Dechert OnPoint: Consumer Protection & the DCFTA

Dechert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ruslan Akhalaia and Irakli Sokolovski, as well as Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

On July 1, 2016, the Deep and Comprehensive Free Trade Agreement (“DCFTA”) between Georgia and the European Union (“EU”) entered into force. The EU is Georgia’s main trade partner. Roughly 32.6 percent of Georgia’s trade is with the EU, followed by Turkey (17.2 percent) and Russia (8.1 percent). Therefore, the entry into force of the DCFTA is a matter of utmost importance for the development of both Georgia’s economy and the quality of its overall legal environment.

The DCFTA aims to deeper integrate Georgia with the EU through reforms in trade-related areas. Being based on the principles of the World Trade Organization (“WTO”), the DCFTA removes all import duties on goods and provides for broad mutual access to trade in services between EU and Georgia. It also provides the opportunity for EU and Georgian companies to set up subsidiaries or branch offices on a non-discriminatory basis, allowing Georgian companies to enjoy the same treatment as domestic companies in the EU markets, and vice versa.

However, open access to the EU single market comes with certain stringent obligations, which require Georgia to modify its legal framework to make it more compatible and harmonized with EU legislation. In the coming years, many different fields of law will fall under scrutiny and be subject to amendment in order for Georgia to fulfill DCFTA obligations. This edition of OnPoint analyzes those legal aspects of the DCFTA which relate to consumer protection.

Existing Consumer Protection laws in Georgia

The existing legislative framework in the field of consumer protection leaves a lot to be desired from the perspective of the consumer. There is no generic legislation which guarantees the rights of consumers of different products. Consumer protection norms, if they exist, are scattered among different regulatory documents in different fields. In general, the consumer protection obligations are industry-limited and apply mainly to regulated industries.

Possibly the best developed consumer protection practices in Georgia are to be found in the field of electronic communications, where the Georgian National Communications Commission (“GNCC”) acts as a watchdog for the rights of different network subscribers. The GNCC’s mandate is enshrined under the technical regulations for consumer protection in the field of electronic communications. The field of electricity, gas and water supply is another example, under the supervision of the Georgian National Energy and Water Supply Regulatory Commission (“GNERC”). The banking, insurance and payments sector can also be added to the limited list of industries with specific consumer protection obligations placed on business operators.

Additionally, the LEPL National Food Safety Agency (“NFSA”) controls and supervises food safety in Georgia. It is now involved in implementing a number of regulations which must be put in place in the course of the DCFTA approximation process.

DCFTA obligations regarding consumer protection

Georgia must approximate its legislation to EU acts and international instruments in the field of consumer protection, according to the DCFTA. EU consumer protection policies shall be implemented in Georgia within the timeframes set by the DCFTA itself. The following policies are notable:

• With regards to product safety, Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety shall be implemented upon the entry into force of the DCFTA. Additionally, the directive on the approximation of the laws of the Member States concerning products which, appearing to be other than they are, endanger the health or safety of consumers shall be implemented within two years of the entry into force of the DCFTA;

• Commission Decision 2006/502/EC of 11 May 2006 requires Member States to take measures to ensure that only lighters which are child-resistant are placed on the market, and to prohibit the placing on the market of novelty lighters. The decision shall be implemented within two years of the entry into force of DCFTA;

• In the sphere of contract law, the directive on consumer protection in the indication of prices of products offered to consumers, as well as the directive on unfair commercial practices, shall be implemented within five years of the entry into force of the DCFTA;

• As for marketing, the directive concerning misleading and comparative advertising, as well as the directive on certain aspects of the sale of consumer goods and associated guarantees, shall be implemented within five years of the entry into force of the DCFTA;

• Additional contract law protections to be implemented include the directive on unfair terms in consumer contracts; the directive to protect the consumer with regards to contracts negotiated away from business premises; and the directive on the protection of consumers with regards to distance contracts, are to be implemented within five years of the entry into force of the DCFTA;

• Protections in the tourism sphere will also become applicable, with the directive on package travel, package holidays and package tours and the directive on the protection of consumers with regards to certain aspects of timeshare, long-term holiday product, resale and exchange contracts to be implemented within five years of the entry into force of the DCFTA; and

• The banking and financial sector will also be reshuffled with regards to consumer protection laws. The directive concerning the distance marketing of consumer financial services and the directive on credit agreements for consumers shall be implemented within five years of the entry into force of the DCFTA.

Consumer protection enforcement mechanisms shall also be put in place within the framework of approximation with EU law. Namely, the directive on injunctions for the protection of consumers' interests shall be implemented within five years of the entry into force of the DCFTA.

Conclusions

The DCFTA approximation process will upgrade Georgia’s consumer protection legislation from being virtually non-existent to on par with EU levels, once the approximation process is complete within the set timeframe. The DCFTA also encompasses many other guarantees regarding product safety and specifications in different fields that do not on the surface refer to consumer protection but serve the overall aim of improving the quality of supplied goods and services. For example, the NFSA is to implement 102 different technical regulations in the sphere of food safety, 84 different regulations in the veterinary field and 85 other documents in plant protection, in order to comply with the obligations undertaken under the DCFTA.

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Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice.

Dechert Georgia is the Tbilisi branch of Dechert LLP, an international specialist Law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.