A Georgian law which limits agro land acquisition by foreigners has angered many investors and forced them to change their plans in Georgia. LTD Jiveli, co-owned by Polish investors, is one of those companies and was planning to invest EUR 30 million in wine production. The company was denied the possibility to register purchase of the land. “Georgia is sending the message that it’s not open to foreign investment,” American businessmen told The FINANCIAL.
In Spring 2013, two Members of Parliament, Gigla Agulashvili, Chair of the Agricultural Issues Committee, and Zurab Tkemaladze, Chair of the Sector Economy and Economic Policy Committee, drafted a ban on all non-Georgian citizens (including Georgian entities with foreign minority shareholders – foreigners) from purchasing or inheriting agricultural land. The ban has been in effect since June 2013 and is planned to expire in December 2014. Prior to this decision, there were several minor protests made by Georgian farmers against foreign landowners.
The moratorium expired on 20 September but the Georgian Government added new restrictions for foreigners.
Foreigners can purchase agricultural land only if they have experience in agricultural activities in the country of at least 5 years. Individuals are also required to have a Georgian residential permit.
“We purchased 5,336 square meters in May in Telavi, in the Kakheti region. 50% of our company is owned by Polish investor Jurek Marian Berdz. We planned to develop wine-making. However, the Public Registry did not issue permission due to the participation of our foreign partner,” Avtandil Tcharbadze, owner of LTD Jiveli, told The FINANCIAL.
Avtandil owns 25% of the company, while the remaining 25% is owned by his father Zurab Tcharbadze.
“In the first stage the investor planned to make a EUR 1 million investment. The total volume of planned investments was EUR 30 million spread over the coming 5 years. Georgia is hardy saturated with investments of such a scale. If the jurisdiction hampers the inflow of this investment it will firstly impact on our economy,” said Tcharbadze.
Zurab Tcharbadze has been involved in business since 1992. In his words, it is the first time that he has faced such a problem. “Our foreign partner was ready to leave here,” he said.
“I have been cooperating with our Polish partner for four years. During this time I have been assuring him that the tourism and wine business is the most profitable in Georgia. We had hoped to export our products to the European market,” said Tcharbadze.
Tcharbadze does not plan to give up but instead plans to “fight to restore justice”. With the assistance of Transparency International Georgia the company has appealed to the Constitutional Court.
“How properly the Public Registry decided to link the 50% ownership by a foreigner as proof that it was an LTD registered by a foreign alien entity in Georgia – is really questionable,” said Oliko Shermadini, Assistant Lawyer at Transparency International Georgia.
In June 2014, the Constitutional Court upheld Transparency International Georgia’s constitutional appeal in the case of Mathias Huter vs. The Georgian Parliament. The Constitutional Court ruled the Georgian Parliament’s moratorium on the acquisition of agricultural land by foreign citizens until 31 December, 2014, to be unconstitutional as it contradicted Article 21 of the Georgian Constitution whereby the right of property and inheritance is recognized and inalienable and it is also prohibited to abolish the universal right of holding, acquiring, selling or inheriting property.