Kosovo the government “is responsible for implementation of laws and state policies and is subject to parliamentarian control”. The Rules of Procedure of the Assembly of Kosovo

(2010) and the Manual on Oversight Function of Parliamentary Committees (2012) regulate the oversight role of the Assembly and the authority of the committees in monitoring the implementation of laws. In particular, the Committees of the Assembly have authority to monitor the effectiveness of the laws in force, their implementation, and make recommendations for measures to be taken in concrete situations. In the last decade, the

Kosovo Assembly has approved over 300 laws. In this period of time, it has developed the practice of overseeing the implementation of laws. However, due to the workload and the limited capacities of the Parliamentary Committees, only a small proportion of laws have been which was prepared in 2013 in order to make the relevant amendment, was never approved by the Kosovo Assembly.

17 OECD (2012), Evaluating Laws and Regulations, cit., at p. 24.

18 OECD (2012), Evaluating Laws and Regulations, cit., at p. 24.

overseen so far. The LET and LIT are not among those laws.

As a result of the limited amount of information available, which provided no quantification of any impacts and costs, the large majority of issues affecting the implementation of the Laws could only be qualitatively assessed. An aggravating factor was the lack of legal analyses of the

Laws and their shortcomings. Overall, the evaluation was affected by a lack of availability of critical data and the difficulty in collecting both quantitative and qualitative indicators.

1.4.2. Exploratory interviews

Exploratory interviews were carried out with the following institutions/officers:

MTI – Trade Department Sytrime Dervisholli, Director of

Department

MTI – Legal Department Rexhep Bllaca, Director of Department

MTI – Market Inspectorate

- Lulzim Syla, Chief Inspector

- Naim Hajra, Inspector

MTI – Consumer Protection Department Nijazi Shala, Director of Department

MTI – EU Integration Department Irfan Lipovica, Director of Department

Customs

- Legal department – Lendita Zehri

- Bashkim Çitaku

- Ekrem Grabanica

- Avni Selmani

Fuels Association of Kosovo

- Fadil Berjani, President

- Jakup Gashi, Export-Import

Basic Court of Pristina

- Afërdita Bytyçi, President

- Bajram Miftari, Judge - Department for

Commercial Matters

- Lekë Prenaj, Judge - General

Department, Civil Division

- Mustafë Selimaj, Judge - General

Department, Minor Offences Division

- Krenar Berisha, Judge - Department for

Administrative Matters

Association of Kosovo Municipalities

- Sazan Ibrahimi, General Director

- Gani Berisha, Program Manager

Kosova Chamber of Commerce Safet Gërxhaliu, President

Kosovo Manufacturing Club

- Astrit Panxha, Executive Director

- Vllaznim Osmani, General Secretary

Due to the complexity of the issues that need to be covered in the evaluation, the interviews tended to be necessarily specific, and may have been difficult for some stakeholders to answer certain questions. Besides, not all stakeholders interviewed had a legal background. Therefore, the discussion often slipped to a more general discussion about the broader issue of the overall effectiveness and impact of the Laws. This was not necessarily negative as it provided an additional layer of information regarding the effects of the implementation of the Laws. As stated in the Guidelines19, evaluations should measure not only the achievement of initial objectives but also the outcomes and impacts of the law on the broader scale. In particular, the Kosovo Chamber of Commerce (KCC) and the Kosovo Manufacturing Club referred to the need to reform the Laws, and the LIT in particular, in order to protect domestic producers and suppliers from unfair trade practices, especially in the grocery retail market.

The inputs received from those stakeholders that accepted to meet are highly appreciated.

Overall, the stakeholder response can be considered to be good in light of the complexity of the evaluation, and also considering the highly technical and specific nature of the Laws.

However, a more ‘proactive’ approach from key stakeholders in terms of providing written material and information, such as background notes, legal analyses, studies on specific matters, etc. would have contributed to further enhance the quality of this report and the effectiveness of the evaluation.

For all interviews, the results are subject to well-understood limitations that affect the interpretation of the findings, namely that a relatively small sample was collected for some stakeholder groups (e.g., courts), and that the opinions are always subjective. To some extent, the reliability of the results was improved by ensuring a good coverage of representative stakeholders. At any rate, results will need to be interpreted with care.

II. Background

This Chapter provides a baseline against which the degree of achievement of initial objectives can be measured. To assess whether the Laws have met their objectives, it is necessary to go back to the original objectives as set out in the Laws by those involved in their drafting. To this end, this Chapter looks first at the objectives of the Laws as defined in the preamble of the Laws (given the absence of RIAs or policy papers preceding the adoption of the Laws).

Subsequently, it elaborates on the contents of the Laws and their basic principles and rules.

Finally, it provides some additional background information regarding the context of the LET and its underlying factors, in view of the international implications and dimension of this law.

2.1. Law No. 2004/18 on Internal Trade (LIT)

2.1.1. Objectives

The LIT entered into force in 2004. Upon entry into force, it superseded any provision in the applicable law governing internal trade which was inconsistent with it (Article 66). The law was amended in 2011 by Law No. 04/L-005 On Amending and Supplementing the Law No.

2004/18 On Internal Trade.

There is no specific article addressing the purpose of the law. However, the Preamble stipulates that the LIT is approved by the Assembly of Kosovo “For the purpose of promoting a healthy economic development of a free internal market in Kosovo”. According to Article 1, this law specifically regulates the internal trade market, including wholesale, retail sale, auction sale, commercial agency, temporary restrictions of trade, unfair commercial practices, unfair competition, supervision and enforcement. Unlike other regional trade laws20, the LIT does

19 Paragraph 64 at p. 26.

20 See, e.g., Article 4 of the Serbian Law on Trade: “Trade is freely available on the market. Restrictions on the freedom of trade are prohibited. An exceptional restriction on the freedom of trade can be temporarily introduced in the manner and under the conditions prescribed by law”. See also, Article 3.1 not expressly enshrine the principle of free trade, which can be considered central to the above-mentioned purpose. However, such a principle may be inferred from the law as whole, including its Preamble, especially after its amendment in 2011. As already mentioned, no RIA or other policy paper was found which could shed some further light on the objectives of the

LIT.

2.1.2. Basic rules and principles

The LIT is poorly structured into three chapters with no sub-charter or other subdivision:

Chapter One: “General Provisions” (Articles 1-5); Chapter Two: “Conduct of Trade Activity”

(Articles 6-51); and Chapter Three: “Supervision and Administrative Measures” (Articles 52-67).

The scope of the law, however, has been narrowed down as a result of the changes made in

2011, which abrogated or amended several provisions restricting the freedom of trade.

The law provides general principles and rules on trade activities (Articles 3 to 8, Article 16) and regulates in detail the requirements for the conduct of specific activities such as wholesale activities (Articles 9 to 12), retail sale activities (Article 13 to 15), and auction activities (Article

17).

The law also regulates the contract of commercial agency (Articles 18 to 28), as well as certain consumer protection aspects of distance contracts (Article 29, 30 and 31) and contracts negotiated away from business premises (Articles 32, 33 and 34). Some other general consumer-related rules were set forth in Articles 35 to 37 but these articles were deleted in

2011. The rules on commercial agency and consumer contracts are partly compliant with the

EU acquis.

In addition, the law regulates the conditions for exercising trade activities, including the issuance of licenses based on fulfilment of technical, health and sanitary criteria (Article 38), the obligation to comply with minimum professional and educational requirements (Article

39), working hours (Article 40), and record keeping (Article 41), as well as the modalities and conditions for temporary restrictions of trading activities (Articles 42 and 43). These provisions were also significantly modified in 2011.

Furthermore, the LIT provides the sketch of a regulatory framework on unfair competition

(Articles 44 and 45) and unfair commercial practices (Articles 46 to 51). The EU Directive on unfair commercial practices is partly transposed into these provisions.

Finally, the law sets out rules governing trade inspections (Articles 52 to 58) and provides for the imposition of fines in cases of non-compliance (Articles 59 to 64).

With a view to improving the business environment through the removal or reduction of administrative barriers to trade, the Assembly adopted in 2011 the Law on Amending and

Supplementing the Law on Internal Trade (Law No. 04/L-005). First of all, this law repealed

Article 16 in its entirety and Article 38, paragraphs 3 to 8. Article 16 provided that only traders with a valid municipal license might sell their products and exercise trade activity21. In parallel, of the Law on Trade of BiH: “The trade is conducted freely, under equal conditions for all traders, in accordance with the law, good business practices, loyal competition principles and trading rules”.

21 Article 16 also specified that only natural persons may freely sell their agricultural products without having to register, and endowed the market inspectors with a blanket authorization to prohibit natural paragraphs 3 to 8 of Article 38 provided rules regarding the licensing procedure carried out by the municipal authorities, including the payment of fees for the issuance of a license22. As a result, the issuance of a license by the competent municipal authority (and payment of relative fee) is no longer required for the sale of goods. However, special legislation may still require the issuance of a license to trade in certain goods or services.

The 2011 amendment also abrogated Article 39 (jointly with Article 57.1 and Article 60.1(h)).

This article prescribed the fulfillment by persons conducting certain commercial businesses of minimum professional conditions and educational qualifications as defined by the MTI. In connection with this, the text of Article 57.1 (i.e. inspector’s authority to prohibit the continuation of work by a person without the relevant professional qualification) and the text of Article 60.1(h) (i.e. imposing fines on persons conducting business without fulfilling the minimum required professional conditions and educational qualifications) were also deleted.

Consequently, compliance with minimum professional conditions and educational qualifications is not required anymore.

Particularly important among the changes made by Law No. 04/L-005 are also the revision of the inspector’s powers and the amendment of the complaint mechanism against the decisions of the inspectors. Under the LIT, as originally designed, inspectors were granted extensive powers. In particular, the inspector could decide to:

• temporary prohibit a trade activity if irregularities were ascertained during an inspection (see Article 53.1, Article 54.1, and Article 55.1 and 2)23;

• prohibit the sale of certain goods if it was determined that the sale of such goods may cause harm, endanger the health or life of people, or damage the environment (Article

56.1);

• prohibit the continuation of work by the person without the relevant professional qualification or prohibit the trader’s business in contravention with determined working hours (Article 57.1);

• impose (administrative) fines up to 15.000 euro, depending on the type and gravity of the irregularity ascertained (Articles 59, 60 and 61).

Against the inspector’s decisions referred to above, the trader could file a complaint to the

MTI Inspectorate Office within 15 days from the date of the decision. The decision of the

Inspectorate had to be issued within 60 days from the submission of the complaint and could be appealed anytime to the competent court (Article 58). With regard to fines challengeable before the Inspectorate, the LIT only referred to fines provided for by Article 59, failing to refer to those imposed pursuant to Articles 60 and 61. This is most likely the consequence of a drafting error as a result of which fines from 5.000 to 15.000 euro (Article 59) could be challenged in front of the Inspectorate (before going to the competent court), whereas fines from 3.000 to 9.000 euro (Article 60) and those from 2.000 to 6.000 euro (Article 61) could only be challenged before the competent court. This incongruence was eliminated in 2011, and legal persons from trading after giving adequate notice. These restrictions to trade have also been removed.

22 Licenses were issued if all requirements referred to in Article 38.1(a) and (b) were met: 1) technical and other requirements to be fulfilled by business premises, equipment and means through which trade activity is conducted; 2) general health and sanitary conditions to be fulfilled by business premises where trading occurs, or to be met if the trading takes place outside; and 3) standards of hygiene to be met by the personnel carrying out the trading activity. Such requirements are defined by MTI AI No.

2005/12 On Fulfilment of Minimum Technical Conditions for Business Premises for Wholesale and Retail Sale, issued on 29.03.2005.

23 For example, the trade activity was not registered or the person performing it had no license.

when the possibility to file a complaint to the Chief Inspector against a fine was entirely removed from the law (see below).

As a result of the changes made to the LIT in 2011, the powers of the inspectors have been narrowed down. For example, Article 57.1 was reworded to remove the Inspector’s authority to prohibit the continuation of work by a person not holding the relevant professional qualification. This amendment is consistent with the abrogation of Article 39, which required traders to fulfil minimum professional conditions and education qualifications. At the same time, the complaint mechanism against the decisions of the inspectors was substantially revised. In particular, Article 58 was reworded in a way that the following changes were made:

• the complaint against the decision of the inspector (note: “authorized inspector”, no longer “municipal inspector”) shall be addressed to the Chief Inspector of the MTI, not to the MTI Inspectorate Office;

• only inspector’s decisions based on Articles 53, 54, 55, 56 and 57 (i.e. decisions prohibiting a trade activity) may be challenged before the Chief Inspector, whereas decisions imposing fines (Articles 59 to 61) may only be challenged before the competent court;

• the deadline for submitting a complaint is reduced from 15 to 8 days from the date of the decision;

• the decision regarding the complaint shall be taken by the Chief Inspector within 30 days (instead of 60) from the date of submission;

• the trader may file a claim in the competent court against the decision of the Chief

Inspector within 30 days from its issuance (previously, there was no time limit).

Additional amendments include the following: certain definitions set forth in Article 2 (i.e.

“ministry”, “seller or supplier”, etc.) were changed; specific provisions related to consumer protection (Articles 35 and 37) were abrogated; the illustrations of unfair competition referred to under Article 45, letters h) and i) were removed; and the amount of fines foreseen by the law (notably, Articles 60 and 61) were revised.

2.2. Law No. 04/L-048 on External Trade (LET)

2.2.1. Objectives

The LET entered into force in 2012 and replaced Law No. 2002/6 on External Trade Activities, which had been promulgated by UNMIK Administration in 2003.24

The purpose of the LET “is to define the general rules for the exercise of external trade between persons settled within and out of the territory of Kosovo in compliance with best international practices” (Article 1). As in the case of the LIT, no policy document (Concept Paper, Explanatory Memorandum or RIA) was found to clarify further the objectives of the law.

Although Kosovo is not a member state of the World Trade Organization (“WTO”), its trade policy has always been inspired by the WTO guiding principles and approaches. Article 22 of the LET expressly states that the provisions in this law, other legal acts and international agreements shall be in accordance with the WTO agreements. The law further confirms that the conditions, criteria and procedures of trade licensing shall comply with the provisions of

24 Promulgated by UNMIK/REG/2003/15.

the WTO’s Agreement on Import Licensing Procedures (Article 11). Similar WTO-consistent provisions were included in the previous law25.

2.2.2. Basic rules and principles

Foreign trade activities may be carried out by natural and legal persons, while trade for commercial purposes may be carried out only by persons duly registered in Kosovo (Article

2).

The law affirms the principle of free trade under Article 4. In accordance with this principle, the state authorities cannot impose restrictions, prohibitions or conditions on any external trade activity, restrict the ability or impose conditions on the right of every resident or non-resident to perform external trade activities, or apply any other measure having a restrictive effect on external trade, except in cases specifically foreseen by the law.

Article 16 codifies the principle of the most-favored nation (“MFN”) in respect of like-products. This principle is also extended to the trade in services (Article 19). The principle of national treatment is enshrined in Article 15, which stipulates that imported and locally-produced goods should be treated equally after the foreign goods have entered the Kosovo market.

The requirements for imposing restrictive measures on the exercise of trade activities are specified in Article 5, whilst Article 6 describes the responsibilities of the GOK and MTI in the process of adopting restrictive measures. Quantitative restrictions (quotas) are regulated by

Article 12. Non-technical barriers to trade (technical regulations regarding sanitary, phytosanitary, etc. requirements) are referred to under Article 17.

Article 7 provides the general rules on issuance/non-issuance of import or export licenses, including the…