Transparency of the Regulatory System
The laws and regulations that affect direct investment, including environmental rules, health and safety regulations, apply equally to foreign and domestic firms. STP tax laws reward citizens who return to their home country to invest, while also containing provisions for attracting foreigners to live and work in STP.
The STP legal code is based on Portuguese law. Rule-making and regulatory authority exists at the national level and regulations are developed at the ministerial level. The ministry concerned is responsible for any regulatory enforcement mechanisms. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.
Draft bills or regulations are not made available for public comment. There is no centralized online location where key regulatory actions are published similar to the Federal Register in the United States.
International Regulatory Considerations
STP is a member of Economic Community of Central African States (ECCAS). ECCAS’ fundamental goal is to promote exchange and collaboration among the members and give an institutional and legal framework to their cooperation. ECCAS is the largest economic community in Central Africa, combining the Member States of the Central African Economic and Monetary Community (CEMAC) (Gabon, Cameroon, the Central African Republic, Chad, Congo Brazzaville and Equatorial Guinea), as well as Burundi, the Democratic Republic of Congo, Angola and Sao Tome and Principe. Covering an area of 6,630,539 square kilometers, ECCAS has a total population of approximately 121 million. As a member, STP benefits from access to a larger market. STP is not a member of the WTO, but has observer status.
Legal System and Judicial Independence
Disputes are generally solved through dialogue or negotiations between parties without litigation, and there are few known instances of disagreements involving foreign investors reaching international courts. The embassy is not aware of any recent disagreements involving foreign investors. The country has a written commercial law but doesn’t have specialized courts.
Overall, the legal system is perceived to act independently. The judicial process is procedurally fair but is subject to manipulation on occasions. All regulations or enforcement actions are appealable to the Supreme Court.
Laws and Regulations on Foreign Direct Investment
The Investment Code of 2007, updated in 2016, provides for both public and mixed capital investments, allowing foreign investment in every sector of economic activity except limited areas reserved to the state (activities related to the military and paramilitary sectors and the operations of the Central Bank).
Beyond the new “one-stop shop” to help encourage new investments, there are no agencies or brokers that provide services to further simplify the procedures for establishing an office in STP. Some companies hire a legal office for assistance. Recent progress due to the MCC program has significantly reduced the cost and waiting period to start a new business. It now takes between three to five days and costs approximately USD $268.00. Although there is no online business registration processes, companies can easily register their businesses. The WB Ease of Doing Business report ranks STP as 35 out of 190 in terms of starting a business.
The following is a general description of how a foreign company can establish a local office:
- Provide full company documentation, translated into Portuguese.
- Check the uniqueness of the proposed company name and reserve a name.
- Notarize the company statutes with the Registration Office at the Ministry of Justice.
- File a company declaration with Tax Administration Office at Ministry of Finance, Commerce, and Blue Economy.
- Register with the Social Security Office at Ministry of Labor and Social Affairs.
- Publish the incorporation notice in the official government gazette (Diario da Republica).
- Publish the incorporation notice in a national newspaper.
- Register the company with Commercial Registry Office at Ministry of Finance, Commerce, and Blue Economy.
- Apply for a commercial operations permit (also known as an “alvara”).
- Apply for a taxpayer identification number with the Office of Tax Administration at Ministry of Finance, Commerce, and Blue Economy.
- Register employees with the Social Security Office.
- Other required documents include: 1) copies of the by-laws of the parent company and of the minutes of the meeting of the board of directors in which the opening of the STP branch is approved; 2) a certificate of appointment of the general manager for STP office; 3) a copy of any agreement signed with a Sao Tomean company or with the STP government; 4) two copies of permits from Court authorization to operate; and 5) two photographs and a copy of the passport of the General Manager.
In addition, the Single Window website (Portuguese language only) provides information on creating and registering companies in STP.
Competition and Anti-Trust Laws
STP does not have a specific agency that reviews transactions for competition-related concerns. There are no competition laws that limit foreign investment.
Expropriation and Compensation
The government maintains strong protections over all types of ownership of private property. The law permits expropriation of property only if deemed to be in the national public interest and only with adequate compensation. There is no evidence to suggest that the government would undertake expropriation in a discriminatory manner or in violation of established principles of international law and standards.
Aside from a massive land expropriation from colonial farmers in 1976 – later recognized by the government as detrimental to STP's economy – there have not been any documented cases of expropriation of foreign-owned properties. The government has reportedly considered expropriating land to expand the runway at the international airport, but thus far has been reluctant to do so out of concern that any expropriation will be a deterrent to new investment.
ICSID Convention and New York Convention
STP is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
Investor-State Dispute Settlement
STP does not have a Bilateral Investment Treaty with the United States. There are no reports of investment disputes that have involved a U.S. person or other foreign investors in the past 10 years. STP courts recognize and enforce foreign arbitral awards issued against the government. There are no reports or history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
The STP legal system recognizes international arbitration, and local courts recognize foreign arbitral awards, however enforcement may be difficult.
STP has a bankruptcy law but it is not well developed. In the World Bank's 2017 Doing Business Report, STP ranks 158th out of 190 economies on the ease of resolving insolvency.