In July, Georgian Parliament amended the Law on Electronic Communications that sets up new rules and regulations that enables the government to appoint special administrators in the private companies operating in the communication sector. The discussion of the bill was carried out with tense debates between representatives of communication regulators and the country’s largest mobile and internet companies.

Former US special envoy to Ukraine Kurt Volker told BMG that the new regulations in the communications sector have the potential to damage Georgia’s investment climate. According to Volker, there is an assessment that the purpose of the expedited adoption of this law was to sanction a specific company – “Caucasus Online”.

Kurt Volker points out that NEQSOL Holding, a new shareholder in Caucasus Online, plans to launch a digital silk road project that will create a unified fiber-optic infrastructure that will connect Europe with Central Asia. According to Volker, the implementation of this project should be in the interest of Georgia, but the changes adopted in the form of a new law might have a negative impact on a new digital silk road initiative.

“The law has been passed and now we are looking at how it’s been implemented and it is potentially very damaging for Georgian investment climate. I think that investors will look forward to how things move forward with some concern. One aspect is passing a law and then applying it retroactively on the transactions that took place in the past,”- Kurt Volker told BMG.

Interview with Kurt Volker:

– Many believe that the legislative process on this law was deliberately rushed and it was motivated against the Caucasus Online and it’s new shareholder, what do you think? Do you see some connection with that?

– Clearly the process was rushed, that it was all done so fast and so late at night in the Parliament, so it was a rushed process. The motivations for that I am really not sure. If it was to target one specific company, that would also be a concern for foreign investors generally because, again it means that your investment may not be secure. The law has been passed, it is passed and is on the books now. The question is what decisions are made in the future.

– How can you assess the decisions and steps from GNCC – Georgian communications regulator?

– I don’t know all the ins and outs of this process, but my impression is that having passed the law the government should be negotiating with the company to regularize the company’s activities inside the space. and instead there has been very little negotiation and very little dialogue and I think that would also be very worrying. As I have been saying, taking the law retroactively in very harsh measures that really don’t have precedent elsewhere in developed democracies this would be quite a concern. And since there does not seem to be anything here that would be jeopardizing the strategic interests of Georgia which is why the law was passed to begin with. It would seem more matter of regularizing the situation and preventing any transfers going forward, rather than trying to apply it retroactively.

– As former US ambassador to Azerbaijan, Mr. Matthew Bryza noted developing such project should be in the interest of Georgia, thus stopping it can be in the interest of adversaries like Russia.

– I don’t know what might be the motivations for trying to stop this project. It seems to me that the project itself is in the interests of Georgia, because it creates a digital silkroad or a digital highway that does the most for Georgia’s digital independence. I would say that this is also in the interests of the Euro-Atlantic community, we are very interested to see Georgia creates as much space for independence and sovereignty as possible.”

In 2019 one of the largest private holdings of Azerbaijan, NEQSOL acquired Caucasus Online and paid $61 million. This deal was followed by a sharp response from the Georgian Communications Commission and the government. The commission indicated that the deal was not pre-arranged with them, which should have resulted in a tough sanction for Caucasus Online.

However, according to the representatives of NEQSOL Holding, they have kept Georgian government fully informed about their plans prior to the deal and got blessings for the transaction.

This case was one of the reasons why Georgian Parliament amended the law and set the new regulations for the communications companies. The private sector was opposing the changes, and as a result of tense hearings in Georgian Parliament, the draft was amended and the rights of special administration that Communications Commission can appoint in the companies was reduced.

The dispute between NEQSOL and Georgian communications regulator has not been solved yet, and NEQSOL Holding with support of the leading international law firms has already launched preparations for international arbitration.