copy the linklink copied!7. Policy and regulatory framework for the transport sector

7.1.1. The law on transport

Law No. 1194 of 21 May 1997 on transport sets out the general framework for the operation of all modes of transport in the territory of the Republic of Moldova. According to Art. 15, the country's transport system includes rail, car, air, naval, electric urban transport and pipeline transport. State administration of the transport system is carried out by the Ministry of Economy and Infrastructure (which now incorporates the former Ministry of Transport and Roads Infrastructure), the local public administration authorities and other authorised bodies (Art. 3). Article 4, par. (6) of the law stipulates that interference by local public administration authorities in the economic activity of transport companies, as well as the diversion of their operating personnel to other works, will only be permitted in the cases provided for under legislation. According to Art. 5, par. (2) of the law, the companies that are part of the transport system, irrespective of the type of property and the legal form of organisation, benefit from state protection on equal principles. The transport companies carry out transport and provide other services covered in contracts and orders for the carriage of passengers and goods, based on market economy principles (Art. 7). The law also deals with the liability of transport companies (Art. 10), as well as their obligations to ensure transport safety (Art. 13). Compliance with transport legislation is checked by the respective central and local public authorities within the limits of their competence (Art. 22).

7.1.2. The law on local public administration

Law No. 436 of 28 December 2006 on local public administration establishes and regulates the organisation and functioning of the public administrative authorities in the administrative-territorial units. Thus, according to Art. 14, par. (2), lit. c) and h), the competences of the councils of the first level local public administrative authorities include the “concession of public services of local interest, in accordance with the law” and “organisation of public communal services”.

The competences of the local government executive (mayor, local government of the first level) of relevance to public transport include:

• proposing to the local council the organisational structure and the terms and conditions for the provision of public utility services

• taking measures to ensure the proper functioning of communal services

• approving tariffs/fares for public transport in their jurisdiction

• ensuring the safety of road and pedestrian traffic by organising the circulation of transport; maintaining roads and bridges; and installing road signs within the boundaries of the administered territory

• ensuring the registration and record-keeping of trolleybuses.1

The district councils’ (local public administration, second level) competences include:

• granting concessions for public services of district interest

• organising public services of district and/or regional interest

• approving tariffs for services provided.

7.1.3. The law on public services

Law No. 1402 of 24 October 2002 on Public Services of Communal Households is one of the most important acts affecting public transport, as it establishes a legal framework for the creation and organisation of public utilities in the administrative-territorial units, and for monitoring and controlling their operations, including the public transport service (Art. 3, par. (1), lit. e). The law establishes the principles and conditions for the organisation and operation of public utilities (Art. 3 – Art. 12), as well as the attributions and responsibilities of the central public administration (Art. 13) and local public administrative authorities (Art. 14 – Art. 15).

According to the law, the management of public utilities is organised through direct or delegated management (Art. 17). Direct management implies that local public administrative authorities assume all the tasks and responsibilities related to the organisation, operation, administration and management of public services through specialised departments. Each public utility established and operated under the direct management regime operates under a statute that is prepared and approved by the local public administration (Art. 18). In the case of delegated management, the local public administrative authorities may call upon one or more operators to manage the provision of public utility services (Art. 19) on a contractual basis (Art. 20).

Although the provisions of the law on public services are broadly harmonised with EU legislation, inconsistencies in secondary regulations mean these provisions remain theoretical and difficult to apply in practice.

7.1.4. Regulation of concessions in public services

The legal framework for concessions is provided for under Law No. 534 of 13 July 1995 on Concessions and Governmental Decision No. 1006 of 13 September 2004 on Approval of Regulation of Public Services Concession for Communal Households. While this legal framework allows, solely from a legal perspective, for the use of a concession contract for activities related to local public transport, this does not mean that the concession complies with the minimum requirements defined in EU legislation (Directive 2014/23/EU on the award of concession contracts). These requirements include transparent, non-discriminatory and proportionate selection criteria that allow continuous access by all economic operators to the provision of specific services, such as social services (which, in turn, allows customers to choose between such operators).

When defining concession (Art. 1), the law includes public services as a possible object of the concession contract. The law and the regulation, however, do not provide for a procedure to ensure equal treatment and non-discrimination of economic operators. Consequently, the contracting authorities lack a framework for ensuring they act in a transparent and proportionate manner.

Compliance with minimum requirements established by EU legislation should be ensured from the very beginning, starting with the definition of concession. EU legislation defines a concession in relation to the risks assumed by the operators. The concession involves transferring risk (demand or supply risk or both) to the concessionaire in operating the works or services. The concession, as it is regulated by the national legal framework, does not reflect any kind of risk.

In terms of transparency, there are also major deficiencies in proportionality and equal treatment principles. The Regulation of Public Services Concession for Communal Households refers to Government Decision No. 102 of 27 February 1996 on Measures for the Enforcement of the Law on Concessions, which was revoked by Government Decision No. 118 of 11 February 2013 on Government Decisions Abrogation. The aforesaid decisions described the procedural stages of the tender, but the regulation still does not comply with EU minimum requirements.

The deficiencies in the entire national legal framework for public concessions are as follows:

• Publicising the tender. The content of the notice is not very clearly defined.

• Selecting candidates. Conditions for participation related to the professional and technical capacity and the financial and economic standing of the candidates are not indicated/specified. This means the contracting authority can include some “artificial” conditions that will restrict participation by possible candidates to the point where there are not enough candidates to ensure genuine competition. Moreover, conditions for excluding candidates, such as fraud, distortion of competition, or non-payment of taxes, are not stipulated.

• Concession award criteria. The law does not impose the adoption of an evaluation method prior to the appraisal process.

• Conflict of interest. There are no provisions related to this topic.

• Framework for value and corresponding duration of the contract. There are no indications of the methods for calculating the estimated value of the concession. This means the duration of the contract is not determined in a consistent manner. Ideally, the maximum duration of the concession should not exceed the time that a concessionaire could reasonably be expected to pay off the investments made in operating the works or services, together with making a return on invested capital, taking into account the investments required to achieve the specific contractual objectives. The actual legal framework establishes a maximum term of 50 years, but there are no specific data on the investment and revenues obtained by the concessionaire.

• Royalty. There is no methodology for determining royalties. While this is not a mandatory inclusion in the Law on Concessions, the Regulation on Concession should define a precise methodology for royalty calculation in order to ensure the sustainability of the systems. The level of the royalty should allow at least for the replacement of outdated infrastructure and the development of facilities. For example, at the end of the operating life of a means of transport, the contracting authority should have enough funds to replace it.

• Asset property regime. The property regime for the concession’s assets is not defined. Ownership of the assets when the concession contract expires or the contract is cancelled is therefore not regulated.

• The right to appeal in court against the terms of reference or the award notice is not stipulated. The right to appeal should be very clearly defined by specifying the terms of appeal, the competence and jurisdiction of the courts and the applicable procedure.

In conclusion, these deficiencies demonstrate that the current legislation does not ensure genuine competition for awarding concession contracts, which also applies to the public transport sector. From a legal perspective, if the legal framework promoted fair competition, the concession system could apply to all activities related to public transport.

7.1.5. The law on local public finance

The provisions of Law No. 397 of 16 October 2003 on Local Public Finance do not raise any major difficulties for the provision of public transport services. The law lays out the structure of the budgets of the administrative-territorial units, as well as how they are prepared, approved and executed. In the context of discussions on the possibility for local authorities to finance projects in local public passenger transport, the need to promote tax incentives for transport operators in order to encourage the development of this type of transport should also be included in the law.

7.1.6. The fiscal code, including excise and duties

Several provisions of the Fiscal Code of the Republic of Moldova No. 1163 of 24 April 1997 affect urban public transport. According to Art. 103 par. (1), p. 18, “value added tax (VAT) does not apply to supply deliveries, performed services by taxable persons, which are the result of their entrepreneurial activity in the Republic of Moldova: services provided by urban transport, as well as services provided by the transport of suburban passengers”.

Excise taxes are regulated by Title IV of the Fiscal Code (Art. 119 – Art. 128). The excise tax rate for means transport is expressly stipulated in Annex 2 to Title IV of the fiscal code. Under this, when importing cars into Moldova, import duties are assessed depending on engine type, capacity and year of manufacture. From 1 January 2017, excise tax or import duty rates have been set in MDL and not in EUR. A vehicle grading system has also been introduced, divided into 7 age categories: 0-2 years, 3-4 years, 5-6 years, 7 years, 8 years, 9 years and 10 years. For hybrid cars, the excise tax or import duty rate has been reduced by 50%. For vehicles with truck status, 20% VAT is applied on import and the excise tax amount is a fixed fee of MDL 222 440 (USD 11 916).

The procedure and principles for setting, modifying and cancelling local taxes, their maximum rates, the mode of payment, the criteria for granting tax relief, etc., are also determined by Title VII of the fiscal code. Accordingly, Art. 289 par. (2). lit. and Art. 291, lit. (i) provides that the fees for providing passenger transport services on municipal, town and village (communal) routes are to be paid by operators per transport unit, depending on the number of seats. Thus, the maximum tax rate for the provision of passenger services is:

• MDL 500 (USD 27) per month for each car with a capacity of up to 8 seats inclusive

• MDL 1 000 (USD 54) per month for each motor vehicle (minibus) with a capacity of 9 to 16 seats inclusive

• MDL 1 500 (USD 81) per month for each bus with a capacity of 17 to 24 seats inclusive

• MDL 1 700 (USD 92) per month for each bus with a capacity of over 24 seats.

It should be noted that this tax is only paid by private operators and not by municipal transport companies. These municipal exemptions violate competition protection provisions, thus creating a privileged position in relation to other operators in the market.

Title IX of the fiscal code regulates road taxes, including the road tax disc (Art. 335 – Art. 366).

7.1.7. The customs code

The Customs Code of the Republic of Moldova No. 1149 of 20 July 2000 sets out the legal, economic and organisational principles of customs activity. Articles 19 to 27 of the code regulate the general principles of transporting goods and means of transport across customs borders. According to Art. 20, par. (4) of the code, the following are forbidden from being entered and/or placed under customs imports procedure, customs warehousing or customs clearance free zones:

• means of transport with a service life exceeding 10 years classified under heading 8 702 for the transport of more than 20 persons, and under tariff headings 8 704 and 8 705, and their engines and bodies

• vehicles with a service life exceeding 10 years classified under heading 8 703 (except motor vehicles), and their engines and bodies

• motor vehicles with a service life exceeding 7 years designed for carrying a maximum of 20 people classified under tariff heading 8 702, and their engines and bodies

• motorcycles with a service life exceeding 10 years classified under heading 8 711, and their engines.

7.1.8. The civil code

The Civil Code of the Republic of Moldova No. 1107 of 6 June 2002 includes provisions for the establishment, organisation and dissolution of legal persons, as well as regulations related to the entrepreneurial activity of natural persons (transport operators), general provisions in matters of contracts (training, execution and effects of non-execution), calculation of deadlines, tort liability, etc. The Book III, Title III, Chapter XII - "Transport" includes provisions regulating the transport contract in general (Art. 980 – Art. 985), the transport contract for persons (Art. 986 – Art. 992) and the transport of goods (Art. 993 – Art. 1029).

7.1.9. The contravention code

The Contravention Code of the Republic of Moldova No. 218 of 24 October 2008 lists a series of contraventions in the field of public passenger transport. Violations that can be prosecuted include violation of transport sanitary-hygienic and sanitary-anti-epidemic rules (Art. 80 par. (1)), and breach of fire safety rules (Art. 358). Among the contraventions in the field of environmental protection set out in Chapter IX of the code, the following sanctions apply to transport:

• failure to fulfil the registration obligations for operations involving harmful substances and mixtures (Art. 150)

• breach of technical and ecological testing rules (Art. 151)

• commissioning and operating terrestrial vehicles, ships and aircraft that exceed pollutant emissions and noise emission standards (Art. 152 – Art. 153).

Chapter XII “Contraventions against the transport regime” provides sanctions for violating rules for the transport of persons and goods (Art. 197) and travelling without a ticket (Art. 204). Contraventions in road traffic are found in Chapter XIII of the Code (Art. 228 – Art. 245).

7.1.10. Entrepreneurial activity

Law No. 451 of 30 July 2001 on Business Activity Licensing determines the legal, organisational and economic regulatory framework for licensing entrepreneurial activity. The law stipulates the types of activities subject to licensing, including paid transport routes, bus station activity and training staff in road transport (Art. 8, par. (1), points 11, 111 and 321). At the same time, the law establishes the content of the licence (Art. 9), the documents required for obtaining the licence (Art. 10), the licence validity term (Art. 13), the licence-issuing procedure (Art. 11, Art. 14 – Art. 18), the organisations/bodies and control arrangements in the field of licensing (Art. 19), the conditions for suspension (Art. 20) and licence withdrawal (Art. 21). The Public Services Agency is the only licensing authority for passenger-paying road transport and bus station activity.

7.1.11. Consumer protection

Law No. 105 of 13 March 2003 on Consumer Protection establishes general consumer protection requirements, the necessary framework for unlimited access to products and services (including full information of their main features), and the protection and safeguarding of consumers’ legitimate rights and interests in the event of unfair commercial practices and in decisions that interest them as consumers. The law regulates the protection of consumers’ life, health, heredity and security (Chapter II); protection of consumers’ economic interests (Chapter III); the execution of works (Chapter IV); consumer information (Chapter V); and the bodies empowered with consumer protection functions (Chapter VI).

7.1.12. Road safety

Law No. 131 of 7 June 2007 on Road Safety regulates the legal and social relations in the field of road traffic; establishes the rights, obligations, responsibilities of the competent authorities and the participants in this traffic; and determines the principles for organising the activity of staff training units in the field of road transport, as well as the conditions for the admission to traffic of motor vehicles drivers. The provisions of this law deal with road traffic in terms of ensuring its smooth and safe deployment, which implies the protection of the legitimate rights and interests of individuals and legal entities; the defence of their property; the health, bodily integrity and lives of passengers; as well as the protection of the environment (Art. 1 par. (2)). The Law on Road Safety outlines the responsibilities of the competent authorities in the field of road traffic (Chapter II), including the competence of the Ministry of Economy and Infrastructure (Art. 8). The law also regulates the process of organising the initial training, re-qualification and periodic training of drivers (Art. 18 – Art. 31), as well as the process of admission to road traffic and erasure from the state transport register (Art. 37 – Art. 55). Approval and certification of motor vehicles is provided for under Art. 39.

7.1.13. The law on competition

Law No. 183 of 11 July 2012 on Competition establishes the legal framework for the protection of competition, including the prevention and countering of anti-competitive practices and unfair competition, and market concentration. It also establishes the legal framework for the Competition Council's activity and competences, and responsibility to take measures in the event of a violation of the Competition Law.

7.1.14. Insurance laws

Law No. 407 of 21 December 2006 on Insurance regulates the organisation and functioning of insurers, reinsurers and insurance and/or reinsurance intermediaries, as well as the supervision of their activity. According to Art. 5, par. (4), lit. a) of the law, the approval and the establishment of insured risks, the assessment of damages, the establishment and payment of indemnities and insurance indemnities shall be made under the law in the case of compulsory insurance, or on the basis of the insurance conditions and the insurance contract, in case of voluntary insurance.

Law No. 414 of 22 December 2006 on Mandatory Insurance of Civil Liability for Damage Caused by Motor Vehicles regulates the legal relations between insurers, insured persons and third parties deriving from the compulsory third party liability motor insurance contract, as well as the method for realising this type of insurance.

7.1.15. Road traffic and the road transport code

Government Decision No. 357 of 13 May 2009 on Approval of the Road Traffic Regulation establishes traffic rules, the interaction of public transport means with other road users; the technical conditions to be met for a vehicle to be permitted to circulate; as well as the responsibilities related to the safety of all parties involved in traffic. All of these ensure the smooth running of traffic.

Government Decision No. 415 of 8 April 2003 on Approval of the Regulation on the Technical Supervision by Road Police includes provisions for regulating and ensuring the effectiveness of technical surveillance, establishes the obligations of all road police subdivisions responsible for technical surveillance, as well as the modalities for its accomplishment in order to ensure road safety. The regulation also rules on the exercise of control over vehicle conformity with standards for ensuring road safety, including the conditions under which motor vehicles can be re-used.

The special regulatory framework includes acts that directly regulate road transport activity, including public passenger transport. A first group of acts to be analysed is represented by the Road Transport Code of the Republic of Moldova No. 150 of 17 July 2014 and the secondary regulations edited in its application, namely:

• Government Decision No. 257 of 28 April 2017 on Approval of the Regulation of Issuance and Use of Road Transport Authorisations

• Government Decision No. 437 of 12 April 2016 on Approval of Regulation of Issuance, Replacement, Changing and Renewing Tachograph Cards, Downloading and Storing Tachograph Data and Tachograph Cards

• Order of the Ministry of Transport and Roads Infrastructure No. 9 of 10 February 2015 on Elaboration of Continuous Training Programmes

• Order of the Ministry of Transport and Roads Infrastructure No. 43 of 20 February 2012 on Provisional Instruction on Issuance and Use of Books of Journey (Interbus)

• Government Decision No. 539 of 23 April 2008 on the Creation of the National Agency of Road Transport

• Government Decision No. 1167 of 29 October 2007 on Approval of the Methodology of Calculation of Tariffs in Transportation Services in Public Passenger (Passengers) and Baggage Road Transport

• Government Decision No. 854 of 28 July 2006 on Regulation of Passenger and Baggage Road Transport

• Regulation of the Ministry of Transport and Communications No. 9/12 of 9 December 1999 on Bus Station (Auto Station)

• Regulation of the Ministry of Transport and Communications No. 9/12 of 9 December 1999 on Regulation of Traffic Safety of Businesses, Institutions and Organisations which Perform Passenger and Freight Transport

• Government Decision No. 1047 of 8 November 1999 on Reorganisation of the Automated Information System ‘AutoTEST’ in the State Transport Registry and Introduction of Vehicles and Trailers Testing.

The Road Transport Code is the main legislative act that establishes the legal framework for organising and carrying out safe and high-quality transport of goods and people by road; as well as road transport activities on the territory of the Republic of Moldova, respecting the principles of free competition and measures for protecting the environment; the legitimate rights and interests of natural and legal persons benefiting from such services; and the rights, obligations and responsibilities of public bodies organising road transport, including natural and legal persons.

Article 6, par. (3) of the code provides that public administration in the field of road transport is exercised by the central public administrative authorities, the local public administrative authorities and other authorities authorised by law within the limits of their competencies.