July 2026 Legal Insights and Regulatory Developments
State Programme for Supporting Investment Funds
By Resolution No. 361 of 30 July 2026, the Government of Georgia approved the “State Programme for Supporting Investment Funds”, aimed at promoting the establishment and operation of investment funds and improving businesses’ access to finance.
The Programme provides for co-financing of initial costs associated with establishing an investment fund, management fees and technical assistance costs, as well as the use of a guarantee mechanism. In addition, under the Programme, JSC “Georgian Economic Development Corporation” may itself invest in the capital of an investment fund through equity participation. At least 80% of the capital of an investment fund supported under the Programme must be invested in companies established in Georgia.
The Programme comprises two main directions:
Mechanisms supporting the activities of investment funds, consisting of four components:
- Co-financing of initial establishment costs (up to 50%, capped at GEL 300,000);
- Guarantee component (to mitigate investors’ losses);
- Co-financing of management fees (from 0.7% to 1.5% annually depending on capital raised, capped at GEL 3 million per fund);
- Technical assistance for small and medium-sized enterprises in which the fund has invested (up to GEL 150,000 per enterprise);
- Investment in an investment fund’s capital — the Corporation itself becomes a co-investor (equity holder), through a competitive process or direct offer.
The Annex to the Resolution lists prohibited sectors (including tobacco, weapons, gambling, religious/political organizations and others) in which investment is not permitted.
The Resolution entered into force upon publication, on 3 August 2026.
State Programme for Supporting International Trade
By Resolution No. 362 of 30 July 2026, the Government of Georgia approved the “State Programme for Supporting International Trade”, aimed at facilitating the sale of products manufactured in Georgia on international markets through co-financing of logistics costs.
The Programme provides for co-financing of up to 50% of the costs of transporting and warehousing products on international markets. Where a product is exported to an international market for the first time, co-financing of transportation costs may reach 100%. Under each component, the maximum annual co-financing available to one beneficiary is GEL 50,000. The Programme is open to small and medium-sized businesses, provided that the applicant’s revenue for the preceding year does not exceed GEL 60 million. In addition, the company must not have outstanding tax liabilities, must not be registered in the Debtors’ Registry, and must not have previously failed to fulfil obligations or had its participation terminated under other state programmes, such as “Produce in Georgia” or the Credit Guarantee Scheme.
The Resolution entered into force on 31 July 2026, upon publication.
Significant Supreme Court Decision on Penalties and the Scope of Judicial Intervention
On 10 July 2026, the Supreme Court of Georgia provided important guidance in Case No. as-655-2025 on the interpretation of a contractual penalty clause, the period for which a penalty accrues, and the prerequisites for its reduction by a court.
According to the facts of the case, the contract provided for a penalty equal to 0.1% of the contract value for delay in completion of the works.
One of the key issues before the Court of Cassation was whether the 0.1% penalty specified in the contract constituted a one-off sanction or was to accrue for each day of delay.
The Supreme Court explained that the content of a contractual provision should not be determined solely by its literal wording. Pursuant to Article 52 of the Civil Code, the court must establish the parties’ true intention by considering the contract as a whole, its purpose and the parties’ subsequent conduct.
In the Court’s assessment, for construction works valued at GEL 1,064,757, a one-off penalty of only 0.1% of the contract value would not, in practice, fulfil the preventive and liability-securing functions of a contractual penalty. Moreover, the dispute directly concerned the duration of the performance period, further indicating that the parties linked accrual of the penalty to each day of delay.
Accordingly, the Court concluded that the parties’ true intention was to impose a penalty equal to 0.1% of the contract value for each day of delay.
Another important aspect of the decision is the Court’s interpretation concerning the application of Article 420 of the Civil Code.
The Supreme Court reiterated that a court may reduce a disproportionately high contractual penalty; however, this power is not exercised automatically. The mere fact that a penalty is high does not justify its reduction — it must be disproportionately high in relation to the specific breach.
Furthermore, particularly in disputes between business entities, reduction of a contractual penalty requires a substantiated and reasoned objection by the debtor. The party must explain why the penalty claimed is disproportionate and identify the circumstances justifying its reduction.
In the present case, the contractor neither requested a reduction of the penalty in its statement of defense nor challenged it as disproportionately high. Accordingly, the Supreme Court held that the lower courts had no basis to consider reducing the penalty on their own initiative.
