Contributed By Concern Dialog Law Firm
Armenia is a unitary parliamentary republic (based on the Constitution, as amended in 2015). Armenia belongs to the (continental) civil law system. The Civil Code is based on the Napoleonic Code, while administrative law was developed based on the German model.
In Armenia, only courts are authorised to administer justice. The following courts operate in Armenia:
The Administrative Court has jurisdiction over all cases arising from public relations (both those between public bodies and those between public bodies and individuals), including disputes relating to public or alternative service, and disputes between administrative bodies that are not subject to settlement by order of precedence. The Administrative Court is the body empowered with the review of fines and other administrative acts.
The Court of Bankruptcy is responsible for managing bankruptcy cases.
The Anti-corruption Court has criminal and civil jurisdiction. The criminal jurisdiction covers criminal cases with corruption-related charges. Within the civil jurisdiction, the court deals with civil forfeiture cases and recovery of damages to state and other public entities caused by crimes.
The courts of the first instance of general jurisdiction have jurisdiction over all other cases which are not subject to other courts.
The Law on Foreign Investments defines a foreign investor as a foreign state, a foreign legal entity, a foreign citizen, a stateless person, a citizen of Armenia permanently residing outside of Armenia, or any international organisation that engages in investment in Armenia according to the legislation in force. Foreign investment is further defined as any property, including financial resources and intellectual values, directly invested by a foreign investor as defined above in commercial or other activities in Armenia to gain profit, revenue or any other benefit.
According to court practice, only those assets which are invested in the company’s equity (via relevant corporate decisions) are considered to be investments.
As a general remark, Armenian law in this area does not determine requirements for pre-approval or approval of such foreign investment by any state body. Accordingly, besides the generally applicable processes for carrying out business in Armenia, the law does not determine any such pre-approval requirements.
That being said, in certain areas and specific sectors, approval of the investment plan assures incentives and other benefits to the investor.
For example, according to the Land Code of the Republic of Armenia (RA), property owned by the state or community can be donated for social or charitable purposes or for implementing investment plans approved by the government of the RA. Such a decision of the government and the donation agreement indicate the sole purposes for which the donated land can be used.
Furthermore, investors can be entitled to specific tax or customs incentives in specific cases if the government approves the granting of incentives as per a submitted investment plan under the particular degree of government specifying the incentives. For instance, it is possible to submit for exemption from customs duties for five years of implementation of an investment plan.
Also, in the case of investment in the public service sectors, the investment plan can be of the Public Services Regulatory Commission’s (PSRC) consideration in the context of determination of tariffs for public services; the permission for operation in this sector is not mandatorily linked to the investment plan.
In general, the stated cases concern benefits to and incentives for the investor, rather than a pre-approval process to protect the investment or for the investment to be qualified as a foreign investment.
As described in 2.1 Approval of Foreign Investments, there is no mandatory regulation of pre-approval mechanisms for investment plans, ie, no requirement to invest with prior approval of state bodies. As a matter of general rule, there is no procedure or sanction regarding the supervision or fulfilment of an investment plan as well. However, once incentives are granted under a government-approved investment plan, the investment plan will be subject to reporting to the government, and failure in fulfilment thereof may cause or will cause liabilities depending on the type of incentive granted and the conditions of the government decree on approval of the investment plan under which the incentives are granted. For instance, in the case of incentives for land purchase, the consequence may be the judicial cessation of ownership rights over the land plot should the land plot be used for purposes other than those granted.
The applicable legislation indicates no such specific commitments. However, under the law on public-private partnerships, the government may agree with the investor on specific commitments on a case-by-case basis. As a matter of practice, such commitments can be imposed under the government decree on approval of the investment plan.
There is no specific process applicable to the appeal of decisions of the government or PSRC concerning failure to approve the investment plan of an investor. Theoretically, however, the generally applicable administrative litigation processes concerning the appeal of administrative bodies’ decisions would apply. The recipient of a decision not to grant consent to the investment plan can bring a claim to challenge the decision before the Administrative Court.
Such a claim must be brought within two months upon receipt of the decision.
That being said, it must be noted that the grounds and scope of possible arguments are limited: the government and PSRC have a rather large scope of discretion when approving investment plans (to the point that no specific list of grounds of rejection is identified) and thus the scope of discretion is extensive. Technically, the appeal can be brought either for procedural breaches or in the case of breach of equality requirements (the administrative bodies are required by law to act similarly in similar cases).
The most common business vehicles are the limited liability company (LLC) and the joint-stock company (JSC).
In both cases, the liability of shareholders (or in the case of LLCs, participants) is limited. Furthermore, no requirements for the minimum share capital or a minimum number of shareholders is determined. However, minimum capital requirements are envisaged in several sectors (mainly for financial institutions).
Both LLCs and JSCs are governed by the meeting of shareholders (participants), which is the highest governing body. The sole director – in the case of LLCs, a sole director (CEO); in the case of JSCs, a collegial executive board (directorate) can be appointed – carries out the company’s ongoing management. The establishment of a board (board of directors) is possible in either type, with the Law on JSCs regulating specific requirements and the scope of authorities of such a board. In contrast, the Law on LLCs is silent on most of these issues, allowing the companies to determine the scope at their discretion.
The main differences between the two types of entities are as follows.
LLCs are preferred when the shareholding and management structures are straightforward and less complex. For JSCs, it is possible to have multi-layered, complex management structures (including the collegial executive body) and regulate the relationships between the shareholders, including through shareholders’ agreements, etc.
Furthermore, in LLCs, the participant has a right to exit from the company without the consent of the other participants and request the company to pay the market value of its share. The majority of participants also have a right to remove a minority participant from the company without its consent through bringing a claim against the minority participant before the court if the minority participant hinders the company’s activities.
Finally, a significant difference to consider is that the information on the participants of LLCs is open to the public; however, in the case of JSCs, the information on shareholders is maintained by private registry keepers and is not provided to third persons without the company’s consent. At the same time, since 2023 all the companies are obliged to disclose their UBOs, and that information on UBOs is publicly and freely available on the webpage of the State Registry of Legal Entities.
The process of incorporation of both LLCs and JSCs is fairly straightforward and simple. The registration of both types of entities before the Agency for State Register of Legal Entities of the Republic of Armenia (Agency) is free of charge. The process itself takes no more than two working days after submitting the necessary package of documents. Below are certain peculiarities of the process to be considered by foreign investors.
Template (Pre-approved) Package-Based Registration of LLCs
Suppose the founder(s) of an LLC is an individual, and both the director and the founder(s) are in Armenia. In that case, they can quickly establish an LLC at the Agency by simply visiting it with their passports (verified translation) and answering the simple questions of the Agency employee. The Agency employee shall create and provide a standard (pre-approved) template package (only in Armenian) to the applicants. The company is registered in less than half an hour without any costs.
The Standard Process of Establishment and Registration of LLCs
As an alternative, the founding and governing documents of the LLC (founding decision, charter) can be drafted to meet the specific needs and requirements of the founders, including preparing multilingual versions (the Armenian version shall still prevail), establishing specific governing mechanisms, and thus not following pre-approved standard documents.
It must be noted that although the founding package (founding decision, charter) does not need any verification by a notary under Armenian law, the documents or copies thereof related to a foreign founder (in the case of a legal entity – charter and excerpt from the register or equivalent; in the case of an individual – passport) and a foreign director (passport) must be verified by a notary and legalised (consular or by an apostille) and subsequently translated into Armenian with the verification of an Armenian notary.
Establishment of a JSC
The process of establishment of a JSC consists of two stages. The first stage is the preparation of the founding documents and submission thereof to the Agency (similar to the registration of an LLC). The second stage is the registration of the company’s shares with the Central Depository through one of the account operators (to ensure the quality of services and competition the Central Depository does not provide services to the public directly, only through the account operators who are acting based on the agreement signed with the Central Depository).
In either case, within 40 days upon registration, the companies shall submit declarations on their ultimate beneficial owners (UBOs) disclosing the full ownership structure up to the beneficial owner. Such declaration shall also include the notarially verified translations of the passports of the UBOs.
Changes of Management
According to the general rules of Armenian legislation, only the head of the executive body is subject to registration with the Agency. Hence, the company needs to disclose a change of the executive body (CEO, general manager, general director, etc).
Depending on the company’s business activity, there may be exceptions to the general rules described above. For example, the executive body of a bank, including the chief accountant, deputy directors, chief compliance officers and compliance officers, chief auditor and auditors, as well as the board of directors, is subject to certification and registration by the regulator, in this case the Central Bank of Armenia. Thus, practically any change of the bank’s management needs to be filed to and approved by the regulator.
Amendments to Articles of Incorporation (Charter)
In case of amendment of articles of incorporation in part or in whole (new edition of articles of incorporation/charter), the amendments must be filed for registration to the Agency. The company needs to change its articles of incorporation when, for instance, it changes its firm name, address, charter capital or corporate governance.
The process and requirement for registration of amendments to the articles of incorporation/charter may have some peculiarities depending on the reasons for and the content of such amendments. For example, in the case of amendments to the articles of incorporation/charter due to investment into the company (ie, an increase of the company’s charter capital), the company needs to submit proof of payment of the investment for registration. There may be some differences, depending on the company’s business activity, when the Central Bank instead of the Agency is responsible for registration (mostly typical for legal entities that provide financial, insurance and investment services, and investment funds).
Change of Shareholder
Participation in the share capital of an LLC needs to be registered with the Agency (open to the public). In contrast, participation in a JSC is recorded in the centralised securities register which is managed by the Central Depository of Armenia (the information is not available to the wider public). Information on the participation of commercial co-operatives is not recorded by the Agency or in any outsourced registers.
While changing the participation in an LLC, the articles of incorporation must be changed as far as it is mandatory to include that data in the articles of incorporation and keep them up to date. Hence, a change of shareholder of an LLC is performed together with a change of the articles of incorporation.
It is not required to include information about shareholders of a JSC in its articles of incorporation except at the stage of incorporation of the company (ie, the initial registration of the articles of incorporation). Thus, a change of shareholder must only be recorded in the company’s register of shareholders.
UBO
There is an obligation to submit a declaration to the Agency in the case of a change of UBO.
The legal entity shall submit the following report/information to the Agency by 20 February of each year:
In the case of a change of data regarding real beneficiaries, the change must be declared immediately after the disclosure to the legal entity, but not later than 40 days after the change.
The declaration on the UBOs and further changes in the declaration are submitted to the Agency through the website e-register.am (see the procedure for filling out the application below). In this case the declaration shall be signed via electronic signature accepted by the government․ Completion of the declaration is possible through an authorised person, in which case a relevant power of attorney is required.
The liability for the failure to submit a declaration on UBOs within the period prescribed by law by an entity obliged to submit such a declaration, as well as for presenting it in violation of the law or inadvertently presenting incorrect or incomplete data in the declaration, according to the RA Law on Administrative Offences, can be a warning or a fine of up to AMD100,000. In addition, if the declaration on the UBOs contains false information or lacks information which should have been included, and the person submitted the false information wilfully, they can be held criminally liable.
In addition, if the obligation to submit confirmation or amended information on UBOs is violated each year for three years in a row, as well as in cases of repeated or gross violation of the rules regarding submitting a declaration, the Agency may apply to the court to dissolve the legal entity.
Since 2023, all companies are obliged to submit UBO declarations, and the latter are publicly available on the webpage of the Agency.
Approval of Financial Statements
Companies need to submit financial statements to the State Revenue Service:
As a matter of general rule, there is no requirement for companies to disclose their financial statements. Depending on the type of business activity, the law may specifically mandate companies to publish financial statements and financial audit reports. For instance, banks, insurance companies and managers of investment funds must perform this requirement.
Starting from year 2024, resident individuals of Armenia (in the beginning only certain groups of individuals, and from year 2026 all resident individuals) will be obliged to submit a simplified income tax calculation to the State Revenue Service.
General Notes on Management Structure
The highest governing body of the company is its general meeting of shareholders (participants). All companies need to have at least one executive body.
There are specific cases defined in the law when the company must have a board of directors. Open JSCs or companies with activities in specific areas such as banking and insurance must have a board of directors. The board of directors of an open JSC must have under it an audit committee.
Under its articles of incorporation, the company may declare and set forth the collective executive body.
The Powers of the General Meeting
The general meeting approves the amendments of the articles of incorporation; decides on reorganisation and liquidation of the company; approves final, interim and liquidation balance sheets; and appoints the liquidation committee. The general meeting approves the number of board members, elects board members, terminates their powers, and appoints and dismisses the executive body (unless these authorities are delegated to the board of directors). Increasing and reducing charter capital, approval of the company’s annual report, distribution of dividends, and approval of significant transactions and transactions with conflict of interests are powers of the general meeting as well.
The Board of Directors
The Law on LLCs does not specify the powers of the board of directors (ie, the board of directors may exercise powers given under the articles of incorporation/charter), which cannot include the exclusive powers of the general meeting or executive body. The Law on JSCs lists exclusive powers of the board of directors. It stipulates that if a company has no board of directors, the general meeting exercises those powers.
The board of directors of a JSC determines and approves the strategy of the company, decides on using the reserve fund and other funds of the company, and approves (i) internal documents regulating the activities of the company’s governance bodies; (ii) the administrative and organisational structure of the company; and (iii) a list of the company’s staff positions. It also establishes branches and representative offices as well as exercising the powers related to convening of the general meeting and other powers defined in the law.
The Executive Body
The single-person executive body or head of the collegial executive body is responsible for the company’s day-to-day activities and represents the company by the capacity to act without a letter of authorisation. The director is entitled to issue letters of authorisation; conclude agreements and contracts; perform banking operations; issue orders, directives and binding instructions as well as supervise their implementation; decide on employment and dismissal; apply incentives; and impose disciplinary action on employees.
Liability of Board Members and Executive Body
Both the Law on LLCs and the Law on JSCs (the latter consists of more detailed regulation on the matter) determine the liability of board members and the executive body․
The rules are the following: the board members and executive body must act for the benefit (in the interest) of a company, in good faith and reasonable manner, and avoid actual and possible conflicts of interest while exercising their rights and performing their obligations (fiduciary duty). The Law on JSCs also forbids a person who may, by virtue of participation in the charter capital of the company or other circumstances, have a material impact on the decisions of the company, from inducing board members or the executive body to take decisions that contradict the interests of the company or the legitimate interests of shareholders who cannot have a material impact on the decisions of the board.
The board members and executive body may be released from liability if (i) there is no damage caused by their fault (applicable only to LLCs), (ii) they voted against the decision, (iii) they did not participate in the meeting, or (iv) they acted in good faith – ie, did not know or could not have known that the company would incur losses as a result of their actions or omissions (applicable only to JSCs). The resignation, recall or dismissal of a board member or the executive body does not exempt them from liability for the damage caused to the company.
If the damage was caused to the LLC by one of its board members or the executive body, any shareholder (participant) of the company and the company may apply to court on behalf of the company against that board member or executive body and claim damages. If the damage was caused to the JSC by one if its board members or the executive body, the claim for compensation of damages against that board member or executive body may be brought against the company or its shareholder(s) (jointly) owning 1% or more of the placed common (ordinary) stocks of the company. The breach of fiduciary duty might cause criminal liability of a board member or executive body if their actions or omissions caused essential damages.
Shareholders’ Liability
Under Armenian law, the separation of liability of a legal entity from its shareholders’ liability is determined.
That being said, Armenian legislation allows for the “piercing of the corporate veil” in specific cases of activities between parent and daughter or dependent companies (subsidiaries). The daughter company must not be liable for the obligations of the parent company, but the parent company must bear joint and several liability with the daughter company if the parent company (i) has the right to give binding instructions to the daughter company, and (ii) transactions are concluded in pursuance of that instruction.
Other shareholders of a daughter company also have a right to claim from the parent company compensation for any damages caused to the daughter company by fault of the parent company – ie, when the damage is caused by the execution of binding instructions given by the parent company.
The parent company must bear subsidiary liability for the debt of the daughter company in the case of bankruptcy of the latter if the bankruptcy is caused by the fault of the parent company – ie, when the damage is caused as the result of execution of binding instructions given by the parent company.
The primary sources regulating labour relations in Armenia are the Labour Code and relevant international treaties. Specific regulations of the Civil Code and legislation regulating different types of state service (civil service, military and diplomatic service, etc) regulate particular types of labour relations. Finally, specific aspects of labour relations are regulated by the Law on Foreigners, the Law on Labour and Collective Agreements, and internal and individual legal acts of the employer.
The Labour Code mandates that employment contracts should be concluded or issued in writing and should contain specific terms, such as:
1. The date, month, year and location of adopting an individual legal act or concluding an employment contract.
2. The employee’s first and last name, and optionally, their patronymic name upon request.
3. The name of the organisation or, if applicable, the first and last name of the employer as an individual, and optionally, their patronymic name upon request.
4. The organisational unit within the company, if applicable.
5. The date, month and year when the employment begins.
6. The job title and/or job responsibilities.
7. The base salary amount and/or the method used to determine it.
8. Additional allowances, bonuses, subsidies, etc, provided to employees according to established procedures.
9. The duration of validity for the individual legal act or employment contract if required.
10. If a probationary period is established, the duration and conditions of the probationary period.
11. The normal working hours, part-time arrangement, reduced working hours, or the overall method for calculating working hours.
12. The type and duration of annual leave, including minimum, additional or extended vacation.
13. The position, first name and last name of the person signing the legal act on behalf of the organisation.
Parties to the contract can agree to include additional conditions in the employment contract or individual legal act, but these conditions must be no less favourable than what is established by law.
It should be noted that the Labour Code has undergone amendments (effective from 31 July 2023, hereinafter referred to as the Amendments), which now require the employment contract to include specific details regarding the employee’s place of work, as well as the employer’s structural or separate subdivision, office or institution (if applicable) in which the employee will work. Additionally, the contract should outline the methods for mutual notification between the employer and employee in relation to their employment relationship.
Fixed-Term Contracts
Generally, an employment contract is intended to be of indefinite duration. However, it is also possible to conclude an employment contract with a fixed term if labour relations cannot be defined for an indefinite period, considering the conditions or the nature of the work to be done. The Labour Code specifies certain circumstances in which an employment contract may be concluded for a fixed term. These include the following cases:
The Amendments stipulate that employers are no longer allowed to terminate an employment contract solely based on an individual reaching retirement age. Additionally, the Amendments provide employers with the right to offer retirees indefinite employment contracts.
Under Armenian legislation the regular working hours must not exceed 40 hours per week and eight hours per day, unless exceptions are specified by the Labour Code, other laws or legal acts.
Certain categories of employees, such as those working in healthcare organisations with continuous duty, guardianship organisations, children’s educational institutions, specialised energy, gas and heat supply organisations, specialised communication and emergency response services, etc, may have 24-hour continuous work shifts. The specific list of such occupations is determined by the Government of the Republic of Armenia.
Any work performed beyond the specified limits shall be classified as overtime work and must be compensated according to the following rate: for each hour of overtime, in addition to the regular hourly rate, a supplement of no less than 50% of the hourly rate must be provided.
The total working hours, including overtime, must not exceed 12 hours per day (including breaks for rest and meals) and 48 hours per week.
An employment contract can be terminated through various means․ The most common cases are:
The Amendments provide that the employment contract can be terminated by the force of law․ For example, when the employer fails to notify the employee of the termination of an employment contract that was originally agreed upon for a specific period, and the parties also do not sign the appropriate individual legal act to terminate such a contract, and the employment relationship does not continue in practice, then in such cases, the law can intervene to legally terminate the contract.
The Labour Code provides an exhaustive list of reasons that entitle an employer to terminate an employment contract. This implies that an employee cannot be dismissed by the employer for any arbitrary reason. The grounds for termination specified in the Labour Code are as follows:
According to the Labour Code, the employer is obliged to give notification prior to dismissal to employees in cases specified by the Labour Code. For example, when the employment contract is terminated due to the liquidation of the company or a reduction in the staff, the employer must provide employees with two months of prior notice.
According to the Labour Code, it is possible for an employer to provide pay in lieu of notice, which is calculated by multiplying the employee’s average daily salary by each day of notice.
The Labour Code allows the establishment of employees’ representatives, such as a trade union or works council elected by the assembly (conference) of workers. Apart from that, the Law on Trade Unions regulates and guarantees the activities of trade unions.
Moreover, a works council is elected if the organisation does not have a trade union (or any trade unions), or if any existing trade unions do not unite more than half of the organisation’s employees. At the same time, the presence in the organisation of works councils elected by employees should not interfere with the exercise of the trade unions’ functions.
Employees’ representatives have the power to develop charters, conduct negotiations, propose organisational improvements and participate in decision-making processes. They also oversee labour law implementation, have access to employee information, and can propose measures for better working conditions and fair compensation. They can organise lawful strikes and appeal to the court against violations. Employees’ representatives play a crucial role in protecting workers’ rights and promoting collaboration between employees and employers.
If an employees’ representative violates the rights of the employer, or breaches legislation or agreement norms, the employer has the option to seek legal action through the appropriate procedures defined by the legislation, requesting the cessation of the representative’s unlawful activities.
Employee representation is not a widespread practice in Armenia. There are some single cases of the practice, and it is expected to develop in the future.
Employees pay income tax on their employment remuneration.
Employers act as tax agent for their employees. They calculate their employees’ income tax due every month and pay it by the 20th day of the following month.
According to the Tax Code of Armenia, the income tax rate for employees is 20% from 1 January 2023.
Besides income tax, employees must also pay a mandatory social security (pension) payment with the following rates:
The following tax regimes apply in the RA.
All taxpayers involved in agricultural production are exempt from income tax until the end of the year 2024.
Taxpayers who are dealing with hand-made carpet production are also exempt from paying income tax.
Armenian resident companies may deduct annual salaries from their income if the government approves their business plan. The deduction may be not greater than 30% of the actual calculated corporate income tax. This incentive is applicable for not more than five fiscal years besides the year of the start of the business.
There is no tax consolidation prescribed in Armenian tax legislation.
There are no thin capitalisation rules in Armenia. At the same time, there are some limitations on deductibility of interest expenses. The following are not deductible from gross income.
Under the Tax Code, transfer pricing rules are applicable for a taxpayer if the amount of all supervised transactions of the taxpayer exceeds AMD200 million for the current year.
According to the Tax Code, there are several transfer pricing methods allowed:
Armenian legislation envisages administrative liability for the responsible employee of the taxpayer for tax evasion, and if the amount of unpaid taxes is more than approximately USD26,000, according to new Penal Code of Armenia which entered into force on 1 July 2022, then criminal liability is also envisaged in the form of a fine or even imprisonment for up to ten years. At the same time, the Tax Code provides for tax liability in the form of fines, penalties and interest for taxpayers who fail to pay taxes properly.
Concentrations
Mergers and acquisitions are subject to notification to the Competition Protection Commission (the Commission) if they are notifiable concentrations under the Law on the Protection of Economic Competition. According to the Law, the following actions are considered concentrations:
Notification
A concentration is subject to notification if:
The thresholds established by the applicable decision of the Commission are set out below.
The concentration of economic entities is subject to notification before it takes effect. For the assessment of a concentration, the participants submit an application and declaration. The declaration should contain the following information: (i) the purpose of the concentration; and (ii) information about the participants (name, address, annual financial statements of the activity, volumes of goods sold during the previous year, etc).
Duration of Assessment
The concentration assessment process by the Commission lasts three months. By the reasoned decision of the Commission, the three-month period may be extended up to another three months.
In addition, there is a simplified assessment procedure in cases of mixed concentration and concentration within a group of persons. In this case the assessment procedure lasts one month․
Liability
Failure to declare the concentration as stipulated by the Law on the Protection of Economic Competition shall lead to imposition of a fine up to AMD5 million.
The amount of the fine imposed for enacting a prohibited concentration shall be up to 10% of the turnover of the preceding financial year.
Also, enacted prohibited concentrations shall be subject to liquidation (annulment, cessation) according to the procedure defined by the legislation.
The Law on the Protection of Economic Competition prohibits restrictive agreements and practices․ According to this Law, anti-competitive agreements are those transactions concluded between economic entities; their oral or written agreements; direct or indirectly agreed actions or behaviour; and decisions made by business associations that lead to or may lead to restriction, prevention or prohibition of competition.
Restrictive agreements and practices can be:
Restrictive agreements and practices, among other things, relate to the following:
The actions or behaviour of economic entities in foreign countries, when such actions or behaviour may prevent, restrict or prohibit economic competition or harm the interests of consumers in the RA, may also be considered as restrictive agreements within the meaning of the Law.
The Law on the Protection of Economic Competition prohibits the abuse of a dominant or monopoly position, including:
Patents can be granted for technical solutions that concern a product or a method, including the use of a product or a method for a certain purpose. There are three conditions for the patentability of an invention:
Patents are registered by the Intellectual Property Agency of Armenia. The Agency website has guidance on the procedure and samples of the necessary forms.
If the object of the protection is a product, the right-holder has an exclusive right to prohibit any third party from manufacturing the product, using it, introducing it to the market or offering it for sale, or importing or obtaining the product for any of those purposes. Similar prohibitions can be imposed if the object is a method. The infringement of a patent can result in civil and criminal liability.
Patents are protected for 20 years from the application, or ten years in the case of short-term certification.
A trade mark is a mark that is used to distinguish the products and/or services of one person from the products and/or services of another. There are very detailed regulations on the circumstances where the registration of a trade mark can or must be rejected, such as the mark being:
Trade marks are registered by the Intellectual Property Agency of Armenia. The Agency website has guidance on the procedure and samples of the necessary forms. For an unregistered trade mark, the only protection available is the refusal by the Agency to register any mark that is confusingly similar to the unregistered trade mark being used in Armenia or outside of its territory, where the applicant is not acting in good faith.
The right-holder of a registered trade mark has a right to prohibit:
The length of protection is ten years from the application and can be renewed indefinitely for ten years at a time.
An industrial design is a solution in connection with the appearance of an object that is new and unique.
In the RA, the following are given protection by the law:
Designs are registered with the Intellectual Property Agency of Armenia. The Agency website has guidance on the procedure and samples of the necessary forms.
A right-holder has the right to prohibit any use of the design without its permission. Infringement can result in civil liability.
The length of protection is five years from the application. It can be renewed further for five years at a time but for no more than 25 years in total.
Copyright protects the unique results of creative work that are both:
Copyright does not require registration.
The author has the exclusive right to use their creation as they wish and to prohibit or authorise its use by a third party. The infringement of copyright can result in civil and criminal liability.
The tangible rights of the author are protected during the author’s lifetime and for 70 years after their death. The intangible (personal) rights do not have any time limit for protection.
There are no specific regulations for the protection of software; the same rules apply as for copyright (the software is the subject of copyright).
According to the Law on Copyright and Related Rights, a “database” means a collection of works, data or other independent materials arranged in a systematic or methodical way the individual elements of which shall be separately accessible by electronic or other means, and the acquisition, verification or presentation thereof shall require a substantial qualitative and/or quantitative contribution.
The maker of a database shall be deemed any person by whose initiative and on whose own responsibility a substantial qualitative and/or quantitative contribution is made for the acquisition, verification or presentation of the content of the database.
The rights of a developer of databases shall arise from the moment of completing the development of the database and shall have effect for 15 years.
The same regulations apply as for copyright.
Trade Secrets
With respect to trade secrets, it should be mentioned that according to Article 141 of the Civil Code, information is a trade secret when it has an actual or potential commercial value by virtue of it being unknown to third persons, when there is no free access thereto on a legal basis, and when the holder of the information takes measures for the protection of its confidentiality.
Persons having illegally obtained information that constitutes a trade secret shall be obliged to compensate the damages caused. This obligation shall also be imposed on parties to a contract that have disclosed and/or used a trade secret in violation of a civil law or employment contract.
The Regulation of Data Protection
Under the Armenian Constitution, the right to the inviolability of private and family life and the right to protection of personal data are declared as basic human rights, which may only be legally suspended or restricted during a state of emergency or under martial law.
Armenia has ratified the Convention for the Protection of Human Rights and Fundamental Freedoms 1950. This means that Armenia applies personal data protection in its jurisdiction as it is stipulated under Article 8 of this Convention. Armenia has also ratified the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (Strasbourg, 28 January 1981), including the Protocol amending the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (Strasbourg, 10 October 2018).
The main internal legal act related to data protection in Armenia is the Law on Protection of Personal Data, which was adopted in 2015 (Data Protection Law). The Data Protection Law stipulates that the following separate laws indicate specific rules for processing the defined particular personal data:
There are some other laws which regulate personal data protection in specific areas, for instance the Labour Code.
Principles of Data Protection
The Data Protection Law specifies the principles of personal data protection, which are as follows:
The principle of lawfulness requires the processing of personal data to be in compliance with the law as well as with the data subject’s consent. Under the principle of proportionality, the law mandates that:
Compliance with the principle of reliability means that personal data being processed needs to be complete, accurate, simple and, where necessary, kept up to date. The principle of minimum engagement of a data subject is mostly applicable to the public authorities when the latter must collect data necessary for exercising their powers from the official sources available rather than request that a data subject regularly provide the same information.
Data Processing Framework
Data processing should be performed with the data subject’s consent unless the law allows the processing without it – eg, in the case of a court order to disclose personal data. The data subject has basic rights such as right of access to personal data, right to erasure, right to rectification and right to object.
The data processor should notify the data subject prior to the processing of their personal data by indicating the purpose of processing, the list of data processing, the category of processors and other information defined under the law. There is no mandatory requirement to have a privacy policy approved.
The transfer of personal data to third parties needs to be performed with the data subject’s consent, as well as the transfer of personal data abroad. The transfer of personal data abroad is subject to the preliminary approval of the Personal Data Protection Agency of the Republic of Armenia if the data needs to be transferred to a state without a sufficient level of data protection.
The Data Protection Law and the powers of the Personal Data Protection Agency of the Republic of Armenia are limited to the territory of Armenia.
If the personal data is collected (stored) by a legal entity – or a branch or representative office of a legal entity – established in Armenia, the collection and further processing will have to be performed under the Data Protection Law, and the Personal Data Protection Agency of the Republic of Armenia will be entitled to enforce its powers over this data processing.
The Personal Data Protection Agency of the Republic of Armenia is part of the Ministry of Justice of Armenia. However, the Data Protection Law declares that the Agency operates independently.
Among other authorities listed under the law, the Agency is entitled to do the following:
Adoption of the New Criminal Code
Within the next year or two, the practice of interpretation of the civil foreclosure legislation will be clarified, which will allow the due diligence of assets before purchase and the evaluation and mitigation of related business risks to be carried out with higher certainty. The legislation has been in force since 2020 and the first cases are being heard in the courts since 2021. No case has been concluded by a court judgment on merits yet. We expect first judgments to appear in the end of 2023 to early 2024. In addition, the Constitutional Court is due to deal with the constitutionality of the law before the end of the year.
In addition, the articles of the Criminal Code foreseeing criminal liability of corporations are coming into force, and after several initial cases have been heard by the courts, the main approaches to their interpretation will be clarified, allowing businesses to have a better understanding of the need for internal regulations and controls.
Another major change will be simplification of the process of collection of small debt (up to AMD5 million). According to the draft legislation now under public discussion, those debts would be able to be collected via notaries without applying to the court.
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