Editorial Note:
The author of this article worked at the Ministry of Education, Science, Culture, and Sports of the Republic of Armenia from April 15 to November 27, 2024, including involvement in certain stages of the drafting process of this decision at a technical level (editorial and legal formalization). While fulfilling his professional duties, he was not directly involved in the conceptual development of the program or in the decision-making process.
Given the public significance of the current development in the field, the analysis presented in this article is based exclusively on the international investigation by Film Industry Watch and reflects the author’s journalistic position. The article does not use any non-public information or official data.
On April 10, the Government of the Republic of Armenia adopted Decision No. 412-N on partial reimbursement of investments for foreign films shot on Armenian territory. The cash rebate program provides for a refund of 25% to 35% of local expenditures, and authorities have repeatedly referred in public communications to “cooperation with Netflix” as evidence of the program’s effectiveness. However, as highlighted in the international investigation by Film Industry Watch, behind the grand announcements may lie legal contradictions and conflicts of interest.
What the Investigation’s Authors Claim
The May 30 report published by Film Industry Watch shows that the reimbursement rates set by the government decision exceed the government’s authorized powers. Article 18 of the “Law on Cinematography” clearly defines a range of 10% to 40%, and according to the organization’s legal experts, any changes must be approved by the Parliament. Nevertheless, the decision specifies a different range — 25% to 35%.
The investigation pays particular attention to possible conflicts of interest. According to open sources, David Banuchyan, Director of the Armenian Film Foundation, is co-producer and tax rebate supervisor for the production company People of Ar. This company is also party to a quadripartite memorandum signed with government bodies before the legal framework for the rebate program was adopted — in December 2023, prior to the enactment of required subordinate regulations and the establishment of the Armenian Film Foundation.
It is also noted that Banuchyan “played a key role in the development of Armenia’s cinematography legislation and cash rebate system.” Thus, as Film Industry Watch states, a person involved in creating the program later became its coordinator on behalf of the state.
That alignment is not accidental. Sixteen months before the CFA existed, the Ministry of Education, Science, Culture and Sport, several parliamentarians, the National Cinema Center and People of Ar signed a four-party memorandum of understanding pledging to secure rebate support for three English-language features involving German actor-director Til Schweiger. The document, dated 18 December 2023, promised cooperation on “all necessary sub-legislative acts” long before those acts were drafted.
— Film Industry Watch references the memorandum.
Where Is Netflix?
The authorities’ key claim of attracting Netflix productions to Armenia has also come under question. According to Film Industry Watch, at the time of the investigation’s publication, no projects related to Armenia appeared in Netflix’s official sources — including Netflix’s public newsrooms, investor filings or trade-press databases. “The streaming platform declines to comment on productions that are not formally announced, but the absence of any reference after more than a year raises doubts about the government’s headline claim,” – the article states.
The authors emphasize that despite this, Netflix’s name continues to be invoked as a primary justification for the reforms — in parliament, media, and official press releases.
Context and International Parallels
As Film Industry Watch notes, similar schemes, where the architects of funding mechanisms later participate in their implementation, have already been encountered in other countries. Specifically, investigations in Israel, Greece, and North Macedonia revealed so-called “closed circles” between state funds and private companies. The report cites Ukraine as an example, where Netflix’s million-dollar donation ended up under the control of the same officials of the Ukrainian Film Academy tasked with fairly distributing it.
The authors warn that as long as the legal basis and transparency of the mechanism remain questionable, any rebate incentive program for foreign partners carries a “risk premium” — which they will factor into their calculations or decline to participate in altogether.
What Issues Does Film Industry Watch Highlight?
First, there is legal vulnerability. The government’s Decision No. 412-N, which fixes the reimbursement range at 25-35%, contradicts the current Law on Cinematography’s 10-40% range. Moreover, changes to the law are exclusively within the Parliament’s authority. This situation risks invalidation of all contracts based on the decision if challenged in court. This threatens not only the program’s stability but also the legal protection of investors.
Second, a significant risk is the possible conflict of interest. The director of the Cinema Foundation of Armenia, the responsible state body for implementing the mechanism, is simultaneously connected to a private production company involved in promoting the cash rebate system. Such overlapping roles can undermine the objectivity of decisions, cause internal scandals, and provoke negative reactions from international partners.
Additionally, the report points to ignoring the opinions of government agencies. The Ministry of Finance had raised detailed objections to the draft normative act, warning about legal and budgetary risks. Nevertheless, the draft was adopted. This could indicate institutional weaknesses in checks and balances, creating risks for uncontrolled use of budget funds.
This situation may be perceived as an example of a closed system, where an insider group decides the rules, controls their enforcement, and directly benefits. Such models, already recorded in other countries, often lead to decreased trust in state institutions, regression of reforms, and rejection of programs by foreign companies whose legal and institutional reliability is in doubt.
No Official Response Yet
As of June 3, neither the Ministry of Education, Science, Culture and Sports nor the Cinema Foundation of Armenia have issued official comments.
On February 16, when the Cinema Foundation of Armenia officially announced the partial reimbursement of investments before attending the Berlin market, KinoPress expressed concern about international vulnerabilities. On February 17, KinoPress sent a written inquiry to the Ministry of Education, Science, Culture and Sports asking:
“How appropriate was it — risking the Republic of Armenia’s reputation on such an important issue [partial reimbursement of investments] — to present to the international community [at the European Film Market] a fact that has not yet been approved by the Government of the Republic of Armenia? This question also concerns the Armenian pavilion at the 2024 European Film Market, which during the National Cinema Center’s tenure was decorated with 10-40% rebate messages.”
On February 25, the Cinema Foundation of Armenia responded that:
“The implementation of the partial investment rebate program in the film production sector is aimed at the long-term development of the industry and attracting foreign investments. All steps taken by the Foundation on international platforms in this direction are carried out with consistency, strategic thinking, and dedication to the preservation and development of national cultural values and are aimed exclusively at enhancing and strengthening the reputation of the Republic of Armenia.”
Thus, maintaining the current state, Armenia’s cash rebate program faces not only legal but also institutional and reputational risks, which can directly impact the investment environment in the film sector.
