Weekly Client Alert # 18




Disputing a Favorable Administrative Act Is No Longer a Ground For Suspending Its Implementation

Henceforth, being disputed by a person who is not the addressee of a favourable administrative act is not a ground for suspending the execution of the act. Upon entry into force of the above-mentioned regulation, the suspensions of the execution of the relevant favourable administrative acts on the basis of the lawsuits with the demand to completely or partially annulet the administrative act shall be considered abolished.

Exceptions are the judicial acts’ appealing, reviewing or cassation of completed cases at the time of entry into force of this regulation.

The bill has been adopted by the National Assembly of the Republic of Armenia in the second reading.

We are happy to not that TK & Partners has also contributed to the initiation and drafting process of the legislative package.

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Audiovisual Media

Henceforth, the status of audiovisual media service providers, operators, the procedure for authorization, licensing, issuance of permits thereof, submission of notices, as well as the grounds for the emergence of rights and responsibilities of relevant entities, the relations arising during the activity will be regulated by the RA Law on Audiovisual media.
Upon the entry into force of the Law, the RA Law on Television and Radio will be repealed.

The bill has been adopted by the National Assembly of the Republic of Armenia in the second reading.

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Draft on Making Changes and Additions to the RA Law on State Duty

The Ministry of Justice of the Republic of Armenia has submitted for public discussion a draft on making changes and additions to the RA Law on State Duty (hereinafter referred to as the "Draft"), which proposes to increase the current rates of state duty for applying to court on average up to 4 times.

The RA Ministry of Justice has conditioned the necessity of the regulations defined in the draft with the increase of socio-economic indicators and with the increase in costs required for the administration of justice. 

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New Regime for Making Mandatory Pension Contributions as of July 1st This Year

As of July 1st this year, a new regime is applicable for those employees whose monthly salary is more than 500,000 AMD.

Particularly, those employees shall make monthly contributions to their pension funds in the difference between 10% of their salary and 37,500 AMD, but not more than 64,500 per month. In this calculation the 37,500 AMD is paid by the government and the 64,500 AMD is connected to the maximum limit, according to which no mandatory pension contributions shall be made for the amount exceeding 15 folds (68,000 X 15= 1,020,000, 10% of which is: 102,000 AMD) of the minimal salary (102,000 – 37,500= 64,500).

This regime will apply until the end of this year.




Derivative Financial Instruments Entered Into by Mandatory Pension Funds

The Central Bank of Armenia’s Board has adopted Regulation 10/32 “Types and Parties of Derivative Financial Instruments Entered into by Mandatory Pension Funds” in its session on July 17, 2020. The Regulation permits investment of assets of mandatory pension funds in any type of derivative financial instruments stipulated in Article 3 of the Law on Securities Market for hedging purposes. An investment in derivative financial instruments shall be considered to be made for hedging purposes, if:

1) it is aimed at total or partial reduction of the risks associated with the management of investments of the fund;

2) there is a direct link between the object of hedging (the risk) and the derivative instrument being used; and

3) such investment stems from the investment policy of the fund, including – it is associated with the assets of the fund or those assets, wherein the fund is planning to make investments.

As to parties of derivative financial instruments entered into by mandatory pension funds, as such may act:

1)         financial organizations licensed by the Central Bank of the Republic of Armenia;

2)         international financial organizations. These organizations shall be subject to the threshold for banks established in Article 39 (5) of the Law on Funded Pensions;

3)         foreign financial organizations possessing at least the following rankings:

  • Standard and Poor’s, group “BBB” BBB;
  • Moody’s, group “Baa” Baa3;
  • Fitch, group “BBB”

At the same time, the conclusion of derivative financial instruments between a mandatory pension fund and an international financial organization, which is not subject to licensing in or control by any state and has been established pursuant to an international treaty, shall not be considered as an investment made in a foreign state.


The Official Clarification of The Board of The Central Bank About Derivative Financial Instruments Concluded by Mandatory Pension Funds

In addition to Regulation 10/32, with regard to derivative financial instruments concluded by mandatory pension funds, an official clarification of Articles 39 (1) and (15) and 68 (5) of the Law on Funded Pensions have also been adopted by the Board of the Central Bank. The main lines of interpretation embodied in the official clarification are the following:

  • currency swaps entered into by pension funds for the purpose of hedging currency risks are to be considered as investments expressed in foreign currency and taken into account for calculation of thresholds of such investments pursuant to Article 39 (1) of the Law on Funded Pensions;
  • for calculation of the threshold associated with derivative financial instruments concluded with one person, as required under Article 39 (15) of the Law on Funded Pensions, the mark to market value of the derivative financial instrument shall be taken into account, while for calculation of the threshold associated with all derivative financial instruments entered into by the pension fund the market value of the underlying asset shall be taken into account;
  • the prohibition of the pledge of assets of pension funds set out in Article 68 (5) of the Law on Funded Pensions does not mean that pension funds cannot enter into the Credit Support Annex of the Master Agreement of International Swaps and Derivatives Association.

We are also happy to mention that both the Regulation and the official clarification have been adopted thanks to our law firm’s efforts


Capital Market Development Program

On July 16 the Government approved the Capital Market Development Program, among purposes whereof are the determination of development directions of the capital market and detection of problems. The first part of the document is a detailed analysis of the capital market, including the necessity of development of the market, instruments being offered and markets thereof, demand and structure of the market. The second part is focused on strategic directions of the development of the capital market.

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