Outsourcing 2019 Second Edition

Last Updated October 28, 2019

Albania

Law and Practice

Authors



Haxhia & Hajdari Attorneys at Law was founded in 1992 and is one of Albania's premiere law firms, based in Tirana. The firm offers a full range of services for individuals and companies operating in Albania. Haxhia & Hajdari Attorneys at Law has been a constant feature of the Albanian legal market and this is reflected an expansive client base. Our lawyers provide a dedicated approach to national and international clients. Haxhia & Hajdari Attorneys at Law has earned its reputation by being at the heart of the most complex commercial and financial transactions in Albania. Many of the firm's partners maintain covering positions as university lecturers in addition to their professional activities.

Generally, outsourcing is the kind of sector that is still growing in Albania due to the fact that the Albanian economy is not a fully developed one. Since outsourcing IT services to a third party requires finding high professional standard for the company who will carry out the service, there are not much Albanian companies that can perform outsourced services for third parties. There are generally Albanian law companies, but internationally controlled, that requires outsourcing IT, as part of their global management, more than a requirement of their business development within Albania.

There are some services, such as digital marketing, web development and mobile app development or similar, that have been, and remain, a constant presence in the market. Other services like software development or security systems are, as yet, not fully growing due to the non-sufficient expertise present in the market and structural deficiencies in companies operating in the system that they are not yet avoiding, to the extent that do not yet represent a reliable alternative in the global market, despite the fact that the Albanian environment provides some other evident advantages that will be further elaborated in this chapter.

BP outsourcing is quite more frequent and more developed in Albania. Services as Human Resource Outsourcing (HRO), KPO (Knowledge Process Outsourcing) and Supply Chain Management (SCM), Finance & Accounting (F&A), Customer Integrated Services, Content Management, BPO Bundled, Transactional Services and Content Management Services etc, lately and historically manufacturing are constantly present and developing in the Albanian market. The expertise of these sectors is more advanced in the Albanian environment though there is more supply for these sectors.

In General terms, the Albanian market can provide a set of advantages that has been the key incentive for the growth of this industry in recent years. They can be shortlisted as follows:

  • Workforce availability - due to the rate of unemployment in Albania there is a good number of individuals ready to be performing in this industry;
  • Workforce education and maturity - generally the education system, and the cultural environment in Albania, has produced numbers of individuals who are conscious and educated to a level that allows them to serve in this industry, specifically in relation to the understanding of foreign languages and in-depth technological studies;
  • Cost of labour - since the economy of the free market has been introduced and operated in Albania, inflation has generally been under careful control and therefore prices for goods and services are, on average, lower when compared to other competitor countries;
  • Physical infrastructure (geographical position and formation), transportation, real estate - Albania is geographically very conveniently located and it is reachable via all means of transportation (although the railway is still somewhat rudimentary). Main cities, that are the real centres for developing these industries, are well connected and the distances between are affordable regarding the cost of travel and transportation. Real estate prices, and rents in general, are still very affordable, while urban development and construction, which are main sectors of the domestic economy, have enabled a variable choice of premises that can be used to develop businesses;
  • Telecommunication and internet penetration - this part of the market is constantly growing and developing in Albania and the diffusion of the relative networks is optimal to enable reliable services in most areas of the country.

The presence of new technology is still rudimentary in this market, as in other sectors generally. However, a growing introduction of distance/smart/electronic contracts can be noticed. In fact, the legislation regulating e-signatures and e-documents is fully enacted and directly related to, and compatible with, the European Union legislation that should easily enable the use of such instruments. It is commonly believed that the absence of such instruments and developments is mainly related to cultural obstacles and some time to cost issues related to advances in technologies that the general market cannot easily support.

The major reasons for outsourcing services in Albania are the low labour cost and a favourable taxation range. However, the major share of the outsourcing services are telephonic, marketing, custom care, financial services and manufacturing of clothing and shoes. Due to the fact that the market is now well established and has provided a quality performance for the last decade, the latest kinds of services, such as KFO or Content Management Services, have recently been accessing the market and domestic companies are structuring their capabilities to welcome such demands, in the shortest timeframe possible.

Regulatory restrictions are not related to outsourcing as a matter of subcontracting services to third party. This activity is considered a fully private agreement and it is regulated mainly by the private law, which in Albania gives dedicated spaces for structuring the agreements in the most pragmatic way, for the best interests of all parties. However, different sectors in which outsourcing services are provided have particular regulatory requirements for companies belonging to those sectors. Companies should, therefore, comply to those regulatory obligations, some of them are sector-specific and clearly detailed.

There are no restrictions that prohibits outsourcing in a specific sector. But in sectors where licensing is required the company holding a specific license/permit cannot outsource the business activity to the measure that it made it impossible to hold the license/permit.

Furthermore, sensitive sectors such as financial services, stock exchange marketing, software development, etc, have particular compliance requirements that are related to the sector. A major example is financial services, these are closely monitored by the domestic institutions regulating the sector. An example of an institution is the Agency for Financial Monitoring, which issues the relative licences to companies that intend to provide financial services, such as stock agent, commissioner, etc. These agencies also monitors the ethical behaviour of such companies and evaluates if their services might be somehow conflicted to the interest of the public they serve.

Other important compliance issues are related to intellectual property which are as well determinant in matters of software development.

Data protection regulatory issues are obviously an area of great importance, where careful compliance is required in order to provide services without breaching regulations or sharing sensitive information, which may be revealed as harmful to the activity of outsourcing, and specifically in those sectors related to client care, marketing and outbound services in general.

There is a specific law on Personal Data Protection and a public body named the Public Commissioner on Personal Data that regulate this aspect of outsourcing. The Public Commissioner is an autonomous authority, appointed by and reporting to the Albanian Parliament, and it is not a part of the executive branch of the government.

Keeping, processing and transferring data (domestic and cross border) is regulated under the provisions of this law. The legislation is oriented to follow the trends of the European Union, even if the effective application of this legislation is yet not at a proper standard. Companies which are interested in acting in full compliance with the requirements of this law should have an adequate understanding of the requirements of this legislation and structure their internal organisation and their transactions with third parties as per the provisions of the same.

Among the restrictions for transferring personal data are:

  • the consent of individuals to the processing party to transfer personal data;
  • the competence and the compliance of the processing party to safely perform the transfer;
  • the safety requirements and the structure of the receiver of the data, enabling the safeguarding of public interest;
  • the safety standard of the country where the receiver is located; and
  • the eventual permission of the Commissioner in cases where it is required by the law.

The above-mentioned law provides fines to be imposed by the Commissioner to entities processing data, in relation to the nature of the breach. The amount of the fines varies from LEK10,000, approximately EUR85, to LEK2 million, approximately EUR17,000.

Some of the main breaches provided by the law are:

  • breaches to the requirements for the processing of data;
  • breaches to the requirement for the special processing of the data;
  • breaches by the controller and the processing party related to the requirement to inform the subject of the data of the purposes of the processing, the identity of the processing party, the fact the delivery of the personal data is facultative, etc;
  • breaches by the controller to the obligation to erase or correct the data, as per the provisions of the same law;
  • breaches by the controller of the obligation to notify the Commissioner on the processing of the data, or on every eventual change of the conditions of the processing;
  • breach or omission by the controller or the processing party of the security requirement, of the organisation and establishment, or internal structures that would provide security standards for the data, non-training of the personnel, etc; and
  • breach by the processing party or the controller of the obligation to cooperate with the Public Commissioner for the Protection of the Data.

The Albanian law tradition would properly classify the data sharing, transferring or processing contract as a contract for works. It can be structured freely considering that the statutory requirement of this type of contract are very flexible. It would be recommended to include, and try to provide, complete regulations on the following topics in the contract:

  • the nature of the data being shared;
  • the relationship between the parties;
  • the level of oversight available to each party;
  • whether the transfer is a cross-border transfer (ie, in the direction of the EEA or in the direction of a country outside the EEA and/or from the EEA or from a country outside the EEA);
  • the consent; and
  • the eventual regulatory regime in a recipient country.

The most useful and practicable remedy and/or protection that can be used in similar contracts is a penalty clause that may be used to punish each potential breach. The amount of the penalty clause can be agreed in accordance to the gravity of the breach, even if there are some statutory limits to be considered in regard to the proportion of the clause. Other forms of guaranties are functional, such as a performance guarantee, a financial guarantee, etc.

There is no standard or typical supplier-customer contract model for outsourcing in the Albanian jurisdiction. Nevertheless, as explained in 2.5 Contractual Protections on Data and Security, the most adaptable typical contract can be considered the contract of works. In essence, the supplier will carry out the services outsourced by the customer according to the conditions that will be agreed between the parties.

However, since the outsourcing models might be numerous, it is obvious that other standard contracts might be opportune to be considered such as the sales of goods, lease contract, license contracts, etc.

There is general freedom to use the structure of a contract that can be considered opportune for the circumstances and the conditions agreed among parties. Even if some models of contracts (ie, multi-sourcing) are not familiar to the Albanian legal tradition, they can be used if they are suitable for the situation and are implemented with the agreement of all parties. This being said, there is no indication, in our experience, that may suggest that contracts similar to multi-sourcing have been used in outsourcing.

There are no indications that captive BPOs or shared services centres are developing within the Albanian Jurisdiction.

Whoever is considering making a contract to be governed by the Albanian Law, should first be aware that the Albanian Contract Law is part of the Albanian Civil Code, an act clearly inspired and belonging to the continental European law tradition. Therefore, while it is true that there is no model contract for outsourcing in the Civil Code (see 3.1 Standard Supplier Customer Model), there are sufficient margins to refer to, and provisions and principles of other model contracts (contract for works, sales contract, lease contract, contract for the supply of goods, etc) that can be used to draft an outsourcing contract that would reflect the agreement and the requirements of the parties.

In relation to general principles of contract law, customers can use any remedy protection that the contract law can provide depending on the agreement, penalty clauses, performance securities, third-party guaranties, etc. In case of cross-border agreements, the parties are free to choose the regulating law, other than the Albanian law, and refer to remedies provided by the regulating law.

Under Albanian contract law, the only circumstance that may justify termination of a contract is a “serious breach” of a contract. There is a continuously evolving jurisprudence in regard to what is to be considered a “serious breach” since no specific provision or definition of the “serious breach” is found in the Albanian law, but it is agreed that it should be a breach that relates to, and affects, the core obligations of the contract, and that the occurrence of a breach has caused the suffering party to require a termination of the contract and/or remedies to the breach.

In fact, contract law also provides the principle that an insignificant breach of the contract would be legal grounds for justifying the termination and the party terminating on the grounds of a non-serious breach would be considered the breaching party. Furthermore, in order to have a better understanding and regulation of the same contract, the parties can include in the contract provisions defining the breaches that they consider “serious” and would therefore justify the termination of the contract.

The Albanian legal tradition does not provide for categories such as direct or indirect losses. The principle to be applied in this area is that the breach of contract does not only deprive the suffering party from receiving what was due as per the provisions of the contract, but it also that it causes other losses that derive from the breaching party falling short of their obligations as per the contract.

The principle for losses is that they should be compensated, in full, by the breaching party, to the extent that would be considered if the breaching party had performed the duties as per the contract. The remedy for a breach, therefore, is the performance of the contract, and the remedy for the losses is to restore the patrimonial status and interests of the suffering party as if the contract has been performed as stipulated.

The same principles, and logic, dictate the fact that every loss suffered by the performing party and directly deriving from the breach of the contract should be restored by the breaching party. Loss of business, goodwill, etc, are included.

The Albanian legal tradition does not refer to implied terms in general. Nevertheless, general legal provisions regulating contracts and imposing rules or interpretation are applicable in that they may be useful to the correct interpretation of the contract. Since there is no model contract for outsourcing, different provisions regulating contracts can be applicable for their correct interpretation.

Principles such as good faith, transparent negotiation, equity, etc, are obligatory to all kind of contracts and therefore they can be considered as implied terms for all outsourcing contracts.

The Labour Code and the labour discipline in general does not provide anything specifically related to employee transfer in case of outsourcing. Generally, the transfer of employees without their consent is not allowed by the Labour Code and, therefore, every discussion or interpretation can only be made when the consent for transferring is given by the employee. However, there are some unclear provisions in the Labour Code that could be used very carefully when outsourcing is structured, including the transferring of the workforce from the Client to the supplier. Further, there is a scenario, namely the transferring of the company, that can imply an eventual transferring of workforce.

The transferring of a company is a situation where the whole company, or part of it, changes ownership yet retains same purpose and functionality.

There is no legal reference that can apply in this circumstance, since the consent of each employee for transferring to another company or another location within the same company should be given individually.

However, the situation changes in the case of a transferring of the company or part of it. In this case, the employees are obliged to join the new employer with the transferring of the company, or part of it. After the transferring of the company occurs, the transferring party should notify the Workers Union to discuss the reasons of the transfer, to notify them of the employees’ rights, the eventual legal and economic consequences that may affect the employees, and disclose to them the new working conditions post transfer. A breach of these obligations may produce a further penalty for the employer, equal to a maximum of six months of a salary, should the labour contract be terminated as a result of the transferring of the company.

As explained in 5.1 Rules Governing Employee Transfers, there can be no point of reference or market practice in the case of employee transfers. However, it is provided that if the termination is instigated by the employee and they can prove that the transfer has produced substantial changes of the work conditions, this termination will instead be considered as made by the employer and considered not justified. It would produce penalties for the employer, for more than 18 months of the salary of the employee, depending on the seniority of the employer.

There can be no specific answer to such inquiry, but the basic orientation is that Asset Transfer can be construed freely within the outsourcing contract. The major legal issues that has to be considered in this context are those referring to property law, the right of retention, etc. However, there may be some fiscal and tax aspects that might need specific advice in case of asset transfer.

Haxhia & Hajdari Attorneys at Law

Blvd. “Dëshmorët e Kombit”
Twin Towers, Tower 2
9th floor, Tirana, Albania

+355 4 22 80 170

+355 4 22 80 171

office@lawfirmhh.com www.lawfirmhh.com
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Law and Practice

Authors



Haxhia & Hajdari Attorneys at Law was founded in 1992 and is one of Albania's premiere law firms, based in Tirana. The firm offers a full range of services for individuals and companies operating in Albania. Haxhia & Hajdari Attorneys at Law has been a constant feature of the Albanian legal market and this is reflected an expansive client base. Our lawyers provide a dedicated approach to national and international clients. Haxhia & Hajdari Attorneys at Law has earned its reputation by being at the heart of the most complex commercial and financial transactions in Albania. Many of the firm's partners maintain covering positions as university lecturers in addition to their professional activities.

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