An official website of the United States Government Here's how you know

Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Afghanistan

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Under the Private Investment Law of 2005 (PIL), qualified domestic or foreign entities may invest in all sectors of the economy.

On July 29, 2016, Afghanistan was formally admitted to the WTO, which could bring about a number of benefits for Afghanistan, including improving prospects for foreign direct investment.

Article 16 of the PIL also states that approved domestic and foreign companies with similar objectives are subject to the same rights under Afghan law and the same protections against discriminatory governmental actions.

The Afghanistan Investment Support Agency (AISA) is an investment promotion agency that was merged into the Ministry of Commerce and Industries (MOCI) in October 2016. The transition period is ongoing so the AISA continues to play a semi-independent role.

Additionally, a restructuring plan is currently underway to create an investment promotion directorate with the MOCI. The MOCI has taken on the role of promoting business growth, investment, and trade.

The High Commission on Investment (HCI) is responsible for investment policy making. The HCI includes the Ministers of Agriculture, Economy, Finance, Foreign Affairs, Mines and Industries, the Governor of the Central Bank (Da Afghanistan Bank), and the Chief Executive Officer of AISA. The Minister of Commerce and Industries chairs the HCI. The High Economic Council (HEC), which is chaired by the President and includes both the HCI members and representatives from academia and the private sector, also plays a role in investment policy development.

The HEC, HCI, MOCI, Afghan Chamber of Commerce and Industries, and AISA are tasked with maintaining a dialogue and resolving business disputes with the government.

Limits on Foreign Control and Right to Private Ownership and Establishment

Under the PIL, foreign and domestic private entities have equal standing and may establish and own business enterprises, engage in all forms of remunerative activity, and freely acquire and dispose of interests in business enterprises.

While there is no requirement for foreigners to secure Afghan partners, the Afghan Constitution and the PIL prohibit foreign ownership of land. In practice most foreign firms find it necessary to work with an Afghan partner. Although foreign land ownership is not permitted, foreigners may lease land for up to 50 years.

Although the HCI has authority to limit the share of foreign investment in some industries, specific economic sectors, and specific companies, that authority has never been exercised. In practice, investments may be 100 percent foreign owned.

Article 5 of the PIL prohibits investment in nuclear energy and gambling establishments.

Investment in certain sectors, such as production and sales of weapons and explosives, non-banking financial activities, insurance, natural resources, and infrastructure (defined as power, water, sewage, waste-treatment, airports, telecommunications, and health and education facilities) is subject to special consideration by the HCI, in consultation with relevant government ministries. The HCI may choose to apply specific requirements for investments in restricted sectors. Direct investment exceeding $3,000,000 requires HCI approval of the investment application.

Other Investment Policy Reviews

There have been no third-party investment policy reviews by the OECD, WTO, or UNCTAD in the past three years.

Afghanistan’s last major investment policy review was the Afghanistan National Development Strategy (ANDS), which was developed with the assistance of the United Nations Development Program (UNDP) and covered the period 2008-2013. That strategy attempted to guide development investments in the focus areas of (1) agriculture and rural rehabilitation, (2) human capacity development, and (3) economic development and infrastructure, through high-priority programs chosen for contributions to job creation, broad geographic impact, and likelihood of attracting additional investment. As of March 2016, the Afghanistan Investment Support Agency (AISA) is urging the government to consider an updated strategy, potentially focusing on support to industry, electricity generation, taxation reform, industry supports, customs, technology, and the agricultural sector.

Currently a new investment law has been drafted by the MOCI and is awaiting review by the Council of Ministers.

Business Facilitation

Responsibility for business facilitation, previously under AISA, was recently moved to the MOCI. The HCI and HEC are responsible for investment and economic policy making.

Foreign or domestic companies investing in Afghanistan must obtain a corporate registration from the Afghanistan Central Business Registry (ACBR) and a Tax Identification Number issued by the Department of Revenue.

The websites for registration are:

Companies operating in the security, telecommunications, agriculture, and health sectors require additional licenses from relevant ministries. Companies seeking licenses to provide consultancy, legal, or audit services must meet requirements for education or related experience for top officers.

To begin the process for initial issuance of licenses, renewals, and material changes to the license, foreign firms must first obtain an introduction letter from the Ministry of Foreign Affairs (MOFA) addressed to the MOCI. Obtaining this letter typically requires an application to the Afghan embassy located in the country where the company is incorporated or a letter of introduction from the embassy or commercial attaché in Kabul representing the country where the company is incorporated. Once this process is complete, the company will be introduced by MOFA to MOCI/AISA and may proceed to obtain a license.

These steps to register a business can take as little as two days to complete but may require more time and may require a local attorney’s help.

Ease of doing business reforms in 2016 led AISA to begin issuing licenses for three years, as opposed to one year, to attract investment. Obtaining a business license is relatively simple; however, applications for renewal are contingent upon certification from the Ministry of Finance (MOF) that all tax obligations have been met. Some companies have seen AISA license renewals delayed while the MOF audits their tax status, despite MOF assurances that an ongoing tax audit should not impede AISA license renewal.

Outward Investment

The government does not promote or incentivize outward investment. Due to the security situation, capital flight is a concern.

Private investors have the right to transfer capital and profits out of Afghanistan, including for off-shore loan debt service. There are no restrictions on converting, remitting, or transferring funds associated with investment, such as dividends, return on capital, interest and principal on private foreign debt, lease payments, or royalties and management fees, into a freely usable currency at a legal market-clearing rate. The PIL states that an investor may freely transfer investment dividends or proceeds from the sale of an approved enterprise abroad. The MOF has in some instances frozen the domestic bank accounts of companies over tax disputes, which has effectively served to prohibit transfers of capital.

3. Legal Regime

Transparency of the Regulatory System

Afghanistan’s Law on Publication and Enforcement of Legislation requires publication in the Official Gazette of official declarations, laws, decrees, and other legislative documents. There is no legal requirement or practice for publication and comment for domestic laws, regulations, or other measures of application that will become legally enforceable. In general, the Afghan government shares draft legislation with interested parties for comment and some ministries publish draft legislation in national newspapers for comment by the public. Foreign firms in Afghanistan follow accounting procedures consistent with international norms. The government uses ministerial orders to enforce regulatory compliance. For example, ministries have in the past taken action to freeze accounts or limit travel for companies until they comply with regulations.

International Regulatory Considerations

Afghanistan became a WTO member in 2016. The government is working to build its capacity to meet the notification requirements of the WTO.

Legal System and Judicial Independence

The legal system of Afghanistan consists of Islamic, statutory, and customary (Shura) rules. The supreme law of the land is the Constitution. The judiciary system is composed of the Supreme Court, the Courts of Appeal, and the Primary Courts. There are trial and appellate courts that specialize in commercial disputes. Since 2002, NGOs have been working to strengthen the rule of law in Afghanistan by identifying peaceful means for dispute resolutions and developing partnerships between state and community actors in the hopes of improving access to justice. Despite these efforts, many legal disputes are still resolved outside the formal justice system by community-based tribal leaders. Contract law in Afghanistan is set out in the Afghanistan Commercial Code 1955 and the Afghanistan Civil Code 1977. Under these codes, parties are generally free to: a) enter into and perform a contract on any commercial subject matter provided that subject matter or performance is not contrary to law, public policy, or sharia; and b) agree to have the law of a foreign state govern their contract.

According to credible contacts, civil cases in the commercial court system can sometimes take more than 18 months for parties to obtain resolutions. Cases are frequently resolved more quickly through an informal system or, in some cases, pursuant to negotiations facilitated by formal justice system actors or private lawyers.

Because there is often limited access to the formal legal system in rural areas, local elders and shuras (consultative gatherings, usually of men selected by the community) are often the primary means of settling both criminal matters and civil disputes, and they are known to levy unsanctioned punishments. According to the 2017 Asia Foundation Survey of the Afghan People, shuras were used to resolve 43 percent of all disputes and represent the predominant form of dispute resolution employed by Afghans.

Investors should be aware that the Human Rights Report noted that arbitrary arrests occur in most provinces and that there have been a number of cases in which the Attorney General’s office, with the complicity of some police officials, imposed or threatened to impose criminal penalties on persons who may only be indirectly connected to a contractual dispute between a foreign company and an Afghan person or entity.

Laws and Regulations on Foreign Direct Investment

Under the PIL, investment is defined as currency and contributions in kind, including, without limitation, licenses, leases, machinery, equipment, and industrial and intellectual-property rights provided for the purpose of acquiring shares of stock or other ownership interests in a registered enterprise. The PIL permits investments in nearly all sectors except nuclear power, gambling, and production of narcotics and intoxicants. There are also limitations on the total value of service transactions or assets with respect to motion pictures, road transport (passenger and freight), and on the total number of people that can be employed in security companies.

Foreign investors have complained of irregularities in the court system, arbitration, and tax disputes. As a result of the various legal and regulatory challenges, companies operating in Afghanistan should seek local legal counsel to help navigate licensing and permitting requirements and conforming to tax regulations.

Competition and Anti-Trust Laws

Afghanistan does not have anti-trust laws. In 2010, the Afghan government enacted a law to protect sound competition in markets and prevent unfair competition.

Expropriation and Compensation

The PIL allows for expropriation of investments or assets by the government on a non-discriminatory basis for the purposes of public interest. The law stipulates that the government shall provide prompt, adequate, and effective compensation in conformity with the principles of international law. In cases of investment in a foreign currency, the law requires compensation to be made in that currency. The government may also confiscate private property to settle debts. According to the PIL, investors with an ownership share of more than 25 percent may challenge the expropriation. There have been no reports of government expropriation of foreign assets.

The Ministry of Finance may freeze assets to collect taxes.

Dispute Settlement

ICSID Convention and New York Convention

In 2005 Afghanistan became a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Under the New York Convention, Afghanistan has agreed to (a) recognize and enforce awards made in another contracted state, and (b) apply the convention to commercial disputes. Under the PIL and the Commercial Arbitration Law of 2007, (a) parties can agree to have foreign law govern their contract and agree to have their disputes resolved through arbitration or other mechanisms inside or outside of Afghanistan, and (b) Afghan courts must enforce any resulting award or agreement.

Afghanistan has been a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention) since 1966.

Investor-State Dispute Settlement

Afghanistan does not have a Bilateral Investment Treaty or Free Trade Agreement with the United States. There are several ongoing disputes between the government and investors, typically about tax assessments and license requirements.

International Commercial Arbitration and Foreign Courts

Since 2005, Afghan law has expressly recognized alternative dispute resolution provisions. In 2014, the Afghanistan Centre for Dispute Resolution (ACDR), whose decisions are non-binding, was established with support from USAID and the Department of Commerce Commercial Law Development Program (CLDP). The ACDR offers mediation, expert witness services, and award calculation services in a limited number of cases referred by the commercial courts and plans to expand its services to include arbitration.

Bankruptcy Regulations

Provisions in the Banking Law provide special procedures for bank insolvency. The Afghan government enacted a new insolvency law in 2017 (Law of Insolvency and Bankruptcy in Afghanistan of 2018) to provide a uniform and fair procedure for the payment of debts to creditors. The text of the law can be found at https://ahg.af/wp-content/uploads/2015/04/Draft-Insolvency-Law-English.pdf .

6. Financial Sector

Capital Markets and Portfolio Investment

Afghanistan is in principle welcoming toward foreign portfolio investment, but financial institutions and markets are at an early stage of development. Afghanistan does not have a stock market. There are no limitations of foreign investors obtaining credit. The banking sector generally only provides short term loans.

Afghanistan joined the IMF on July 14, 1955. According to the 2017 IMF Country Report, Afghanistan imposes no restrictions on the making of payments and transfers for current interactional transactions and its exchange system is free of multiple currency practices. The 2017 Country Report for Afghanistan can be found here: https://www.imf.org/en/Publications/CR/Issues/2017/12/14/Islamic-Republic-of-Afghanistan-2017-Article-IV-Consultation-and-Second-Review-under-the-45473 .

Money and Banking System

Most Afghans remain outside the formal banking sectorAfghans continue to rely on an informal trust-based process referred to as Hawala to access finance and transfer money, due in part to religious acceptance, unfamiliarity with a formal banking system, and limited access to banks in rural areas. Three of the four major mobile network operators – Etisalat, AWCC, and Roshan – offer limited mobile money servicesThe Afghan government is developing a procedure for mobile money salary payments in the Ministry of Labor, but the program has not yet been launched.

Still, finance is Afghanistan’s second-largest service industry behind telecommunications and is potentially an important driver of private investment and economic growth. There are 15 commercial banks operating in Afghanistan, with total assets of approximately $4.48 billion. There are three state banks: Bank-e Millie Afghan (Afghan National Bank), Pashtany Bank, and New Kabul Bank (formerly the privately owned Kabul Bank). There are also branch offices of foreign banks, including Alfalah Bank (Pakistan), Habib Bank of Pakistan, and National Bank of Pakistan.

As of December 2017, the total assets of the banking sector was $4.6 million. Banking remains highly centralized, with a considerable majority of total loans made in Kabul. Bank lending is undermined by the legal and regulatory infrastructure that impedes the enforcement of property rights and development of collateral.

As of December 2017, the banking sector gross Non-Performing Loans (NPL) ratio was 12.18 percent, while the net ratio stands at 6.79%.

Formal credit to the private sector stands at less than 10 percent of GDP, significantly lower than other countries in the region. Afghanistan ranks 101 out of 189 economies for ease of obtaining credit in the World Bank’s Doing Business 2017 Report. Afghan entrepreneurs complain interest rates for commercial loans from local banks are high, averaging around 15.5 percent. In response to this situation, investment funds, leasing, micro-financing, and SME-financing companies have entered the market. USAID is working with the Afghan government and the banking sector to promote improved access to finance and the expansion of financial inclusion.

Afghanistan has lost many correspondent banking relationships in the past few years due to risk aversion and lack of profitability. The full extent of impact has yet to be quantified, but the unmeasured effects have been a loss in the ease of basic international transactions.

The Afghan central bank Da Afghanistan Bank (DAB) has made improvements in monitoring and supervising the banking sector, following the 2010 Kabul Bank crisis. President Ghani also took steps to hold those responsible accountable. The Afghan Government has a plan to recover assets from perpetrators of the large-scale bank fraud, though progress on its implementation remains slow.

Foreigners can open bank accounts with Afghanistan banks if they have valid visas, work permits, and in the case of a legal entity, a valid business license. Afghan banks do not open bank accounts for non-resident customers.

Foreign Exchange and Remittances

Foreign Exchange Policies

Private investors have the right to transfer capital and profits out of Afghanistan, including for off-shore loan debt service. There are no restrictions on converting, remitting, or transferring funds associated with investment, such as dividends, return on capital, interest and principal on private foreign debt, lease payments, or royalties and management fees, into a freely usable currency at a legal market clearing rate. The PIL states that an investor may freely transfer investment dividends or proceeds from the sale of an approved enterprise abroad.

Major transactions in Afghanistan, such as the sale of autos or property, are frequently conducted in dollars or in the currency of neighboring countries. Afghanistan does not maintain a dual-exchange-rate policy, currency controls, capital controls, or any other restrictions on the free flow of funds abroad. Afghanistan uses a managed floating exchange rate regime under which the exchange rate is determined by market forces. It is illegal to transport more than AFN 1,000,000 (approximately USD 17,200) or the foreign currency equivalent out of Afghanistan via land or air. Amounts over AFN 500,000 (approximately USD 8,600), but beneath AFN 1,000,000, must be declared. Enforcement is reported to be inconsistent.

Remittance Policies

Access to foreign exchange for investment is not restricted by any law or regulation. There are large, yet informal, foreign exchange markets in major cities and provinces where U.S. dollars, British pounds, and euros are readily available. Entities wishing to buy and sell foreign exchange in Afghanistan must register with the central bank, Da Afghanistan Bank, but thousands of Hawalas continue to practice their trade. Non-official money service providers often cite the lack of enforcement in the currency exchange sector, and the resulting competitive disadvantage to licensed exchangers, as a disincentive to becoming licensed.

Over the past three years, Afghanistan has made significant progress in improving Anti-Money Laundering/Combating the Financing of Terrorism and is no longer subject to Financial Action Task Force (FATF) monitoring. The FATF report can be found at http://www.fatf-gafi.org/countries/a-c/afghanistan/documents/fatf-compliance-june-2017.html .

Sovereign Wealth Funds

Afghanistan does not have a sovereign wealth fund.

Albania

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The government of Albania (GoA) understands that private sector development and increased levels of foreign investment are critical to increase opportunity and lower unemployment. Albania maintains a liberal foreign investment regime designed to help attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. Albanian legislation does not distinguish between domestic and foreign investments.

The 2010 amendments to the Law on Foreign Investment introduced criteria specifying when the state would grant special protection to foreign investors involved in property disputes, providing additional guarantees to investors for investments of more than 10 million euros. The 2017 amendments extended state protection for strategic investments, as defined under the 2015 Law on Strategic Investments, through December 2018.

The Albanian Investment Development Agency (AIDA) is in charge of promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about the services AIDA offers to foreign investors (http://aida.gov.al/home ).

The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop shop for foreign investors, from filing of the application form to granting the status of strategic investment/investor.

The deadline for application to receive the status of strategic investment/investor is December 2018. The legal framework regulating the strategic investments can be found at the Albanian Investment Development Agency page (http://aida.gov.al/pages/strategic-investments ).

Despite hospitable legislation, U.S. investors are challenged by rampant corruption and the perpetuation of informal business practices. Several major U.S. investors have left the country in recent years after contentious commercial disputes, including several that were brought before international arbitration.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” According to the World Bank’s “Investing Across Borders”  indicator, just three out of 33 sectors may not be foreign owned.

  • Domestic and International air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation;
  • Television broadcasting: no entity, foreign or domestic, may own more than 40 percent of a television company.

Albania lacks an investment review mechanism for inbound foreign direct investment. Albanian law permits private ownership and establishment of enterprises and property. Foreign investors do not require additional permission or authorization beyond that required of domestic investors. Foreign individuals and companies may not purchase agricultural land, though land may be leased for up to 99 years. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships.

Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 ‘Law on Entrepreneurs and Commercial Companies,’ and ‘Law Establishing the National Registration Center’ (NRC) allow for the following legal types of business entities to be established through the NRC: Sole Entrepreneur; Unlimited Partnership; Limited Partnership; Limited Liability Company; Joint Stock Company; Branches and Representative Offices; and Joint Ventures.

Other Investment Policy Reviews

World Trade Organization (WTO) completed a Trade Policy Review of Albania in May 2016 (https://www.wto.org/english/tratop_e/tpr_e/tp437_e.htm ).

In November 2017, UNCTAD completed the first Investment Policy Review (IPR) of South-East European (SEE) countries, including Albania (http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1884 ).

Business Facilitation

According to the 2018 World Bank Doing Business Report, it takes an average of five procedures over five days to start a company in Albania. The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published on-line (http://www.qkb.gov.al/information-on-procedure/business-registration/ ). The registration may be done in person, or online via the e-Albania portal . Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in the Albanian language. In 2016, the Business Licenses Center merged with the National Registration Center, to create the National Business Center (http://www.qkr.gov.al/home/ ), which now serves as a one-stop-shop for business registration and all licenses.

Outward Investment

Albania neither promotes nor incentivizes outward investment or restricts domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

Albania’s regulatory system has improved in recent years, but challenges remain. Uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency are all hindrances to the business community.

Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of capital, mergers and divisions, takeover bids, shareholders’ rights, as well as corporate governance principles. The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards for large companies, and national financial reporting standards for small and medium enterprises.

Other independent agencies and bodies, including the Energy Regulator (ERE), Telecom Regulator (AKEP), Natural Resources Bureau (AKBN), and other major institutions operate to ensure transparency in specific sectors.

State-owned oil company Albpetrol retains some regulatory authority over legacy oilfields and is a consistent source of reports of corruption, malign interpretation of regulations, and inefficiency in the hydrocarbons sector. Major foreign investors in this sector report difficulties in complying with often overlapping regulatory requirements, and inconsistent and often conflicting interpretations of Albanian legislation and regulations governing oil exploration and extraction.

International Regulatory Considerations

Albania acceded to the World Trade Organization in 2000, and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

Legal System and Judicial Independence

The Albania legal system is based on the continental judicial system. The Albanian constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code, enacted in 1996, governs civil procedure in Albania. The civil court system consists of district courts, appellate courts, and the Supreme Court. The district courts are organized in specialized sections according to the subject of the claim, including civil, family, and commercial disputes.

The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court, now adjudicate administrative disputes. Administrative courts aim to adjudicate administrative cases quickly. The Constitutional Court reviews whether laws or subsidiary legislation comply with the Constitution, and in limited cases protects and enforces the constitutional rights of citizens and legal entities.

Parties may appeal the judgment of the first instance courts within 15 days, while appellate court judgments must be appealed to the Supreme Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes enabling faster adjudication of administrative disputes.

Albania does not have a specific commercial code, but defines commercial legislation through a series of relevant commercial laws including, the Foreign Investment Law, Commercial Companies Law, Bankruptcy Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, Value Added Law, and Sports Law.

Corruption is endemic in the Albanian judicial system and U.S. investors are advised to include binding international arbitration clauses in agreements with Albanian counterparts. While the government has historically respected decisions by international arbitration courts, the GoA ignored a 2016 injunction from such a court in a high-profile investment dispute (a decision that was later reversed). Albania is a signatory to the New York Convention and foreign arbitration awards may be enforced in local courts.

Laws and Regulations on Foreign Direct Investment

The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:

  1. No prior government authorization is needed for an initial investment;
  2. Foreign investment may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law;
  3. Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments;
  4. Foreign investors receive most favored nation treatment according to international agreements and Albanian law.

There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities, but may be rented for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.

In an effort to boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment” as deemed by the government benefits from either “assisted procedure” or “special procedure” assistance by the government to help navigate the permitting and regulatory process. To date, no major foreign investors have taken advantage of the law. Several projects proposed by domestic companies or consortiums of local and foreign partners have been designated as strategic investments, mostly in the tourism sector.

Major Laws Governing Foreign Investments:

  • Law 55/2015, “On Strategic Investments”: Defines procedures and rules to be observed by government authorities when reviewing, approving and supporting strategic domestic and foreign investments in Albania;
  • Law 9901/2008 “On Entrepreneurs and Commercial Companies”: Outlines general rules and regulations on the merger of commercial companies;
  • Law 110/2012 “On Cross-Border Mergers”: Determines rules on mergers when one of the companies involved in the process is a foreign company;
  • Law 9121/2003 “On Protection of Competition”: Stipulates provisions for the protection of competition, and the concentration of commercial companies;
  • Law 10198/2009 “On Collective Investment Undertakings”: Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies;
  • Law 7764/1993 “On the Foreign Investments” amended by the Law 10316/2010.

Authorities responsible for mergers, change of control, and transfer of shares include, the Albanian Competition Authority (ACA; http://www.caa.gov.al/laws/list/category/1/page/1 ) which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and, the Albanian Financial Supervisory Authority (FSA; http://www.amf.gov.al/ligje.asp ) which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.

Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania, although the government refused to recognize an injunction from a foreign arbitration court in one high profile case, in 2016, calling into question the government’s commitment to arbitration (this refusal was later reversed). The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes.

Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy (as high as 50 percent) presents challenges for tax administration.

Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. The only potential complication to obtaining a work permit is the requirement that a foreign employer maintain a certain number of local employees. The Law on Foreigners states that a foreign employer will be granted a work permit when the number of foreign employees does not exceed 10 percent of the total number of employees on the payroll over the 12 proceeding months.

The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the European Union’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.

The Law on Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. Concessions may be identified by central or local governments or through third party unsolicited proposals. In the case of unsolicited proposals, the proposing company is entitled to receive a bonus of up to 10 percent of total points based on the technical and financial proposal.

Competition and Anti-Trust Laws

The Albanian Competition Authority (http://www.caa.gov.al/?lng=en ) is the agency that reviews transactions for competition- related concerns. The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green field investments, irrespective of industry or sector. In the case of particular share transfers in insurance and banking industries, the Financial Supervisory Authority (http://amf.gov.al/ ) and/or the Bank of Albania (https://www.bankofalbania.org/ ) may require additional regulatory approvals. Transactions between parties outside Albania, including foreign-to-foreign transactions, are covered by the competition law, which explicitly states that the transactions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market.

Expropriation and Compensation

The Albanian Constitution guarantees the right of private property. According to Article 41, expropriation or limitation in the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been below market value and owners have complained that the compensation process is slow and unfair. Civil courts are responsible for resolving such complaints.

Change of government can also be of concern to foreign investors. Following the 2013 elections and peaceful transition of power, the new government revoked or attempted to renegotiate numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in years past, as well.

There are many ongoing disputes regarding properties confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993, but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have suffered from long-running restitution disputes. Court cases drag on for years without a final decision, forcing many to refer their case to the European Court of Human Rights in Strasbourg, France. To date, the Court has issued around 29 decisions in favor of Albanian citizens in civil cases involving protection of property with an assessed financial cost of approximately USD 50 million. Approximately 400 applications are pending for consideration. Even after settlement in Strasbourg, enforcement of decisions is slow.

The GoA has recently approved new property compensation legislation that aims to provide a solution to the pending claims for restitution and compensation. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; and cash settlement/financial compensation. The legislation sets a 10-year timeframe for the completion of the entire process.

The Albanian government has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, especially in the mining and energy sectors, based on contract violation claims.

Dispute Settlement

ICSID Convention and New York Convention

Under the Albanian Constitution, ratified international agreements prevail over domestic legislation. Albania is a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention). It also is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Albania has ratified the 1927 Convention and the European Convention on Arbitration (Geneva Convention).

Investor-State Dispute Settlement

For an arbitration award to be locally recognized, the claimant must enforce the award before the Court of Appeals. The procedure to recognize a foreign arbitral award typically lasts around one month and either party may appeal the Court’s decision to the Supreme Court. The appeal must be filed within 30 days from the date of decision or notification of the other party (if absent).

The possibility of bringing an action before the local court to avoid arbitration proceedings is remote. According to explicit provisions in the Albanian Code of Civil Procedure, if a party brings actions before local courts despite the parties’ agreement to arbitrate, the court would, upon motion of the other party, dismiss the case without entertaining the merits of the case. The decision of the court to dismiss the case can be appealed to the Supreme Court, which has 30 days to consider the appeal.

An alternative to dispute settlement via the courts is private arbitration or mediation. Parties can engage in arbitration when they have agreed to such a provision in the original agreement, when there is a separate arbitration agreement, or by mutual agreement at any time when a dispute arises. Legislation distinguishes arbitration of international disputes from arbitration of domestic disputes in that the parties involved in an international dispute may agree to settle through either a domestic or foreign arbitration tribunal. Mediation is also applicable in resolving all civil, commercial, and family disputes and is regulated by the law “On Dispute Resolution through Mediation.” Arbitral awards are final and enforceable and can be appealed only in cases foreseen in the Code of Civil Procedure. Mediation is final and enforceable in the same way.

There are no consolidated institutions for dispute resolution through arbitration and arbiters are appointed ad hoc in compliance with the provisions of the Code of Civil Procedure. The law provides for the National Chamber of Mediators and Chambers of Mediators as institutions to perform mediation. Mediators are licensed and registered at the Mediators Register at the Ministry of Justice, which maintains a list of mediators from which the parties can choose.

The provisions for arbitration procedures and the recognition and enforcement of foreign awards are stipulated in the Albanian Code of Civil Procedure. Albania does not have a separate law on arbitration. Although the arbitration chapter of the Code of Civil procedure stipulates only the rules for domestic arbitration, the country is signatory to the 1958 New York Convention, and as such, recognizes the validity of written arbitration agreements and arbitral awards in a contracting state.

The Albanian Code of Civil Procedure requires the courts to reach a judgment within a reasonable amount of time, but does not provide for a specific deadline to decide on commercial disputes. Reaching a final judgment in a commercial litigation may take several years to exhaust all stages of the process.

The procedure for the recognition of a foreign arbitral award should take on average approximately one month; however, in certain cases this decision may be appealable. An appeal against a court decision that recognizes a foreign arbitral award does not automatically suspend the effects of the enforcement.

International Commercial Arbitration and Foreign Courts

Over the past ten years, there have been six investment disputes between the Albanian government and U.S. companies, four of which resulted in international arbitration. Despite a stated desire to attract and support foreign investors, U.S. investors in disputes with the Albanian government report a lack of productive dialogue with government officials, who frequently display a reluctance to settle the disputes before they are escalated to the level of international arbitration, or before the international community exerts pressure on the government to resolve the issue. U.S. investors in Albania are encouraged to include strong binding arbitration clauses in any agreements with Albanian counterparts.

Bankruptcy Regulations

Albania maintains adequate bankruptcy legislation, though actual bankruptcies are rare in practice. Corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy. The new law on bankruptcy, approved in May 2017, aims to address loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. The Bankruptcy Law governs the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.

Debtors, creditors, or tax authorities can initiate a bankruptcy procedure. Debtors and creditors can file for either liquidation or reorganization. Tax authorities can request a bankruptcy procedure when the subject reports losses three years consecutively. Bankruptcy proceedings may also be invoked when the debtor is unable to pay the obligations at maturity date or will be unable to pay in the near future.

According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings would suspend the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories should submit their claims to the bankruptcy administrator in order to be treated under the bankruptcy proceeding. The Bankruptcy Law provides specific treatment for different categories, including, secured creditors, unsecured creditors, and unsecured creditors of lower ranking (i.e. those whose claims would be paid after all the secured and unsecured creditors were satisfied). The claims of the secured creditors will be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors will be paid out of bankruptcy estate excluding the assets used for payment of the secured creditors, following the priority ranking described under the Albanian Civil Code.

Pursuant to the provisions of the Bankruptcy Law, the creditors have the right to establish a creditors committee and the creditors’ assembly. The creditors’ committee is appointed by the Commercial Section Courts, before the first meeting of the creditors’ assembly. The creditors’ committee represents the secured creditors, the unsecured creditors with larger claims, and creditors with small claims. The committee has the right: (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; c) to inspect the books and records; and, d) to order an examination of the revenues and cash balances.

In the event that the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.

According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right of vote and the dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately and creditors of the same class are treated equally.

The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement creditors.

The creditor has the right to object to decisions accepting or rejecting creditors’ claims, and should approve the sale of substantial assets of the debtor. The creditor does not have the right to request information from the insolvency representative and the law does not require approval by the creditor for the selection of appointment of insolvency representative.

According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.

The Albanian Criminal Code provides for several criminal offences in bankruptcy such as: (i) the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and, (iv) failure to comply with the obligations arising under bankruptcy proceeding.

According to the World Bank’s 2018 Doing Business Report, Albania ranked 41 out of 190 countries in the insolvency index. A reference analysis of ‘resolving insolvency’ can be found here: http://www.doingbusiness.org/data/exploreeconomies/albania#resolving-insolvency .

The number of bankruptcy requests in Albania is growing; as of November 2016, 132 companies had navigated through bankruptcy based on the register of the Taxation Department.

6. Financial Sector

Capital Markets and Portfolio Investment

In the absence of a stock market, the country’s banking sector remains the main channel for business financing. The sector is sound, profitable, and well capitalized, although the high rate of non-performing loans remains a concern. The Bank of Albania’s legal measures to address the problem have generated positive results. During 2017, non-performing loans continued to decrease, reaching 13.2 percent at the end of the year, an improvement over 2014, when the rate stood at 25 percent. Capital adequacy, at 16.6 percent, remains above Basel requirements and indicates sufficient assets, which totaled USD 13.25 billion in 2017, 2.7 percent higher than the previous year. The banking sector is fully private and includes 16 banks, most of which are subsidiaries of foreign banks. As of December 2017, the Turkish National Commercial Bank has further consolidated its position as the largest bank, with 27.8 percent of the market, followed by Austrian Raiffeisen Bank, which has a 17 percent market share. The share of Greek banks has fallen in recent years and stands at around 10 percent, due chiefly to the recent sale of the Albanian subsidiary of the National Bank of Greece to the American Bank of Investments (ABI), a domestic bank.

The government has adopted policies promoting the free flow of financial resources to promote foreign investment in Albania. The government and Central Bank refrain from restrictions on payments and transfers for international transactions. Despite Albania’s shallow FX market, banks enjoy sufficient liquidity to support sizeable positions. Furthermore, portfolio investments remain limited mostly to company shares, government bonds, and real estate.

The high rate of non-performing loans and the economic slowdown has forced commercial banks to tighten lending standards. After falling in 2015, the stock of loans increased by 2.5 percent year-on-year in 2016, but has remained flat since then. The credit market is competitive, but interest rates in domestic currency can be high, ranging from 5.8 percent to 8.3 percent. Most mortgage and commercial loans are denominated in euros, as rate differentials between local and foreign currency average 3.3 percent. Commercial banks have improved the quality and quantity of services they offer and the private sector has benefited from the expansion of these instruments.

The major state owned enterprises are Electric Distribution Operator (OSHEE), Transmission System Operator (OST), Electricity Generation Company (KESH), Oil and Gas Operator, Albpetrol, Albanian Post Office, and the Albanian Railway System. There is no published list of SOEs and no clear data on their assets, net income, or total number of employees.

Money and Banking System

Albania’s banking sector weathered the financial crisis better than many of its neighbors, due largely to a lack of exposure to international capital markets and lack of a domestic housing bubble. Market concentration remains high, as the five largest banks dominate the market with about 74 percent of total assets. The Bank of Albania has the flexibility to intervene in the currency market to protect exchange rates and official reserves, but not for more than 12 months. As part of its strategy to stimulate business activity, the Bank of Albania maintained a stable central bank interest rate at the historic low of 1.25 percent in 2017.

Foreigners are not required to prove residency status to establish a bank account aside from the normal know-your-client procedures. However, U.S. citizens are required to fill out a form allowing for the disclosure of their banking data to the IRS under the framework of the U.S. Foreign Account Tax Compliance Act.

Foreign Exchange and Remittances

Foreign Exchange Policies

The Central Bank of Albania (BOA) formulates, adopts, and implements foreign exchange policies and maintains a supervisory role in foreign exchange activities in accordance with the Law on the Bank of Albania No. 8269 and the Banking Law No. 9662. Foreign exchange is regulated by the 2009 Regulation on Foreign Exchange Activities no. 70 (FX Regulation).

The BOA maintains a free float exchange rate regime for its domestic currency, the lek (ALL). Foreign exchange is readily available at banks and exchange bureaus. However, when exchanging several million dollars or more, preliminary notification may be necessary, as the exchange market in Albania remains small. The domestic currency has generally been stable in recent years, experiencing just minor fluctuations. Nevertheless, it has appreciated by around 4.5 percent against the euro since the beginning of 2018. Albanian authorities do not engage in currency arbitrage, and do not view such as an efficient instrument to achieve competitive advantage. In early 2018, the Bank of Albania, in cooperation with the Ministry of Finance, launched a campaign that aims to reduce the domestic use of the euro and other foreign currencies for savings, loans, and high-value investments and expenditures. The campaign is part of a larger reform that aims to improve the effectiveness of domestic economic policies.

Remittance Policies

The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange. However, the Law on the Bank of Albania authorizes the Bank to temporarily restrict the purchase, sale, holding, or transfer of foreign exchange to preserve the foreign exchange rate or official reserves. In practice, the Bank of Albania rarely employs such measures. The last episode was in 2009, when the Bank temporarily tightened supervision rules over liquidity transfers by domestic correspondent banks to foreign banks due to insufficient liquidity in international financial markets. It also asked banks to halt distribution of dividends and use dividends to increase shareholders’ capital, instead. The Bank lifted these restrictions in 2010.

The Law on Foreign Investment guarantees the right to transfer and repatriate funds associated with an investment in Albania into a freely usable currency at a market-clearing rate. Only licensed entities (banks) may conduct foreign exchange transfers and waiting periods depend on office procedures adopted by the banks. Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of ALL 1,000,000 (USD 9,000) in hard currency and/or precious items. Failure to declare such assets is considered a criminal act, which is punishable by confiscation of the assets and imprisonment. Legal parallel markets are not in place in Albania, as the financial sector does not make use of convertible or negotiable instruments.

Although the Foreign Exchange Regulation provides that residents and non-residents may transfer capital within and into Albania without restriction, capital transfers out of Albania are subject to certain documentation requirements. Persons must submit a request indicating the reasons for the capital transfer, the amount of capital transferred outside the territory of Albania, and the address to which the capital will be transferred. Such persons must also submit a declaration on the source of the funds to be transferred. In January 2015, The FX Regulation was amended and the requirement to present the documentation showing the preliminary payment of taxes related to the transaction was removed.

Albania is not a major trading partner with the United States, but, in general, does not engage in currency manipulation tactics. Albania is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body. The INCRS 2017 report for the first time ever categorizes Albania as a country of jurisdiction of primary concern with regard to money laundering.

Sovereign Wealth Funds

Albania does not have a sovereign wealth fund.

Algeria

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Algerian economy is both challenging and potentially highly rewarding. While the Algerian government publicly welcomes FDI, a difficult business climate, an inconsistent regulatory environment, and contradictory government policies complicate foreign investment. There are business opportunities in nearly every sector, including energy, power, water, healthcare, telecommunications, transportation, recycling, agribusiness, and consumer goods. Lower oil prices since mid-2014 have spurred the Algerian government to initiate reforms to drive economic diversification, but progress has been slow. The government has sought to reduce the country’s trade deficit through an openly-espoused policy of import substitution and import bans. A rebound of oil prices in the latter half of 2017 has also helped the government with its balance sheets. Companies that set up local manufacturing operations can receive permission to import materials to produce finished products the government would not approve for import. Certain regulations explicitly favor local firms at the expense of foreign competitors, most prominently in the pharmaceutical sector, where an outright import ban remains in place on more than 360 medicines and medical devices. The arbitrary nature of the government’s frequent changes to business regulations has added to the uncertainty of the market.

The National Agency of Investment Development (ANDI) is the primary Algerian government agency tasked with recruiting and retaining foreign investment. ANDI runs branches in each of Algeria’s 48 governorates (“wilayas”) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors. In practice, U.S. companies report that the agency is under-staffed and ineffective; its “one-stop shops” only operate out of physical offices, and there are no efforts to maintain dialogue with investors after they have initiated an investment. The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry and Mines, the Minister of Industry himself, and in many cases the Prime Minister.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. However, the 51/49 rule requires majority Algerian ownership (at least 51 percent) in all projects involving foreign investments. This requirement was first adopted in 2006 for the hydrocarbons sector and was expanded across all sectors in the 2009 investments law. The rule was removed from the investments law in 2016, but it remains in force by virtue of its inclusion in the 2016 annual finance law. Algerian government officials have defended the law as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise. The government has argued the rule is not an impediment to attracting foreign investment and is needed to diversify investment in Algeria’s economy, foster private sector growth, create employment for nationals, transfer technology and know-how, and develop local training initiatives. Additionally, officials contend, and some foreign investors agree, that a range of tailored measures can mitigate the effect of the 51/49 rule and allows the minority foreign shareholder to exercise other means of control. Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share.

The 51/49 investment rule poses challenges for various types of investors. For example, the requirement hampers market access for foreign small and medium-sized enterprises (SMEs), as they often do not have the human resources or financial capital to navigate the complex requirements. Large companies can find creative ways to work within the law, sometimes with the cooperation of local authorities, because larger companies usually create more jobs and may have technology and equipment the government desires. SMEs usually do not receive this same consideration. There are also allegations that Algerian partners sometimes refuse to invest the required funds in the company’s business, require non-contract funds to get projects, and send unqualified workers to job sites. Manufacturers are also concerned about intellectual property rights (IPR), as foreign companies do not want to surrender control of their designs and patents. Several U.S. companies have reported they have internal policies that preclude them from investing overseas without maintaining a majority share, out of concerns for both IPR and financial control of the local venture, which correspondingly prevent them from establishing businesses in Algeria.

Since 2013, the Algerian government has not officially screened FDI. However, foreign investments are still subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Energy, and Industry and Mines. U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister. In 2017, the government instituted an Investments Review Council, which the Prime Minister chairs, for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny. Approval by the National Investments Council, also chaired by the Prime Minister, is necessary to obtain benefits and incentives for any project totaling more than 5 billion dinars (approximately $44 million).

Other Investment Policy Reviews

In the past three years, Algeria has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD). The last such review was conducted by UNCTAD in 2003.

Business Facilitation

Algeria’s online information portal dedicated to business creation and registration (www.jecreemonentreprise.dz ) is clear and well-designed and allows quick navigation to the appropriate registration process for a firm. The website is in French and Arabic. The website lists a maximum of nine steps involving seven agencies and taking approximately three weeks to register a firm in Algeria. Only an individual seeking to create a business for self-employment can follow a relatively streamlined process of six steps. The website offers information on the process for registering with the social insurance authorities but lacks information on creating an official corporate seal or receiving a required court stamp, additional requirements for establishing a business in Algeria.

In the World Bank’s 2018 Doing Business report, Algeria’s ranking for starting a business remained low, at 145 (www.doingbusiness.org/data/exploreeconomies/algeria/#starting-a-business ), with rankings ranging from 1 to 190. The report lists a total of 12 procedures that cumulatively take an average of 20 days to complete to register a new business. Algeria improved on the indicators for gaining construction permits and access to electricity, but remained near the bottom of the rankings for property registration (162) and obtaining credit (175).

Outward Investment

Algeria does not currently have any mechanisms that promote or incentivize outward investment, though there are also no restrictions on domestic investors from investing overseas, provided they can access foreign currency for such investments. The exchange of Algerian dinars outside of Algerian territory is illegal, as is carrying abroad more than 3,000 dinars in cash (approximately $26; see section 7 for more details on currency exchange restrictions).

3. Legal Regime

Transparency of the Regulatory System

All regulatory processes are managed by the national government. Accounting, legal, and regulatory procedures, as written, are considered consistent with international norms, although the decision-making process is opaque.

There is no specific mechanism for public comment on draft laws. Typically, government officials give testimony to the Parliament on draft legislation, which receive press coverage, and occasionally copies of bills are leaked to the media. However, full-text copies of draft laws are not made publicly accessible before enactment. All laws and some regulations are published in the Official Gazette (www.joradp.dz ) in Arabic and French, but the database has only limited online search features.

In some cases, authority over a matter may rest among multiple ministries, which imposes additional bureaucratic steps and the likelihood of either inaction or the issuance of conflicting regulations due to errors or unusual circumstances. The development of regulations occurs largely away from public view; internal discussions at or between ministries are not usually made public. In some instances, the only public interaction on regulations development is a press release from the official state press service at the conclusion of the process; in other cases, a press release is issued earlier. Regulatory enforcement mechanisms and agencies exist at some ministries, but they are usually understaffed and enforcement remains weak.

International Regulatory Considerations

Algeria is not a member of any regional economic bloc or of the WTO. The structure of Algerian regulations largely follows European—specifically French—standards.

Legal System and Judicial Independence

Algeria’s legal system is based on the French civil law tradition. The commercial law was established in 1975 and most recently updated in 2007 (www.joradp.dz/TRV/FCom.pdf ). The judiciary is nominally independent from the executive branch, but U.S. companies have reported allegations of political pressure exerted on the courts by the executive. Regulation enforcement actions are adjudicated in the national courts system and are appealable. Algeria has a system of administrative tribunals for adjudicating disputes with the government, distinct from the courts that handle civil disputes and criminal cases. Decisions made under treaties or conventions to which Algeria is a signatory are binding and enforceable under Algerian law.

Laws and Regulations on Foreign Direct Investment

The 51/49 rule in the 2016 annual finance law requires a majority Algerian partner for any foreign investment (see section 2), but otherwise there are few laws restricting foreign investment. In practice, the many regulatory and bureaucratic requirements for business operations provide officials many avenues to advance informally political or protectionist policies. The investments law enacted in 2016 charged ANDI with creating four new branches to assist with business establishment and the management of investment incentives. ANDI’s website (www.andi.dz/index.php/en/investir-en-algerie ) lists the relevant laws, rules, procedures, and reporting requirements for investors. However, much of the information lacks detail—particularly for the new incentives elaborated in the 2016 investments law—and refers prospective investors to ANDI’s physical “one-stop shops” located throughout the country.

Competition and Anti-Trust Laws

The National Competition Council (www.conseil-concurrence.dz/ ) is responsible for reviewing both domestic and foreign competition related concerns. Established in late 2013, it is housed under the Ministry of Commerce.

Expropriation and Compensation

The Algerian state can expropriate property under limited circumstances proscribed by law, with the state mandated to pay “just and equitable” compensation to the defendants for the property. Expropriation of property is extremely rare, with no cases within the last 10 years.

Dispute Settlement

ICSID Convention and New York Convention

Algeria is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention) and the Convention on the International Center for the Settlement of Investment Disputes (ICSID Convention). The Algerian code of civil procedure allows both private and public-sector companies full recourse to international arbitration. Algeria permits the inclusion of international arbitration clauses in contracts.

Investor-State Dispute Settlement

Investment disputes sometimes occur, especially on major projects. These disputes can be settled informally through negotiations between the parties or via the domestic court system. For disputes with foreign investors, most cases are decided at international arbitration. The most common disputes in the last several years have involved state-owned oil and gas company Sonatrach and its foreign partners concerning the retroactive application since 2006 of a windfall profits tax on hydrocarbons production. Sonatrach won a case in October 2016 against Spanish oil company Repsol and two Korean firms. Sonatrach recently settled a dispute with French oil company Total.

The most recent investment dispute involving a U.S. company dates to 2012. The company, which had encountered bureaucratic blocks on the expatriation of dividends from a 2005 investment, did not resort to arbitration. The dispute was resolved in 2017, with the government permitting the company to expatriate the dividends.

International Commercial Arbitration and Foreign Courts

The Algerian Chamber of Commerce and Industry (CACI), the nationwide, state-supported chamber of commerce, has the authority to arbitrate investment disputes as an agent of the court. The bureaucratic nature of Algeria’s economic and legal system, as well as its opaque decision-making process, means that disputes can drag on for years before a resolution is reached. Businesses have reported cases in the court system are subject to political influence and generally tend to favor the government’s position.

Local courts recognize and have the authority to enforce foreign arbitral awards. Disputes between state-owned enterprises (SOEs) and foreign investors are rarely decided in domestic courts, since nearly all contracts between foreign and Algerian partners include clauses for international arbitration. The Ministry of Justice is in charge of enforcing arbitral awards against SOEs.

Bankruptcy Regulations

Algeria’s bankruptcy law generally follows international norms. While bankruptcy per se is not criminalized, management decisions (such as company spending, investment decisions, and even procedural mistakes) are subject to criminal penalties from fines to jail time, so decisions that lead to bankruptcy could be punishable under Algerian criminal law. However, bankruptcy cases rarely proceed to a full dissolution of assets. Public companies on the verge of bankruptcy are generally propped up by the Algerian government via cash infusions from the public banking system.

According to the World Bank’s Doing Business report, both debtors and creditors may file for both liquidation and reorganization. The report ranked Algeria 71st on its resolving insolvency indicator for 2018 (http://www.doingbusiness.org/data/exploreeconomies/algeria/#resolving-insolvency ).

6. Financial Sector

Capital Markets and Portfolio Investment

The Algiers Stock Exchange has five stocks listed—each at no more than 35 percent equity—with a total market capitalization representing less than 0.1 percent of GDP. Daily trading volume on the exchange averages less than $2,000. Despite its small size, the market functions well and is adequately regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.

Officials aim to reach a capitalization of $7.8 billion in the next five years and enlist up to 50 new companies. However, attempts to list additional companies have been stymied both by a lack of public awareness and appetite for portfolio investment and by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by nationalist politics. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited—the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.

Money and Banking System

The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held, and is regulated by an independent central bank. Estimated total assets in the sector in 2015 were roughly 9.2 trillion dinars ($83.6 billion) against 7.3 trillion dinars ($66 billion) in liabilities. The central bank had mandated a 12 percent minimum ratio for assets to liabilities until mid-2016, when in response to a drop in liquidity the bank lowered the threshold to eight percent. The decrease in liquidity was a result of all public banks buying government bonds in the first public bond issuance in more than 10 years; buying at least five percent of the offered bonds is required for banks to participate as primary dealers in the government securities market. The bond issuance essentially returned funds to the state that it had parked in funds at local banks during years of excess hydrocarbons profits.

Despite falling liquidity, the banks are still considered financially healthy, with only about five percent of assets considered non-performing, which is standard for emerging markets. The quality of service in public banks is generally considered low; generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are still materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bank cards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. In addition, approximately 4.6 trillion dinars ($40 billion), or one-third, of the money supply is estimated to circulate in the informal economy.

Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices. Of the handful of foreign banks with a presence in Algeria, all are engaged exclusively in commercial banking; none offers retail banking services.

In 2015, the FATF removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.

Foreign Exchange and Remittances

Foreign Exchange

There are few statutory restrictions on foreign investors converting, transferring, or repatriating funds, according to banking executives. Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies. The difficultly with conversions and transfers results more from the procedures of the transfers rather than the statutory limitations: the process is heavily bureaucratic and requires almost 30 different steps from start to finish. The slightest misstep at any stage can slow down or completely halt the process. In theory, it should take roughly one month to complete, but in reality, it often takes three to six months. Also, the Algerian government has been known to delay the process as leverage in commercial and financial disputes with foreign companies.

Expatriated funds can be converted to any world currency. The IMF classifies the exchange rate regime as an “other managed arrangement,” with the central bank pegging the value of the Algerian Dinar (DZD) to a “basket” composed of 64 percent of the value of the U.S. dollar and 36 percent of the value of the euro. The currency’s value is not controlled by any market mechanism and is set solely by the central bank. As the Central Bank has full control of the official exchange rate of the Dinar, any change in its value could be considered currency manipulation. When dollar-denominated hydrocarbons profits fell starting in mid-2014, the central bank allowed a slow depreciation of the dinar against the dollar over 24 months, culminating in about a 30 percent fall in its value before stabilizing around 110 dinars to $1 in late 2016. However, the dinar lost only about 10 percent of its value against the euro in the same time frame.

Remittance Policies

There have been no recent changes to remittance policies. There are no specific time limitations, although the bureaucracy involved in remittances can often slow the process to as long as six months. There is no legal parallel market by which investors can remit; however, there is a substantial black market currency exchange system in Algeria. Exchange rates for the dollar and euro are about 50 percent stronger on the black market than the official rates. With the more favorable informal rates, local sources report that most remittances occur via foreign currency hand-carried into the country. Under central bank regulations revised in September 2016, travelers to Algeria are permitted to enter the country with up to 1,000 euros or equivalent without declaring the funds to customs. However, any non-resident can only exchange dinars back to a foreign currency with proof of initial conversion from the foreign currency. The same regulations prohibit the transfer of more than 3,000 dinars ($26) outside Algeria.

Sovereign Wealth Funds

Algeria does not have a sovereign wealth fund.

Andorra

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Andorra has established an open framework for foreign investments, allowing non-residents to create companies in the country, open businesses and invest in all kinds of assets.

The Foreign Investment Law came into force in July 2012, completely opening the economy to foreign investors. Since then, foreigners, whether resident or not, may own up to 100 percent of any Andorra-based company. The law also liberalizes restrictions on foreign professionals seeking to work in Andorra. Previously, a foreigner could only begin to practice in Andorra after twenty years of residency. Under the new regulations, any Andorran legal resident from a country that has a reciprocal standard can work in Andorra.

The Government of Andorra created the ACTUA program (www.actua.ad ) as Andorra’s economic development and promotion office in order to provide counseling services, to both Andorran companies looking to grow and foreign investors wanting to start new businesses in Andorra.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Andorran legal framework is also being adapted to international standards. The most relevant laws passed by Parliament to accompany the economic openness include the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012).

The OECD removed Andorra from its “tax haven list” in 2009 after the country signed the Paris Declaration, formally committing to fiscal information outlined by the agreement when requests . From 2011 to 2017, the Parliament also approved direct corporate, non-resident, capital gains, savings, and personal income taxes. These regulations aim at establishing a transparent, modern, and internationally comparable regulatory framework. At 10 percent, well below the European average, Andorra’s corporate tax is more competitive than rates in neighboring Spain or France.

Other Investment Policy Reviews

In the past three years neither the Government nor any international organization has conducted an investment policy review, be it the Organization for Economic Cooperation and Development (OECD); World Trade Organization (WTO); or, the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

Andorra created the Office of Andorran Development and Investment (ADI) to provide counseling services, through its “Invest in Andorra” (ACTUA) program, to Andorran companies and potential foreign investors. The ACTUA Program complements other reforms partnering private and public sectors to facilitate investment and diversification.

The ACTUA Program is based on three key pillars:

  • Economic diversification through the development of clusters oriented towards the fields of innovation; health and wellness; education and sport.
  • Attracting direct foreign investors and supporting national companies throughout their internationalization process.
  • Supporting entrepreneurs: promoting collaboration between the public and private sectors and giving support to the development of new business initiatives.

Andorran regulations allow for two types of companies: Private Limited Liability Company (Societat de Responsabilitat Limitada – SL), which have a minimum capital requirement of 3,000 euros; and, Public Liability Company (Societat Anonima – SA) which is normally required for multiple shareholders and has a minimum capital requirement of 60,000 euros.

The business establishment procedures and for share acquisitions or transfers are quite similar to those of other countries, requiring the filling of a simple application form, with the additional unique condition of the presentation of any prior investment authorization received in the country. This same procedure is applicable for incorporation, establishment, extension, branching, or other form of business expansion. Once the company name is registered, the foreign investment is established, and the investor is required to deposit the share capital with an Andorran banking entity and proceed to public deed of incorporation before a Notary. The company registration before the Company Registry is automatic.

Outward Investment

The Government’s ACTUA program and the Andorran Chamber of Commerce (www.ccis.ad ) help companies search for business opportunities abroad.

3. Legal Regime

Transparency of the Regulatory System

The Government set out transparent policies and laws, which have significantly liberalized all economic sectors in Andorra. New, foreign-owned businesses have to be approved by the government, and the process can take up to a month. The Government is committed to a transparent process. Andorra has begun to relax labor and immigration standards; previously, foreign professionals had to establish 20 years of residency before being eligible to own 100 percent of their business in Andorra. This restriction has been lifted for nationals coming from countries that have reciprocal standards for Andorran citizens.

Following approval of the new Accounting Law in 2007, individuals carrying out business or professional activities, trading companies, and legal persons or entities with a profit purpose must file financial statements with the administration.

International Regulatory Considerations

Although not a member of the European Union (EU), Andorra, as a member of the European Customs Union, is subject to all EU free trade regulations and arrangements with regard to industrial products. Concerning agriculture, the EU allows duty free importation of products originating in Andorra.

Andorra is negotiating a new association agreement with the European Union that will allow Andorrans to establish themselves in Europe and Andorran companies will be able to trade in the EU market.

Although the Government took some steps to become a member of the World Trade Organization (WTO) in 2003, the country is not yet a full member. Andorra currently holds observer status in the WTO.

Legal System and Judicial Independence

Andorra has a mixed legal system of civil and customary law with the influence of canon law. The judiciary is independent from the executive branch. The Supreme Court consists of a court president and eight judges, organized into civil, criminal, and administrative chambers; four magistrates make up the Constitutional Court. The Tribunal of Judges and the Tribunal of the Courts are lower courts. Regulations and enforcement actions can be appealed in the national court system.

Laws and Regulations on Foreign Direct Investment

The Law on Foreign Investment (10/2012) entered into force in 2012, opening the country’s economy by removing the sectorial restrictions stipulated in the prior legislation. In this way, Andorra has positioned itself on equal terms with neighboring economies, enabling it to become more competitive for new sectors and enterprises.

ACTUA is responsible for economic promotion and provides relevant laws, rules, procedures, and reporting requirements to investors.

Competition and Anti-Trust Laws

The Law on Effective Competence and Consumer Protection (13/2013) protects investors against unfair practices. The Ministry of Economy is responsible for administering anti-trust laws and reviews transactions for competition-related concerns (whether domestic or international in nature).

Expropriation and Compensation

The Law of Expropriation (1993) allows the Government to expropriate private property for public purposes in accordance with international norms, including appropriate compensation. We know of no incidents of expropriation involving the U.S. entities in Andorra.

Dispute Settlement

Andorran legislation establishes mechanisms to resolve disputes if they arise and its judicial system is transparent. The Constitution guarantees an independent judiciary branch, overseen by a High Council of Justice. The prosecution system allows for successive appeals to higher courts. The European Court of Justice is the ultimate arbiter of unsettled appeals.

Andorra became a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards in September 2015, requiring Andorran courts to enforce financial awards. Andorra is not a member of the International Center for the Settlement of Investment Disputes (ICSID).

Parties to a dispute can also resolve disputes contractually through international arbitration. Contractual disputes between U.S. individuals or companies and Andorran entities are rare, but when they arise are handled appropriately. There have been no reported cases of U.S. investment disputes.

Bankruptcy Regulations

Andorra’s Bankruptcy decree dates back to 1969. Other laws from 2008 and 2014 complement the initial text and further protect workers’ rights to fair salaries as well set up mechanisms to monitor the implementation of judicial resolutions. Additionally, Law 8/2015 outlines urgent measures allowing Government intervention of the banking sector in a crisis.

6. Financial Sector

Capital Markets and Portfolio Investment

The Andorran financial sector is efficient and is currently the main pillar of the Andorran economy, representing 21 percent of the country’s GDP and over 5 percent of the workforce. Created in 1989, and redefined with more responsibilities in 2003, the Andorran National Institute of Finance (INAF; www.inaf.ad ) regulates all aspects of the integrated financial system and safeguards its stability. The INAF is a public entity with its own legal status, functionally independent from the Government. INAF has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and studies.

The Andorran Financial Intelligence Unit (UIF) was created in 2000 as an independent organ dealing with the tasks of promoting and coordinating the prevention of money laundering and the financing of terrorism (www.uif.ad ).

The State Agency for the Resolution of Banking Institutions (AREB; www.areb.ad ) is a public-legal institution created by Law 8/2015 to take urgent measures to introduce mechanisms for the recovery and resolution of banking institutions.

Money and Banking System

Andorra adopted the use of the Euro in 2002 and in 2011 signed a new Monetary Agreement with the European Union (EU) making the Euro the official currency. Since July 1, 2013, Andorra has had the right to coin Euros. No exchange or capital controls exist.

The Andorra banking system is sound and considered the most important part of the financial sector. The Andorran banks offer a variety of services at market rates. The country also has a sizeable and growing market for portfolio investments.

The U.S. Internal Revenue Service certified all the Andorran banks as qualified intermediaries.

Founded in 1960, the Association of Andorran Banks (ABA; www.aba.ad ) represents all Andorran banks. Among its tasks are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving sector technical standards, co-operation with public administrations, and promoting professional training, particularly dealing with money laundering prevention. At present, all five Andorran banking groups are ABA members, totaling an estimated 46 billion Euros in combined assets for 2017.

Foreign Exchange and Remittances

Andorra adopted the Euro in 2002 and in 2011 signed a new Monetary Agreement with the EU making the Euro the official currency. Since 2013, Andorra has the right to coin Euros. There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records.

Sovereign Wealth Funds

Andorra has no Sovereign Wealth Fund (SWF).

Angola

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Angola’s business environment remains one of the most difficult in the world. Investors must factor in pervasive corruption, an underdeveloped financial system, loss of U.S. corresponding banking relationships, abundant but unskilled labor, and extremely high operating costs. Surface transportation inside the country is slow and expensive, while bureaucracy and port inefficiencies complicate trade and raise costs.

The GRA actively seeks FDI, although it has traditionally set barriers to protect domestic businesses. The new 2018 private investment law, approved by Presidential decree 10/18 of 26 June 2018, removes obstacles that render the country’s business climate challenging and a deterrent to investors. The new investment law recognizes that prospective investors need a regulatory environment that guarantees contract enforcement and the repatriation of earnings. The biggest change within the new law is on how the government treats foreign investors versus domestic investors. The other more significant changes include:

  • The scope: The new law applies to all national and foreign private investments, irrespective of the investment amounts.
  • Eligibility for tax and customs benefits/incentives and other facilities: The new law does not subject investors to minimum investment thresholds. However, future regulations and/or amendments to the law may set limitations.
  • Local content: Local content restrictions were eliminated (except for those originating from industry specific legal statutes, such as on oil & gas, mining, banking and financial services, aviation, and shipping).
  • Transfer of profits and dividends: foreign investors remain entitled to repatriate dividends or profits distributed, the proceeds from liquidation of their investments (capital gains included), the amounts resultant from indemnities, royalties or other indirect investments associated with technology transfers; the right to repatriate depends on the full implementation of the investment and full compliance with tax obligations.
  • Surtax on Capital Investment: tax levied on the portion of dividends exceeding the investor’s capital contributions in local SPVs (formerly ranging from 15 percent to 50 percent) was abolished.
  • Priority Sectors: agriculture, food & agroindustry; health care units and related services; reforestation and industrial processing of forest resources, forestry; textile, clothing & footwear (TCF); lodging, tourism & leisure; civil construction & public works, telecoms & IT, airport and railway infrastructures; power production and supply; education, professional and educational training, scientific research and ID; water supply and waste collection and management.
  • Indirect Investment: capital and finance investments in shares and debt securities was added to shareholders loans, supplementary capital contributions, proprietary technology, technical processes, industrial secrets and models, franchising, registered trademarks and other forms of access to their use; indirect investment remains capped at 50 percent of the overall investment amount.
  • Shareholders loans: capped at 30 percent of the overall investment, reimbursable only after 3 years.
  • Financing: foreign investors and companies majority owned by foreign investors are only eligible to take domestic financing upon full implementation of their investment projects.
  • Financial Benefits: new concept which includes governmental financing programs (micro funding, privileged interest rates, public collaterals and risk capital) and administrative support (simplified and privileged access to business and operational licenses or assets of private domain of public entities).
  • Reinvestment: special benefits awarded to reinvestment projects, in terms still to be regulated.
  • Procedural regimes: investors are free to opt by one of the following regimes:
    • Prior-declaration Regime: applicable to investments not falling within the scope of priority sectors; investors may incorporate their local entities prior to the filing of investment proposals.
    • Special Regime: applicable to investments in priority sectors; SPVs incorporated under this regime are exempted from payment of taxes and fees (customs duties included) for a period of up to 5 years.
  • Zones of Investment: Defines four territorial investment-developing zones for tax and customs incentives purposes.
  • Tax and Customs Incentives: tax incentives vary depending on a number of criteria, including investment procedural regime followed, nature of the tax (conveyance tax, industrial tax, investment income tax or stamp duty) and investment zone; tax savings can amount to up to 85 percent (for stamp duty) and be granted up to 8 years.
  • Fines: 1 percent of the investment amount (other ancillary penalties may also apply).
  • Effective date and Implementation: the 2018 PIL entered into force on the date of its gazette, but its effective implementation depends on the enactment of future regulations, which are due soon.

Angola’s Regulatory Competition Agency submitted its first anti-trust law that was also approved on May 17. The new competition law aims to ensure and safeguard sound competition practices in the award and enforcement of contracts. In addition to changes to the investment legal framework, the government has created the Agency for Private Investment and Export Promotion (AIPEX), a single state-run agency with the goal of facilitating investment and export processes. The government abolished the visitor visa requirement for several countries in the region, and as of March 30, 2018, it began issuing tourism visas on arrival at the airport to citizens from 61 countries, including the United States, China, and the European Union. For other countries, a series of measures are in development to expedite the issuance of tourist and business visas, a historically difficult process that has been a major complaint from international companies, expatriate workers, and investors.

Under the new 2018 investment law, the compulsory 35 percent minimum local participation requirement set by the 2015 investment law, ceases to be a requirement and investors are free to decide their investment capital threshold, share capital structure and request incentives.

Investment in the petroleum, diamond, and financial sectors are governed by sector-specific legislation. Details on the petroleum investment guidelines are outlined in the Country Commercial Guide Best Prospect Summary of the Oil and Gas industry.

Angola’s foreign exchange laws require all companies operating in Angola to make payments through local (Angola-domiciled) banks using the Angolan currency (kwanza). The foreign exchange law aims to strengthen demand for the kwanza, and build the capacity of Angola’s underdeveloped financial sector. The law was implemented in two phases. First in 2012, oil companies were required to pay taxes owed to the Angolan Ministry of Finance through a local bank. Then in July 2013, the regulation expanded to all companies operating in Angola, requiring them to use local banks (and local currency) for all payments, including payments to suppliers and contractors domiciled abroad.

Foreign exchange availability in the market during 2017 averaged USD 1 billion per month, up from USD 890.5 million per month in 2016. Foreign exchange availability in 2017 met only 63 percent of demand. Foreign exchange availability has been on the upswing in early 2018, as the National Bank of Angola (BNA) sold approximately USD 1.8 billion from January to March, 2018 to commercial banks. Despite the increase compared to 2017 in available forex, Angolan companies report waits of 3-8 months to access foreign exchange for imports. The government prioritized the following areas for forex: 1) employment retention (raw materials and inputs, equipment, technician salaries, and oil sector operations); 2) inflationary control (food, consumer necessities, fuel); 3) health and education; and 4) priority government expenses for necessary operations.

When preparing and entering into contracts with Angolan entities, foreign investors generally ensure that contracts are not governed solely by Angolan laws. This measure is to avoid the accompanying government mandate that contracts be denominated and paid in kwanza, the local currency which has little commercial or practical use outside of Angola. Companies often find it advisable to seek appropriate legal advice prior to negotiating binding law, arbitration, and payment clauses, and to seek to ensure that contract payments are denominated in and made in U.S. dollars. Consequent to the drop in global oil prices, the mainstay of the Angolan economy, foreign companies with kwanza based contracts have found it extremely difficult to repatriate profits due to the Central Bank’s severe restrictions on forex.

The 2018 investment law seeks to reduce bureaucracies and eliminate arcane legal complexities of the Angolan business environment. The new law also seeks to give equal treatment to all companies tendering for government contracts for goods, services, and public works. Regardless of origin, all companies can benefit from the Angolan Government’s loan guarantees, generous terms, and subsidized interest rates of the Ministry of Economy’s Angola Invest USD 1.6 billion Angola Invest Program. However, in 2018, the Angola Invest Program suffered a 27 percent drop in allocation in the State Budget to support micro, small, and medium-sized enterprises.

FDI in Angola has steadily increased since the end of the civil war in 2002, but peaked in 2014 just before the oil led economic crisis. Angola’s Central Bank, the Banco Nacional de Angola (BNA) reported USD 16.5 billion of FDI in Angola in 2014, which declined to USD 14.4 billion in 2016, and further in 2017 to an estimated USD 8.5 billion. The latest figures indicate that U.S. Direct Investment in Angola rose to USD 804 million in 2016 from USD 239 million in 2015, according to the U.S. Department of Commerce’s Bureau of Economic Analysis (www.bea.gov/international/factsheet/factsheet.cfm ).

President Lourenco began a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against nepotism. He has dismissed a number of prominent Angolan figures from government ministries and state owned institutions, called for the re-structuring of state owned enterprises, and has dismantled a series of monopolies in the industrial and media space controlled by members of the former president’s family. He dismissed the former president’s daughter, Isabel dos Santos, as head of Sonangol, the state-owned oil company, and removed dos Santos’ son from his position as Chair of the USD 5 billion valued Sovereign Wealth Fund. Lourenco put new executive boards in place that are charged with developing plans to improve operations and accountability in State Owned Enterprises. These reforms have attracted considerable international attention.

Limits on Foreign Control and Right to Private Ownership and Establishment

With the new 2018 investment law, Angola’s limits on foreign equity participation  will substantially reduce, bringing it more in line with those of its sub-Saharan African neighbors. Foreign ownership will remain limited to 49 percent in the oil and gas sectors, 50 percent in insurance, and 10 percent in the banking sectors. The Angolan government eliminated the 35 percent local content requirement in foreign investments, and it offers incentives to companies investing in the domestic economy, while maintaining minimal FDI screening processes. There are several objectives that the GRA seeks to accomplish through its FDI screening process: 1) create jobs for Angolans or transfer expertise to Angolan companies as part of the “Angolanization” plan; 2) protect sensitive industries such as defense and finance; 3) prevent capital flight or any other behavior that could threaten the stability of the Angolan economy; and, 4) diversify the economy.

Other Investment Policy Reviews

Angola has been a member of the World Trade Organization (WTO) since 1996. There have been no investment policy reviews for Angola from either the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) in the last four years. The World Trade Organization (WTO) performed a policy review of Angola in September 2015. Excerpts of the Trade Policy Review concluding remarks by the WTO Chairperson were as follows:

“Members noted that Angola had implemented a number of measures aimed at import substitution. Its applied tariff rates have been significantly increased and range from 2 percent to 50 percent, with a simple average of 10.9 percent (up from 7.4 percent in 2005). Members urged Angola to rectify the instances where applied tariff rates and other duties and charges exceed the corresponding bound levels. In lieu of import substitution, Members suggested that Angola reduce production costs through lower import tariffs on inputs and further trade facilitation measures with a view to enhancing competitiveness and promoting local production.”

Members welcomed Angola’s new mining code and sought information about opportunities for foreign operators. They sought clarifications about Angola’s agricultural policy, which deals with food security and aims for sustainability of its fisheries sector. Some participants inquired about Angola’s plans to broaden its General Agreements on Trade in Services (GATS) commitments beyond its three existing sectors. Members were also interested in the Government’s priorities regarding, inter alia, competition policy, Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) regimes, and state-trading and state-owned enterprises. Noting that Angola’s intellectual property regime had not been substantially updated since 1992, Members urged the country to implement the TRIPS Agreement and to broaden its participation in international conventions on intellectual property. The Government of Angola plans to introduce a new tariff schedule in 2018.

Business Facilitation

Angola made dealing with construction permits easier and less time-consuming by improving its system of permit applications, according to the World Bank. The World Bank Doing Business 2018 report ranked Angola 175 out of 182 countries and also recorded an improvement in Luanda’s electrical grid and overall access to electricity, and the government’s facilitation of border trade by improving infrastructure at the Port of Luanda. Launching a business typically requires 36 days, compared with a regional average of 27 days. In 2012, the government opened approximately twenty “Balcoes Unicos do Empreendedor” (Single “One stop” Shop for Entrepreneurs). In addition to the Balcoes Unicos process, new business owners must also complete processes at the Ministry of Commerce, the tax office, and a provincial court in the location where the business has its headquarters.

On March 13, 2018, the government replaced the Angolan Investment and Export Promotion Agency (APIEX) with a new agency, the Private Investment and Export Promotion Agency (AIPEX). The new agency will now serve as a one-stop shop to promote investments and exports and the international competitiveness of Angolan companies.

The government also amended the 2015 private investment law. The current 2018 investment law eliminates the obligation to establish a partnership with an Angolan entity with at least a 35 percent stake in the capital structure in order to implement projects in the electricity and water, tourism, transport and logistics, construction, media, telecommunications, and IT sectors. As for the mineral and petroleum sectors, a legal document approving the Legal and Tax Regime for the Development of Marginal Discoveries of Petroleum Resources is also in the approval process.

Presidential Decree 56/18, of February 20, 2018 exempts several regional countries from entry visas, and as of March 30, 2018, the government is granting visas upon arrival to 61 countries including the United States and European Union.

Under the new 2018 investment law, the government reserves approval of investments of up to USD 10 million by the Agency for Private investment and Exports (AIPEX). The process can be time consuming and difficult to navigate, thus it is strongly recommended to retain legal counsel to assist in the investment application process.

The following documents are required to launch an investment:

  • Letter of Investment Proposal addressed to the Minister of Commerce (MINCO);
  • A Power of Attorney or Delegation of Authority to represent the investment proposal (in case you are not principal);
  • Presentation Template Model of the Project, Dully Completed;
  • Copy of the legal documentation of the company (company status), commercial registry duly authenticated by the consular services of Angola at the country of company domicile in case of legal entities;
  • Copy of the legal documentation of the natural persons (identity card/passport) and criminal record dully authenticated by the consular services of the republic of Angola at the country of residency in case of natural persons;
  • Technical economic and financial feasibility study of the proposed investment project;
  • Environmental Impact Study (When is it applicable in Angola); and,
  • Presentation of Documents in Duplicate.

Angolan law provides equal access for women entrepreneurs and underrepresented minorities in the economy. However, in practice, the investment facilitation mechanisms do not provide added advantages to these groups. Programs to benefit female entrepreneurs and underrepresented groups such as startup projects, business capacity building and development, and financial assistance including micro credit, are mainly implemented by non-governmental organizations and international financial institutions such as the African Development Bank, the World Bank, and private sector companies.

The new state-run private investment agency AIPEX does not yet have a website.

Contact Information: Departamento de Promocao e Captacao do Investimento; Agencia de Investimento Privado e Promocao de Investimentos e Exportacoes de Angola (AIPEX). Rua Kwamme Nkrumah No.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81

Outward Investment

The Angolan Government does not promote or incentivize outward investment nor does it restrict Angolans from investing abroad. Investors are free to invest in any foreign jurisdiction.

According to a credible local newspaper, Expansao, based on data from the Angolan central bank, Banco Nacional de Angola (BNA), outward investments by Angolans exceeded USD 1 billion in 2015, for an aggregate total investment of more than USD 29 billion at the end of 2015. (Expansao Journal, March 3, 2017 edition).

3. Legal Regime

Transparency of the Regulatory System

Angola’s regulatory system is complex, vague, and inconsistently enforced. In many sectors, no effective regulatory system exists due to lack of institutional capacity. The banking system is slowly adhering to International Financial Reporting Standards (IFRS). Public sector companies (SOEs) are still far from practicing IFRS. The public does not participate in draft bills or regulations formulation, nor does a public online location exist where the public can access this information for comment or hold executives accountable for irresponsible actions. The Angolan Communications Institute (INACOM) sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. Revised energy-sector licensing regulations have permitted some purchase power agreements (PPA) participation.

Overall, Angola’s national regulatory system does not correlate to other international regulatory systems. However, Angola is a member of the World Bank, African Development Bank (AfDB), the Organization of Petroleum Exporting Countries (OPEC) (January 2007), the United Nations (UN) and most of its specialized agencies – International Conference on Reconstruction and Development (IBRD), the United Nations Development Program (UNCTAD), the International Monetary (IMF), the World Health Organization (WHO), World Trade Organization (WTO), and has a partnership agreement with the European Union (EU). At the regional level, the GRA is part of the Common Market for Eastern and Southern Africa (COMESA), the Community of Portuguese Speaking Countries (CPLP), and the Southern African Development Community (SADC), among other organizations. Angola has yet to join the SADC Free Trade Zone of Africa as a full member. On March 21, 2018, together with 44 African countries, Angola joined the African Continental Free Trade Area (AfCFTA), an agreement aimed at paving the way for a liberalized market for goods and services across Africa. Angola is also a member of the Port Management Association of Eastern and Southern Africa (PMAESA), which seeks to maintain relations with other port authorities or associations, regional and international organizations and governments of the region to hold discussions on matters of common interest.

Angola became an original WTO Member on 23 November 1996; however, it is not party to the Plurilateral Agreements on Government Procurement, the Trade in Civil Aircraft Agreement and has not yet notified the WTO of its state-trading enterprises within the meaning of Article XVII of the GATT. A government procurement management framework introduced in late 2010 stipulates a preference for goods produced in Angola and/or services provided by Angolan or Angola-based suppliers. Technical Barriers to Trade (TBT) regimes are not coordinated. There have been no investment policy reviews for Angola from either the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) in the last four years. Angola conducts several bilateral negotiations with Portuguese Speaking countries (PALOPS), Cuba and Russia and extends trade preferences to China due to credit facilitation terms, while attempting to encourage and protect local content.

Regulation reviews are based on scientific or data driven assessments or baseline surveys. Evaluation is based on data; however, it is not made available for public comment.

The National Assembly is Angola’s main legislative body with the power to approve laws on all matters (except those reserved by the Constitution to the Government) by simple majority (except if otherwise provided in the Constitution). Each legislature comprises four legislative sessions of twelve months starting on October 15 annually. National Assembly members, parliamentary groups, and the government hold the power to put forward all draft-legislation. However, no single entity can present draft laws that involve an increase in the expenditure or decrease in the State revenue established in the annual budget.

The President promulgates laws approved by the Assembly and signs Government Decrees for enforcement. The State reserves the right to have the final say in all regulatory matters and relies on sectorial regulatory bodies for supervision of institutional regulatory matters concerning investment. The Economic Commission of the Council of Ministers oversees investment regulations that affect the country’s economy including the ministries in charge. Other major regulatory bodies responsible for getting deals through include:

  • The Ministry of Petroleum: The government regulatory and oversight body responsible for regulating oil exploration and production activities. The national concessionaire is Sonangol EP, which is the holder of the concession rights and has the authority to conduct, execute, and ensure oil operations in Angola.
  • IRSEA: The regulatory authority for renewable energies and enforcing powers of the electricity regulatory authority.
  • The Angolan Communications Institute (INACOM): The institute sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. Revised energy-sector licensing regulations have improved legal protection for investors to attract more private investment in electrical infrastructure, such as dams and hydro distribution stations.

Angola acceded to the New York Arbitration Convention on August 24, 2016 paving the way for the first time for effective recognition and enforcement in Angola of awards rendered outside of Angola and subject to reciprocity. Angola participates in the New Partnership for Africa’s Development (NEPAD), which includes a Peer Review Mechanism on good governance and transparency. Enforcement and protection of investors is under development in terms of regulatory, supervisory, and sanctioning powers. Investor protector mechanisms are weak or almost non-existent.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations, and the government does not allow the public to engage in the formulation of legislation or to comment on draft bills. Procurement laws and regulations are unclear, little publicized, and not consistently enforced. Oversight mechanisms are weak; no audits are required or performed to ensure internal controls are in place or administrative procedures are followed. Inefficient bureaucracy frequently leads to payment delays for goods delivered, resulting in an increase in the price the government must pay.

No regulatory reform enforcement mechanisms have been implemented since the last ICS report, in particular those relevant to foreign investors.

The Diario da Republica (the Federal Register equivalent), is a legal document where key regulatory actions are officially published.

International Regulatory Considerations

Angola’s overall national regulatory system does not correlate to other international regulatory systems and is overseen by its constitution. Angola is not a full member of the International Standards Organization (ISO), but has been a corresponding member since 2002. The Angolan Institute for Standardization and Quality (IANORQ) within the Ministry of Industry coordinates the country’s establishment and implementation of standards. Angola is an affiliate country of the International Electro-technical Commission that publishes consensus-based International Standards and manages conformity assessment systems for electric and electronic products, systems and services.

A government procurement management framework introduced in late 2010 stipulates a preference for goods produced in Angola and/or services provided by Angolan or Angola-based suppliers. Technical Barriers to Trade (TBT) regimes are not coordinated.

Angola acceded the Kyoto Convention on February 23, 2017.

Legal System and Judicial Independence

Angola’s formal legal system is primarily based on the Portuguese legal system and can be considered civil law based, with legislation as the primary source of law. Courts base their judgments on legislation and there is no binding precedent as understood in common law systems. The Constitution proclaims the Constitution as the supreme law of Angola (article 6(1)) and all laws and conduct are valid only if they conform to the Constitution (article 6(3)).

Businesses and non-governmental organizations report that the Angolan justice system is slow, arduous, and not always impartial. Legal fees are high, and most businesses avoid taking commercial disputes to court in the country. The World Bank’s Doing Business 2018 survey ranks Angola 186 out of 190 countries on contract enforcement, and estimates that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, takes an average of 1,296 days, at an average cost of 44.4 percent of the claim.

Angola has commercial legislation that governs all commercial activities but no specialized court. In 2008, the Angola Attorney General ruled that Angola’s specialized tax courts were unconstitutional. The ruling effectively left businesses with no legal recourse to dispute taxes levied by the Ministry of Finance, as the general courts consistently rule that they have no authority to hear tax dispute cases, and refer all cases back to the Ministry of Finance for resolution. Angola’s Law 22/14, of December 5, 2014, which approved the Tax Procedure Code (“TPC”), sets forth in its Article 5 that the courts with tax and customs jurisdiction are the Tax and Customs Sections of the Provincial Courts and the Civil, Administrative, Tax and Customs Chamber of the Supreme Court. Article 5.3 of the law specifically states that tax cases pending with other courts must be sent to the Tax and Customs Section of the relevant court, except if the discovery phase (i.e., the production of proof) has already begun.

The Judicial system is administered by the Ministry of Justice at trial level for provincial and municipal courts and the Supreme Court nominates provincial court judges. In 1991, the constitution was amended to guarantee judiciary independence. However, as per the 2010 constitution, the President appoints Supreme Court judges for life upon recommendation of an association of magistrates and appoints the attorney general. Confirmation by the General Assembly is not required. The system lacks resources and independence to play an effective role and the legal framework is obsolete, with much of the criminal and commercial code reflecting colonial era codes with some Marxist era modifications. Courts remain wholly dependent on political power.

There is a general right of appeal to the court of first instance against decisions from the primary courts. To enforce judgments/orders, a party must commence further proceedings called executive proceedings with the civil court. The main methods of enforcing judgments are:

  • Execution orders (to pay a sum of money by selling the debtor’s assets);
  • Delivery up of assets; and,
  • Provision of information on the whereabouts of assets.

The Civil Procedure Code also provides ordinary and extraordinary appeals. Ordinary appeals consist of first appeals, review appeals, interlocutory appeals, and full court appeals, while extraordinary appeals consist of further appeals and third-party interventions. Generally, an appeal does not operate as a stay of the decision of the lower court unless expressly provided for as much in the Civil Procedure Code.

Laws and Regulations on Foreign Direct Investment

The newly constituted Agency for Investment and Promotion of Exports of Angola (AIPEX) is the sole investment and export promotion center tasked with promoting Angola’s export potential, legal framework, environment, and investment opportunities nationally and abroad. Housed within the Ministry of Commerce, AIPEX is also responsible for ensuring the application of the new 2018 investment law on Foreign Direct investments.

Competition and Anti-Trust Laws

On May 17, Angola’s National Assembly approved a Law on Competition. The law provides for the creation of the Competition Regulatory Authority, which is tasked with preventing and cracking down on actions of economic agents that fail to comply with the rules and principles of competition. The Competition Regulatory Authority may file a suit based on violations of fair competition rules.

The Pricing and Competition Bureau under the Ministry of Finance was created in 2011 (Presidential Decree 162/11) to ensure the coordination and consistency of pricing and revenue, under which goods and services were divided into three categories: 1) Preco Fixo (Fixed Price): Oil, gas, electricity, water, urban transportation; 2) Preco Vigiado (Monitored Price): Basic Food Basket: Sugar, rice, oil, salt, milk tomatoes, onions, fish, meat, etc., plus transportation (air, surface, rail, sea, ports.); and, 3) Free Price (Preco Libre): items not included in categories one and two. A February 25, 2016 Presidential Decree (28/16), further established price formation on categories two and three.

Expropriation and Compensation

Under the Land Tenure Act of 2004, all land belongs to the state and the state reserves the right to expropriate land from any settlers. The State may also allow for land usage through a 60-year lease, after which the State reserves legal right to take over ownership.

Expropriation without compensation remains a common practice. Land tenure became a more significant issue following independence from Portugal when over 50 percent of the population moved to urban centers during the civil war. The State offered some areas for development within a specific timeframe. After this timeframe, areas that remained underdeveloped reverted to the state with no compensation to any claimants. Almost in all cases, claimants allege unfair treatment and little or no compensation.

Dispute Settlement

Angola is not a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention), but has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Its ratification was endorsed domestically via resolution No. 38/2016, published in the Official Gazette of Angola on August 12, 2016.

Investor-State Dispute Settlement

The Angolan Arbitration Law (Law 16/2003 of 25 July) (Voluntary Arbitration Law — VAL) provides for domestic and international arbitration. Substantially inspired by Portuguese 1986 arbitration law, it cannot be said to strictly follow the UN Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. In contrast the VAL contains no provisions on definitions, rules on interpretation, adopts the disposable rights criteria in regards to arbitration, does not address preliminary decisions, nor distinguish between different types of awards, and permits appeal on the merits in domestic arbitrations, unless the parties have otherwise agreed.

Angola is also a member of the Multilateral Investment Guarantee Agency (MIGA), which can provide dispute settlement assistance as part of its political risk insurance products and eligibility for preferential trade benefits under the African Growth Opportunity Act. The United States and Angola have signed a trade and investment framework agreement (TIFA), which seeks to promote greater trade and investment between the two nations.

The U.S. Embassy is aware of two ongoing formal investment disputes involving American companies that went to arbitration in 2017.

International Commercial Arbitration and Foreign Courts

In June 2014, the Ministry of Justice and Human Rights (MINJHR) opened the Center of Legal Alternatives for Conflict Resolution. Among other functions, the Center is tasked with providing consultation, mediation, and arbitration of contract disputes for both Angolan and foreign businesses. The process is designed to be faster and less costly than the traditional court system. The U.S. Embassy is not aware of any cases reviewed by this court.

Local courts do recognize arbitration, but do not enforce or distinguish between different types of awards, and permit appeal on the merits in domestic arbitrations, unless the parties have otherwise agreed.

Bankruptcy Regulations

Angola is ranked 168 out of 190 on the World Bank’s Doing Business 2018 report on resolving insolvency.

As a former Portuguese colony, Angola inherited the Portuguese insolvency legislation. The current civil procedure code in force since 1961 establishes two different processes: a bankruptcy procedure applicable exclusively to commercial debtors, or an insolvency procedure applicable to non-commercial debtors.

The World Bank Doing Business 2018 report found that no foreclosure, liquidation, or reorganization proceedings were filed within the past 12 months. While Angola’s arbitration law (Arbitration Law No. 16/03) adopted in 2013 introduced the concept of domestic and international arbitration, the practice of arbitration law is still not widely implemented.

The Ministry of Finance, the BNA and the Capital Markets Commission (CMC) oversee credit monitoring and regulation.

6. Financial Sector

Capital Markets and Portfolio Investment

Angola’s capital markets remain very underdeveloped. To respond to the need for increased sources of financing of the economy, in 2013, the Angolan Government created the Capital Market Commission (CMC). Angola’s banks are likely the most established businesses that could potentially list on an exchange. However, many Angolan banks have a high rate of non-performing loans, reported to be as high as 31 percent. Angola’s banks have struggled in recent years due to the country’s deteriorating economic environment and increasing high rate of delinquent loans. The Governor of the BNA has stated that Angola’s banks must go through a consolidation phase over the next year, which may limit their ability in the near-term to list on the country’s fledgling stock exchange.

In May 2018, Angola raised USD 3 billion in its second Eurobond issue in international markets. The two-part deal included a USD 1.75 billion of 10-year bond with an 8.25 percent yield and a second of USD 1.25 billion of 30-year bonds with a 9.37 percent yield. Angola previously, in 2012, through Russia’s second-largest bank, VTB, managed the sale of its first international bond, a USD 1 billion, 7-year bond with a 7.0 percent yield. In November 2015, Angola placed a USD 1.5 billion, 10-year Eurobond with a 9.5 percent yield. Deutsche Bank, Goldman Sachs, and ICBC managed the 2015 bond placement.

The BNA has developed a market for short-term bonds, called Titulos do Banco Central, and long-term bonds, called Obrigacoes do Tesouro. Most of these bonds are bought and held by local Angolan banks. The Obrigacoes have maturities ranging from one to 7.5 years, whereas the Titulos have maturities of 91 to 182 days. For information on current rates, see: http://www.bna.ao/ .

Foreign investors do not normally access credit locally. For Angolan investors, credit access is very limited, and if available comes with a collateral requirement of 125 percent, so they either self-finance, or seek financing from non-Angolan banks and investment funds. Subsidized government loan programs to promote economic development, such as the Ministry of Economy’s Angola Invest USD 1.6 billion fund to support small and medium-sized enterprises with loans of up to USD 5 million. These loans are available only to majority-owned Angolan companies, but due to reports of limited quality projects and commercial banks reticence, only a handful of the Angola Invest loans were approved in 2017.

Money and Banking System

The BNA has remained under considerable pressure to stabilize Angola’s economy as the kwanza lost over 55 percent of its value since 2014. The BNA has struggled to fully implement reforms across Angola’s banks, which have lost their correspondent relationships with banks in the United States. Angola has been affected by the broader global de-risking trends wherein banks decide to close business in markets deemed too risky from an anti-money laundering and terrorist financing standpoint. In December 2016, Deutsche Bank, the last international bank providing dollar-clearing services, closed its dollar clearing services in Angola. A limited number of international banks still operate in Angola and provide limited trade finance such as Germany’s Commerzbank and South Africa’s Standard Bank. International banks have held back on entering the Angolan market because the risk of fines and other penalties outweighs the potential rewards of doing business in Angola.

In an effort to increase greater confidence in the banking sector, President Joao Lourenco appointed Jose de Lima Massano as new Governor of the Central Bank on October 30, 2017. The BNA has since raised the mandatory capital start-up requirements for banks from USD 25 million to USD 50 million in the hopes of reducing the number of banks and force necessary mergersCommercial banks operating in Angola also have until the end of 2018 to increase their share capital to USD 35 million, in line with Notice 2/2018 from the BNA on the “Adequacy of Minimum Capital Stock and Regulatory Own Funds of Financial Banking Institutions.” This regulatory instruction will be reinforced by current draft legislation (“Implementation Strategy of Executive Macroeconomic Program 2017”), which seeks to designate six Angolan Banks (BAI, BIC, Banco Economico, Banco Millenium-Atlantico, BNI, and Banco Sol) to handle 80 percent of Forex in the primary market. The remaining 22 banks are likely to survive only by merging with other banks.

Angola has a low banking market penetration rate and ranks 183 out of 190 countries in the World Bank’s Doing Business 2018 report on the ease of getting credit indicator. According to latest demographics recorded on the last census in 2014, the rate of banked population is 47 percent. As of December 2013, the latest figures available indicated that total customer deposits with the Angolan commercial banks was 4.6 trillion Angolan kwanza, an increase of 17 percent since 2012. Angolan banks extend little unsecured credit, instead requiring significant amounts of collateral (125 percent) in the form of property, or dollar deposits from the borrower. Commercial credit in Angola remains tight. Unclear land titles and ill-defined property rights frequently complicate and lengthen the process of applying for a mortgage. While the BNA tries to limit foreign currency risk, some loans are denominated in foreign currencies, but are consequently weighted at 130 percent for the calculation of risk-weighted assets.

Five banks, Banco Angolano de Investimentos (BAI), Banco Economico, Banco de Fomento Angola (BFA), Banco BIC Angola (BIC) and Banco de Poupanca e Credito S.A.R.L. (BPC), control over 80 percent of total banking assets, deposits, and loans. Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds. Loans to most sectors have slowed because of the economic crisis. BNA and local bankers have also indicated that there is a growing level of non-performing loans (12 percent in 2015 and 31.3 percent as of December 31, 2017 according to the BNA Financial Indicator System) corresponding to USD 6.8 billion out of USD 22 billion of loans granted. Across most economic sectors, clients struggle to make payments on loans because of the economic crisis. Most banks focus their operations on short-term commission-related activities and are the largest purchasers of government treasuries. Even with the severe economic slowdown and reduction in overall foreign exchange availability, bank profit margins are still high enough to allow them to sustain operations. However, traditional commercial loans are still only a small part of banking in Angola. In the past, state and state-affiliated companies enjoyed privileged access to loans, often at concessionary rates without regard to risk, leading to several bank failures.

Foreign Exchange and Remittances

Foreign Exchange Policies

Angola continues trading mostly in two currencies, the USD and the Euro, with the Renminbi gaining greater prominence given the degree of trade with China. In a bid to deal with the foreign currency shortage and substantial foreign currency arbitrage in the parallel market, the government has opted for a managed float for its currency exchange rate. The Angolan Kwanza was pegged at a rate of 166.00 per U.S. dollar from April 2016 to January 2018 following a steep devaluation due to the slump in oil prices. On January 10, 2018, the BNA began conducting foreign currency auctions allowing the kwanza to fluctuate within an undisclosed but controlled band. As a result, the BNA facilitated a 20 percent devaluation of the kwanza. Commercial banks now purchase foreign currency from the BNA at weekly auctions within the undisclosed band. Payment of remittances in any form and non-strategic imports face a lengthy wait between 90-180 days for foreign exchange. Priority is given to strategic importers of food, raw materials for construction, agriculture, medicine and the oil sector. The government also has a huge backlog of forex arrears of approximately USD 3 billion.

Investors cannot freely convert their earnings in kwanza to any foreign exchange rate due to limited available foreign exchange. Credit cards and other options for payment are extremely limited and money-servicing businesses (Western Union & MoneyGram) have ceased foreign outward transactions in foreign currency.

Remittance Policies

The Angolan government established anti-money laundering restrictions in January 2014 to combat illicit remittance flows. The subsequent drop in foreign exchange availability in Angola beginning in 2015 due to declining petroleum revenues has severely impeded personal and legitimate business remittances. International and domestic companies operating in Angola face significant delays securing foreign exchange approval for remittances to cover key operational expenses, including imported goods and expatriate salaries. Profit and dividend remittances are even more problematic for most companies. The Angolan government has prioritized foreign exchange for essential goods and services including the food, health, defense, and petroleum industries. Due to the tremendous strains on foreign exchange, in 2017, reports indicated that the country drew substantially from its international reserves to increase foreign exchange liquidity in the market. As a result, Angola’s international reserves, which had been protected carefully at USD 24 billion, were reportedly down to USD 13.3 billion as of December 31, 2017. However current levels are now estimated at USD 12.5 billion. Foreign exchange allocations from the BNA since 2016 have been almost exclusively in Euros, partly driven by the loss of corresponding banking relationships with U.S. banks. Profits and dividends repatriation are not prioritized by the BNA, which aggressively protects the country’s foreign exchange.

The new 2018 investment law grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due. Under the previous 2015 investment law, foreign investors were required to pay higher taxes on early repatriation of dividends and profits within the first several years of an initial investment. The new tax on dividends starts at 15 percent and can rise to as high as 50 percent depending on the value and how early repatriation occurs. Under regulations established in July 2013 aimed at tracking capital movement, strengthening the banking system, and capturing tax revenue, foreign companies are required to process transactions through Angolan banks.

Sovereign Wealth Funds

In October 2012, former President Eduardo dos Santos established a petroleum-funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA). The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles. In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10. The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component (http://www.fundosoberano.ao/investments/ ). Jose Filomeno dos Santos (Zenu), son of President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but has been since removed by President Lourenco based reportedly on poor results at the FSDEA. Zenu also came into the spotlight following revelations by the “Paradise Papers” that approximately USD 3 billion of the FSDEA’s capital was illicitly invested in seven offshore corporations in Mauritius. Zenu was further accused of embezzling USD 500 million from a BNA account held in a London-based bank. Former Finance Minister Carlos Alberto Lopes was named new head of the FSDEA.

Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed income instruments, global and emerging-market equities, and other alternative investments. Since the revelations of the Paradise Papers, the Government of Mauritius, in concert with the Angolan government, has frozen seven bank accounts in Mauritius linked to the FSDEA, and suspended business licenses linked to the FSDEA’s Swiss manager, Quantum Global Investment Management.

Antigua and Barbuda

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

The Government of Antigua and Barbuda strongly encourages FDI, particularly in industries that create jobs, enhance economic activity, earn foreign currency, and have a positive impact on its citizens. Diversification of the economy remains a priority for the Government of Antigua and Barbuda.

Through the Antigua and Barbuda Investment Authority, the government facilitates and supports FDI in the country and maintains an open dialogue with current and potential investors. While the government welcomes all FDI interests; agriculture, diversified tourism, healthcare services, outsourcing and business support services, information and communication technologies and international financial services are identified as priority investment areas.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign control in Antigua and Barbuda. Foreign investors may hold up to 100 percent of an investment, and a local or foreign entrepreneur needs about 40 days from start to finish to transfer the title on a piece of property. In June 1995, the government established a permanent residency program to encourage high-net-worth individuals to establish residency in Antigua and Barbuda for up to three years. As residents, their incomes are free of local taxation. This program is separate from the Citizenship by Investment program.

The Antigua and Barbuda Investment Authority evaluates all FDI proposals and provides intelligence, business facilitation and investment promotion to establish and expand profitable business enterprises in Antigua and Barbuda. The Antigua and Barbuda Investment Authority also advises the government on issues that are important to the private sector and potential investors to ensure that the business climate continues to improve, that investment opportunities grow, and to increase the international competitiveness of the local economy.

The Government of Antigua and Barbuda treats foreign and local investors equally with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investment in its territory.

Other Investment Policy Reviews

The last trade policy review for the Organization of Eastern Caribbean States (OECS), which Antigua and Barbuda is a member, was conducted by the World Trade Organization (WTO) in 2014.

Business Facilitation

Established in 2006, the Antigua and Barbuda Investment Authority facilitates foreign direct investment in the aforementioned priority sectors and advises the government on the formation and implementation of policies and programs to attract investment in Antigua and Barbuda. The Antigua and Barbuda Investment Authority provides crucial business support services and market intelligence to all investors. The Antigua and Barbuda Investment Authority offers an online tool that is useful for navigating the laws, rules, procedures and registration requirements for foreign investors. This can be found at http://www.theiguides.org/public-docs/guides/antiguabarbuda  and http://investantiguabarbuda.org/ .

All potential investors applying for government incentives must submit their proposals for review by the Antigua and Barbuda Investment Authority to ensure the project is consistent with national interests and provides economic benefits to the country.

According to the World Bank’s 2018 Doing Business Report, Antigua and Barbuda is ranked 126th in ease of starting a business. The establishment of a new business takes nine procedures and 22 days to complete. The general practice is to retain a local attorney who prepares all the relevant incorporation documents. A business must register with the Intellectual Property and Commerce Office (IPCO), the Inland Revenue Department, the Medical Benefits Scheme, the Social Security Scheme and the Board of Education. Given the multiple agencies currently involved in the process, a Single Window facility to expedite the process is being planned.

Recently, there has been an increased focus on women’s issues. A number of regional development agencies have launched programs to assist Caribbean women entrepreneurs, notably Caribbean Export and the Women Innovators Network of the Caribbean. In this context, the Government of Antigua and Barbuda recently launched the Antigua and Barbuda Business Innovation Center to help support small business and entrepreneurs. This project is being implemented in collaboration with the United Nations Office for Project Services (UNOPS) and will run for an initial period of two years. The Antigua and Barbuda Innovation Center will include a business incubator and will provide education, training and investment opportunities to new and existing businesses.

Immediate focus will be placed on businesses in the healthcare, tourism, agriculture and environment sectors, as well as projects submitted by women. International partners in this enterprise include UN Women, MIT, Harvard University and the European International Bank.

The Government of Antigua and Barbuda has also ratified the United Nations Convention on the Rights of Persons with Disabilities and will take the appropriate steps to ensure implementation of policies and plans that effectively integrate persons with physical and intellectual disabilities into society, in collaboration with the Association of Persons with Disabilities,. It is important to the Government of Antigua and Barbuda that this group of citizens has increased access to opportunities, which will allow them to make a meaningful contribution to the development of Antigua and Barbuda. In this regard, the Prime Minister’s Entrepreneurial Development Program (EDP) will include a special incentive to be awarded to the first entrepreneur with a disability who submits a viable proposal for a new business. Special consideration will also be given to business proposals that incorporate provisions to meet the needs of persons with disabilities.

Outward Investment

Although the Government of Antigua and Barbuda prioritizes investment retention as a key component of its overall economic strategy, there are no formal mechanisms in place to achieve this. Even so, the economy will continue to require significant foreign investment.

There is no restriction on domestic investors seeking to do business abroad. Local companies in Antigua and Barbuda are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the OECS Economic Union and the Caribbean Community Single Market and Economy, which enhance the competitiveness of the local and regional private sectors across traditional and emerging high-potential markets.

3. Legal Regime

Transparency of the Regulatory System

Antigua and Barbuda uses transparent policies and effective laws to foster competition and establish clear rules for foreign and domestic investors in the areas of tax, labor, environment, health, and safety. The Government of Antigua and Barbuda publishes laws, regulations, administrative practices and procedures of general application and judicial decisions that affect or pertain to investments or investors in Antigua and Barbuda. Where the national government establishes policies that affect or pertain to investments or investors that are not expressed in laws and regulations or by other means, the national government will make them publicly available.

Rulemaking and regulatory authority lies with the Bicameral Parliament of the Government of Antigua and Barbuda. The Parliament has two chambers: the House of Representatives has 19 members, 17 members elected for a five-year term in single-seat constituencies, one ex-officio member and one Speaker. The Senate has 17 appointed members.

All regulations that relate to foreign investment into Antigua and Barbuda are governed by the relevant National Laws of Antigua and Barbuda. These laws are developed within the respective Ministries and drafted by the Ministry of Legal Affairs. These laws are enforced by the requisite Ministry of the Government of Antigua and Barbuda. The attraction of Foreign Direct Investment is governed principally through laws overseeing the Antigua and Barbuda Investment Authority and the Citizenship by Investment Program. The National Laws of Antigua and Barbuda are available online at http://laws.gov.ag/new/index.php  . This website contains the full text of laws already in force, as well as those currently being proposed in Parliament.

Although, some draft bills are not subject to public consultation, input from various stakeholder groups is enlisted in the formulation of law. The process is detailed at: http://www.laws.gov.ag/makinglaws.htm . Stakeholder organizations are encouraged to support and contribute to the standards development process by participating in technical committees and remarking on drafts that are available for comment. These organizations support the standards development process by presenting their members’ interests, expert opinions and analysis to ensure standards are sound and effective.

Accounting, legal and regulatory procedures are generally transparent and consistent with international norms. The International Financial Accounting Standards, which stem from the General Accepted Accounting Principles, govern the accounting profession.

The Office of the Ombudsman is a Constitutional provision established to guard against excesses by government officers in the performance of their duties. The Office of the Ombudsman is independent and is not subject to the direction or control of any other person or authority. The function of the Ombudsman is to investigate any complaint relating to any decision or recommendation made or any act done or omitted by any officer of the Government or statutory body in any case in which a member of the public claims to be aggrieved, or appears to the Ombudsman to be the victim of an injustice as a result of the exercise of the administrative function of that officer or body.

Regulations are developed nationally and regionally. At the national level, the requisite ministry reviews and documents the desired legal authority that would enable it to effectively perform at the desired levels to reach optimum development objectives. These reviews are then submitted to the Ministry of Legal Affairs for the preparation of the draft legislation. Subsequently, the Ministry of Legal Affairs reviews all agreements and legal commitments (national, regional and international) to be undertaken by Antigua and Barbuda before they are finalized. The Antigua and Barbuda Investment Authority has the main responsibility for investment supervision, whereas the Ministry of Finance and Corporate Governance monitors investments to collect information for national statistics and reporting purposes.

Antigua and Barbuda’s membership in regional organizations, particularly the Organization of Eastern Caribbean States and its Economic Union, commits the state to implement all appropriate measures to ensure the fulfillment of its various treaty obligations. Thus, laws are uniformly enacted in the eight member territories of the Eastern Caribbean Currency Union, although there may be some minor differences in implementation from country to country.

The enforcement mechanisms of these regulations include penalties and other sanctions. The Antigua and Barbuda Investment Authority can revoke an issued Investment Certificate if the holder fails to comply with certain stipulations detailed in the Act and its regulations.

International Regulatory Considerations

As a member of the OECS and the Eastern Caribbean Economic Union, Antigua and Barbuda subscribes to principles and policies outlined in the Revised Treaty of Basseterre. The relationship between national and regional systems is such that each participating member state is expected to coordinate and adopt, where possible, common national policies aimed at the progressive harmonization of relevant policies and systems across the region. Thus, Antigua and Barbuda is obligated to implement regionally developed regulations, such as legislation passed under Organization of Eastern Caribbean States Authority, unless specific concessions are sought.

The Antigua and Barbuda Bureau of Standards is a statutory body established under the Standards Act of 1987 to prepare and promulgate standards in relation to goods, services, processes and practices. As a signatory to the WTO Agreement on the Technical Barriers to Trade, Antigua and Barbuda, through the Antigua and Barbuda Bureau of Standards, is therefore obligated to harmonize all national standards to international norms to avoid creating technical barriers to trade.

Antigua and Barbuda ratified the WTO Trade Facilitation Agreement (TFA) in November 2017. Ratification of the Agreement is an important signal to investors of the country’s commitment to improving its business environment for trade. It will also improve the speed and efficiency of border procedures, facilitate trade costs reduction and enhance participation in the global value chain. Antigua and Barbuda has already implemented a number of TFA requirements. A full list can be viewed here: https://www.tfadatabase.org/members/antigua-and-barbuda/measure-breakdown .

Legal System and Judicial Independence

Antigua and Barbuda bases its legal system on the British common law system. The Attorney General, the Chief Justice of the Eastern Caribbean Supreme Court, junior judges, and magistrates administer justice. The Eastern Caribbean Supreme Court Act establishes the Supreme Court of Judicature, which consists of the High Court and the Eastern Caribbean Court of Appeal. The High Court hears criminal and civil matters and makes determinations on the interpretation of the Constitution. Appeals are made in the first instance to the Eastern Caribbean Supreme Court, an itinerant court that hears appeals from all Organization of Eastern Caribbean States members. Final appeal is to the Judicial Committee of the Privy Council of the United Kingdom. In May 2018, the Government of Antigua and Barbuda signaled its intent to hold a referendum to decide whether or not the country should remain subject to the Privy Council or turn to the Trinidad-based Caribbean Court of Justice as its final court of appeal before the end of 2018.

The Caribbean Court of Justice is the regional judicial tribunal, established in 2001 by the Agreement Establishing the Caribbean Court of Justice. The Caribbean Court of Justice has original jurisdiction to interpret and apply the Revised Treaty of Chaguaramas.

Antigua and Barbuda is party to the WTO. The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes. Antigua and Barbuda brought a case against the United States before the WTO concerning the cross-border supply of gambling and betting services. The WTO ruled in favor of Antigua and Barbuda, but agreement on settlement terms remains outstanding.

Laws and Regulations on Foreign Direct Investment

The Antigua and Barbuda Investment Authority provides guidance on the relevant laws, rules, procedures, and reporting requirements for investors. These can be obtained at http://www.theiguides.org/public-docs/guides/antiguabarbuda  and http://investantiguabarbuda.org/ .

The Tourism and Business Special Incentives Act (2013) was extended in 2016 to facilitate the further development of other key sectors, such as the creative industries, yachting and marine services and information and computer technology-enabled services. The Act formally ended in April 2018.

Citizenship by Investment

Under the Citizenship by Investment Program, foreign individuals can obtain citizenship in accordance with the Citizenship by Investment Act of 2013, which grants citizenship (without voting rights), to qualified investors. Program applicants are required to undergo a due diligence process before citizenship can be granted. Amendments were made in 2017 with the minimum that would entitle an investor to qualify is now a USD 100,000 contribution to the National Development Fund for a family application for up to four persons and USD 125 000 for a family of five. Previous qualifications of a real estate purchase valued at USD 400,000 or above, or a business investment of USD 1.5 million individually or at least USD 400,000 for a joint project remain. All applicants must also pay relevant government and due diligence fees, as well as a full medical certificate, a police certificate, and evidence of the source of funds. Further information is available at: http://www.cip.gov.ag/ .

Competition and Anti-Trust Laws

Chapter 8 of the Revised Treaty of Chaguaramas outlines the competition policy applicable to CARICOM States. Member States are required to establish and maintain a national competition authority for implementing the rules of competition. CARICOM established a Caribbean Competition Commission to apply rules of competition regarding anti-competitive cross-border business conduct. CARICOM competition policy addresses anti-competitive business conduct, such as agreements between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction or distortion of competition within the Community, and actions by which an enterprise abuses its dominant position within the Community. No legislation is yet in operation to regulate competition in Antigua and Barbuda. The OECS agreed to establish a regional competition body to handle competition matters within its single market. The draft OECS bill is with the Ministry of Legal Affairs for review.

Expropriation and Compensation

According to the Investment Authority Act of 2006, investments in Antigua and Barbuda will not be nationalized, expropriated or subject to indirect measures having an equivalent effect, except where any such measures are adopted for the public good and in accordance with due process of law, on a non-discriminatory basis and accompanied by prompt, adequate and effective compensation. Compensation in such cases will amount to the fair market value of the expropriated investment immediately before the expropriation or the impending expropriation became public knowledge, whichever is earlier. It shall include interest from the date of dispossession of the expropriated property until the date of payment. Compensation is required to be paid without delay, in convertible currency, and be effectively realizable and freely transferable.

There is an unresolved dispute regarding the expropriation of an American-owned property with multiple U.S. citizen owners. In November 2015, the Government of Antigua and Barbuda paid the property owners a percentage of the total amount owed. In November 2017, the Government of Antigua and Barbuda disclosed that it has paid an additional installment towards the principal cost of the property. The government still owes outstanding interest payments to the property owners.

Arrangements are being finalized for the payment of the outstanding balance. The owner intends to continue battling the Government of Antigua and Barbuda in court until all monies are paid. For this reason, the U.S. government recommends continued caution when investing in real estate in Antigua and Barbuda.

Dispute Settlement

Antigua and Barbuda is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States; however it is a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Arbitration Convention. International or national arbitration may be used if specified in contracts between private parties. The Arbitration Act Cap. 33 (1975) is the main legislation which governs arbitration in Antigua and Barbuda. It adheres to the New York Arbitration Convention.

Investor-State Dispute Settlement

Investors are permitted to use national or international arbitration with regards to contracts entered into with the state. Antigua and Barbuda also has Bilateral Investment Treaties with the Federal Republic of Germany and the United Kingdom in which binding international arbitration of investment disputes is recognized. Antigua and Barbuda does not have a Bilateral Investment Treaty or a Free Trade Agreement with an investment chapter with the United States. U.S. Embassy Bridgetown is not aware of any current investment disputes in Antigua and Barbuda.

Antigua and Barbuda is ranked 33 out of 190 countries in resolving contracts in the 2018 World Bank Doing Business Report. According to the report, dispute resolution in Antigua and Barbuda generally takes an average of 476 days. The slow court system and bureaucracy are widely seen as main hindrances to timely resolutions to commercial disputes. Through the Arbitration Act Cap.33 (1975), the local courts recognize and enforce foreign arbitral awards issued against the government.

International Commercial Arbitration and Foreign Courts

As mandated by the Arbitration Act Cap 33 (1975), alternative dispute mechanisms are available as a means for settling disputes between two private parties. Voluntary mediation or conciliation is also used in dispute resolution. The Arbitration Act mandates the legal recognition and enforcement of judgements of foreign courts by local courts. Thus, the High Court of Antigua and Barbuda recognizes and enforces foreign arbitral awards. The Eastern Caribbean Supreme Court’s Court of Appeal provides meditation on commercial contracts.

Bankruptcy Regulations

Under the Bankruptcy Act (1975), Antigua and Barbuda has a bankruptcy framework that grants certain rights to debtor and creditor. The World Bank’s 2018 Doing Business Report addresses the strength of the framework and its limitations in resolving insolvency in Antigua and Barbuda and ranked Antigua and Barbuda 128th of 190 countries in this area.

6. Financial Sector

Capital Markets and Portfolio Investment

As a member of the Eastern Caribbean Currency Union, Antigua and Barbuda is also a member of the Eastern Caribbean Securities Exchange and the Regional Government Securities Market. The Eastern Caribbean Securities Exchange is a regional securities market established by the Eastern Caribbean Central Bank and licensed under the Securities Act of 2001, a uniform regional body of legislation governing securities market activities to facilitate the buying and selling of financial products for the eight member territories.

As at 31 March 2017, the number of securities listed on the ECSE totaled 129, comprising 109 sovereign debt instruments, 13 equities and seven corporate bonds. Market capitalization as at 31 March 2017 was USD 3.07 billion. Antigua and Barbuda is open to portfolio investment.

Antigua and Barbuda accepted the obligations of Article VIII of the International Monetary Fund Agreement, Sections 2, 3 and 4, and maintains an exchange system free of restrictions on making payments and transfers for current international transactions. Foreign tax credits normally are not granted unless in the case of taxes paid in a British Commonwealth country that grant similar relief for Antigua and Barbuda taxes, or where an applicable tax treaty provides a credit. The private sector has access to credit on the local market through loans, purchases of non-equity securities, and trade credits, as well as other accounts receivable that establish a claim for repayment.

Money and Banking System

The Eastern Caribbean Central Bank Agreement Act was passed into law by the eight Participating Governments. The Schedule to the Act contains an agreement established on July 5, 1983 by seven member governments and acceded to by the Government of Anguilla on April 1, 1987. This Agreement provides for the establishment of the Eastern Caribbean Central Bank, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves and other related matters. Antigua and Barbuda is a signatory to this agreement and as such, the Eastern Caribbean Central Bank controls Antigua and Barbuda’s currency and regulates its domestic banks.

In its latest annual report, the Eastern Caribbean Central Bank listed the commercial banking sector as stable. Assets of commercial banks totaled USD 2.3 billion at the end of December 2017 and remained relatively consistent during the previous year. The reserve requirement for commercial banks was 6 percent of deposit liabilities.

The Caribbean has witnessed a withdrawal of correspondent banking services by U.S. and European banks in the last three years. In 2015, the Caribbean Community declared the loss of correspondent banking to be a grave issue facing the region. The Caribbean Community is committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to collate a collective response to this issue. Antigua and Barbuda is the current chair of this Committee.

The Government of Antigua and Barbuda has announced plans to introduce Legislation to operate and regulate blockchain technology as an integral part of its ‘Vision 2023 and Beyond”. The introduction and regulation of blockchain technology is anticipated to give Antigua and Barbuda another platform to offer services globally through companies located in Antigua that provides employment and contribute to economic growth. In March 2018, the ECCB signed a Memorandum of Understanding with Barbados-based fintech company, Bitt Inc. to conduct a fintech pilot on blockchain technology in ECCB member countries.

During the pilot, the ECCB will work closely with Bitt Inc. to develop, deploy and test technology which focuses on data management, compliance and transaction monitoring system for Know Your Customer, Anti-Money Laundering, and Combating the Financing of Terrorism (KYC/AML/CFT). This will help to improve the risk profile of the Eastern Caribbean Currency Union (ECCU) and mitigate against the trend of de-risking by the region’s correspondent banking partners. The pilot will also focus on developing a secure, resilient digital payment and settlement platform with embedded regional and global compliance; and the issuance of a digital EC currency which will operate alongside physical EC currency. The pilot is expected to begin in late 2018.

Antigua and Barbuda remains well served by Bank and Non-Bank Financial Institutions. As a consequence there are minimal alternative financial services being offered. Informal community group lending is still practiced in some sections of the population, albeit not as significantly as in previous years.

Foreign Exchange and Remittances

Foreign Exchange Policies

Antigua and Barbuda is a member of the Eastern Caribbean Currency Union and the Eastern Caribbean Central Bank. The currency of exchange is the Eastern Caribbean Dollar (XCD). As a member of the Organization of Eastern Caribbean States, Antigua and Barbuda has a foreign exchange system that is fully liberalized. The Eastern Caribbean Dollar was pegged to the United States dollar at a rate of XCD 2.70 to USD 1.00 since 1976. As a result, the Eastern Caribbean Dollar does not fluctuate, creating a stable currency environment for trade and investment in Antigua and Barbuda.

Remittance Policies

Currently, companies registered in Antigua and Barbuda have the right to repatriate all capital, royalties, dividends and profits free of all taxes or any other charges on foreign exchange transactions. Withholding taxes are also levied on non-resident corporations and individuals receiving income in the form of dividends, preferred share dividends, interest and rentals, management fees, and royalties, as well as on interest on bank deposits to non-resident corporations. One must be on the island for 180 days to be considered a resident. Antigua and Barbuda is a member of the Caribbean Financial Action Task Force (CFATF).

In February 2017, the Government of Antigua and Barbuda signed an Intergovernmental Agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Antigua and Barbuda to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Neither the Government of Antigua and Barbuda, nor the Eastern Caribbean Central Bank, of which Antigua and Barbuda is a member, maintains a Sovereign Wealth Fund.

Argentina

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Macri government actively seeks foreign direct investment. To improve the investment climate, the Macri administration has enacted reforms to strengthen institutions, reduce economic distortions, and increase capital markets efficiencies. It expanded economic and commercial cooperation with key partners including Mexico, Chile, Brazil, Japan, South Korea, Spain, Canada, and the United States, and deepened its engagement in international fora such as the G20, WTO, and OECD.

Over the past year, Argentina issued new regulations in the gas and energy, communications and technology, aviation, and automobile industries to improve competition and provide incentives aimed to attract investments to those sectors. The government more than doubled public works spending during the first quarter of 2017 alone and continues to seek investment in its infrastructure development plans. Argentina is also seeking investments in wireless infrastructure, oil and gas, lithium mines, renewable energy, and other areas.

Foreign and domestic investors generally compete under the same conditions in Argentina. The amount of foreign investment is restricted in specific sectors such as aviation and media. Foreign ownership of rural productive lands, bodies of water, and areas along borders is also restricted.

Argentina has a national Investment and Trade Promotion Agency that provides information and consultation services to investors and traders on economic and financial conditions, investment opportunities, and Argentine laws and regulations. The agency also provides matchmaking services and organizes roadshows and trade delegations. The agency’s web portal provides detailed information on available services (http://www.produccion.gob.ar/agencia ). Many of the 24 provinces also have their own provincial investment and trade promotion.

The Macri Administration welcomes dialogue with investors. Argentine officials regularly host roundtable discussions with visiting business delegations and meet with local and foreign business chambers. During official visits over the past year to the United States, Russia, and Europe, among others, Argentine delegations often met with host-country business leaders.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law No. 19,550), the Argentina Civil and Commercial Code, and rules issued by the regulatory agencies. Foreign private entities can establish and own business enterprises and engage in all forms of remunerative activity in nearly all sectors.

Full foreign equity ownership of Argentine businesses is not restricted, for the most part, with exception in the air transportation and media industries. The share of foreign capital in companies that provide commercial passenger transportation within the Argentine territory is limited to 49 percent per the Aeronautic Code Law No. 17,285. The company must be incorporated according to Argentine law and domiciled in Buenos Aires. In the media sector, Law No. 25,750 establishes a limit on foreign ownership in television, radio, newspapers, journals, magazines, and publishing companies to 30 percent.

Law No. 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) restricts foreign ownership to a maximum of 15 percent of all national productive land. Individuals or companies from the same nation may not hold over 30 percent of that amount. Individually, each foreign individual or company faces an ownership cap of 1,000 hectares (2,470 acres) in the most productive farming areas, or the equivalent in terms of productivity levels in other areas. The law also establishes that a foreigner cannot own land that contains big and permanent extensions of water bodies, are located in riversides or water bodies with such features, or are located near a Border Security Zone. Waivers are not available.

Argentina does not maintain an investment screening mechanism for inbound foreign investment. U.S. investors are not at a disadvantage to other foreign investors or singled out for discriminatory treatment.

Other Investment Policy Reviews

Argentina was last subject to an investment policy review by the OECD in 1997 and a trade policy review by the WTO in 2013. The United Nations Conference on Trade and Development (UNCTAD) has not done an investment policy review of Argentina.

Business Facilitation

Since entering into office in December 2015, the Macri Administration has enacted reforms to normalize financial and commercial transactions and facilitate business creation and cross-border trade. These reforms include eliminating capital controls, reducing export taxes and import restrictions, streamlining business administrative processes, decreasing tax burdens, increasing businesses’ access to financing, and streamlining customs controls.

In October 2016, the Ministry of Production issued decree No. 1079/2016, easing bureaucratic hurdles for foreign trade and creating a Single Window for Foreign Trade (“VUCE” for its Spanish acronym). The VUCE centralizes the administration of all required paperwork for the import, export, and transit of goods (e.g., certificates, permits, licenses, and other authorizations and documents). Argentina subjects imports to automatic or non-automatic licenses that are managed through the Comprehensive Import Monitoring System (SIMI, or Sistema Integral de Monitoreo de Importaciones), established in December 2015 by the National Tax Agency (AFIP) through Resolutions 5/2015 and 3823/2015. The SIMI system requires importers to submit electronically detailed information about goods to be imported into Argentina. Once the information is submitted, the relevant Argentine government agencies can review the application through the VUCE and make any observations or request additional information. The number of products subjected to non-automatic licenses has been modified several times, resulting in a net decrease since the beginning of the SIMI system.

The Argentine Congress approved an Entrepreneurs’ Law in March 2017, which allows for the creation of a simplified joint-stock company (sociedad por acciones simplifacada, or SAS) within 24 hours and online. The Ministry of Production website provides the following link where there is a detailed explanation on how to register a SAS in Argentina (https://www.argentina.gob.ar/crear-una-sociedad-por-acciones-simplificada-sas ). As of April 2018, the online business registration process is only available for companies located in the city or province of Buenos Aires. The process is clear and complete and can be used by foreign companies. Officials project it will become available in other large municipalities by the end of 2018. More information may be found at http://www.produccion.gob.ar/todo-sobre-la-ley-de-emprendedores/ .

Foreign investors seeking to set up business operations in Argentina follow the same procedures as domestic entities without prior approval and under the same conditions as local investors. To open a local branch of a foreign company in Argentina, the parent company must be legally registered in Argentina. Argentine law requires at least two equity holders, with the minority equity holder maintaining at least a five percent interest. In addition to the procedures required of a domestic company, a foreign company establishing itself in Argentina must legalize the parent company’s documents, register the incoming foreign capital with the Argentine Central Bank, and obtain a trading license.

A company must register its name with the Office of Corporations (IGJ, or Inspeccion General de Justicia). The IGJ website describes the registration process and some portions can be completed online (http://www.jus.gob.ar/igj/tramites/guia-de-tramites/inscripcion-en-el-registro-publico-de-comercio.aspx ). Once the IGJ registers the company, the company must request that the College of Public Notaries submit the company’s accounting books to be certified with the IGJ. The company’s legal representative must obtain a fiscal code and a tax identification number from the federal tax agency (AFIP by its Spanish acronym), register for social security, and obtain blank receipts from another agency. Companies can register with AFIP online at www.afip.gob.ar  or by submitting the sworn affidavit form No. 885 to AFIP.

The enterprise must also provide workers’ compensation insurance for its employees through the Workers’ Compensation Agency (Aseguradora de Riesgos del Trabajo). The company must register and certify its accounting of wages and salaries with the General Bureau of Labor, within the Ministry of Labor.

Companies located in the City of Buenos Aires must register their by-laws and other documents related to their incorporation with the City’s Public Registry of Commerce. The company must file the proposed articles of association and by-laws, the publication in the Official Gazette, evidence of managers’ and unions’ (if applicable) acceptance of position, evidence of the deposit of the cash contributions in the National Bank of Argentina, evidence of compliance with the managers’ guarantee regime (filing of managers’ performance bonds), and evidence of the reservation of the corporate name for approval with the City’s Office of Corporations.

Some provinces offer training and assistance to facilitate business development. Under the law, those mechanisms are equally accessible by women and underrepresented minorities in the economy, but in practice may not be available in all areas with significant minority populations. At present, there is one operational small business center based on the Small Business Development Center model of the United States, located in Neuquén province.

Outward Investment

Argentina does not have a governmental agency to promote Argentine investors to invest abroad nor does it have any restrictions for a domestic investor investing overseas.

3. Legal Regime

Transparency of the Regulatory System

The Macri administration has taken measures to improve public dialogue and government transparency. President Macri created the Ministry of Modernization, tasked with conducting quantitative and qualitative studies of government procedures, and finding solutions to streamline bureaucratic processes and improve transparency.

In September 2016, Argentina enacted a Right to Access Public Information Law (No. 27,275) that mandates all three governmental branches (legislative, judicial, and executive), political parties, universities, and unions that receive public funding are to provide non-classified information at the request of any citizen. The law also created the Agency for the Right to Access Public Information to oversee compliance.

Continuing its efforts to improve transparency, in November 2017, the Ministry of the Treasury launched a new website to communicate how the government spends public funds in a user-friendly format. Subsections of this website are targeted toward policymakers, such as a new page to monitor budget performance (https://www.minhacienda.gob.ar/secretarias/hacienda/metas-fiscales/ ), as well as improving citizens’ understanding of the budget, e.g. the new citizen’s budget “Presupuesto Ciudadano” website (https://www.minhacienda.gob.ar/onp/presupuesto_ciudadano/ ). This program is part of the broader Macri government initiative led by the Ministry of Modernization to build a transparent, active, and innovative state that includes data and information from every area of the public administration. The initiative aligns with the Global Initiative for Fiscal Transparency (GIFT) and UN Resolution 67/218 on promoting transparency, participation, and accountability in fiscal policy.

During 2017, the government introduced new procurement standards including electronic procurement, formalization of procedures for costing-out projects, and transparent processes to renegotiate debts to suppliers. The government also introduced OECD recommendations on corporate governance for state-owned enterprises to promote transparency and accountability during the procurement process. (The link to the regulation is at http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do?id=306769 .)

Argentine government efforts to improve transparency were recognized internationally. In its December 2017 Article IV consultation, the International Monetary Fund (IMF) Executive Board noted that “Argentina’s government made important progress in restoring integrity and transparency in public sector operations,” and agreed with the staff appraisal that commended the government for the progress made in the systemic transformation of the Argentine economy, including efforts to rebuild institutions and restore integrity, transparency, and efficiency in government.

On January 10, 2018, the government issued Decree 27 with the aim of curbing bureaucracy and simplifying administrative proceedings to promote the dynamic and effective functioning of public administration. Broadly, the decree seeks to eliminate regulatory barriers and reduce bureaucratic burdens, expedite and simplify processes before the public administration, taking advantage of the benefits of existing technological tools and focusing on transparency.

In the bilateral Commercial Dialogue, Argentina and the United States share best practices to improve the incorporation of public consultation in the regulatory process as well as regulatory coherence. Similarly, through the bilateral Digital Economy Working Group, Argentina and the United States share best practices on a multi-stakeholder approach to Internet governance and liberalization of the telecommunications sector.

Legislation can be drafted and proposed by any citizen and is subject to Congressional and Executive approval before being passed into law. Argentine government authorities and a number of quasi-independent regulatory entities can issue regulations and norms within their mandates. There are no informal regulatory processes managed by non-governmental organizations or private sector associations. Rulemaking has traditionally been a top-down process in Argentina, unlike in the United States where industry organizations often lead in the development of standards and technical regulations.

Ministries, regulatory agencies, and Congress are not obligated to provide a list of anticipated regulatory changes or proposals, nor share draft regulations with the public, nor establish a timeline for public comment. They are also not required to conduct impact assessments of the proposed legislations and regulations.

Since 2016, the Office of the President and various ministries sought to increase public consultation in the rulemaking process; however, public consultation is non-binding and has been done in an ad-hoc fashion. Some ministries and agencies have developed their own processes for public consultation, such as publishing the draft on their websites, directly distributing the draft to interested stakeholders for feedback, or holding public hearings.

Once the draft of a bill is introduced into the Argentine Congress, the text can be viewed online at the websites of the chamber where the bill was introduced. The lower chamber’s website is located at http://www.diputados.gov.ar/ , and the senate’s website is at http://www.senado.gov.ar/ .

All final texts of laws, regulations, resolutions, dispositions, and administrative decisions must be published in the Official Gazette (https://www.boletinoficial.gob.ar ), as well as in newspapers and the websites of the Ministries and agencies. These texts can also be accessed through Infoleg (http://www.infoleg.gob.ar/ ), overseen by the Ministry of Justice. Interested stakeholders can pursue judicial review of regulatory decisions.

Argentina requires public companies to adhere to International Financial Reporting Standards (IFRS). Argentina is a member of UNCTAD’s international network of transparent investment procedures.

International Regulatory Considerations

Argentina is a founding member of MERCOSUR and has been a member of the Latin American Integration Association (ALADI for Asociacion Latinoamericana de Integracion) since 1980.

Argentina has been a member of the WTO since 1995, and it ratified the Trade Facilitation Agreement in January 2018. Argentina notifies technical regulations, but not proposed drafts, to the WTO Committee on Technical Barriers to Trade. Argentina voiced its intention to deepen its engagement with the OECD and submitted itself to an OECD regulatory policy review in March 2018. Argentina participates in all 23 OECD committees.

Additionally, the Argentine Institute for Standards and Certifications (IRAM) is a member of international and regional standards bodies including the International Standardization Organization (ISO), the International Electrotechnical Commission (IEC), the Panamerican Commission on Technical Standards (COPAM), the MERCOSUR Association of Standardization (AMN), the International Certification Network (i-Qnet), the System of Conformity Assessment for Electrotechnical Equipment and Components (IECEE), and the Global Good Agricultural Practice network (GLOBALG.A.P.).

Legal System and Judicial Independence

According to the Argentine constitution, the judiciary is a separate and equal branch of government. In practice, there have been instances of political interference in the judicial process. Companies have complained that courts lack transparency and reliability, and that Argentine governments have used the judicial system to pressure the private sector. The Macri administration has publicly expressed its intent to improve transparency and rule of law in the judicial system, and the Justice Minister announced in March 2016 the “Justice 2020” initiative to reform the judiciary.

Argentina follows a Civil Law system. In 2014, the Argentine government passed a new Civil and Commercial Code that has been in effect since August 2015. The Civil and Commercial Code provides regulations for civil and commercial liability, including ownership of real and intangible property claims. The current judicial process is lengthy and suffers from significant backlogs. In the Argentine legal system, appeals may be brought from many rulings of the lower court, including evidentiary decisions, not just final orders, which significantly slows all aspects of the system.

Many foreign investors prefer to rely on private or international arbitration when those options are available. Claims regarding labor practices are processed through a labor court, regulated by Law 18,345 and its subsequent amendments and implementing regulations by Decree No. 106/98. Contracts often include clauses designating specific judicial or arbitral recourse for dispute settlement.

Laws and Regulations on Foreign Direct Investment

According to the Foreign Direct Investment Law No. 21,382 and Decree 1853/93, foreign investors may invest in Argentina without prior governmental approval, under the same conditions as investors domiciled within the country. Foreign investors are free to enter into mergers, acquisitions, greenfield investments, or joint ventures. Foreign firms may also participate in publicly-financed research and development programs on a national treatment basis. Incoming foreign currency must be identified by the participating bank to the Central Bank of Argentina (www.bcra.gov.ar ). There is no official executive or other interference in the court that could affect foreign investors.

All foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law No. 19,550) and the rules issued by the commercial regulatory agencies. Decree 27/2018 amended Law No. 19,550 to simplify bureaucratic procedures. Full text of the decree can be found at (http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305736/norma.htm ). All other laws and norms concerning commercial entities are established in the Argentina Civil and Commercial Code.

Further information about Argentina’s investment policies can be found at the following websites:

Competition and Anti-Trust Laws

The National Commission for the Defense of Competition and the Secretariat of Commerce, both within the Ministry of Production, have enforcement authority of the Competition Law (Law 25,156). The law aims to ensure the general economic interest and promotes a culture of competition in all sectors of the national economy. In April 2018, Argentina’s Senate passed a bill to amend the Competition Law, which is pending approval by the lower chamber of Congress.

Expropriation and Compensation

Section 17 of the Argentine Constitution affirms the right of private property and states that any expropriation must be authorized by law and compensation must be provided. The United States-Argentina BIT states that investments shall not be expropriated or nationalized except for public purposes upon prompt payment of the fair market value in compensation.

Argentina has a history of expropriations under previous administrations, the most recent of which occurred in March 2015 when the Argentine Congress approved the nationalization of the train and railway system. A number of companies that were privatized during the 1990s under the Menem administration were renationalized under the Kirchner administrations. Additionally, in October 2008, Argentina nationalized Argentina’s private pension funds, which amounted to approximately one-third of total GDP, and transferred the funds to the government social security agency.

Dispute Settlement

ICSID Convention and New York Convention

Argentina is signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which the country ratified in 1989. Argentina is also a party to the International Center for Settlement of Investment Disputes (ICSID) Convention since 1994.

There is neither specific domestic legislation providing for enforcement under the 1958 New York Convention nor legislation for the enforcement of awards under the ICSID Convention. Companies that seek recourse through Argentine courts may not simultaneously pursue recourse through international arbitration. In practice, the Macri administration has shown a willingness to negotiate settlements to valid arbitral awards.

In March 2012, the United States suspended Argentina’s designation as a Generalized System of Preferences (GSP) beneficiary developing country because it had not acted in good faith in enforcing arbitral awards in favor of United States citizens or a corporation, partnership, or association that is 50 percent or more beneficially owned by United States citizens. Effective January 1, 2018, the United States ended Argentina’s suspension from the GSP program and restored access for GSP duty-free treatment for over 3,000 Argentine products.

Investor-State Dispute Settlement

The Argentine government officially accepts the principle of international arbitration. The United States-Argentina BIT includes a chapter on Investor-State Dispute Settlement for U.S. investors.

In the past ten years, Argentina has been brought before the ICSID in 23 cases involving U.S. or other foreign investors. Of those, nine remain pending. Argentina currently has five pending arbitral cases filed against it by U.S. investors, including four which have been pending for several years. For more information on the cases brought by U.S. claimants against Argentina, go to: https://icsid.worldbank.org/en/Pages/cases/AdvancedSearch.aspx# .

Local courts cannot enforce arbitral awards issued against the government based on the public policy clause. There is no history of extrajudicial action against foreign investors.

Argentina is a member of the United Nations Commission on International Trade Law (UNCITRAL) and the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Argentina is also a party to several bilateral and multilateral treaties and conventions for the enforcement and recognition of foreign judgments, which provide requirements for the enforcement of foreign judgments in Argentina, including:

Treaty of International Procedural Law, approved in the South-American Congress of Private International Law held in Montevideo in 1898, ratified by Argentina by law No. 3,192.

Treaty of International Procedural Law, approved in the South-American Congress of Private International Law held in Montevideo in 1939-1940, ratified by Dec. Ley 7771/56 (1956).

Panamá Convention of 1975, CIDIP I: Inter-American Convention on International Commercial Arbitration, adopted within the Private International Law Conferences – Organization of American States, ratified by law No. 24,322 (1995).

Montevideo Convention of 1979, CIDIP II: Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, adopted within the Private International Law Conferences – Organization of American States, ratified by law No. 22,921 (1983).

International Commercial Arbitration and Foreign Courts

Alternative dispute resolution (ADR) mechanisms can be stipulated in contracts. Argentina also has ADR mechanisms available such as the Center for Mediation and Arbitrage (CEMARC) of the Argentine Chamber of Trade. More information can be found at: http://www.intracen.org/Centro-de-Mediacion-y-Arbitraje-Comercial-de-la-Camara-Argentina-de-Comercio—CEMARC–/#sthash.RagZdv0l.dpuf .

Argentina does not have a specific law governing arbitration, but it has adopted a mediation law (Law No. 24.573/1995), which makes mediation mandatory prior to litigation. Some arbitration provisions are scattered throughout the Civil Code, the National Code of Civil and Commercial Procedure, the Commercial Code, and three other laws. The following methods of concluding an arbitration agreement are non-binding under Argentine law: electronic communication, fax, oral agreement, and conduct on the part of one party. Generally, all commercial matters are subject to arbitration. There are no legal restrictions on the identity and professional qualifications of arbitrators. Parties must be represented in arbitration proceedings in Argentina by attorneys who are licensed to practice locally. The grounds for annulment of arbitration awards are limited to substantial procedural violations, an ultra petita award (award outside the scope of the arbitration agreement), an award rendered after the agreed-upon time limit, and a public order violation that is not yet settled by jurisprudence when related to the merits of the award. On average, it takes around 21 weeks to enforce an arbitration award rendered in Argentina, from filing an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 18 weeks to enforce a foreign award. The requirements for the enforcement of foreign judgments are set out in section 517 of the National Procedural Code.

No information is available as to whether the domestic courts frequently rule in cases in favor of state-owned enterprises (SOE) when SOEs are party to a dispute.

Bankruptcy Regulations

Argentina’s bankruptcy law was codified in 1995 in Law 24,522. The full text can be found at: http://www.infoleg.gov.ar/infolegInternet/anexos/25000-29999/25379/texact.htm . Under the law, debtors are generally able to begin insolvency proceedings when they are no longer able to pay their debts as they mature. Debtors may file for both liquidation and reorganization. Creditors may file for insolvency of the debtor for liquidation only. The insolvency framework does not require approval by the creditors for the selection or appointment of the insolvency representative or for the sale of substantial assets of the debtor. The insolvency framework does not provide rights to the creditor to request information from the insolvency representative but the creditor has the right to object to decisions by the debtor to accept or reject creditors’ claims. Bankruptcy is not criminalized; however, convictions for fraudulent bankruptcy can carry two to six years of prison time.

Financial institutions regulated by the Central Bank of Argentina (BCRA) publish monthly outstanding credit balances of their debtors; the BCRA and the Central de Deudores (debtors’ center) compile and publish this information. The database is available for use of financial institutions that comply with legal requirements concerning protection of personal data. The credit monitoring system only includes negative information, and the information remains on file through the person’s life. At least one local NGO that makes microcredit loans is working to make the payment history of these loans publically accessible for the purpose of demonstrating credit history, including positive information, for those without access to bank accounts and who are outside of the Central Bank’s system. Equifax, which operates under the local name “Veraz” (or “truthfully”), also provides credit information to financial institutions and other clients, such as telecommunications service providers and other retailers that operate monthly billing or credit/layaway programs.

The World Bank’s 2018 Doing Business Report ranked Argentina 101 among 189 countries for the effectiveness of its insolvency law. This is a jump of 15 places from its ranking of 116 in 2017. The report notes that it takes an average of 2.4 years and 16.5 percent of the estate to resolve bankruptcy in Argentina.

6. Financial Sector

Capital Markets and Portfolio Investment

The Macri administration enacted a series of macroeconomic reforms (unifying the exchange rate, settling with holdout creditors, annulling most of the trade restrictions, lifting capital controls, to mention a few) to improve the investment climate. In May 2018, the Congress approved a new capital markets law aimed at boosting economic growth through the development and deepening of the local capital market. Argentina also signed several bilateral agreements and memoranda of understanding with other countries aimed to increase inward foreign direct investment.

The Argentine Securities and Exchange Commission (CNV or Comision Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms. Foreign investors have access to a variety of options on the local market to obtain credit.

The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina’s primary stock exchange, located in Buenos Aires City. The most important index of the Buenos Aires Stock Exchange is the MERVAL (Mercado de Valores).

U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina. The Congress approved in May 2018 a new capital markets law that will remove over-reaching regulatory intervention provisions introduced by the previous government and ease restrictions on mutual funds and foreign portfolio investment in domestic markets.

Money and Banking System

Argentina has a relatively sound banking sector based on diversified revenues, well-contained operating costs, and a high liquidity level. The main challenge for banks is to rebuild long-term assets and liabilities. In 2017, the quantity of money available as credit to the private sector increased 22 percent in real terms, achieving the largest increase in the last 16 years. As a result, the stock of credit to the private sector (for both corporations and individuals) reached 14 percent of GDP. BCRA regulatory changes revised the permitted calculations of interest rates in home loans in 2016; as a result, in 2017, the mortgage credit market had a stellar performance by growing 118 percent in real terms. The largest bank is the Banco de la Nacion Argentina. Non-performing private sector loans constitute less than two percent of banks’ portfolios. The ten largest private banks have total assets of approximately ARS 1,656 billion (USD 66 billion). Total financial system assets are approximately ARS 3,468 billion (USD 138 billion). The Central Bank of Argentina acts as the country’s financial agent and is the main regulatory body for the banking system.

Foreign banks and branches are allowed to establish operations in Argentina. They are subject to the same regulation as local banks. Argentina’s Central Bank has many correspondent banking relationships, none of which are known to have been lost in the past three years.

The Central Bank has enacted a resolution recognizing cryptocurrencies and requiring that they comply with local banking and tax laws. No implementing regulations have been adopted. Blockchain developers report that several companies in the financial services sector are exploring or considering using blockchain-based programs externally and are using some such programs internally. One Argentine NGO, through funding from the Inter-American Development Bank (IDB), is developing blockchain-based banking applications to assist very low income populations.

Foreign Exchange and Remittances

Foreign Exchange Policies

President Macri issued a number of regulations that lifted all capital controls and reduced trade restrictions. In November 2017, the government repealed the obligation to convert hard currency earnings on exports of both goods and services to pesos in the local foreign exchange market.

Per Resolution 36,162 of October 2011, locally registered insurance companies are mandated to maintain all investments and cash equivalents in the country. In November 2017, the Argentine insurance regulator issued Resolution 41057-E/2017, amending the investment regime for insurance companies. The Resolution prohibits insurance companies from purchasing (directly or indirectly through mutual funds) short-term Central Bank debt instruments (locally known as Lebac) for their investment portfolios.

The Argentine Central Bank limits banks’ dollar-denominated asset holdings to 10 percent of their net worth.

Since December 2015, Argentina has a managed floating exchange rate regime in which the Central Bank may intervene to reduce volatility in the domestic foreign exchange market, which generally is determined by demand and supply.

Remittance Policies

According to Resolutions No. 3,819/2015 and 1/2017, companies and investors have no official restrictions on money conversion, remittances, or repatriation of their earnings.

Sovereign Wealth Funds

The Argentine Government does not maintain a Sovereign Wealth Fund.

Armenia

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

The Armenian Government officially welcomes foreign investment; the country has achieved respectable rankings on some global indices measuring the business climate. Armenia’s investment and trade policy is relatively open; foreign companies are entitled by law to the same treatment as Armenian companies (national treatment). Armenia has strong human capital and a well-educated population, particularly in the Science, Technology, Engineering and Math (STEM) fields. The high-tech and information technology (IT) sectors have particularly attracted foreign investment. Many international companies have established branches or subsidiaries in Armenia to take advantage of the country’s pool of qualified specialists and trade preferences with Russia and the Eurasian Economic Union. However, Armenia’s investment climate poses several challenges as a result of its small market (Armenia has a population of less than three million), its relative geographic isolation due to closed borders with Turkey and Azerbaijan, its per capita gross national income (GNI) of about USD 3,800, and high levels of corruption.

Major sectors of Armenia’s economy are controlled by well-connected businessmen enjoying government-protected market dominance, creating barriers to new entrants and preventing a level playing field for all businesses. The Armenian government has also on occasion deployed government agencies, including the tax and customs services, for political motives. Foreign businesses, especially SMEs, may encounter non-transparent tax and customs procedures that increase costs and business risks. The open legislative framework and the government’s visible effort to attract more foreign investment are complicated by instances of unfair tender / procurement processes and practices and preferential treatment. The investment climate is also tainted by the failure to properly enforce or to selectively enforce intellectual property rights. The lack of an independent and strong judiciary has undermined the government’s assurances of equal treatment and transparency and reduced businesses’ recourse in the instances of contract or tax disputes. However, in 2011, the Republic of Armenia became the first country among the Commonwealth of Independent States (CIS) to accede to the WTO’s Government Procurement Agreement (GPA 1994). Armenia joined the GPA 2012 version in June 2015. Currently, the Armenian Government has submitted to Parliament a new draft Law on Foreign Investment, which would strengthen protections for foreign investors.

The Development Foundation of Armenia (DFA) is Armenia’s national authority for investment and export promotion; the DFA provides services and information to foreign investors related to the business climate, investment opportunities and legislation. It also provides support for investors’ visits as well as a liaison with governmental institutions. More information about the legislation, procedures and registrations can be obtained from the DFA (E-mail: info@dfa.amwww.dfa.am https://www.facebook.com/DFArmenia/ ). The Armenian Government established the Center for Strategic Initiatives to advance essential reforms, increase exports, and attract long-term and sustainable foreign investments into Armenia through public-private partnership (http://www.reforms.am/en ). Investment projects promoted by the Armenian Government could be found at http://investmentprojects.am/ .

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limitations on foreign ownership and control of commercial enterprises. There are also no sector specific restrictions.

The Armenian government does not screen foreign direct investments.

Other Investment Policy Reviews

Armenia has not undergone Investment Policy Reviews by either the Organization of Economic Cooperation and Development (OECD) or U.N Conference on Trade and Development (UNCTAD). The World Trade Organization (WTO) conducted a Trade Policy Review in 2010, which can be found at http://www.wto.org/english/tratop_e/tpr_e/tp328_e.htm .

Business Facilitation

Armenia has traditionally ranked well in the World Bank’s Ease of Doing Business report. Companies can register businesses electronically at http://www.e-register.am/en/ . This single window service was launched in 2011 and allows individual entrepreneurs and companies to obtain name reservation, business registration, and tax identification services at a single location and at the same time. The legal time limit for the process is two working days, but the application may be dealt with in one day. However, an electronic signature is needed in order to be able to register online. Foreign citizens can obtain an e-signature and more detailed information from the e-signature portal at https://www.ekeng.am/en/ . A foreign company is not required to seek investment approval. Companies in Armenia are free to open and maintain bank accounts in foreign currency and there are no minimum capital requirements for foreign or domestic companies.

Outward Investment

The Armenian Government does not restrict domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

The Armenian regulatory system is still not implemented in a sufficiently transparent manner. A small cadre of businesses dominates particular sectors and utilize government assistance to suppress full competition. Despite some improvements in customs with regard to import procedures and the application of reference prices, the inconsistent application of tax, customs (especially with respect to valuation and classification), and regulatory rules (especially in the area of trade) undermines fair competition and adds risk for less politically-connected businesses, particularly small-and medium-sized businesses and new market entrants. Armenia’s legislation on protection of competition has recently been improved with clear definitions of limitation of competition and newly introduced concepts on price manipulation, imposition of fines on economic agents as a percentage of revenue vs. previous fixed amounts, and penalties for state officials for fixing tenders. However, the State Commission for the Protection of Economic Competition (SCPEC) lacks investigative powers and operates based on document studies, often provided by competing claimants. The efforts of the SCPEC alone are not enough to ensure a level playing field because of the roles of other state institutions, which affect competition, like courts, tax and customs agencies, and law enforcement agencies. Banking supervision is relatively well developed and largely consistent with the Basel Core Principles. The Central Bank of Armenia is the primary regulator for all segments of the financial sector, including banking, securities, insurance and pensions.

Safety and health requirements, most of them holdovers from the Soviet period, generally do not impede investment activities. Bureaucratic procedures can nevertheless be burdensome, and discretionary decisions by individual officials still provide opportunities for petty corruption. Despite persistent problems with corrupt officials, both local and foreign businesses assert that a sound knowledge of tax and customs law and regulations enables business owners to deflect the majority of unlawful bribe requests, which is easier for big companies than for SMEs. The unified online platform for publishing draft legislation was launched in March 2017, available at https://www.e-draft.am/ . The proposed legislation is available for everybody to view and the registered users can send feedback and get a summary of comments on draft legislation. However, the time period devoted to public comments in Armenia is often not sufficient for proper feedback. The results of consultations have not been reported by the government in the past.

International Regulatory Considerations

Armenia is a member of the Eurasian Economic Union (EAEU) and adheres to the technical regulations adopted within the EAEU. Armenia is also a member of the WTO and the Armenian Government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Armenia is a signatory to the Trade Facilitation Agreement and had already implemented all category A requirements. Notification on implementation of category B requirements will be submitted to the WTO in April 2018 and the Armenian Government is working with international donors on potential assistance for the implementation of category C requirements.

Legal System and Judicial Independence

Armenia has a hybrid legal system that includes elements of both civil and common law. Although Armenia is developing an international commercial code, the laws regarding commercial and contractual matters currently are set forth in the civil code. Thus, because Armenia lacks a commercial court, all disputes involving contracts, ownership of property, or commercial matters are resolved by litigants in the courts of general jurisdiction, which handle both civil and criminal cases. However, the courts which handle civil matters are overwhelmed by the volume of cases before them and are seen by the public as corrupt. Despite the ability of courts to use the precedential authority of the Court of Cassation and the European Court of Human Rights, many judges do not do so, making civil court decisions unpredictable.

Many Armenian courts suffer from low levels of efficiency, independence, and professionalism, creating a need to strengthen the Armenian judiciary. Very often in cases when additional forensic expertise is requested during the judicial proceedings, the court may suspend the process until the forensic opinion is received, which may take months. Litigants are wary of turning to Armenian courts for redress because of the lack of judicial independence. Many judges at the court of general jurisdiction are reluctant to make a decision without getting advice from high court judges. Thus, decisions may be influenced by factors other than the law and merits of the cases. In general, the government honors judgments from both arbitration and Armenian national courts.

Due to the nature and complexity of commercial and contractual issues and the caseload of the civil courts, many matters involving investment/commercial disputes take months or years to work their way through the civil courts. In addition, because of the inherent inefficiencies and institutional corruption of the courts, matters are often delayed and outcomes are not predictable. Even though the Armenian Constitution provides investors the tools to enforce awards and their property rights, there is little predictability in what a court may do.

Laws and Regulations on Foreign Direct Investment

The Development Foundation of Armenia (DFA) is Armenia’s national authority for investment, and export promotion that provides services and information to foreign investors on business climate, investment opportunities and the legislation, support for investors’ visits, as well as liaison with governmental institutions. More information about the legislation, procedures and registrations can be obtained from DFA (E-mail: info@dfa.amwww.dfa.am ).

Competition and Anti-Trust Laws

The State Commission for the Protection of Economic Competition reviews transactions for competition related concerns. The law, regulations, commission decisions, and more information can be found at http://www.competition.am/?lng=2 .

Expropriation and Compensation

Under Armenian law, foreign investments cannot be confiscated or expropriated except in extreme cases of natural or state emergency, upon obtaining an order from a domestic court. In all cases, proper and fair compensation is owed to the property owner. The U.S. Government is not aware of any confirmed cases of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Armenia is a state member of the ICSID convention and a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Under Article 5 of the Armenian Constitution, international treaties are a constituent part of the legal system of the Republic of Armenia. When an international treaty is ratified, if it stipulates norms other than those present in the domestic laws, the guidelines of the treaty shall prevail.

Investor-State Dispute Settlement

According to the 1994 Foreign Investment Law, all disputes that arise between a foreign investor and the Republic of Armenia must be settled in Armenian courts. A law on Commercial Arbitration was enacted in 2007, which provides investors with a wider range of options for resolving their commercial disputes. The U.S.-Armenia BIT provides that in the event of a dispute between an American investor and the Republic of Armenia, the investor may take the case to international arbitration. As an international treaty, the BIT supersedes Armenian law, a point which Armenia’s constitution acknowledges and which holds in actual practice. While there have been a few investment disputes involving U.S. and other foreign investors, there is no evidence of a pattern of discrimination against foreign investors in these cases.

International Commercial Arbitration and Foreign Courts

Commercial disputes may be brought before an Armenian or any other competent court, as provided by law or in accordance to party agreement. Commercial disputes are heard in courts of general jurisdiction. The specialized administrative courts adjudicate cases brought against state entities. Final judgments may be appealed to the Court of Appeal and Court of Cassation, the highest judicial authority in Armenia.

The Law on Arbitration Courts and Arbitration Procedures provides rules governing the settlement of disputes by arbitration. Armenia is a member state to the International Center for Settlement of Investment Disputes (ICSID Convention) and convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). The stipulations of the New York convention have been incorporated into Article 5 of the Armenian Constitution which requires domestic courts to recognize foreign arbitral awards.

Armenia intends to develop an alternative dispute resolution (ADR) mechanism that will include mediation and arbitration. ADR could be used not only in commercial matters, including those involving mobile property and secured transactions, but also in cases involving family and labor disputes. While ADR options are available for those who seek alternatives to litigation, they currently are not widely used or trusted.

Bankruptcy Regulations

According to the Law on Bankruptcy adopted in 2006, the creditors, equity and contract holders (including foreign entities) have the right to participate and defend their interests in the judicial proceedings of a bankruptcy case. Creditors have the right to access all materials relevant to the case, submit claims to the court in relation to the bankruptcy, participate in creditors’ meeting, and nominate a candidate to administer the case. Monetary judgments are usually made in local currency. The Armenian Criminal code defines penalties for false and deliberate bankruptcy, for concealment of property or other assets of the bankrupt party, or for other illegal activities during the bankruptcy process. Armenia amended its bankruptcy law in 2012 to clarify procedures for appointing insolvency administrators, reducing the processing time for bankruptcy proceedings, and regulating asset sales by auction.

According to the World Bank’s 2018 Doing Business Index, resolving insolvency takes 1.9 years on average and costs 11 percent of the debtor’s estate, with the most likely outcome being that the company will be broken up and sold. The average recovery rate is 36.4 cents on the dollar. Globally, Armenia stands at 97 in the ranking of 190 economies on the ease of resolving insolvency in the World Bank’s Doing Business 2018 Report (http://www.doingbusiness.org/rankings http://www.doingbusiness.org/data/exploreeconomies/
armenia#resolving-insolvency
 
).

6. Financial Sector

Capital Markets and Portfolio Investment

The banking system in Armenia is sound and well-regulated, but Armenia’s financial sector is not highly developed. IMF estimates suggest that banking sector assets account for about 90 percent of total financial sector assets. Financial intermediation is poor. Because Armenian banks charge service and other fees, the actual interest rate paid by the customer may be higher than the nominal interest rate quoted by the banks. Nearly all banks require collateral located in Armenia, and large collateral requirements often prevent potential borrowers from entering the market. This remains the main barrier for SMEs and start-up companies.

The Armenian Government welcomes foreign portfolio investments and there is a system in place and legal framework for investments. However, Armenia’s securities market is not well developed and has only minimal trading activity through the NASDAQ-OMS exchange. Liquidity for the transfer of large sums can be difficult due to the small size of Armenia’s financial market and overall economy. The Armenian Government is hoping that as a result of the 2014 pension reform, which brought two international asset managers (Amundi and C-Quadrat) to Armenia, the capital market will play a more prominent role in the financial sector of the country. Armenia respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and foreign investors are able to access credit locally.

Money and Banking System

The banking sector is healthy; non-performing loans are less than 10 percent which is within acceptable international standards. The top three Armenian banks by assets are Ameriabank – 677.7 billion AMD (1.4 billion USD), Armbusinessbank – 574.9 billion AMD (1.2 billion USD) and Ardshinbank – 568.2 billion AMD (1.1 billion USD) and. The Central Bank of Armenia has initiated consolidation in the banking system; as of January 1, 2017 the minimum capital requirements for banks increased from the 5 billion AMD (10.4 million USD) to 30 billion AMD (62.5 million USD). This is intended to allow the banks to issue bigger loans at lower interest rates and will further strengthen the Armenian banking system. There are no restrictions for foreigners to open bank accounts. Foreign banks and branches are allowed to establish operations in the country, being subjected to the same prudential measures and regulations as local banks.

Foreign Exchange and Remittances

Foreign Exchange Policies

Armenia has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. Most banks can transfer funds internationally within two to four days. Armenia maintains the Armenian dram (AMD) as a freely convertible currency under a managed float. The Central Bank of Armenia (CBA) sought to maintain the AMD through intervention in the foreign exchange market and through administrative measures in November– December 2014 to prevent market panic and drastic devaluation in the currency market. As a result, a 17 percent depreciation of the Armenian dram was roughly on par with the widespread decline of many currencies against the dollar over the same period. The AMD/USD exchange rate as of March 2018 fluctuated around 480 AMD to the USD.

According to the 2005 law on Currency Regulation and Currency Control, prices for all goods and services, property and wages must be set in AMD. There are exceptions in the law, however, for transactions between resident and non-resident businesses and for certain transactions involving goods traded at world market prices. The law requires that interest on foreign currency accounts be calculated in that currency, but be paid in AMD.

Remittance Policies

Armenia has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, lease payments, private foreign debt or management or technical service fees.

Sovereign Wealth Funds

Armenia does not have a sovereign wealth fund.

Australia

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for certain types of foreign investment described below, there are no laws that discriminate against foreign investors.

A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national ‘gateway’ agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC.

In addition, state investment promotion agencies also support international investment at the state level and in key sectors. For example, Investment Attraction South Australia aims to drive inward investment for South Australia. Invest in New South Wales similarly seeks to promote New South Wales as an investment location.

Limits on Foreign Control and Right to Private Ownership and Establishment

Within Australia, the right exists for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity in accordance with national legislative and regulatory practices.

See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.

Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD 15 million (USD 12 million) is subject to screening. This threshold will apply to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under AUSFTA. The current threshold remains AUD 1.094 billion (USD 875 million) for U.S. non-government investors. Future investments made by U.S. non-government investors will be subject to inclusion on the foreign ownership register of agricultural land and are also subject to Australian Tax Office (ATO) information gathering activities on new foreign investment.

U.S. investors do not face any restrictions when investing in Australia relative to investors from other countries. All foreign persons, including U.S. investors, must notify the Australian government and receive prior approval to make investments of five percent or more in the media sector, regardless of the value of the investment.

Other Investment Policy Reviews

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. A WTO review of the trade policies and practices of Australia did take place however, in April 2015, and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp412_e.htm .

The Australian Trade Commission compiles an annual ‘Why Australia Benchmark Report’ that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report .

Business Facilitation

Business registration in Australia is relatively straightforward and is facilitated through a number of Government web sites. The Commonwealth Department of Industry, Innovation and Science’s business.gov.au  provides an online resource and is intended as a ‘whole-of-government’ service providing essential information on planning, starting and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets and financial services regulator, the ASIC web site provides information and guides on starting and managing a business or company.

In registering a business, individuals and entities are required to register as a company with the ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank ‘Starting a Business’ indicator, registering a business in Australia takes 2.5 days and Australia ranks 7th globally on this indicator.

The Australian Government has a range of initiatives to assist women and minority groups with establishing new businesses. At a high level, the Office for Women within the Department of Prime Minister and Cabinet promotes economic security for women, leadership for women in business, and various grants and funding for initiatives that promote women in business. Various initiatives also exist to assist indigenous Australians engage in the economy including through business creation. Guidance on setting up new businesses is also available in a range of foreign languages through the business.gov.au  website.

Outward Investment

Australia generally looks positively towards outward investment as a ways to grow its economy. There are no restrictions on domestic investors. Austrade, the Australian Government’s export credit agency, Efic (Export Finance and Insurance Corporation), and various other government agencies offer assistance to Australian businesses looking to invest abroad.

3. Legal Regime

Transparency of the Regulatory System

The Australian Government utilizes transparent policies and effective laws to foster national competition and is consultative in its policy making process. The government generally allows for public comment of draft legislation and publishes legislation once it enters into force.

Regulations drafted by Australian Government agencies must be accompanied by a Regulation Impact Statement when submitted to the final decision maker (which may be the Cabinet, a Minister, or another decision maker appointed by legislation). All Regulation Impact Statements must first be approved by the Office of Best Practice Regulation (OBPR) which sits within the Department of Prime Minister and Cabinet, prior to being provided to the relevant decision maker. They are required to demonstrate the need for regulation, the alternative options available (including non-regulatory options), feedback from stakeholders, and a full cost-benefit analysis. Regulations are subsequently required to be reviewed periodically. All Regulation Impact Statements, second reading speeches, explanatory memoranda, and associated legislation are made publicly available on Government websites. Australia’s state and territory governments have similar processes when making new regulations.

The Australian Government has tended to prefer self-regulatory options where an industry can demonstrate that the size of the risks are manageable and that there are mechanisms for the industry to agree on, and comply with, self-regulatory options that will resolve the identified problem. This manifests in various ways across industries, including voluntary codes of conduct and similar agreements between industry players.

The Australian Government has recognized the impost that regulation can impose on businesses and has undertaken a range of initiatives to reduce red tape. This has included specific red tape reduction targets for government agencies, and various deregulatory groups within government agencies.

Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board, an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are to develop a conceptual framework for the purpose of evaluating proposed standards; make accounting standards under section 334 of the Corporations Act 2001, and advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy. The Australian Government conducts regular reviews of proposed measures and legislative changes and holds public hearings into such matters.

International Regulatory Considerations

Australia is a member of the WTO, the Asia-Pacific Economic Cooperation (APEC) and became the first of Association of Southeast Nations’ (ASEAN) ten dialogue partners in 1974. While not a regional economic block, Australia’s free trade agreement with New Zealand provides for a high level of integration between the two economies with the ultimate goal of a single economic market.

Australia is a signatory to the WTO Trade Facilitation Agreement (TFA) and performs at, or close to, the frontier for all eleven OECD Trade Facilitation Indicators. For the eight indicators where it is not located at the frontier, it has significantly improved on six between 2015 and 2017. While no new legislation has been required to progress Australia’s implementation of the TFA, Australia has created a National Committee on Trade Facilitation to oversee development of new trade facilitation initiatives. Two important initiatives to date have been the creation of an Authorized Economic Operator scheme to allow approved companies to streamline imports through Australian Customs, and the creation of a ‘single window’ portal for traders seeking information on importation and permit requirements.

Legal System and Judicial Independence

The Australian legal system is firmly grounded on the principles of equal treatment before the law, procedural fairness, judicial precedent, and the independence of the judiciary. Strong safeguards exist to ensure that people are not treated arbitrarily or unfairly by governments or officials. Property and contractual rights are enforced through the Australian court system, which is based on English Common Law.

Laws and Regulations on Foreign Direct Investment

Information regarding investing in Australia can be found in Austrade’s Investor Guide at http://www.austrade.gov.au/International/Invest/Investor-guide . The guide is designed to help international investors and businesses navigate investing and operating in Australia. It is an online guide to the regulations, considerations and assistance relevant to investing in, establishing, and running a business in Australia, with direct links to relevant regulators and government agencies that relate to Australian Government regulation and available assistance.

Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB), a division of Australia’s Treasury, is a non-statutory body established to advise the Treasurer and the Commonwealth Government on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB, the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. Following a number of recent investments made by foreign companies in key sectors of Australia’s economy, the laws and regulations governing foreign direct investment have been subject to a wide ranging and ongoing review.

The Australian Government has a ‘national interest’ consideration in reviewing foreign investment applications.

In January 2017, the Government established the Critical Infrastructure Centre (CIC) to better manage the risks to Australia’s critical infrastructure assets. A key role of the CIC is to advise the FIRB on risks associated with foreign investment in infrastructure assets, particularly telecommunications, electricity, water and port assets. While the CIC’s role in the foreign investment process signals the Government’s focus on these assets, its role is limited to providing advice to the Government and the approval framework itself was not changed when the CIC was established. Further changes to investments in electricity assets and agricultural land were announced in early 2018. Under these changes, electricity infrastructure is formally viewed as ‘critical infrastructure’ and foreign purchases will face additional scrutiny and conditions, while agricultural land is now required to be ‘marketed widely’ to Australian buyers before being sold to a foreign buyer. Various states also announced over 2017 that they would apply surcharges to foreign investment in real estate.

Under the Australia-United States Free Trade Agreement (AUSFTA), all U.S. greenfield investments are exempt from FIRB screening. U.S. investors require prior approval if acquiring a substantial interest in a primary production business valued above AUD 1.094 billion (USD 791.6 million).

Competition and Anti-Trust Laws

The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 and a range of additional legislation, promotes competition, fair trading and regulates national infrastructure for the benefit of all Australians. The ACCC plays a key role in assessing mergers to determine whether they will lead to a substantial lessening of competition in any market. ACCC also engages in consumer protection enforcement and has expanded responsibilities to monitor digital industries and the “sharing economy.”

Expropriation and Compensation

Private property can be expropriated for public purposes in accordance with Australia’s constitution and established principles of international law. Property owners are entitled to compensation based on “just terms” for expropriated property. There is little history of expropriation in Australia although a few U.S. investors have claimed certain commercial disputes should be considered expropriation. (See below description.)

Dispute Settlement

ICSID Convention and New York Convention

Australia is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The International Arbitration Act 1974 governs international arbitration and the enforcement of awards.

Investor-State Dispute Settlement

Investor-State Dispute Settlement (ISDS) is included in some but not all of Australia’s 21 BITs and 9 FTAs. AUSFTA establishes a dispute settlement mechanism for investment disputes arising under the Agreement. However, AUSFTA does not contain an investor-state dispute settlement (ISDS) mechanism that would allow individual investors to bring a case against the Australian government. Regardless of the presence or absence of ISDS mechanisms, there is no history of extrajudicial action against foreign investors in Australia.

In 2010, an Australian company with approximately 30 percent U.S. institutional investor ownership acquired an Australian mining company for the purpose of obtaining the latter company’s primary asset, a coal exploration license. The New South Wales (NSW) government had legally approved the purchase. Subsequent to the purchase, however, the NSW Independent Commission Against Corruption (ICAC), a non-judicial anti-corruption entity with sweeping powers of investigation but no independent powers to prosecute, determined that the original Australian company had corruptly obtained the license. Based on the ICAC findings, the NSW government passed legislation cancelling the license, denying the investors the ability to seek compensation, and preventing the NSW government from having any liability for its past conduct. The result of these actions is the investors of the acquiring company, including the U.S. investors, have lost their entire investment.

International Commercial Arbitration and Foreign Courts

Australia has an established legal and court system for the conduct or supervision of litigation and arbitration, as well as alternate dispute resolutions. Australia is a leader in the development and provision of non-court dispute resolution mechanisms. It is a signatory to all the major international dispute resolution conventions and has organizations that provide international dispute resolution processes.

Bankruptcy Regulations

Bankruptcy is a legal status conferred under the Bankruptcy Act 1966 and operates in all of Australia’s States and Territories. Only individuals can be made bankrupt and not businesses or companies. Where there is a partnership or person trading under a business name, it is the individual or individuals who make up that firm that are made bankrupt. Companies cannot become bankrupt under the Bankruptcy Act though similar provisions (called administration and winding up) exist under the Corporations Act 2001. Bankruptcy is not a criminal offense in Australia.

Creditor rights are established under the Bankruptcy Act 1966, the Corporations Act 2001, and the more recent Insolvency Law Reform Act 2016. The latter legislation commenced in two tranches over 2017 and aims to increase the efficiency of insolvency administrations, improve communications between parties, increase the corporate regulator’s oversight of the insolvency market, and ‘improve overall consumer confidence in the professionalism and competence of insolvency practitioners’. Under the combined legislation, creditors have the right to: request information during the administration process, give direction to a liquidator or trustee, appoint a liquidator to review the current appointee’s remuneration, and remove a liquidator and appoint a replacement.

Four credit monitoring authorities operate in the Australian market: Equifax, Dun and Bradstreet, Experian, and the Tasmanian Collection Service. The information that can be provided to, and used by, these bodies is restricted by the Privacy Act 1988 and the associated Privacy (Credit Reporting) Code 2014. Current policy seeks to balance the privacy rights of individuals and the depth of information available to credit providers. Until 2018, credit reporting in Australia has consisted only of ‘negative’ reporting, however, in July 2018 the Government will require that credit providers also report ‘positive’ information on individuals’ credit history.

6. Financial Sector

Capital Markets and Portfolio Investment

The Australian Government takes a favorable stance towards foreign portfolio investment with no restrictions on inward flows of debt or equity. Indeed, access to foreign capital markets is crucial to the Australian economy given its relatively small domestic fixed income markets. Australian capital markets are generally efficient and are able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms do face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity and smaller firms more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, and Australia is one of only two countries with insufficiently large Government debt issuance to enable domestic banks to meet their requirements under the Basel III regulations. Foreign investors are able to get credit on the local market on market terms.

Money and Banking System

Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance.

Total assets of the four largest banks is US$296 billion, approximately 67 percent of total financial sector assets and 21 percent of the market value of all listed Australian companies. According to Australia’s Central Bank (the Reserve Bank of Australia or RBA), the ratio of non-performing assets to total loans was just under 1 percent at the end of 2017, having remained at around that level for the last four years after falling from highs of nearly 2 percent following the Global Financial Crisis. The RBA is responsible for monitoring and reporting on the stability of the financial sector, while the Australian Prudential Regulatory Authority (APRA) monitors individual institutions. Foreign banks are allowed to operate as a branch or a subsidiary in Australia. Australia has generally taken an open approach to allowing foreign companies to operate in the financial sector, largely to ensure sufficient competition in an otherwise small domestic market.

The RBA is responsible for monitoring and regulating payments systems in Australia. It has overseen the creation of the New Payments Platform that came online in early 2018, allowing fast processing of low value transactions. The Australian Government and RBA have investigated opportunities for using blockchain technologies in the financial sector. Private sector blockchain solutions are also being developed, including the announcement that the Australian Stock Exchange’s clearing solution will be replaced by a distributed ledger system. Governments at both the federal and state levels have sought to encourage the development of a local fintech industry, with assistance including supporting regulatory changes and in-kind assistance. Developments in these alternative payment systems remain nascent and the vast majority of transactions continue to be carried out through existing centrally-maintained payment platforms.

Foreign Exchange and Remittances

Foreign Exchange

The Commonwealth Government formulates exchange control policies with the advice of the Reserve Bank of Australia (RBA) and the Treasury. The RBA, charged with protecting the currency, has the authority to implement exchange controls, although there are currently none in place.

The Australian dollar is a fully convertible and floating currency. The Commonwealth Government does not maintain currency controls or limit remittances. Such payments are processed through standard commercial channels, without governmental interference or delay.

Remittance Policies

Australia does not limit investment remittances.

Sovereign Wealth Funds

Australia’s sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government. The Fund’s objective is to enhance the ability of future Australian Government’s to discharge unfunded superannuation (pension) liabilities expected after 2020, when an ageing population is likely to place significant pressures on Government finances. As a founding member of the International Forum of Sovereign Wealth Fund (IFSWF), the Future Fund’s structure, governance and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the ‘Santiago principles’).

In addition to the Future Fund, the Australian government has a number of ‘nation-building funds’, a Disability Care Fund, and a Medical Research Future Fund. A Building Australia Fund enhances the Commonwealth’s ability to make payments in relation to the creation or development of transport, communications, energy, and water infrastructure and in relation to eligible national broadband matters. An Education Investment Fund makes payments in relation to the creation or development of higher education infrastructure, research infrastructure, vocational education and training infrastructure, and eligible education infrastructure. A DisablityCare Australia Fund aims to reimburse States, Territories and the Commonwealth for expenditure incurred in relation to the National Disability Insurance Scheme Act 2013 and to fund implementation of that Act in its initial period of operation. A Medical Research Future Fund provides grants of financial assistance to support medical research and medical innovation.

As of December 31, 2017, the value of the Future Fund totaled AUD 138.9 billion. The value of the Education Investment Fund totaled AUS$3.8 billion; the Building Australia Fund totaled AUS$3.8 billion; the DisabilityCare Australia Fund totaled AUD 10.4 billion, and the Medical Research Future Fund totaled AUS$7.0 billion.

Austria

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are no sectoral or geographic restrictions on foreign investment. American investors have not complained of discriminatory laws against foreign investors. Corporate taxes are relatively low (25 percent flat tax) and a tax reform implemented in 2016 aimed to further stimulate the economy. Citizens and investors have reported that it is difficult to establish and maintain banking services since the Foreign Account Tax Compliance Act (FATCA) Agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should also factor in Austria’s strict environmental regulations and environmental impact assessments into their investment decision-making. The requirement that over 50 percent of energy providers must be in public hands creates a potential additional burden for investments in the energy sector. Strict liability and co-existence regulations in the agriculture sector restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops. That situation is unlikely to improve for biotech producers under the new coalition government.

Austria’s national investment promotion company, the Austrian Business Agency (ABA), is the first point of contact for foreign companies aiming to establish their own business in Austria. It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides its services free of charge.

Austrian agencies do not press investors to keep investments in the country, but the Federal Economic Chamber (WKO), and the American Chamber of Commerce in Austria (Amcham) carry out annual polls among their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems investors have identified.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly-started enterprise. For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in many trades sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education. There are no limitations on ownership of private businesses. Austria maintains an investment screening process for takeovers of 25 percent or more in the sectors of national security and public services such as energy and water supply, telecommunication, and education services, where the Austrian government retains the right of approval. The screening process has been rarely used since its introduction in 2012, but could pose a de facto barrier, particularly in the energy sector.

Other Investment Policy Reviews

Not applicable.

Business Facilitation

Although the World Bank ranks Austria among the top 25 countries in 2018 with regard to “ease of doing business” (www.doingbusiness.org ), starting a business takes time and requires many procedural steps (rank 118 in 2018).

There is no business registration website or online process for starting a business in Austria.

In order to register a new company, or open a subsidiary in Austria, a company must first be listed on the Austrian Companies’ Register at a local court. The next step is to seek confirmation of registration from the Austrian Federal Economic Chamber (WKO) establishing that the company is really a new business. The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located. Finally, membership in the WKO is mandatory for all businesses in Austria.

According to Deloitte Austria, the average time to set up a company in Austria is 25 days, far more than the EU average of 7 days. A one-stop shop procedure for completing all necessary steps would improve the situation for U.S. investors significantly.

Austrian law prohibits gender-based discrimination. Job advertisements have to be gender-neutral. While government entities advertise a preference for women for top positions if they possess the same qualifications as males, private companies have no formal quotas and only encourage applications from qualified female candidates.

The government-run Austrian Business Agency (ABA) provides consulting services to firms interested in setting up business operations in Austria. There are several legal structures for companies to use in establishing a presence in Austria. The ABA website contains further details and contact information, and is intended to serve as a first point of contact for investors: https://investinaustria.at/en/starting-business/ .

Outward Investment

The Austrian government encourages outward investment. There is no special focus on specific countries, but the United States is seen as an attractive target country. The “Austrian Foreign Trade Service” (“Aussenwirtschaft Austria”) is a special section of the WKO promoting outward foreign investment and exports alike. The ATS runs six offices in the United States in Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco. The Ministry for Digital and Economic Affairs and the WKO run a joint program called: “go international,” providing services to companies that are considering investing for the first time in foreign countries. The program provides grants in form of contributions to “market access costs” and “soft subsidies,” such as counselling, legal advice, and marketing support.

3. Legal Regime

Transparency of the Regulatory System

Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms.

Federal ministries generally publish draft laws and regulations for public comment prior to their adoption by Austria’s cabinet and/or Parliament. In addition, relevant stakeholders such as the “Social Partners” (Economic Chamber, Agricultural Chamber, Labor Chamber, and Trade Union Association), the Industrial Association, and research institutions are invited to provide comments and suggestions for improvement, which may be taken into account before adoption of laws. This mechanism encompasses investment laws, as well. Austria’s nine provinces can also adopt laws relevant to investments; their review processes are generally less extensive, but local laws are less important than federal laws for investments. The judicial system is independent from the executive branch, thus helping to ensure the government follows administrative processes.

Draft legislation by ministries (“Ministerialentwurfe”) and resulting government draft laws and parliamentary initiatives (“Regierungsvorlagen und Gesetzesinitiativen”) can be accessed through the website of the Austrian Parliament: https://www.parlament.gv.at/PAKT/  (all in German). The parliament also publishes a history of all law-making processes. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx .

The government has made progress in streamlining its complex and cumbersome requirements for issuing business licenses and permits. It claims to have reduced the processing time for business permits to less than three months, except in the case of projects requiring an environmental impact assessment.

Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information. In line with EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

International Regulatory Considerations

Austria is a member of the EU. As such, its laws must comply with EU legislation and the country is therefore subject to European Court of Justice (ECJ) jurisdiction. Austria is a member of the WTO and largely follows WTO requirements. Austria has ratified the Trade Facilitation Agreement (TFA), but has not taken specific actions to implement it.

Legal System and Judicial Independence

The Austrian legal system is based on Roman law. The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher instrument. The full text of each legislative act is available online for reference. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx .

Commercial matters fall within the competence of ordinary regional courts except in Vienna, which has a specialized Commercial Court. The Commercial Court also has nationwide competence for trademark, design, model, and patent matters. There is no special treatment of foreign investors and the executive does not interfere in judicial matters.

The system provides an effective means for protecting property and contractual rights of nationals and foreigners. Sensitive cases must be reported to the Minister of Justice who can issue instructions for addressing them. Austria’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austria allows for court decisions to be appealed, first to a Regional Court and finally, in the Supreme Court.

Laws and Regulations on Foreign Direct Investment

There is no discrimination against foreign investors, but businesses are required to follow numerous local regulations. Although there is no requirement for participation by Austrian citizens in ownership or management of a foreign firm, at least one manager must meet Austrian residency and other legal requirements. Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income.

In April 2017, a new “Law to Support Investments in Municipalities” (published in the Federal Law Gazette, 74/2017, available online in German only on the federal legal information system www.ris.bka.gv.at ) was adopted that allows federal funding of up to 25 percent of the total investment amount of a project to “modernize” a municipality.

Competition and Anti-Trust Laws

Austria’s Anti-Trust Act (ATA) is in line with European Union anti-trust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states. The Austrian Anti-Trust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Cartel Prosecutor (FCP) are responsible for administering anti-trust laws. The FCA can conduct investigations and request information from firms. Private parties are enabled to file damage claims based on an infringement of Austrian and European anti-trust rules under an April 2017 ATA amendment. The ATA amendment also includes strengthened merger control, and more room for appeals against verdicts based on the ATA.

Companies must inform the FCA of mergers and acquisitions (M&A). Special M&A regulations apply to media enterprises, such as a lower threshold above which the ATA applies, and the requirement that media diversity must be maintained. A cartel court is competent to rule on referrals from the FCA or the FCP. For violations of anti-trust regulations, the cartel court can impose fines of up to the equivalent of 10 percent of a company’s annual worldwide sales. The independent energy regulator E-Control separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court.

Austria’s Takeover Law applies to friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange. The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30 percent or more in direct or indirect control of a company’s voting shares) must offer to buy out smaller shareholders at a defined fair market price. The law also includes provisions for shareholders who passively obtain a controlling stake in a company. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90 percent of capital stock to force out minority shareholders. An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.

Expropriation and Compensation

According to the European Convention of Human Rights (applicable in Austria) and the Austrian Civil Code, property ownership is guaranteed in Austria. Expropriation of private property in Austria is rare and may be undertaken by federal or provincial government authorities only on the basis of special legal authorization “in the public interest” in such instances as land use planning, and infrastructure project preparations. The government can initiate such a procedure only in the absence of any other alternatives for satisfying the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms. There is no indication that significant expropriations will take place in the foreseeable future.

Dispute Settlement

ICSID Convention and New York Convention

Austria is a member of both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce foreign arbitration awards in Austria. There is no specific domestic legislation in this regard, but local courts must enforce arbitration decisions where the affected companies have their business locations.

Investor-State Dispute Settlement

Austria is a member of the UN Commission on International Trade Law (UNCITRAL). Its arbitration law largely conforms to the UNCITRAL model law. The main divergence is that an award may only be set aside if the arbitral procedure is not in accordance with Austrian public policy.

Austria does not have a BIT or FTA with the United States. There is no special domestic arbitration body.

In 2015, the Austrian government was sued, for the first time ever, by the offshore parent company of the Austrian Meinl Bank, Far East. The case was brought before the ICSID in New York because of alleged damages arising from domestic prosecution in Austria; the ICSID dismissed the case in November 2017.

International Commercial Arbitration and Foreign Courts

The Vienna International Arbitral Center of the Austrian Federal Economic Chamber acts as Austria’s main arbitration institution. Legislation is modeled after the UNCITRAL model law (see above). The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) overrides most of Austria’s domestic provisions, where applicable, and Austrian courts are consistent in applying it.

Bankruptcy Regulations

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings. Reorganization requires a restructuring plan from the still solvent debtor. The plan must offer a quota of at least 20 percent of the debtor’s obligation and be adopted by a majority of all creditors and a majority of creditors holding at least 50 percent of all claims. Bankruptcy proceedings take place in court and are opened upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributes proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person performed all his documentation and reporting in accordance with the law.

Austria’s major commercial association for the protection of creditors in cases of bankruptcy is the “KSV 1870 Group”, www.ksv.at , which also carries out credit assessments of all companies located in Austria. Other European-wide credit bureaus, particularly “CRIF” and “Bisnode”, also monitor the Austrian market.

6. Financial Sector

Capital Markets and Portfolio Investment

Austria has sophisticated financial markets that allow foreign investors access without restrictions. The government welcomes foreign portfolio investment. The Austrian National Bank (OeNB) regulates portfolio investments effectively.

Austria has a national stock exchange which currently includes 66 companies. The Austrian Traded Index (ATX) is a price index consisting of the 20 largest stocks on the market and forms the most important index of Austria’s stock market. The size of the companies listed on the ATX is roughly equivalent with the MDAX in Germany. However, the stock exchange has been suffering from a declining number of listed companies in recent years and declining interest from investment bankers and brokers. This can be attributed to more companies pursuing a private ownership structure, as well as listed companies shifting to foreign stock exchanges. This trend is likely to continue in the future, as the Austrian stock exchange consists of largely small- to medium-sized companies which do not stand to benefit from the latest EU regulations. The new government intends to facilitate SME access to the Austrian stock exchange, but has not yet set incentives to increase the free flow of financial resources into product and factor markets.

Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. To that end, the Austrian government has appointed a special envoy for capital markets, and announced it plans to open the stock exchange to small, innovative companies.

Austria is fully compliant with IMF Article VIII, all financial instruments are available, and there are no restrictions on payments. Credit is available to foreign investors at market-determined rates. Credit standards for loans have been tightened as banks work to improve the quality of their loan portfolios and align with European Central Bank regulations. Nevertheless, the strong growth in Austria’s economy resulted in a 4.8 percent increase in loans to Austrian companies in 2017, with loans reaching their highest value since 2009. Austria’s financial market development showed significant improvement, ranking 30th in the most recent World Economic Forum’s Global Competitiveness Report out of 137 countries examined, compared to 47th in the previous year.

Money and Banking System

Austria has one of the densest banking networks in Europe with over 535 Head Offices and close to 3,800 branch offices registered in the first quarter of 2018. The banking system is highly developed with worldwide correspondent banks, and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Total assets of the banking sector amounted to EUR 950 billion (USD 1.1 billion) in 2017, approximately three times the country’s GDP.

Austria’s banking sector is primarily managed and overseen by the Austrian National Bank (OeNB) and, to a lesser extent, the Financial Market Authority (FMA). Six Austrian banks with assets in excess of EUR 30 billion (USD 34 billion) are subject to the Eurozone’s Single Supervisory Mechanism (SSM), as is Sberbank Europe AG, a Russian bank subsidiary headquartered in Austria. All other Austrian banks continue to be subject to the country’s dual-oversight bank supervision system with roles for the OeNB and the FMA, both of which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds.

Due to U.S. government financial reporting requirements, Austrian banks are very cautious in accepting U.S. clients, whose access to banking services here is consequently restricted. Locally incorporated businesses belonging to U.S. investors have also reported problems in finding banking services.

There is considerable interest among Austria’s banking sector in cryptocurrencies and blockchain technology. Austria’s banks generally struggle to keep up with modern IT requirements, partially due to a lack of IT specialists available for hire. This opens up possibilities for mobile banking providers and Financial Technology Companies (Fintechs) to provide online banking services. These are still nascent, as a comparatively large share of the population continues to prefer traditional banking services and cash transactions.

Foreign Exchange and Remittances

Foreign Exchange Policies

Austria has no restrictions on cross-border capital transactions, including the repatriation of profits and proceeds from the sale of an investment, for non-residents and residents. The Euro, a freely convertible currency and the only legal tender in Austria and 18 other Euro-zone member states, shields investors from exchange rate risks within the Euro-zone.

Remittance Policies

Not applicable.

Sovereign Wealth Funds

Austria has no sovereign wealth funds.

Azerbaijan

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Over the past few years, the Azerbaijani government has worked to integrate the country more fully into the global economic marketplace and attempted to attract foreign investment in order to diversify its economy and boost economic growth and employment. The flows of foreign direct investment to Azerbaijan have risen steadily in recent years, primarily in the energy sector. The government continues to seek to attract FDI to the agriculture, transportation, tourism, and information and communication technology (ICT) sectors in an effort to diversify the economy, but foreign investments in these areas have thus far been limited.

Foreign investments enjoy complete and unreserved legal protection under the Law on the Protection of Foreign Investment, the Law on Investment Activity, and guarantees contained within international agreements and treaties. In accordance with these laws, Azerbaijan will treat foreign investors, including foreign partners in joint ventures, in a manner not less favorable than the treatment accorded to national investors. Azerbaijan’s Law on the Protection of Foreign Investments protects foreign investors against nationalization and requisition, except under specific circumstances. The government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation.

Azerbaijan’s primary body responsible for investment promotion is the Azerbaijan Export and Investment Promotion Foundation (AzPromo). AzPromo is a joint public-private-initiative, established by the Ministry of Economy and Industry in 2003 to foster the country’s economic development and diversification by attracting foreign investment into the non-oil sectors of the economy and stimulating expansion of Azerbaijan’s exports of non-oil goods to overseas markets. In January 2018, President Aliyev issued a decree promoting foreign investment and protecting foreign investors’ rights. The decree called for the drafting of a new law on investment activities that will conform with international standards and establishes mechanisms to protect investors’ rights and regulate damages. The draft law has not yet been released. Additionally, the government regularly meets with the American Chamber of Commerce (AmCham) to solicit the input of the business community, particularly as part of AmCham’s biennial white paper process. AmCham is currently finalizing the 2018 edition and preparing for consultations with appropriate government officials.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreigners are allowed to register business entities by opening a fully-owned subsidiary, acquiring shares of an existing company, or creating a joint venture with a local partners. Foreign companies are also permitted to operate in Azerbaijan without creating a local legal entity by registering a representative or branch office with the Ministry of Taxes.

Foreigners are not permitted to own land in Azerbaijan, but are permitted to lease land and own real estate. Foreigners are also restricted from holding a majority share in certain sectors.

Furthermore, under Azerbaijani laws, the state must retain a controlling stake in companies operating in the mining, oil and gas, satellite communication, and military arms sectors, limiting foreign or domestic private ownership to a 49 percent share of companies in these industries. Foreign ownership in the media sector is also strictly limited. Unless there is an international agreement with Azerbaijan providing otherwise, foreign shareholding in media companies is limited to 33 percent in newspaper publishing and is prohibited in TV broadcasting companies. Restrictions on foreign equity ownership in the financial services sectors (banking and insurance) have been abolished; however, there are still limits within these sectors for how much total foreign capital participation is permitted. Furthermore, a special license to conduct business is required for foreign or domestic companies operating in telecommunications, sea and air transportation, insurance and other regulated industries. Azerbaijan does not screen inbound foreign investment and U.S. investors are not specifically disadvantaged by any existing control mechanisms.

Other Investment Policy Reviews

Azerbaijan has not conducted an Organization for Economic Cooperation and Development (OECD) investment policy review, a United Nations Conference on Trade and Development (UNCTAD) investment policy review, or a WTO Trade Policy Review.

Business Facilitation

Azerbaijan ranks 57th in Ease of Doing Business and 5th in Starting a Business out of 190 countries in the World Bank’s 2017 Doing Business Report (rankings are available at: http://www.doingbusiness.org/rankings ). In 2017, the Doing Business Report highlighted reforms that simplified the process of obtaining a new electricity connection, eliminated the vehicle tax for residents, and introduced an electronic system for submitting import and export declarations. The 2018 Doing Business Report noted reforms related to the establishment of credit bureaus, protection of minority investors, electronic payment of court fees, and processes for resolving insolvency.

Azerbaijani law requires all companies operating in the country to register. Without formal registration, a company may not do business in Azerbaijan (e.g., maintain a bank account, or clear goods through customs). As part of the ongoing business law reforms, a “One Window” principle was introduced January 1, 2008. The registration procedures involving several government bodies (Ministry of Justice, Social Insurance Fund, and State Statistics Committee) have been eliminated, and businesses must register onlywith the Ministry of Taxes. The established period for registration with the Ministry of Taxes is officially set at three days for commercial organizations. Since 2011, companies have been able to e-register, reducing the number of procedures required from six to two and the number of days from eight to three. Online registration is available at http://taxes.gov.az/modul.php?lang=_eng&name=birpencere&bolme=registration .

Outward Investment

Azerbaijan does not actively promote or incentivize outward investment, though Azerbaijani entities, particularly the State Oil Company of Azerbaijan (SOCAR) and the State Oil Fund of Azerbaijan (SOFAZ), have invested in various countries, including the United States. The government does not restrict domestic investors from investing overseas.

3. Legal Regime

Transparency of the Regulatory System

The Azerbaijani government has worked to improve its regulatory system over the past several years, and legal, regulatory, and accounting systems are approaching international norms. However, continued limited transparency and allegations of corruption in regulatory matters remain a problem. Tender procedures remain opaque and a small number of businesses dominate certain sectors of the economy.

The Azerbaijani legal system is based on civil law and the central government is the primary source of regulations relevant to foreign businesses. Azerbaijan’s regulatory system remains opaque, despite efforts to foster competition and establish clear rules. U.S. companies have complained about a lack of transparency and consistency in the application of regulations. Azerbaijan has yet to develop informal regulatory processes managed by private sector associations. Limited transparency and inconsistent enforcement of rules to foster competition are serious impediments to foreign direct investment. Draft legislation is neither made available for public comment nor usually run through a public consultation process. However, the government has begun engaging business organizations, such as the American Chamber of Commerce in Azerbaijan (AmCham) and consulting firms on various proposed draft laws. The website of Azerbaijan’s National Parliament, http://meclis.gov.az/ , lists all the country’s laws, but only in the Azerbaijani language.

Legal entities in Azerbaijan must adhere to the National Accounting Standards (NAS), which are based on the International Financial Reporting Standards (IFRS) with some modifications. “Publicly important” businesses, such as insurers, banks, and other large commercial entities, must adhere to IFRS. Certain small businesses can be registered as simplified taxpayers and are not obliged to maintain accounts in accordance with IFRS or NAS.

On October 19, 2015, the President of Azerbaijan approved a law suspending inspections of entrepreneurs for two years. This suspension was extended on October 31, 2017 to last until January 1, 2021. The suspension includes an exception to allow for inspections of food and pharmaceutical products for quality and safety control purposes, as well as inspections in certain other areas. The government has also simplified its licensing regime. All licenses are now issued with indefinite validity through the ASAN service centers and must be issued within 10 days of application. The Ministry of Economy also reduced the number of activities requiring a license from 60 to 32.

International Regulatory Considerations

Azerbaijan has had observer status at the World Trade Organization (WTO) since 1997. A working party on Azerbaijan’s succession to the WTO was established on July 16, 1997, and Azerbaijan began negotiations with WTO members in 2004. The WTO Secretariat reports that Azerbaijan is less than a quarter of the way to full membership. In 2016, Azerbaijan imposed higher tariffs on a number of imported goods, including agricultural products, to promote domestic production and reduce imports. Currently, Azerbaijan is negotiating bilateral market access with 19 economies.

Legal System and Judicial Independence

Azerbaijan’s legal system is based on Civil Law. Disputes or disagreements arising between foreign investors and enterprises with foreign investment, Azerbaijani state bodies and/or enterprises, and other Azerbaijani legal entities, are to be settled in the Azerbaijani court system or, upon agreement between the parties, in a court of arbitration, including international arbitration bodies. The judiciary consists of the Constitutional Court of the Republic of Azerbaijan, the Supreme Court of the Republic of Azerbaijan, the appellate courts of the Republic of Azerbaijan, trial courts, and other specialized courts. Trial court judgments may be appealed in appellate courts and the judgments of appellate courts can be appealed in the Supreme Court. The Supreme Court is the highest court in the country. Under the Civil Procedure Code of Azerbaijan, appellate court judgments are published within three days of issuance, or within ten days in exceptional circumstances. The Constitutional Court has the authority to review laws and court judgments for compliance with the Constitution. On February 3, 2016, President Aliyev signed the Decree on Establishment of the Board of Appeal in the Central and Local Executive Authorities for the investigation of recurring complaints by entrepreneurs regarding the executive authorities or their local organizations.

Businesses report problems with the reliability and independence of judicial processes in Azerbaijan. While the government promotes foreign investment and the laws guarantee national treatment, in practice investment disputes can arise when a foreign investor or trader’s success threatens well-connected or favored local interests. According to Freedom House’s 2017 report, Azerbaijan’s court system is “subservient to the executive.” The U.S. business community has complained about inconsistent application of regulations and non-transparent decision-making.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Azerbaijan is regulated by a number of international treaties and agreements, as well as domestic legislation. These include the Bilateral Investment Treaty (BIT) between the United States and Azerbaijan, the Azerbaijan-EC Cooperation Agreement, the Law on Protection of Foreign Investment, the Law on Investment Activity, the Law on Investment Funds, the Law On Privatization of State Property, and the Second Program for Privatization of State Property, as well as by laws regulating specific sectors of the Azerbaijani economy. This legislation permits foreign direct investment in any activity in which a national investor may also invest, unless otherwise prohibited by law.

On January 2018, President Aliyev issued a decree on promoting foreign investment and protecting foreign investors’ rights. The decree called for the drafting of a new law on investment activities that is in conformance with international standards and establishes mechanisms to protect investors’ rights and regulate for damages, including lost profit caused to investors. The details of this law have not yet been made public.

Competition and Anti-Trust Laws

The State Service for Antimonopoly Policy and Consumer Protection under the Ministry of Economy is responsible for implementing competition-related policy. On April 28, 2016, President Aliyev signed an amendment to the law on Antimonopoly Activity and an Amendment to the Criminal Code. The amendments introduced the concept of cartel agreements, which are identified as anti-competitive arrangements that may include increasing or decreasing prices; maintaining prices at the same level; implementing privileges, rebates or bonuses; or other methods of restraining competition. A new version of the Competition Code began undergoing revision in Parliament in late 2014, but has not yet been passed.

Expropriation and Compensation

The Law on the Protection of Foreign Investments protects foreign investors against nationalization and requisition, except under certain specified circumstances. Nationalization of property can occur when authorized by parliamentary resolution, although there have been no known cases of official nationalization or requisition against foreign firms in Azerbaijan. Requisition – by a decision of the Cabinet of Ministers – is possible in the event of natural disaster, an epidemic, or other extraordinary situation. In the event of nationalization or requisition, foreign investors are entitled under the law to prompt, effective, and adequate compensation. Amendments made to Azerbaijan’s Constitution in September 2016 enable authorities to expropriate private property when necessary for social justice and effective use of land. According to Freedom House’s 2016 report, “[p]roperty rights and free choice of residence are affected by government-backed development projects that often entail forced evictions, unlawful expropriations, and demolitions with little or no notice.” The Azerbaijani government has not shown any pattern of discriminating against U.S. persons by way of direct expropriations.

Dispute Settlement

ICSID Convention and New York Convention

Azerbaijan is a member of the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID convention) as well as the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The Supreme Court of Azerbaijan is responsible for recognizing and enforcing arbitral awards rendered pursuant to the Conventions. While there are no specialized commercial courts in Azerbaijan, the Azerbaijan International Commercial Arbitration Court (AICAC) was established by a non-governmental organization in 2003 as an independent arbitral institution. The AICAC, a third-party tribunal, is the only arbitration institution functioning in Azerbaijan, but public information on the case load of the AICAC is not available.

Investor-State Dispute Settlement

Azerbaijan has also ratified the European Convention on Foreign Commercial Arbitration dated April 21, 1961. The Bilateral Investment Treaty (BIT) between the United States and Azerbaijan, which went into force in 2001, provides U.S. investors recourse to settle any investment dispute using the ICSID convention. Azerbaijan has been a party to three ICSID cases, two of which (Barmek v. Azerbaijan and Fondel Metal Participations and B.V. v. Republic of Azerbaijan) were settled and one of which (Azpetrol v. Azerbaijan) was decided in favor of the State. Thus far, the ICSID has not issued arbitral awards against the government of Azerbaijan. Over the past 10 years, the U.S. Embassy in Baku has been notified of three investment dispute cases regarding U.S. citizens. None of these cases, however, have been resolved.

International Commercial Arbitration and Foreign Courts

International arbitration in Azerbaijan is regulated by the Law on International Commercial Arbitration, based on the UNCITRAL model law. Parties may select arbitrators of any nationality, the language of the proceedings, the national law to be applied, and the arbitration procedure to be used. In cases in which parties did not stipulate the terms of the proceedings, the Supreme Court of the Republic of Azerbaijan will resolve the omission. Azerbaijan has incorporated the provisions of the New York Convention into the Law on International Commercial Arbitration. The Supreme Court may refuse to enforce a foreign arbitral award on specific grounds contained in Article 476 of the Civil Code.

Bankruptcy Regulations

Azerbaijan’s Bankruptcy Law continues to restrict economic development. Azerbaijan’s Bankruptcy Law applies only to legal entities and entrepreneurs, not to private individuals. Bankruptcy proceedings may be initiated by either a debtor facing insolvency or by any creditor. In general, the legislation focuses on liquidation procedures. Amendments to Azerbaijan’s bankruptcy law adopted in 2017 extended the obligations of bankruptcy administrators and defined new rights for creditors. In the World Bank’s 2017 Doing Business Report’s section on resolving insolvency, Azerbaijan’s ranking advanced from 84 in 2017 to 47 in 2018.

6. Financial Sector

Capital Markets and Portfolio Investment

Azerbaijan’s stock market, the Baku Stock Exchange, opened in 2000. An effective regulatory system that encourages and facilitates portfolio investment, foreign or domestic, is not fully in place. There is not sufficient liquidity in the markets to enter or exit sizeable positions, and existing policies limit the free flow of financial resources into the product and factor markets. In February 2016, the government established the Financial Market Supervisory Authority (FMSA), a new financial supervisory authority, to take over all functions of the Azerbaijan State Committee for Securities, the State Insurance Supervision Service under the country’s Ministry of Finance, and the Financial Monitoring Service under the Central Bank of Azerbaijan. The FMSA aims to license, regulate and control the securities market, investment funds, insurance, credit organizations (banks, non-banking credit organizations and operator of postal communication) and payment systems. It also aims to improve the oversight system for combatting money laundering and preventing the financing of terrorism as well as to provide transparency and efficiency in this sphere.

Non-bank financial sector staples such as capital markets, insurance, and private equity are in the early stages of development. Several recent projects designed to strengthen Azerbaijan’s financial services sector, including the Capital Market Modernization Project (CMMP), the diversification of the State Oil Fund’s (SOFAZ) investment strategy, and pension reform represent opportunities for U.S. firms that provide asset management and global custodian services. The CMMP is an attempt by the government to build the foundation for a modern financial capital market, including developing market infrastructure and automation systems, and strengthening the legal and market frameworks for capital transactions. One major hindrance to the stock market’s growth is the difficulty in encouraging established Azerbaijani businesses to adapt to standard investor-friendly practices that are generally required for publicly listed companies.

The Government of Azerbaijan and Azerbaijan’s Central Bank respect IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions, and credit is allocated on market terms. Foreign investors are able to obtain credit on the local market, and the private sector has access to a variety of credit instruments. However, two currency devaluations in 2015 led to further dollarization of the economy, weakened bank balance sheets, and raised concerns about the country’s financial stability. Lending has still not recovered and limited access to capital remains a barrier to development, particularly for small and medium enterprises.

Money and Banking System

The country’s financial services sector – of which banking comprises more than 90 percent – remains underdeveloped, a factor that constrains economic growth and diversification. The drop in world oil prices in 2014/2015 and the resulting strain on Azerbaijan’s foreign currency earnings and the state budget exacerbated existing problems in the country’s banking sector. Furthermore, the resulting depreciation generated challenges for banks, given the high proportion of foreign currency loans to residents with local currency earnings. One of the banking sector’s main problems is the continuing growth in non-performing loans. According to the country’s Financial Market Supervisory Authority, about 19 percent of all consumer loans in Azerbaijan account for non-performing loans of over USD1 billion. According to other reports , the current volume of non-performing loans exceeds one-third of the capital in the country’s banks. The Institution of Banking Ombudsman was established in Azerbaijan in September 2017. The ombudsman considers appeals on disputes that amount to about USD 2,000.

As of December 2017, there were 30 banks registered in Azerbaijan, including 15 banks with foreign capital and two state-owned. As of December 31, 2017, there are 509 branches, 142 sub-branches, 2,431 ATMs of 30 banks throughout the country. A total of 16,171 people are employed in the banking sector. Bank regulator FMSA closed 10 banks in 2016 and completed restructuring of the country’s largest bank, the International Bank of Azerbaijan (IBA) in 2017. As of January 1, 2018, 47 non-bank credit organizations and 109 credit unions operate in the country. Lending by global banks to Azerbaijan’s financial sector has been minimal.

Total banking sector assets stood at approximately USD16.5 billion as of December 2017, with the top five banks holding almost 58 percent of this amount. The state-owned International Bank of Azerbaijan (IBA) accounts for approximately 40 percent of the country’s banking assets and has received several large cash infusions over the past several years from the government. In January 2017, the Ministry of Finance increased the government’s stake in the IBA from 54.96 percent to 76.73 percent. The government undertook a substantial cleanup of the assets of IBA, including transferring IBA’s non-performing assets at book value to Agrarkredit, a government-owned non-financial enterprise funded by the Central Bank. The amount of transferred assets totaled USD 6 billion in 2015-2016 and a further USD 3 billion transfer in 2017 (25 percent of 2016 GDP in total). In May 2017, IBA entered formal restructuring, similar to U.S. Chapter 11 Bankruptcy, and completed its restructuring process in September 2017.

Foreign banks are permitted in Azerbaijan and may take the form of representative offices, branches, joint ventures, and wholly owned subsidiaries. These banks are subject to the same regulations as domestic banks, with certain additional restrictions. Foreign individuals and entities are also permitted to open accounts with domestic or foreign banks in Azerbaijan.

In December 2017, the Central Bank of Azerbaijan announced plans for a pilot project to create a digital identification system for transactions between banks and customers based on blockchain technology.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no statutory restrictions on converting or transferring funds associated with an investment into freely usable currency at a legal, market-clearing rate. Foreign exchange transactions are governed by the Law on Currency Regulation. The Central Bank administers the overall enforcement of currency regulation. Among those regulations is a requirement that local cash sales be conducted in Azerbaijani manats (AZN), in accordance with the country’s constitution. Foreign companies and individuals may have both manat and foreign currency accounts at a local bank. Currency conversion is carried out through the Baku Interbank Currency Exchange Market (BICEX) and the Organized Interbank Currency Market.

The average time for remitting investment returns is two to three business days. Some requirements on disclosure of the source of currency transfers have been imposed in an effort to reduce illicit transactions. Azerbaijan’s foreign currency reserves are based on the reserves of the Central Bank of Azerbaijan, those of the State Oil Fund of Azerbaijan (SOFAZ), and the assets of the State Treasury Agency under the Ministry of Finance. Foreign currency reserves of the Central Bank) increased by USD 1.3 billion (34.2 percent) during 2017 and totaled USD 5.3 billion. As of January 1, 2018, SOFAZ assets increased by 8.02 percent to reach USD 35.8 million compared to the beginning of 2017 (USD 33.1 million).

The Central Bank of Azerbaijan officially adopted a floating exchange rate in 2016, but continues to operate under an “interim regime” which appears more like a managed float in practice, as it transitions to a full float.

Remittance Policies

Corporate branches of foreign investors are subject to a remittance tax of 10 percent on all profits derived from its business activities in Azerbaijan. There have not been any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There do not appear to be time limitations on remittances, including dividends, return on investment, interest and principal on private foreign debt, lease payments, royalties, and management fees. Nor does there appear to be limits on the inflow or outflow of funds for remittances of profits or revenue.

Azerbaijan is a permanent member of the international Financial Action Task Force (FATF) and is listed as a country of concern. (The continuum of FATF lists countries as being of primary concern, concern, or monitored.) The main obstacle Azerbaijan faces is the endemic level of corruption, but other generators of illicit funds include robbery, tax evasion, smuggling, trafficking, and organized crime.

Sovereign Wealth Funds

Azerbaijan’s sovereign wealth fund is the State Oil Fund of Azerbaijan (SOFAZ). Its mission is to transform hydrocarbon reserves into financial assets generating perpetual income for current and future generations and to finance strategically important infrastructure and social projects of national scale. Since it was established in 1999, SOFAZ has financed several projects relating to infrastructure, housing, energy infrastructure, and education. According to its bylaws, SOFAZ is not permitted to invest domestically. The State Oil Fund publishes an annual report which it submits for independent audit. The fund’s assets totaled USD 35.8 billion as of January 1, 2018. More information is available at oilfund.az .

Bahamas, The

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The government encourages FDI, particularly in the tourism and financial services sector. The country provides incentives for second home ownership and currently has 250 bank and trust companies operating in the jurisdiction but reserves certain sectors of the economy for Bahamian investors. The reserved areas are: wholesale and retail operations; commission agencies engaged in import/export; real estate and domestic property management; domestic newspapers and magazine publications; domestic advertising and public relations firms; nightclubs and restaurants except specialty, gourmet, and ethnic restaurants and those operating in a hotel; security services; domestic distribution of building supplies; construction companies except for special structures; personal cosmetic/beauty establishments; shallow water scale fish, crustacean, mollusk, and sponge-fishing; auto and appliance service operations; and public transportation. In 2015, the domestic gaming industry was included as an area reserved for domestic investment and supported by a moratorium on new licenses.

With the exception of these sectors, the Bahamian government does not give preferential treatment to investors based on nationality, and investors have equal access to incentives, which include land grants, tax concessions, and direct marketing and budgetary support. The government provides guidelines for investment through its National Investment Policy (NIP), which is administered by The Bahamas Investment Authority (BIA) in the Office of the Prime Minister. Large foreign investment projects, particularly those that do not fit within the NIP, require approval by the National Economic Council (NEC) of The Bahamas. This process generally requires environmental and economic impact assessments for review by multiple government agencies prior to being considered by the NEC. Bureaucratic impediments are not limited to the approvals process and the country continues to lag behind according to the 2018 World Bank Doing Business numbers on the topics of starting a business, ranking 119 overall, and 167 in registering property, 86 in getting construction permits, and 142 in access to credit.

The Bahamas has an investment promotion strategy that includes multiple government agencies working to attract foreign direct investment. The BIA functions as the investment facilitation agency and acts as a ‘one stop shop’ to assist investors in navigating a potentially cumbersome approvals process. The Embassy is not aware of any formal retention strategies but each administration has consistently supported new investment and has generally honored agreements made by previous administrations. The FNM administration introduced plans for legislative support for Small and Medium Enterprises (SME), defined as companies with fewer than 10 employees, representing 85 percent of registered businesses.

The Embassy is aware of cases where the Bahamian government failed to respond to investment applications and several cases where there have been significant delays in the approvals process. Despite challenges, investment continues to grow in tourism, finance, and quick-serve restaurant franchises.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors have the right to establish private enterprises and, after approval, companies are allowed to operate unencumbered. Key considerations for the Bahamian government include economic impact/job creation and environmental protection. With the assistance of a local attorney, investors can create the following types of businesses: sole proprietorship, limited or general partnership, joint stock company, or subsidiary of a foreign company. The most popular all-purpose vehicles for foreign investors are the International Business Company (IBC) and the Limited Duration Company (LDC). Both benefit from income, capital gains, gift, estate, inheritance, and succession tax exemptions. Investors are required to establish a local company and be registered by the registrar of companies to operate in The Bahamas.

The Bahamian government considers FDI a critical driver for economic growth and the National Investment Policy explicitly encourages foreign investment in certain sectors of the economy. These sectors are listed on the BIA website at www.bahamas.gov.bs/bia  and are as follows: touristic resorts; upscale condominium, timeshare, and second home development; information/data processing; hi-tech services; ship registration; repair; light manufacturing for export; agro-industries; food processing; agriculture; financial services; offshore medical centers; and pharmaceutical manufacture.

The government has made exceptions to this policy on a case-by-case basis but generally, there is no guarantee of market access or right of establishment in the reserved sectors of the economy. The Embassy is aware of several cases in which the Bahamian government has granted foreign investors waivers to the policy and allowed full market access.

Other Investment Policy Reviews

The Bahamas ranks 119 out of 190 countries in terms of the ease of doing business in the 2017 World Bank Doing Business Report, with a Distance to Frontier score below the Caribbean regional average (http://doingbusiness.org/rankings ).

The country is not a member of the WTO. Neither OECD nor UNCTAD have conducted investment policy reviews. The Bahamas achieved the G-20 standard on transparency and cooperation on tax matters, a standard initially advanced by the OECD, and recently re-engaged with the Accessions Division of the WTO with an aim of full membership by 2019.

Business Facilitation

According to the 2018 World Bank Doing Business Index, starting a business in The Bahamas takes 21.5 days, requires seven separate procedures, and costs the same for both men and women. In 2017, the Bahamian government streamlined this process and launched an e-business portal, which facilitated limited liability companies to register online (http://inlandrevenue.finance.gov.bs/business-licence/copy-applying-b-l/ ). In early 2018, the government removed certain documentary requirements to register or renew registration of companies and is considering allowing company fees to be applicable on the date of incorporation to expedite the annual process.

All companies with an annual turnover of USD 100,000 or more are required to register with the government to receive a tax identification number. The registration process is generally viewed as an impediment to east of starting a business. Additionally, companies are required to provide financial reports on a monthly or quarterly basis.

Outward Investment

The Bahamian government does not promote nor incentivize outward investment. Additionally, the government does not restrict its citizens from investing internationally.

3. Legal Regime

Transparency of the Regulatory System

The Bahamas’ legal and regulatory systems are transparent and consistent with international norms and the Bahamian government is engaged in making reforms to public accounting procedures to conform to international financial reporting standards. Proposed legislation is available at the Government Publications office and public comment and engagement of stakeholders is encouraged, particularly on legislation perceived as controversial. There is no equivalent to the Federal Register, but the government regularly updates its website (www.bahamas.gov.bs ) and includes draft legislation and policy pronouncements by Ministers of Government. There is regulatory system reform legislation, but it has not been fully implemented. In some instances, there is public consultation on investment proposals but the process is not required by law. The Embassy is unaware of any informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations that restrict foreign participation in the economy.

International Regulatory Considerations

The country is not a member of a regional economic block and only recently re-engaged with the WTO secretariat to continue negotiations to join the organization. The Bahamian government anticipates a third meeting of the Working Party by the end of 2018 and announced plans to join the organization by the end of 2019.

The country is not a member of UNCTAD’s international network of transparent investment procedures but is actively reviewing investment policies with the aim of developing comprehensive, WTO-compliant investment legislation.

The Bahamas Bureau of Standards and Quality (BBSQ) was launched in 2016 and benefits from EU-funded technical assistance to the Caribbean Regional Organization for Standards and Quality (CROSQ) in the development of national standards.

The Embassy is not aware of any discriminatory technical barriers to trade.

Legal System and Judicial Independence

The Bahamian legal system is based on English common law and foreign nationals are afforded full rights in Bahamian legal proceedings. Contracts are legally enforced through the courts. There is no written contract nor commercial law.

The judiciary is independent and allegations of government interference in the judicial process are rare. The Chief Justice of the Supreme Court, the Attorney General – who serves as the government’s chief legal advisor and is responsible for public prosecutions, and the President of the Court of Appeals are appointed by the Governor-General upon recommendation of the Prime Minister in consultation with the leader of Her Majesty’s Loyal Opposition. The Bahamas is a member of the Commonwealth of Nations and uses the Privy Council Judicial Committee in London as the final court of appeal. The country also contributes financially to the operations of the Caribbean Court of Justice and announced its intention to develop itself as a center for international arbitration.

Judgments by British Courts and selected Commonwealth countries can be registered and enforced in The Bahamas under the Reciprocal Enforcement of Judgments Act. Court judgments from other countries, including those of the United States, must be litigated in the local courts and are subject to all Bahamian legal requirements. The judiciary is independent and judicial process is considered procedurally competent, fair, and reliable.

Laws and Regulations on Foreign Direct Investment

No major laws, regulations, or judicial decisions have been passed since the 2017 Investment Climate Statement.

Competition and Anti-Trust Laws

The fledging Utilities Regulation and Competition Authority (URCA) regulates the telecommunications sector and new regulations have expanded the mandate to include the regulation of the energy sector. URCA is building technical capacity with the support of the U.S. government. There is no legislation governing competition or anti-trust.

Expropriation and Compensation

Property rights are protected under Article 27 of The Bahamian Constitution, which prohibits the deprivation of property without prompt and adequate compensation. There have been compulsory acquisitions of property for public use, but in all instances, there was satisfactory compensation at fair market value.

The Embassy is not aware of any direct or indirect expropriation actions in The Bahamas. There is no indication that the Bahamian government will consider the implementation of expropriations as an instrument of government policy.

Dispute Settlement

ICSID Convention and New York Convention

The Bahamas is a member of both the International Centre for Settlement of Investment Disputes (ICSID) Convention (adopted 1995) and the New York Convention (adopted 1958). The Arbitration Act of 2009 enacted the New York Convention and provides a legal framework. The Bahamas has been a member of the International Center for the Settlement of Investment Disputes since 1995 and is also a member of the Multilateral Investment Guarantee Agency. This agency insures investors against current transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries.

Investor-State Dispute Settlement

Order 66 of the Rules of the Bahamian Supreme Court provides rules for arbitration proceedings. The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards entered into force for The Bahamas on March 20, 2007. This convention provides for the enforcement of agreements for commercial disputes. Under the convention, courts of a contracting state can enforce such an agreement by referring the parties to arbitration. There are no restrictions on foreign investors negotiating arbitration provisions in private agreements.

The government announced its intention to establish The Bahamas as a center for international arbitration cases but a body has yet to be formally established.

Investment disputes in The Bahamas that directly involve the Bahamian government are rare. The Bahamas is not a signatory to a bilateral international trade agreement with a developed dispute settlement mechanism and, therefore, disputes must be settled within the judicial system or be subject to international arbitration.

The Embassy is only aware of a single dispute between a U.S. company and the Bahamian government over the past 10 years. The matter was resolved amicably and did not result in litigation. There is no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The Bahamas is a member of the Multilateral Investment Guarantee Agency, which insures investors against current transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries. Local courts enforce and recognize foreign arbitral awards and foreign investors are provided national treatment. Disputes between companies are generally handled in local courts but foreign investors can refer cases to ICSID and in at least one instance, recourse was sought in a U.S. court in a dispute involving a USD 4 billion resort development. The Embassy is not aware of any cases involving state owned enterprises that resulted in litigation.

Bankruptcy Regulations

Company liquidations, voluntary or involuntary, proceed according to the Companies Act. Liquidations are routinely published in newspapers in accordance with the legislation. Creditors of bankrupt debtors and liquidated companies participate in the distribution of the bankrupt debtor’s or liquidated company’s assets according to statute. U.S. investors should be aware that there is no equivalent to Chapter 11 bankruptcy law provisions to protect assets located in The Bahamas. The Bahamian government circulated new draft legislation in January 2018 to establish a credit bureau and engaged in public consultation and consumer education on the legislation’s impact on access by both institutions and individuals to credit.

6. Financial Sector

Capital Markets and Portfolio Investment

The free flow of capital to markets is encouraged by the Bahamian government and supported by the functions of the Central Bank of the Bahamas. The Bahamas is an Article VIII member of the IMF and has agreed not to place restrictions on currency transactions, such as payments for imports. The Bahamas Securities Commission regulates the activities of investment funds, securities, and capital markets. (www.scb.gov.bs ) The fledgling local stock market excludes foreign investors but is effectively regulated by the Securities Commission.

There are no legal limitations on foreigners’ access to the domestic credit market, and credit is available on market terms through commercial banks. Bahamian-foreign joint venture businesses are encouraged by the government and are eligible for financing through both commercial banks and the Bahamas Development Bank (http://www.bahamasdevelopmentbank.com/ ).

Money and Banking System

The financial sector of The Bahamas is highly developed and dynamic and consists of savings banks, trust companies, offshore banks, insurance companies, a development bank, a publicly controlled pension fund, a housing corporation, a public savings bank, private pension funds, cooperative societies, credit unions, commercial banks, and the majority state-owned Bank of The Bahamas. These institutions provide a wide array of services via several types of financial intermediaries. The Central Bank of The Bahamas, the Securities Commission, Insurance Commission, the Inspector of Financial and Corporate Service Providers, and the Compliance Commission regulate the financial sector.

The sector is healthy and, according to the Central Bank, liquidity and external reserves expanded during the fourth quarter of 2017 and banks’ credit quality indicators reflected sustained credit restructuring measures and loan write-offs. The latest available performance indicators showed an improvement in overall bank profitability due mainly to lower operating costs and a decline in provisioning for bad debt. Bank capital levels also remained robust and well in excess of regulatory requirements. Non-performing loans have declined to 9.2 percent of total loans at the end of 2017 from 11.4 percent at the end of 2016 due mainly to a sale of toxic loans held by the Bank of The Bahamas.

In the domestic banking sector, four of the eight commercial banks are subsidiaries of Canadian banks, three are locally owned, and one is a branch of a U.S.-based institution. Recent reorganization by the Canadian banks has severely limited banking services on some of the less populated islands but to date no local institutions are without correspondent banking relationships.

The Central Bank is exploring the use of block chain technologies to modernize payment systems. In March 2018, it announced its intention to develop a digital version of the Bahamian dollar within 24 to 30 months. The Central Bank’s strategic goals include responding to the loss of brick-and-mortar banks, particularly in the Family Islands, by implementing electronic funds transfer across the country and providing access for individuals to basic financial services through digital media. To this end, the Bank is leading efforts to develop a digital identification system with appropriate legal infrastructure. A pilot project is under development.

Foreign Exchange and Remittances

Foreign Exchange Policies

The Bahamas maintains a fixed exchange rate policy, which pegs the Bahamian dollar one-to-one with the U.S. dollar. The legal basis for the policy is the Exchange Control Act of 1974 and Exchange Control Regulations. The controls ensure that adequate foreign exchange flows are always available to support the fixed parity of the Bahamian dollar against the U.S. dollar. The peg is considered an essential convenience in the tourism-dependent economy, removes issues of rate conversions, and allows for unified pricing of goods and services for tourists and residents. To maintain this structure individuals and corporations resident in The Bahamas are subject to capital or exchange controls.

Exchange controls are not an impediment to foreign investment in the country. All non-resident investors in The Bahamas are required to register with the Central Bank, and non-resident investors who finance their projects substantially from foreign currency transferred into The Bahamas are permitted to convert and repatriate profits and capital gains freely. This is done with minimal bureaucratic formalities and without limitations on the inflows or outflows of funds.

In the administration of exchange controls, the Central Bank does not withhold or delay approval for legitimate foreign exchange purchases for currency transactions and, in the interest of facilitating international trade, it delegates this authority to major commercial banks and selected trust companies. International and local commercial banks, which are registered by the Central Bank as ‘Authorized Dealers,’ may administer and conduct foreign currency transactions with residents of The Bahamas. Similarly, private banks and trust companies which are designated as ‘Authorized Agents’ are permitted to act as depositories for foreign securities of residents and to conduct securities transactions for non-resident companies under their management.

Foreign exchange transactions that fall outside of the delegated authority are approved directly by the Central Bank and include loans, dividends, issues and transfer of shares, travel facilities, and investment currency. Gradual liberalization of exchange controls have continued over the years with the most recent measure implemented in April 2016. The new measures delegated increased authority to commercial banks for exchange control and seek to regularize nationals holding accounts in the United States by allowing nationals to open U.S. dollar denominated accounts within the jurisdiction.

Remittance Policies

There are no restrictions on investment remittances. Foreign investors who receive a Central Bank designation as a non-resident may open foreign currency-denominated bank accounts and repatriate those funds freely. In addition, with Central Bank approval, a foreign investor may open an account denominated in Bahamian currency to be used in paying local expenses. As mentioned, increased authority has been delegated to commercial banks and money transfer businesses.

The Bahamas is a member of the Caribbean Financial Action Task Force (CFATF). Its most recent peer review evaluation can be found at https://www.cfatf-gafic.org/index.php/documents/cfatf-mutual-evaluation-reports/the-bahamas-1 .

Sovereign Wealth Funds

The Bahamian government passed omnibus legislation for the effective management of the oil and gas sector in 2017, which included the creation of a sovereign wealth fund, but has not yet promulgated supporting regulations.

Bahrain

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Government of Bahrain (GOB) has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing foreign direct investment (FDI) is one of the government’s top priorities. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a local partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. The Bahrain Economic Development Board, charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, information and communications technology (ICT), financial services and tourism and leisure sectors.

To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain Free Trade Agreement outlines all activities in which the two countries restrict foreign ownership.

U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, and customs clearance.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted a formal Trade Policy Review of Bahrain in 2014 (see link below):
https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20
(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScripted
Search&languageUIChanged=true#
 
.

Business Facilitation

In 2016, the Ministry of Industry, Commerce and Tourism (MoICT) introduced an online commercial registration portal, “Sijilat” (www.sijilat.bh ) to facilitate the commercial registration process. Through Sijilat, business people can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks, but can take longer if a business requires specialized approvals. In practice, some business people retain an attorney or clearing agent to assist them through the commercial registration process.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

  • MoICT;
  • Ministry of Electricity and Water;
  • The Municipality in which their business will be located;
  • Labour Market Regulatory Authority;
  • General Organization for Social Insurance.

Outward Investment

The Government of Bahrain (GOB) neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

Currently, there is no competition law in force in Bahrain. However, Bahrain’s so-called Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on competition. Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors. There is no official competition authority in Bahrain.

The GOB uses International Financial Reporting Standards (IFRS) as part of its implementation of Generally Accepted Accounting Principles (GAAP). IFRS are used by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting.

Bahrain adopted International Accounting Standard 1 (IAS 1) in 1994 in the absence of other local standards. Non-listed banks and other business enterprises use IASs in the preparation of financial statements.

The 2001 Bahrain Commercial Companies Law required each registered entity to produce a balance sheet, a profit-and-loss account and the director’s report for each financial year. All branches of foreign companies, limited liability companies and corporations must submit annual audited financial statements to the Directorate of Commerce and Company Affairs at the MoICT, along with the company’s articles and /or articles of association.

Depending on the company’s business, financial statements may be subject to other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).

Bahrain encourages firms to adhere to both the International Financial Reporting Standards (IFRS) and Bahrain’s Code of Corporate Governance. Bahrain-based companies by and large remain in compliance with IAS-1 disclosure requirements.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations. The Council of Representatives (COR) engages in consultations on proposed regulations during committee meetings with the general public, businesses, or other entities that might be impacted by pending legislation. Those individuals or entities may raise concerns at committee meetings or send their comments in writing for review by Members of Parliament. According to the World Bank, however, the GOB does not have the legal obligation to publish the text of proposed regulations before their enactment and there is no period of time set by law for the text of the proposed regulations to be publicly available. Bahrain, therefore, ranks among the countries with low rule-making transparency.

http://rulemaking.worldbank.org/data/explorecountries/bahrain#cer_transparency 

Laws and regulatory actions can be proposed by legislators, the government, or the King and are normally drafted under the Cabinet’s guidance prior to being transferred back to the Council of Representatives (COR). If the bill or legislation is approved by a majority of the COR, the legislation advances to the Shura Council. If approved by a majority of the Shura Council, it is referred back to the Cabinet for the King’s ratification. If the COR advances a version that the Shura Council disagrees with, a revised draft goes back to the COR. If the two houses cannot agree, they meet in what is known as the National Assembly, where both chambers meet to iron out differences on a specific bill. The publication of the regulatory action in the Official Gazette is the final legislative step. The implementation of any laws takes place the day following its publication. The media sometimes publishes the draft laws and offers commentary on various legal interpretations.

International Regulatory Considerations

Bahrain is a member of the GCC. The GOB has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations. In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed. For example, the GOB mandates that imported vehicles meet either the U.S. Federal Motor Vehicle Safety Standards or the so-called “1958 Agreement” standards developed by the United Nations Economic Commission for Europe. Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016. Bahrain Customs and MoICT have begun working toward implementing the TFA’s requirements.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim State. Although Article 2 of the Constitution states that Islamic Sharia (Islamic) law is the main source of legislation, general matters and private transactions are governed mainly by laws derived from modern legislation. Three types of courts are present in Bahrain – civil, criminal, and family courts.

The civil court system consists of lower courts, courts of appeal, and the Court of Cassation — the highest appellate court in the Kingdom, hearing a variety of civil, criminal and family cases. Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status  of non-Muslims. Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

Many of the high-ranking judges in Bahrain come from the ruling family , prominent families, or are non-Bahrainis (mainly Egyptians). Bahraini law borrows a great deal from other Arab states, particularly Egyptian codes.

Bahrain has a long-established framework of commercial law. English is widely used, and a number of well-known international (including U.S.) law firms, working in association with local partners, are authorized to practice law in Bahrain and provide expert legal services both nationally and regionally. Fees are charged according to internationally accepted practices. Non-Bahraini lawyers can represent clients in Bahraini courts. In April 2007, the government permitted international law firms to be established in Bahrain. These firms provide services such as commercial and financial consultancy in legal matters.

Entrenched local business interests with government influence can sometimes cause problems for foreign companies. Interpretation and application of the law sometimes varies by Ministry and may be dependent on the stature and connections of an investor’s local partner. These departures from the consistent, transparent application of regulations and the law are not common, and investors report general satisfaction with government cooperation and support.

The GOB is eager to develop its legal framework further. The U.S. Department of Commerce’s Commercial Law Development Program (CLDP) has conducted training and capacity-building programs in Bahrain for several years, in cooperation with the Ministry of Justice and Islamic Affairs, the Higher Supreme Council for Judges, and the Judicial and Legal Studies Institute.

Judgments of foreign courts are recognized and enforceable under local courts. Article nine of the U.S.-Bahrain Bilateral Investment Treaty outlines how problems with U.S. investments should be handled within the Bahraini legal system. The most common source of investment-related problems in Bahrain is slow or incomplete application of the law.

Laws and Regulations on Foreign Direct Investment

The U.S.-Bahrain BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation and national treatment, the right to make financial transfers freely and immediately, the application of international legal standards for expropriation and compensation cases, and access to international arbitration. The BIT guarantees national treatment for U.S. investments across most sectors, with exceptions only for ownership of television, radio or other media, fisheries, and dredging or oil exploration. Bahrain also provides most-favored nation or national treatment status to U.S. investments in air transportation, the purchase or ownership of land, and the purchase or ownership of shares traded on the Bahrain Bourse.

The national treatment clause in the BIT ensures American firms interested in selling products exclusively in Bahrain are no longer required to appoint a commercial agent, though they may opt to do so. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain.

Bahrain permits 100 percent foreign-ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market as long as they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted only under a production-sharing agreement with the Bahrain Petroleum Company (BAPCO), the state-owned petroleum company.

Expatriates may own land in designated areas in Bahrain. Non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects, and training centers.

Officials from U.S. companies with investments in Bahrain occasionally have reported their belief that certain court cases brought against members of the Royal Family have languished in the court system. These officials believed the delays could be attributed to subtle executive pressure put on the judiciary.

Below is a link to a site designed to assist foreign investors navigate the laws, rules, and procedures related to investing in Bahrain: http://cbb.complinet.com/cbb/microsite/laws.html .

Competition and Anti-Trust Laws

There is no formal competition law in Bahrain, nor is there a specific agency that monitors competition-related issues. However, the MoICT’s Consumer Protection Directorate is responsible for ensuring that the law determining price controls is implemented and that violators are punished. There are general restrictions on FDI in some sectors, including the oil and gas and petrochemicals sectors, in which all companies are government-owned.

Expropriation and Compensation

There have been no expropriations in recent years, and there are no cases in contention. The U.S.-Bahrain BIT protects U.S. investments by banning all expropriations (including “creeping” and “measures tantamount to”) except those for a public purpose. Such transactions must be carried out in a non-discriminatory manner, with due process, and prompt, adequate, effective compensation.

Dispute Settlement

ICSID Convention and New York Convention

Bahrain uses multiple international and regional conventions to enhance its commercial arbitration legal framework. Bahrain is a party to the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention, the International Centre for the Settlement of Investment Disputes (ICSID), and the GCC Convention for Execution of Judgments, among others. These conventions and international agreements established the foundation for the GCC Arbitration Centre, and the Bahrain Chamber for Disputes & Resolution (BCDR). Bahrain’s Constitution stipulates international conventions and treaties have the power of law.

Investor-State Dispute Settlement

The U.S.-Bahrain BIT provides for three dispute settlement options:

  1. Submitting the dispute to a local court;
  2. Invoking dispute-resolution procedures previously agreed upon by the national or company and the host country government; or,
  3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or any other arbitral institution agreed upon by both parties.

In 2010, the Ministry of Justice established the Bahrain Chamber for Dispute Resolution (BCDR). In partnership with the American Arbitration Association (AAA), the BCDR specializes in alternative dispute resolution services. The jurisdiction of the BCDR-AAA is twofold: Jurisdiction by Law (Section 1 cases), and Jurisdiction by Party Agreement (arbitration, also referred to as Section 2 cases).

Jurisdiction by Law (Section 1 Cases)

Disputes exceeding BD 500,000 (approximately USD 1.3 million) which involve either an international commercial dispute or a party licensed by the Central Bank of Bahrain (CBB) are referred to the BCDR-AAA. Prior to the creation of the BCDR, these cases fell within the jurisdiction of the courts of Bahrain.

From the establishment of the BCDR-AAA through April 2018, 205 cases were filed under Section 1, with claims totaling over USD 3.4 billion. Of these cases, 31.2 percent were decided or settled within 6 months; 41 percent were decided/settled within 6–12 months; 9.3 percent were decided or settled within 12–18 months; 6.8 percent were decided or settled within 18–24 months; 3.4 percent were decided or settled after 24 months; and 8.3 percent were ongoing.

Arbitration (Section 2 Cases)

As of April 2018, ten cases have been filed: one in 2013, one in 2015, three in 2016, and five in 2017. Of these cases only three of the cases filed in 2017 as of April 2018 were ongoing and the rest were awarded or settled.

Bahrain Chamber for Dispute Resolution
Suite 301, Park Plaza
Bldg. 247, Road 1704
P.O. Box 20006
Manama, Kingdom of Bahrain
Tel: + (973) 17-511-311
Website: www.bcdr-aaa.org 

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017. The case involves investor claims over the Central Bank of Bahrain’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders include Iranian banks. Bahrain and Iran are party to a BIT.

International Commercial Arbitration and Foreign Courts

Arbitration procedures are largely a contractual matter in Bahrain. Disputes historically have been referred to an arbitration body as specified in the contract, or to the local courts. In dealings with both local and foreign firms, Bahraini companies have increasingly included arbitration procedures in their contracts. Most commercial disputes are resolved privately without recourse to the courts or formal arbitration. Resolution under Bahraini law is generally specified in all contracts for the settlement of disputes that reach the stage of formal resolution but is optional in those designating the BCDR. Bahrain’s court system has adequately handled occasional lawsuits against individuals or companies for nonpayment of debts.

Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “New Arbitration Law”) came into effect on August 9, 2015. The law provides that the UNCITRAL 1985 Model Law with its 2006 amendments on international commercial arbitration (the “UNCITRAL Law”) will apply to any arbitration, taking place in Bahrain or abroad, if the parties to the dispute agreed to be subject to the UNCITRAL Law.

The GCC Commercial Arbitration Center, established in 1995, serves as a regional specialized body providing arbitration services. It assists in resolving disputes among GCC countries or between other parties and GCC countries. The Center implements rules and regulations in line with accepted international practice. Thus far, few cases have been brought to arbitration. The Center conducts seminars, symposia, and workshops to help educate and update its members on any new arbitration-related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Tel: + (973) 17278006
Email: case@gcccac.org
Website: 
http://www.gcccac.org/en/ 

Bankruptcy Regulations

The GOB enacted its bankruptcy and insolvency law in 1987. Chapter three of the law states that if a business is facing financial difficulties, fails to make consistent financial payments, or fails to pay commercial transactions within a 30-day timeframe, either the company or debt collectors may declare bankruptcy or ask that the company be liquidated. Chapter 7 of the law specifies that the Supreme Court specialize in bankruptcy and liquidation cases. Chapter 2 briefly describes the procedures for managing insolvency, including that the Supreme Court designates a firm to represent the business in all legal and business procedures. The representative will be involved in managing the firm’s funds, making payments, and other administrative procedures.

CLDP attorneys have been working with the GOB for the last several years to help draft and ratify a new bankruptcy law. The law was approved by Bahrain’s Parliament and Shura Council on April 29, 2018 and as of May 2018 awaits final ratification by the King. The GOB has prioritized updating its bankruptcy law as part of efforts to spur entrepreneurship and the growth of small and medium-sized enterprises.

The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the Central Bank of Bahrain (CBB) and operates as the credit monitoring authority in Bahrain.

6. Financial Sector

Capital Markets and Portfolio Investment

Consistent with the Government of Bahrain’s (GOB) liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahrainis alike have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under USD 50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks. Commercial credit is available to private organizations in Bahrain but has been increasingly crowded out by the government’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth USD 100 million. The Bahrain Liquidity Fund is supported by a number of market participants and will act as a market maker, providing two-way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains relatively small compared to others in the region.

The GOB and the Central Bank of Bahrain are members of the IMF and fully compliant with Article VIII.

Money and Banking System

The Central Bank of Bahrain (CBB) is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains quite healthy despite sustained lower global oil prices. Bahrain’s banks remain well capitalized, and there is sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to be a driver of innovation and expansion in the Islamic finance sector. In 2017, Bahrain ranked as the GCC’s leading Islamic finance market and second out of 92 countries world-wide, according to the ICD-Thomson Reuters Islamic Finance Development Indicator.

Bahrain has an effective regulatory system that encourages portfolio investment, and the CBB has fully implemented Basel II standards, while attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 23 retail banks, 69 wholesale banks, and 36 representative offices. Twenty-four of these banks are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citi, American Express, and JP Morgan.

Ahli United Bank is Bahrain’s largest bank with total assets estimated at USD 33.2 billion as of 2017.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis. The CBB reported in 2017 that it was in the process of introducing a private network as an alternative communication network for the RTGS-SSS Systems.

After introducing Financial Technology “sandbox” regulations in the first half of 2017 that enabled the launch of cryptocurrency and blockchain startups, the CBB released additional regulations on its website in August 2017 for conventional and Shari’a compliant financing-based crowdfunding businesses. Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator.

Foreign Exchange and Remittances

Foreign Exchange Policies

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate.

There are no restrictions on converting or transferring funds, whether or not associated with an investment.

Remittance Policies

The Central Bank of Bahrain is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. The majority of the workforce in the Kingdom of Bahrain is comprised of foreign workers, many of whom remit large amounts of money to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

The commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding USD 10,000 must include a documented source of the income.

Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue. The GOB does not engage in currency manipulation tactics.

Bahrain is a member of the Gulf Cooperation Council (GCC), and the GCC is a member of the Financial Action Task Force (FATF). Additionally, Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), whose headquarters are located in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations. The Government of Bahrain hosted the MENAFATF’s 26th Plenary Meeting Manama from December 2-7, 2017. MENAFATF has not yet released a final declaration from the meeting.

Sovereign Wealth Funds

The Kingdom of Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly USD 11 billion as of early 2018, conducts its business transparently, including by issuing an annual report online. The annual report follows international financial reporting standards and is audited by external, internationally recognized auditing firms. By law, state-owned enterprises (SOEs) under Mumtalakat are audited and monitored by the National Audit Office. In 2016, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

The sovereign wealth fund holds majority stakes in several firms. Mumtalakat invests 70 percent of its funds in the Middle East, 22 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food & agriculture, and industrial manufacturing.

Mumtalakat often acts more as an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s flagship air carrier, restructure and minimize its losses. A significant portion of Mumtalakat’s portfolio is invested in 38 Bahrain-based SOEs.

Through 2016, Mumtalakat had not been directly contributing to the National Budget. Beginning in September 2017, however, Mumtalakat announced it would distribute profits of BD 20 million to the National Budget for two consecutive years, distributed equally for the years 2017 and 2018.

Bangladesh

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Bangladesh actively seeks foreign investment, particularly in the agribusiness, garment and textiles, leather and leather goods, light manufacturing, energy, information and communications technology (ICT), and infrastructure sectors. It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Four sectors, however, are reserved for government investment:

  • Arms and ammunition and other defense equipment and machinery;
  • Forest plantation and mechanized extraction within the bounds of reserved forests;
  • Production of nuclear energy;
  • Security printing.

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with promoting supervising and promoting private investment. The BIDA Act of 2016 approved the merger of the now disbanded Board of Investment and the Privatization Committee. BIDA performs the following functions:

  • Provides pre-investment counseling services;
  • Registers and approves of private industrial projects;
  • Issues approval of branch/liaison/representative offices;
  • Issues work permits for foreign nationals;
  • Issues approval of royalty remittances, technical know-how and technical assistance fees;
  • Facilitates import of capital machinery and raw materials;
  • Issues approvals for foreign loans and supplier credits.

BIDA’s newly designed website has aggregated information regarding Bangladesh investment policies and ease of doing business indicators: http://bida.gov.bd/ .

The Bangladesh Export Processing Zone Authority (BEPZA) acts as the investment supervisory authority in export processing zones (EPZs). BEPZA is the one-stop service provider and regulatory authority for companies operating inside EPZs. In addition, Bangladesh plans to establish over 100 Economic Zones (EZs) over the next several years. The EZs are designed to attract additional foreign investment to locations throughout the country. The Bangladesh Economic Zones Authority (BEZA) is responsible for supervising and promoting investments in the economic zones (EZs).

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled. Draft regulations in the area of telecommunication infrastructure currently include provisions precluding 100 percent foreign ownership.

Four sectors are reserved for government investment and exclude both foreign and domestic private sector activity:

  • Arms and ammunition and other defense equipment and machinery;
  • Forest plantation and mechanized extraction within the bounds of reserved forests;
  • Production of nuclear energy;
  • Security printing.

In addition, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

  1. Fishing in the deep sea;
  2. Bank/financial institution in the private sector;
  3. Insurance company in the private sector;
  4. Generation, supply and distribution of power in the private sector;
  5. Exploration, extraction and supply of natural gas/oil;
  6. Exploration, extraction and supply of coal;
  7. Exploration, extraction and supply of other mineral resources;
  8. Large-scale infrastructure projects (e.g. flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station);
  9. Crude oil refinery (recycling/refining of lube oil used as fuel);
  10. Medium and large industry using natural gas/condescend and other minerals as raw material;
  11. Telecommunication service (mobile/cellular and land phone);
  12. Satellite channels;
  13. Cargo/passenger aviation;
  14. Sea-bound ship transport;
  15. Sea-port/deep seaport;
  16. VOIP/IP telephone;
  17. Industries using heavy minerals accumulated from sea beach.

While discrimination against foreign investors is not widespread, the government frequently promotes local industries and some discriminatory policies and regulations exist. For example, the government closely controls approvals for imported medicines that compete with domestically-manufactured pharmaceutical products and it has required majority local ownership of new shipping and insurance companies, albeit with exemptions for existing foreign-owned firms, following a prime ministerial directive. In practical terms, foreign investors frequently find it necessary to have a local partner even though this requirement may not be statutorily defined.

In certain strategic sectors, the GOB has placed unofficial barriers on foreign companies’ ability to divest from the country.

Business Registration

The Bangladesh Investment Development Authority (BIDA), formerly the Board of Investment, is responsible for screening, reviewing and approving FDI in Bangladesh. BIDA is directly supervised by the Prime Minister’s office and the Chairman of BIDA has Minister-equivalent rank. There have been instances where receiving approval was delayed. Once the foreign investor’s application is submitted to BIDA, the authorities review the proposal to ensure the investment does not create conflicts with local business. Investors note it is frequently necessary to separately register with other entities such as the National Board of Revenue. According to the World Bank’s 2017 Doing Business Report, business registration in Bangladesh takes 19.5 days on average with nine distinct steps (http://www.doingbusiness.org/data/exploreeconomies/bangladesh/ ).

BIDA’s “Roadmap to Investment in Bangladesh” is also available at: http://bida.gov.bd/road-map-to-investment-bangladesh .

Requirements vary by sector, but all foreign investors are also required to obtain clearance certificates from relevant ministries and institutions with regulatory oversight. BIDA establishes time-lines for the submission of all the required documents. For example, if a proposed foreign investment is in the healthcare equipment field, investors need to obtain a No Objection Certificate (NOC) from the Directorate General for Health Services under the Ministry of Health. The NOC states that the specific investment will not hinder local manufacturers and is in alignment with the guidelines of the ministry. Negative outcomes can be appealed, except for applications pertaining to the four restricted sectors previously mentioned.

A foreign investor also must register its company with the Registrar of Joint Stock Companies and Firms (RJSC&F) and open a local bank account under the registered company’s name. For BIDA screening, an investor must submit the RJSC&F Company Registration certificate, legal bank account details, a NOC from the relevant ministry, department, or institution, and a project profile (if the investment is more than USD 1.25 million) along with BIDA’s formatted application form.

Other Investment Policy Reviews

In 2013, Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD): http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=444&Sitemap_x0020_Taxonomy=Investment%20Policy%20Reviews%20(IPR);
#20;#UNCTAD%20Home
 
.

Bangladesh has not conducted an IPR through the Organization for Economic Cooperation and Development.

A Trade Policy Review was last done by the World Trade Organization in October 2012 and can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp370_e.htm .

With EU assistance, Bangladesh conducted a trade policy review, the “Comprehensive Trade Policy of Bangladesh”, which was published by the Ministry of Commerce in September 2014. Current Bangladesh government export and import policies are available at: http://www.mincom.gov.bd/site/page/30991fcb-8dfc-4154-a58b-09bb86f60601/Policy .

Business Facilitation

The Government has had limited success in reducing the time required to establish a company. BIDA and BEZA are both attempting to establish one-stop business registration shops and these agencies have proposed draft legislation for this purpose. In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes. Expected streamlined services from BIDA include: company registration, name clearance issuance, tax certificate and TIN, VAT registration, visa recommendation letter issuance, work permit issuance, foreign borrowing request approval, and environment clearance. BIDA also aims to automate 150 processes from 34 government agencies by December 2018.

Companies can register their business at Office of the Registrar of Joint Stock Companies and Firms: www.roc.gov.bd . However, the online business registration process is not clear and cannot be used by a foreign company to attain the business registration as certain steps are required to be performed in-person.

In addition, BIDA has branch/liaison office registration information on its website at: http://bida.gov.bd/ .

The online business registration process is clear and complete but cannot be used by foreign companies to register their businesses as certain steps are required to be performed in-person.

Other agencies with which a company must typically register are as follows:

  • City Corporation – Trade License;
  • National Board of Revenue – Tax & VAT Registration;
  • Chief Inspector of Shops and Establishments – Employment of workers notification.

The company registration process now takes around 15 workdays to complete. The process to open a branch or liaison office is approximately one month. The process for trade license, tax registration, and VAT registration requires seven days, two days, and three weeks, respectively.

Outward Investment

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947. As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the 1947 Act by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note that the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.

3. Legal Regime

Transparency of the Regulatory System

Since 1989, the government has gradually moved to decrease regulatory obstruction of private business. The chambers of commerce have called for a greater voice for the private sector in government decisions and for privatization, but at the same time, many support protectionism and subsidies for their own industries. The result is that policy and regulations in Bangladesh are often not clear, consistent, or publicized. Registration and regulatory processes are alleged to be frequently used as rent-seeking opportunities. The major rule-making and regulatory authority exist in the national level – under each Ministry with many final decisions being made at the top-most levels, including the Prime Minister’s office (PMO). The PMO is actively engaged in policies, as well as foreign investment in government-controlled projects.

The Bangladesh Investment Development Authority (BIDA) – a merger of the Board of Investment (BOI) and the Privatization Commission (PC) – was formed in accordance with the Bangladesh Investment Development Authority Bill 2016 passed by Parliament on July 25, 2016. The bill established BIDA as the lead private investment promotion and facilitation agency in Bangladesh. The move came amid complaints about redundancies in the BOI’s and the PC’s overlapping mandates and concerns that the PC had not made sufficient progress. BIDA hopes to become a “one-stop shop” for investors and a “true” investment promotion authority rather than simply follow the referral service-orientation of BOI. Currently, BIDA is not yet a one-stop shop and companies must still seek approvals from relevant line ministries.

Bangladesh has achieved incremental progress in using information technology to improve the transparency and efficiency of some government services and to develop independent agencies to regulate the energy and telecommunication sectors. Some investors cited government laws, regulations, and implementation as impediments to investment. The government has historically limited opportunities for the private sector to comment on proposed regulations. In 2009, Bangladesh adopted the Right to Information Act that provides for multilevel stakeholders consultation through workshops or media outreach. Although the consultation process exists, it is still weak and subject to further improvement.

Ministries do not generally publish and release draft proposals to the public. However, several agencies, including the Bangladesh Bank, BIDA, the Ministry of Commerce, and the Bangladesh Telecommunications Regulatory Commission have occasionally posted draft legislation and regulations online and solicited feedback from the business community. In some instances, parliamentary committees have also reached out to relevant stakeholders for input on draft legislation. The media continues to be the main information source for the public on many draft proposals. There is also no legal obligation to publish proposed regulations, consider alternatives to proposed regulation, or solicit comments from the general public.

Regulatory agencies generally do not solicit comments on proposed regulations from the general public; however, when a consultation occurs, comments may be received through public media consultation, feedback on websites (e.g., in the past, the Bangladesh Bank received comments on monetary policy), Focused Group Discussions, or workshops with relevant stakeholders. There is no government body tasked with soliciting and receiving comments, but the Bangladesh Government Press of the Ministry of Information is entrusted with the authority of disseminating government information to the public. The law does not require regulatory agencies to report on the results of consultations, and in practice, regulators do not generally report the results. Widespread use of social media in Bangladesh has created an additional platform for public input into developing regulations, and government officials appear to be sensitive to this form of messaging.

The Bangladesh Government Press ( http://www.dpp.gov.bd/bgpress/ ), the government printing office, publishes the weekly “Bangladesh Gazette” every Thursday. The gazette provides official notice of government actions, including the issuance of government rules and regulations and the transfer and promotion of government employees. Laws can also be accessed at http://bdlaws.minlaw.gov.bd/ .

Bangladesh passed the Financial Reporting Act of 2015 that created the Financial Reporting Council (FRC) and aims to establish transparency and accountability in the accounting and auditing of financial institutions. However, the FRC is not fully operational and accounting practices and quality varies widely in Bangladesh. Internationally known and recognized firms have begun establishing local offices in Bangladesh and the presence of these firms is positively influencing the accounting norms in the country. Some firms are capable of providing financial reports audited to international standards while others maintain unreliable (or multiple) sets of accounting reports. Regulatory agencies also do not conduct impact assessment of proposed regulations; hence, regulations are often not reviewed on the basis of data-driven assessments. National budget documents are not prepared according to internationally accepted standards.

International Regulatory Considerations

BIMSTEC aims to integrate regional regulatory systems between Bangladesh, India, Burma, Sri Lanka, Thailand, Nepal, and Bhutan. However, efforts to advance regional cooperation measures have stalled in recent years and regulatory systems remain uncoordinated.

Local law is based on English common law system, but most fall short of international standards. The country’s regulatory system remains weak, where many of the laws and regulations are not enforced and standards are not maintained.

Bangladesh has been a member of the World Trade Organization (WTO) since January 1995. WTO requires all signatories to the Agreement on Technical Barriers to Trade (TBT) to establish a National Inquiry Point and Notification Authority to gather and efficiently distribute trade-related regulatory, standards, and conformity assessment information to the WTO Member community. Bangladesh Standards and Testing Institute (BSTI) is the National Enquiry Point. There is an internal committee on WTO affairs in BSTI and it participates in the notification activities to WTO through the Ministry of Commerce and the Ministry of Industries.

Focal Points and Methods of Contact are:

Focal Points for WTO:

  • Mr. Taher Jamil, Deputy Director, BSTI, Dhaka, cell: +8801723704505;
  • Mr. Shajjatul Bari, Deputy Director, Standards Wing, BSTI, Dhaka; Office tel: +880-2-8870285;
  • Director General, WTO Cell, Ministry of Commerce; Office Tel: +880-2-8870285.

Focal Points for SPS, TBT and TRIPS:

Legal System and Judicial Independence

Bangladesh is a common law based jurisdiction. Many of the basic laws of Bangladesh, such as the penal code, civil and criminal procedural codes, contract law, and company law, are influenced by English common laws. However, family laws, such as laws relating to marriage, dissolution of marriage, and inheritance, are based on religious scripts, and therefore differ between religious communities. The Bangladeshi legal system is based on a written constitution and the laws often take statutory forms that are enacted by the legislature and interpreted by the higher courts. Ordinarily, executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature. Such subordinate legislation is known as rules or regulations and is also enforceable by the court. Yet, being a common law system, the statutes are short, and set out basic rights and responsibilities, but are elaborated by the courts in their application and interpretation of those. The Judiciary of Bangladesh acts through (1) The Superior Judiciary having appellate, revision, and original jurisdiction, and (2) Sub-Ordinate Judiciary having original jurisdiction.

Since 1971, Bangladesh’s legal system has been updated in the areas of company, banking, bankruptcy, and money loan court laws, and other commercial laws. An important impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain. The judicial system does not provide for interest to be charged in tort judgments, which means delays in proceedings carry no penalties. Bangladesh does not have a separate court or division of a court dedicated solely to hearing commercial cases. The Joint District Judge court (a civil court) is responsible for enforcing contracts.

Some notable commercial laws include:

  • The Contract Act, 1872 (Act No. IX of 1930);
  • The Sale of Goods Act, 1930 (Act No. III of 1930);
  • The Partnership Act, 1932 (Act No. IX of 1932);
  • The Negotiable Instruments Act, 1881 (Act No. XXVI of 1881);
  • The Bankruptcy Act, 1997 (Act No. X of 1997);
  • The Arbitration Act, 2001 (Act No. I of 2001).

The judicial system of Bangladesh has never been completely independent from the interference of the executive branch of the government. In a significant milestone, the government in 2007 separated the country’s judiciary from the executive, but the executive retains strong influence over the judiciary through control of judicial appointments. Other pillars of the justice system, including the police, courts, and legal profession are also closely aligned with the executive branch. In lower courts, corruption is widely perceived as a serious problem. Regulations or enforcement actions are appealable under the Appellate Division of the Supreme Court. Bangladesh scored 2.38 in the World Bank’s 2016 Judicial Independence Index out of a 1-7 band score with 7 being the best.

Laws and Regulations on Foreign Direct Investment

Major laws affecting foreign investment include: the Foreign Private Investment (Promotion and Protection) Act of 1980, the Bangladesh Export Processing Zones Authority Act of 1980, the Companies Act of 1994, the Telecommunications Act of 2001, the Industrial Policy Act of 2005, the Industrial Policy Act of 2010, and the Bangladesh Economic Zones Act 2010. The Industrial Policy Act of 2016 was approved by the Cabinet Committee on Industrial Purchase on February 24, 2016 and replaces the Industrial Policy of 2010.

The Industrial Policy Act of 2016 offers incentives for “green,” (environmental) high-tech, or “transformative” industries. Foreign investors who invest USD 1 million or transfer USD 2 million to a recognized financial institution can apply for Bangladeshi citizenship. The Government of Bangladesh will provide financial and policy support for high-priority industries (those that create large-scale employment and earn substantial export revenue) and creative (architecture, arts and antiques, fashion design, film and video, interactive laser software, software, and computer and media programming) industries. Specific importance will be given to agriculture and food processing, ready-made garments (RMG), information and communication technology (ICT) and software, pharmaceuticals, leather and leather products, and jute and jute goods.

In 2017, BIDA has submitted proposed legislation for a One-Stop Service Act (OSS), which has since been approved by the Parliament, to attract further foreign direct investment to Bangladesh. In addition, Petrobangla, the state-owned oil and gas company, has modified its production sharing agreement contract for offshore gas exploration to include an option to export gas.

BIDA has a “one-stop” website that provides relevant laws, rules, procedure, and reporting requirements for investors at: http://www.bida.gov.bd/ .

Aside from information on relevant business laws and licenses, the website includes information on Bangladesh’s investment climate, opportunities for business, potential sectors, and how to do business in Bangladesh. The website also has an eService Portal for Investors, which provides services like visa recommendations for foreign investors, approval/extension of work permit for expatriates, approval of foreign borrowing, and approval/renewal of branch/liaison and representative office. However, the effectiveness of these online services is questionable.

Competition and Anti-Trust Laws

The GOB formed an independent agency in 2011 called the “Bangladesh Competition Commission (BCC)” under the Ministry of Commerce. The Bangladesh Parliament then passed the Competition Act in June 2012. However, the BCC has experienced operational delays and it has not received sufficient resources to fully operate. Currently, the WTO Cell of the Ministry of Commerce handles most competition-related issues.

In January 2016, the two parent companies of Malaysia-based Robi and India-based Airtel signed a formal deal to merge their operations in Bangladesh, completing the country’s first telecommunications merger. The deal, valued at USD 12.5 million, is to date Bangladesh’s largest corporate merger. The merger raised anti-competition concerns but it was completed in November 2016 after the Bangladesh Telecommunication Regulatory Commission (BTRC) and Prime Minister Sheikh Hasina gave final approvals.

Expropriation and Compensation

Since the Foreign Investment Act of 1980 banned nationalization or expropriation without adequate compensation, the GOB has not nationalized or expropriated property from foreign investors. In the years immediately following independence in 1971, widespread nationalization resulted in government ownership of more than 90 percent of fixed assets in the modern manufacturing sector, including the textile, jute and sugar industries and all banking and insurance interests, except those in foreign (but non-Pakistani) hands. The government has since taken steps to privatize many of these industries during the last 20 years and the private sector has developed into a main driver of the country’s sustained economic growth.

Dispute Settlement

ICSID Convention and New York Convention

Bangladesh is a signatory to the International Convention for the Settlement of Disputes (ICSID) and it acceded in May 1992 to the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards. Alternative dispute resolutions are possible under the Bangladesh Arbitration Act of 2001. The current legislation allows for enforcement of arbitral awards.

Investor-State Dispute Settlement

Bangladeshi law allows contracts to refer investor-state dispute settlement to third country fora for resolution. The U.S.-Bangladesh Bilateral Investment Treaty also stipulates that parties may, upon the initiative of either of them and as a part of their consultation and negotiation, agree to rely upon non-binding, third-party procedures, such as the fact-finding facility available under the Rules of the Additional Facility of the International Centre for the Settlement of Investment Disputes. If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which they have previously agreed. Bangladesh is also a party to the South Asia Association for Regional Cooperation (SAARC) Agreement for the Establishment of an Arbitration Council, signed November 2005, which aims to establish a permanent center for alternative dispute resolution in one of the SAARC member countries.

International Commercial Arbitration and Foreign Courts

Bangladeshi law allows contracts to refer dispute settlement to third country forums for resolution. The Bangladesh Arbitration Act of 2001 and amendments in 2004 reformed alternative dispute resolution in Bangladesh. The Act consolidated the law relating to both domestic and international commercial arbitration. It thus created a single and unified legal regime for arbitration in Bangladesh. Although the new Act is principally based on the UNCITRAL Model Law, it is a patchwork quilt as some unique provisions are derived from the Indian Arbitration and Conciliation Act 1996 and some from the English Arbitration Act 1996.

In practice, enforcement of arbitration results is applied unevenly and the GOB has challenged ICSID rulings, especially those that involve rulings against the GOB. The timeframe for dispute resolution is unpredictable and has no set limit. It can be done as quickly as a few months, but often takes years depending on the type of dispute. Anecdotal information indicates average resolution time can be as high as 16 years. Local courts may be biased against foreign investors in resolving disputes.

Bangladesh is a signatory of the New York Convention and recognizes the enforcement of international arbitration awards. Domestic arbitration is under the authority of the district judge court bench and foreign arbitration is under the authority of the relevant high court bench.

The ability of the Bangladeshi judicial system to enforce its own awards is weak. Senior members of the government have been effective in using their offices to resolve investment disputes on several occasions, but the GOB’s ability to resolve investment disputes at a lower level is mixed. The GOB does not publish the numbers of investment disputes involving U.S. or foreign investors. Anecdotal evidence indicates investment disputes occur with limited frequency and the involved parties often resolve the disputes privately rather than seek government intervention.

The practice of alternative dispute resolution (ADR) in Bangladesh has many challenges, including lack of funds, lack of lawyer cooperation, and lack of good faith. Slow adoption of ADR mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes in Bangladesh.

As in many countries, Bangladesh has adopted a “conflicts of law” approach to determining whether a judgment from a foreign legal jurisdiction is enforceable in Bangladesh. This single criterion allows Bangladesh courts broad discretion in choosing whether to enforce foreign judgments with significant effects on matrimonial, adoption, corporate, and property disputes. Most enterprises in Bangladesh, and especially state-owned enterprises (SOEs), whose leadership is nominated by the ruling government party, maintain strong ties with the government. Thus, domestic courts strongly tend to favor SOEs and local companies, in investment disputes.

Investors are also increasingly turning to the Bangladesh International Arbitration Center (BIAC) for dispute resolution. BIAC is an independent arbitration center established by prominent local business leaders in April 2011 to improve commercial dispute resolution in Bangladesh to stimulate economic growth. The council committee is headed by the President of International Chamber of Commerce – Bangladesh (ICC,B) and includes the presidents of other prominent chambers such as like Dhaka Chamber of Commerce and Industry (DCCI) and Metropolitan Chamber of Commerce and Industry (MCCI). The center operates under the Bangladesh Arbitration Act of 2001. According to BIAC, fast track cases are resolved in approximately six months while typical cases are resolved in one year. Major Bangladeshi trade and business associations such as the American Chamber of Commerce in Bangladesh (AmCham) can sometimes help to resolve transaction disputes.

Bankruptcy Regulations

Many laws affecting investment in Bangladesh are old and outdated. Bankruptcy laws, which apply mainly to individual insolvency, are sometimes not used in business cases because of webs of falsified assets and uncollectible cross-indebtedness supporting insolvent banks and companies. A Bankruptcy Act was enacted in 1997, but has been ineffective in addressing these issues. An amendment to the Bank Companies Act of 1991 was enacted in 2013. Some bankruptcy cases fall under the Money Loan Court Act, which has more stringent and timely procedures.

6. Financial Sector

Capital Markets and Portfolio Investment

Capital markets in Bangladesh are still developing and the financial sector remains highly dependent on bank lending. Current government policy inhibits the creation of reliable benchmarks for long-term bonds and prevents the development of a tradable bond market.

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). The Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance, regulate both. As of March 2018, the DSE market capitalization stood at USD 39.26 billion.

Although the Bangladesh government has a positive attitude towards foreign portfolio investors, participation remains low due to limited liquidity and the lack of publicly available and reliable company information. The DSE has attracted some foreign portfolio investors to the country’s capital market; however, the volume of foreign investment in Bangladesh remains a small fraction of total market capitalization. As a result, foreign portfolio investment has had limited influence on market trends and Bangladesh’s capital markets have been largely insulated from the volatility of international financial markets. Bangladeshi markets continue to rely primarily on domestic investors, and Bangladeshi firms increasingly rely on capital markets to finance investment projects. In March 2017, the government relaxed investment rules, making it possible for foreign investors to use local currency to invest in directly local companies through the purchase of corporate shares.

BSEC has formed separate committees to establish a central clearing and settlement company, allow venture capital and private equity firms, launch derivatives products, and activate the bond market. In December 2013, BSEC became a full signatory of International Organization of Securities Commissions (IOSCO) Memorandum of Understanding and was elevated to the ‘A’ category of regulators.

BSEC has taken steps to improve regulatory oversight, including installing a modern surveillance system, the “Instant Market Watch,” that provides real time connectivity with exchanges and depository institutions. As a result, the market abuse detection capabilities of BSEC have improved significantly. A new mandatory Corporate Governance Code for listed companies was introduced in August 2012. Demutualization of both the DSE and CSE was completed in November 2013 to separate ownership of the exchanges from trading rights. A majority of the members of the Demutualization Board, including the Chairman, are independent directors. Apart from this, a separate tribunal has been established to resolve capital market-related criminal cases expeditiously. All these reforms target a disciplined market with better infrastructure so that entrepreneurs can raise capital and attract foreign investors.

The Demutualization Act 2013 also directed DSE to pursue a strategic investor, who would acquire a 25 percent stake in the bourse. DSE opened bids for a strategic partner in February 2018 and it is still in the process of evaluating proposals from international bidders.

According to the International Monetary Fund (IMF), Bangladesh is an Article VIII member and maintains restrictions on the unapproved exchange, conversion, and/or transfer of proceeds of international transactions into non-resident taka-denominated accounts. Since 2015, authorities have relaxed restrictions by allowing some debits of balances in such accounts for outward remittances, but there is currently no established timetable for the complete removal of the restrictions.

Money and Banking System

The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established on December 16, 1971 through the enactment of the Bangladesh Bank Order-1972. General supervision and strategic direction of BB has been entrusted to a 9-member Board of Directors, which is headed by the BB Governor. BB has 45 departments and 10 branch offices.

According to the BB, four types of banks operate in the formal financial system: State Owned Commercial Banks (SOCBs), Specialized Banks, Private Commercial Banks (PCBs), and Foreign Commercial Banks (FCBs). Some 57 “scheduled” banks including 6 SOCBs, 2 specialized government banks established for specific objectives like agricultural or industrial development, 40 PCBs, and nine 9 FCBs operate in Bangladesh within a network of almost 9,000 total branch offices as of March 2018. The scheduled banks are licensed to operate under Bank Company Act, 1991 (Amended 2013). There are also six non-scheduled banks in Bangladesh, established for special and definite objectives and operating under Acts that are enacted for meeting up those objectives.

Currently, 33 non-bank financial institutions (FIs) are operating in Bangladesh. They are regulated under the Financial Institution Act, 1993 and controlled by the BB. Out of the total, two are fully government owned, one is a subsidiary of an SOCB, 15 are private domestic initiatives, and 15 are joint venture initiatives. Major sources of funds of these financial institutions are term deposits (at least three months tenure), credit facilities from banks and other financial institutions, call money, as well as bonds and securitization.

The major difference between banks and FIs are as follows:

  • FIs cannot issue checks, pay-orders or demand drafts;
  • FIs cannot receive demand deposits;
  • FIs cannot be involved in foreign exchange financing;
  • FIs can employ diversified financing modes like syndicated financing, bridge financing, lease financing, securitization instruments, private placement of equity etc.

Microfinance institutions (MFIs) remain the dominant players in rural financial markets. As of 2016, there were 692 licensed micro-finance institutions operating a network of 17,241 branches with 33.17 million members. A 2014 Institute of Microfinance survey study showed that around 40 percent of the adult population and 75 percent of households had access to financial services in Bangladesh.

The banking sector has had a mixed record of performance over the past several years, but the sector has maintained overall healthy growth. Total assets in the banking sector stood at 63.8 percent of gross domestic product at end of September 2017. The gross non-performing loan (NPL) ratio was 10.7 percent at end of September 2017, with NPLs concentrated in 12 banks, each holding double-digit NPL rates at the end of September 2017.

On December 26, 2017, the BB issued a circular warning citizens and financial institutions about the risks associated with cryptocurrencies. The circular noted that using cryptocurrencies may violate existing money laundering and terrorist financing regulations and that users may incur financial losses. According to the BB, the circular did not constitute a ban. Bangladesh foreign exchange regulations, which limit outward payments, largely prevent the use of cryptocurrencies in Bangladesh. The BB issued similar warnings against cryptocurrencies in 2014.

Foreign Exchange and Remittances

Foreign Exchange Policies

Free repatriation of profits is legally allowed for registered companies and profits are generally fully convertible. However, companies report that the procedures for repatriation of foreign currency are lengthy and cumbersome. The Foreign Investment Act guarantees the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees for businesses. The central bank’s exchange control regulations and the U.S.-Bangladesh Bilateral Investment Treaty (in force since 1989) provide similar investment transfer guarantees. The Bangladesh Investment Development Authority may need to approve repatriation of royalties and other fees.

Since 2013, Bangladesh has tried to manage its exchange rate vis-à-vis the U.S. dollar within a fairly narrow range. Until 2017, the Bangladesh taka traded between 76 and 78.8 taka to the dollar. The taka has depreciated relative to the dollar since October 2017 reaching 82.98, despite ongoing interventions from the Bangladesh Bank. The Bangladesh currency, the taka, is approaching full convertibility for current account transactions, such as imports and travel, but not for capital account transactions, such as investing, currency speculation, or e-commerce.

Remittance Policies

There are no set time limitations or waiting periods for remitting all types of investment returns. Remitting dividends, returns on investments, interest, and payments on private foreign debts do not require approval from the central bank and transfers are done within one to two weeks. For repatriating lease payments, royalties and management fees, some central bank approval is required, and this process can take between two and three-weeks. If a company fails to submit all the proper documents for remitting, it may take up to 60 days. Foreign investors have reported difficulties transferring funds to overseas affiliates and making payments for certain technical fees without the government’s prior approval to do so. Additionally, some regulatory agencies have reportedly blocked the repatriation of profits due to sector-specific regulations. The U.S. Embassy also received complaints of American citizens not being able to transfer the proceeds of sales of their properties. There is no mechanism in place for foreign investors to repatriate through government bonds issued in lieu of foreign currency payments. Bangladesh is not involved in currency manipulation tactics.

The Financial Action Task Force (FATF) notes that Bangladesh has established the legal and regulatory framework to meet its Anti-Money Laundering/Counterterrorism Finance commitments. The Asia/Pacific Group on Money Laundering (APG), an independent and collaborative international organization based in Bangkok, conducted its Mutual Evaluation of Bangladesh’s AML/CTF regime in September 2016 and found that Bangladesh had made significant progress since the last Mutual Evaluation Report (MER) in 2009, but that Bangladesh still faces significant money laundering and terrorism financing risks. The APG report is available online: http://www.apgml.org/mutual-evaluations/documents/default.aspx .

Sovereign Wealth Funds

The Bangladesh Finance Ministry first announced in 2015 that it is exploring the possibility of establishing a sovereign wealth fund for the purposes of investing a portion of Bangladesh’s foreign currency reserves. In February 2017, the Cabinet initially approved a USD 10 billion “Bangladesh Sovereign Wealth Fund,” (BSWF) that will be created with funds from excess foreign exchange reserves. The government claims the BSWF will be used to invest in “public interest” projects. Bangladesh does not currently follow the Santiago Principles, a voluntary set of 24 principles and practices designed to promote transparency, good governance, accountability and prudent investment practices while encouraging a more open dialogue and deeper understanding of sovereign wealth fund activities.

Barbados

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

The Government of Barbados, through Invest Barbados, welcomes foreign direct investment with the stated goals of creating jobs, earning foreign exchange, transferring technology and enhancing skills while having a positive impact on its citizens and contributing overall to economic activity.

Barbados encourages investment in the following key sectors: international financial services, tourism, information technology, education, health, cultural services, agro-processing, medical schools, and renewable energy. In the international financial services sector, the government maintains its regulatory oversight through standards designed to prevent money laundering and tax evasion.

Through Invest Barbados the government supports investment by businesses considering the possibility of locating in Barbados, facilitating both domestic and foreign private investment. Invest Barbados’ foreign direct investment policy is to actively promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors. Invest Barbados also provides customized support for investors to ensure the expansion and sustainability of the initial investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign control in Barbados. Nationals and non-nationals may establish and own private enterprises and private property in Barbados. These rights extend to the acquisition and disposition of interests in private enterprises.

No industries are closed to private enterprise, although the government reserves the right not to allow certain investments. Some activities, such as telecommunications, utilities, broadcasting, franchises, banking, and insurance require a license from the government. There are no quotas, or other restrictions, on foreign ownership of a local enterprise or participation in a joint venture.

Other Investment Policy Reviews

In 2015, Barbados conducted an investment policy review through the World Trade Organization. This report, which addresses the general investment climate in Barbados, can be found at https://www.wto.org/english/tratop_e/tpr_e/tp408_e.htm .

Business Facilitation

Invest Barbados is the main investment promotion agency facilitating foreign investment in Barbados in the identified key sectors. All potential investors applying for government incentives must submit their proposals for review by Invest Barbados to ensure the projects are consistent with national interests and provide economic benefits to the country.

Invest Barbados has the authority to offer guidance and direction to new and established investors seeking to pursue investment opportunities in Barbados. The process is transparent and takes into account the size of capital investment as well as the economic impact a proposed project will have on the country.

Invest Barbados offers a website that is useful for navigating applicable laws, rules, procedures and registration requirements for foreign investors. This can be found at http://www.investbarbados.org . Based on the type of business a foreign investor wishes to set up, there are different steps that must be completed. Potential investors should contact Invest Barbados for guidance in this process.

The Corporate Affairs and Intellectual Property Office (CAIPO) maintains an online e-registry filing service for matters pertaining to the Corporate Registry. It is available to registered agents (usually attorneys). Further information can be obtained at www.caipo.gov.bb.

According to the 2018 World Bank Doing Business Report, Barbados is ranked at 99th of 190 countries in ease of starting a business, which takes eight procedures and 15 days to complete. The general practice is to retain an attorney to prepare relevant incorporation documents. A business must register with the Corporate Affairs and Intellectual Property Office, the Barbados Revenue Authority, the Customs and Excise Department and the National Insurance Scheme.

Recently, there has been an increased focus on issues that directly impact women. A number of regional development agencies launched programs to assist Caribbean women entrepreneurs, notably Caribbean Export and the Women Innovators Network of the Caribbean. Local organizations have also hosted workshops in support of women entrepreneurs. A draft bill which would facilitate the implementation of the Convention on the Rights of Persons with Disabilities is currently under consideration by Parliament. It seeks to systematize the rights to which every person with disabilities is entitled, and to ensure they are treated according to international best practice. The Bill would address issues such as access to public services, education, employment and will codify a supportive environment to promote equal opportunity in all areas of development in order that each person would reach his or her maximum potential; to empower persons with disabilities and their organizations to become involved in the social economic development of the country; to provide a framework for planning of programs, services and activities; and to encourage and support ongoing research in all areas that impact on the lives of persons with disabilities. Barbados’ national policy on persons with disabilities remains obligated to its international treaty commitments under the United Nations Convention on the Rights of Persons with Disabilities, which Barbados signed in 2008 and ratified in 2013. The Government of Barbados remains committed to implementing the 2030 Development Agenda for All Persons with Disabilities.

Outward Investment

While no incentives are offered, the government encourages companies to invest in other countries, particularly within the region. Such outward investment is generally encouraged, except where there may be political/diplomatic considerations. Local companies in Barbados are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the Caribbean Community and the Caribbean Single Market and Economy. The Barbados Investment Development Corporation provides market development support for domestic companies seeking to enhance their export potential.

3. Legal Regime

Transparency of the Regulatory System

Barbados’ legal framework fosters competition and establishes clear rules for foreign and domestic investors with regard to tax, labor, environmental, health, and safety concerns. These regulations are in keeping with international standards. The Ministry of Finance and Economic Affairs and the Invest Barbados Agency each provide oversight aimed at ensuring the attraction and channeling of investment occurs transparently.

Rulemaking and regulatory authority rests with Parliament. This bicameral legislature is made up of the House of Assembly and the Senate. The House of Assembly consists of 30 members who are elected in single seat constituencies. The Senate consists of 21 members who are appointed by the Governor General.

Foreign investment into Barbados is governed by the national laws of Barbados and their implementing regulations. These laws and regulations are developed with the participation of relevant ministries and are drafted by the Office of the Attorney General and enforced by the relevant ministry or ministries. Additional compliance supervision is delegated to specific agencies, by sector, as follows:

  • Banking and financial services – Central Bank of Barbados
  • Insurance and non-banking financial services – Financial Services Commission
  • International business – International Business Unit, Ministry of International Business
  • Business incorporation and intellectual property – Corporate Affairs and Intellectual
  • Property Office (CAIPO)

The Ministry of Finance and Economic Affairs monitors investments to collect information for national statistics and reporting purposes.

All foreign businesses must be registered or incorporated through CAIPO and will be regulated by one of the other aforementioned agencies, depending on the nature of the business.

Although Barbados does not have legislation that guarantees access to information or freedom of expression, access to information is generally available in practice. The government maintains a website and an information service to facilitate the posting of information such as government office directories and press releases. The Government Information Service website is available at: http://gisbarbados.gov.bb/ . The government also maintains a parliamentary website, where it posts legislation prior to parliamentary debate and live streaming of House sittings. The government budget is also available on this website, available at: http://www.barbadosparliament.com/ .

Although some bills are not subject to public consultation, input from various stakeholder groups and agencies is enlisted during the initial drafting of legislation. Public awareness campaigns, through print and electronic media, are used to inform the general public. Copies of regulations are circulated to stakeholders, government ministries and departments, and are published in the Official Gazette after passage in Parliament.

Accounting, legal and regulatory procedures are transparent. Publicly listed companies publish annual financial statements as well as any changes in portfolio shareholdings, including share values. Service providers are required to adhere to international best practice standards including International Financial Reporting Standards (IFRS), International Standards on Auditing (ISA) and International Public Sector Accounting Standards (IPSAs) for government and public sector bodies. They must also comply with the provisions of the Money Laundering and Financing of Terrorism Prevention and Control Act. Accounting professionals, in particular, must engage in continuous professional development. All Barbadian financial service providers are regulated by the Corporate and Trust Service Providers Act. Failure to adhere to these laws and regulations may result in revocation of the business license and/or cancellation of work permit(s).

The Office of the Ombudsman is established by the Constitution to guard against excesses by government officers in the performance of their duties. It is the objective of the Office of the Ombudsman to provide quality service in an impartial, timely and expeditious manner while investigating complaints by Barbadian nationals or residents who consider the conduct of a government body or official unreasonable, improper, inadequate or unjust.

The Office of the Auditor General is also established by the constitution and is regulated by the Financial Administration and Audit Act. The Auditor General is responsible for the audit and inspection of all public accounts of the Supreme Court, the Senate, the House of Assembly, all government ministries, departments, government-controlled entities and statutory bodies. The Office of the Auditor General’s annual reports can be found on the Parliament of Barbados website.

International Regulatory Considerations

Barbados adheres to international standards of best practice and is recognized by the Organization for Economic Cooperation and Development (OECD) as largely compliant. Barbados is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax matters, the Multilateral Competent Authority Agreement, as well as the multilateral convention to implement tax treaty related matters to prevent base erosion and profit shifting.

The Barbados National Standards Institution was established in 1973 as a joint venture between the Government of Barbados and the private sector under the Companies Act. It oversees a laboratory complex housing metrology, textile, engineering and chemistry/microbiology laboratories. The primary functions of the Barbados National Standards Institution include the preparation, promotion and implementation of standards in all sectors of the economy, including the promotion of quality systems, quality control and certification. The work of the Barbados National Standards Institution is governed by the Standards Act (2006) and the Weights and Measures Act (1977) and Regulations (1985). As a signatory to the World Trade Organization Agreement on the Technical Barriers to Trade, Barbados, through the Barbados National Standards Institution, is obligated to harmonize all national standards to international norms to avoid creating technical barriers to trade.

Barbados ratified the WTO Trade Facilitation Agreement (TFA) in January 2018. Ratification of the Agreement is an important signal to investors of the country’s commitment to improving its business environment for trade. It will also improve the speed and efficiency of border procedures, facilitate trade costs reduction and enhance participation in the global value chain.

Legal System and Judicial Independence

Barbados’ legal system is based on the British common law system. Modern corporate law is modeled on the Canada Business Corporations Act. The Attorney General, the Chief Justice, junior (puisne) judges, and magistrates administer justice in Barbados. The Supreme Court consists of the Court of Appeal and the High Court. Appeals are made in the first instance to the Court of Appeal. The High Court hears criminal and civil matters and makes determinations on the interpretation of the Constitution.

The Caribbean Court of Justice is the regional judicial tribunal, established in 2001 by the Agreement Establishing the Caribbean Court of Justice. The Caribbean Court of Justice has original jurisdiction to interpret and apply the Revised Treaty of Chaguaramas. In 2005, Barbados became a full member of the Caribbean Court of Justice; thus making the Caribbean Court of Justice its final court of appeal and original jurisdiction.

The United States and Barbados are both parties to the World Trade Organization (WTO). The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes.

Laws and Regulations on Foreign Direct Investment

Invest Barbados’ foreign direct investment policy is to actively promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors. The main laws concerning investment in Barbados are the Barbados International Business Promotion Act (2005), the Tourism Development Act (2005) and the Companies Act. There is also a framework of legislation concerning International Business Companies, Financial Services, International Insurance, Ships’ Registration and Trusts. Barbados is currently revamping its Fiscal Incentives legislation to bring it in line with the obligations under the World Trade Organization (WTO)’s Agreement on Subsidies and Countervailing Measures. Thus, Barbados has ceased all approvals of applications for new incentives or extensions of incentives under the Fiscal Incentives Act Cap. 71A of the Laws of Barbados. However, work continues on the development of a suite of benefits to investors that will not contravene the conditions of the agreements to which Barbados is a signatory.

All proposals for investment concessions and incentives are reviewed by Invest Barbados to ensure proposed projects are consistent with the national interest and provide economic benefits to the country. All proposals are submitted through Invest Barbados for final consideration.

Invest Barbados provides “one-stop shop” facilitation services to investors to guide them through various stages of the investment process. It offers a website useful for navigating the laws, rules, procedures and registration requirements for foreign investors. This can be found at http://www.investbarbados.org .

Competition and Anti-Trust Laws

Chapter 8 of the Revised Treaty of Chaguaramas outlines the competition policy applicable to Caribbean Community (CARICOM) States. Member States are required to establish and maintain a national competition authority for facilitating the implementation of the rules of competition. At the CARICOM level, a regional Caribbean Competition Commission is established to apply the rules of competition in respect of anticompetitive cross-border business conduct. The CARICOM competition policy addresses anticompetitive business conduct, such as agreements between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction, or distortion of competition within the Community and actions by which an enterprise abuses its dominant position within the Community. The Fair Competition Act codified the establishment of the Fair Trading Commission (FTC) in 2001. The Fair Trading Commission is responsible for the promotion and maintenance of fair competition and participates in the Caribbean Competition Commission. The Fair Trading Commission regulates the principles, rates and standards of service for public utilities and other regulated service providers. Sectorial regulation of competition in the telecommunications field is provided under the Telecommunications Act.

Expropriation and Compensation

The Barbados Constitution and the Companies Act (Chap. 308) contain provisions permitting the government to compulsorily acquire property for public use upon prompt payment of compensation at fair market value. The U.S. Embassy Bridgetown is not aware of any outstanding expropriation claims or nationalization of foreign enterprises in Barbados.

Dispute Settlement

ICSID Convention and New York Convention

The Government of Barbados wrote the New York Convention’s provisions into domestic law, but did not ratify the convention. The Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980), which recognizes the 1958 New York Convention on the Negotiation and Enforcement of Foreign Arbitral Awards, are the main laws governing dispute settlement in Barbados.

Barbados is also a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention. Additionally, individual agreements between Barbados and multilateral lending agencies have provisions calling on Barbados officials to accept recourse to binding international arbitration to resolve investment disputes between foreign investors and the state.

Investor-State Dispute Settlement

The Barbados Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980) contain provisions for arbitration of investment disputes.

Barbados does not have a Bilateral Trade Treaty or a Free Trade Agreement with an investment chapter with the United States. U.S. Embassy Bridgetown is not aware of any current investment disputes in Barbados.

According to the 2018 World Bank Doing Business Report, Barbados is ranked 167th out of 190 countries in resolving contracts. Dispute resolution in Barbados generally takes an average of 1,340 days. The slow court system and bureaucracy are widely seen as the main hindrances to timely resolution of commercial disputes. Through the Arbitration Act of 1976, local courts recognize and enforce foreign arbitral awards issued against the government. Barbados does not have a recent history of investment disputes involving either U.S. or foreign investors.

International Commercial Arbitration and Foreign Courts

The Supreme Court of Barbados is the domestic arbitration body and the local courts do enforce foreign arbitral awards.

Bankruptcy Regulations

Under the Bankruptcy and Insolvency Act (2002), Barbados has a bankruptcy framework that recognizes certain debtor and creditor rights. The Act gives a potentially bankrupt company three options: bankruptcy (voluntary or involuntary), receivership, or reorganization of the company. The Companies Act makes provision for the insolvency and/or liquidation of a company incorporated under this Act. The 2018 World Bank Doing Business Report addressed the strength of the framework and its limitations in resolving insolvency in Barbados and ranked Barbados 34th out of 190 countries in this area.

6. Financial Sector

Capital Markets and Portfolio Investment

Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment. Local policies seek to facilitate the free flow of financial resources, with the exception of periods of low liquidity. Such was the case in late 2016 and early 2017, leading the government to intervene in the local credit market to control interest rates, limit the volumes of funds available for borrowing, and borrow on the local market. Historically, the Central Bank of Barbados independently raised or lowered interest rates without any government intervention. There remains a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.

The government continues to review legislation in the financial sector in an effort to strengthen and improve the regulatory regime and attract and facilitate retention of foreign portfolio investments. During 2013, the Central Bank of Barbados underwent a Financial Sector Assessment Program (FSAP) assessment by the International Monetary Fund and The World Bank. The resulting Financial System Stability Assessment Report was published in February, 2014. The Report noted that since the 2008 FSAP Update, Barbados substantially improved its legal, regulatory, and supervisory frameworks to support the banking system. The International Financial Services Act, which replaced the Offshore Banking Act in June 2002, incorporates Basel standards, and provides for on-site examinations of offshore banks. This allows the Central Bank of Barbados to augment its offsite surveillance system for reviewing anti-money laundering policy documents and analyzing prudential returns.

In 2000, under the authority of the Money Laundering and Financing of Terrorism Prevention and Control Act, the government established the Anti-Money Laundering Authority and its operating arm, the government’s Financial Intelligence Unit. In 2001, the Bank Supervision Department of the Central Bank of Barbados, in conjunction with the Anti-Money Laundering Authority, introduced the Anti-Money Laundering Guidelines for Licensed Financial Institutions, which were revised in 2006, 2011, and most recently in October 2013.

The Securities Exchange Act of 1982 established the Securities Exchange of Barbados (SEB), which was reincorporated as the Barbados Stock Exchange (BSE) in 2001. The 1982 Act was replaced by the Securities Act, which removed regulatory responsibility for the securities market activity from the BSE. This Act helped to strengthen the regulatory framework and development of the capital market. In 1987, the BSE began trading corporate stocks and fixed income securities, including government bonds (not commercial paper). Activities on the BSE include regional cross-border trading arrangements for shares listed on the Trinidad and Tobago and Jamaica stock exchanges.

The BSE operates a two-tier electronic trading system comprised of a regular market and a junior market. Companies applying for listing on the regular market must observe and comply with certain requirements. Specifically, they must inter alia have assets of not less than USD 500,000 and adequate working capital, based on the last three years of their financial performance, as well as three-year performance projections. Companies must also demonstrate competent management and be incorporated under the laws of Barbados or other regulated jurisdiction approved by the Financial Services Commission. Applications for listing on the junior market are less onerous, requiring minimum equity of one million shares at a stated minimum value of USD 100,000. Reporting and disclosure requirements for all listed companies include interim financial statements, and an annual report and questionnaire. Non-nationals must obtain exchange control approval from the Central Bank of Barbados to trade securities on the BSE.

The BSE publicized its intent to fully immobilize traditional share certificates where clearance and settlement is computerized through the Barbados Central Securities Depository Inc., which is a wholly owned subsidiary of the BSE Inc. The Financial Services Commission, under the Property Transfer Tax Act, can accommodate investors requiring a traditional certificate for a small fee. The Financial Services Commission also regulates mutual funds in accordance with the Mutual Funds Act.

Since 2014, the BSE introduced new rules in accordance with International Organization of Securities Commission guidelines designed to protect investors, ensure a fair, efficient, and transparent market, and reduce systemic risk. Public companies now have only 90 days from the close of their financial year to file audited financial statements with the BSE, 30 days fewer than before. Additionally, a fine not exceeding USD 5,000 was added to the list of possible penalties for any person under the jurisdiction of the BSE who contravenes or is not in compliance with any regulatory requirements.

In 2016, the BSE launched the International Securities Market (ISM). It is designed to operate as a separate market, thus allowing issuers from not only Barbados, but other international markets. This is aimed at developing the international business and financial services sector, a key contributor to Barbados’ economy. The ISM is founded on a strong regulatory framework that includes the BSE, the Central Bank of Barbados and the Financial Services Commission. To date, the International Securities Market has five listing sponsors.

On 2017, the BSE announced a historic collaboration with its regional partners, the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange, through the adoption of new trading software. The capacity for this inter-exchange connectivity will provide a wealth of potential investment opportunities for both local and regional investors as the BSE seeks to position itself as a globally-recognized international exchange.

Barbados has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement and maintains an exchange system free of restrictions on current account transactions.

Money and Banking System

The Barbados domestic financial sector consists of five commercial banks, 14 trust and finance companies and merchant banks; and 25 offshore banks. There are also 34 credit unions and four money remitters. Since 2001, the government required Barbados institutions and legal entities to reveal the identity of beneficiaries receiving dividends and/or interest. The total assets for the banking system stood at USD 6.74 billion as of December 2017. The local cash reserve requirement was five percent, the foreign cash reserve requirement was two percent, and the securities reserve requirement was 18 percent over the same period.

The Barbados Deposit Insurance Corporation, which was established under the Deposit Insurance Act (2006), provides protection for depositors of deposit-taking financial institutions. Oversight of the entire financial system is conducted by elements of the Financial Oversight Management Committee, which consists of the Central Bank of Barbados, the Barbados Deposit Insurance Corporation and the Financial Services Commission. The private sector has access to financing on the local market through short-term borrowing and credit, asset-financing, project-financing and mortgage financing.

In 2015, the Central Bank of Barbados announced the decision to deregulate interest rates for savings accounts by removing the minimum saving deposit rate. Accordingly, commercial banks and other deposit-taking institutions now set their own interest rates. In 2017, the CBB announced an increase in its Barbados dollar securities reserve requirement ratio for companies licensed under part II of the Financial Institutions Act. This increase requires banks to now hold 15 per cent of their domestic deposits in stipulated securities.

In 2016, Bitt, a Barbadian company, introduced a blockchain-based electronic mobile wallet for consumers. This digital e-commerce solution is praised by advocates of the technology as less expensive to use and more secure and traceable than cash. Officially launched in 2015, Bitt offers a digital asset exchange, remittance channel, and merchant-processing gateway available via a mobile application. Bitt is widely seen as the frontrunner in the Caribbean’s burgeoning cryptocurrency ecosystem and is expected to invest across the region. In March 2018, BITT signed a Memorandum of Understanding with the Eastern Caribbean Central Bank (ECCB) to conduct a fintech pilot on blockchain technology in ECCB member countries.

International banks domiciled in the United States, Canada and Europe are reviewing their correspondent banking relationships in regions they deem high-risk for financial services. The Caribbean witnessed a withdrawal of these services by U.S. and European banks in the last three years. In 2015, the Caribbean Community declared the loss of correspondent banking to be a grave issue facing the region. The Caribbean Community is committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to collate a collective response to this issue.

Foreign Exchange and Remittances

Foreign Exchange Policies

Barbados’ currency of exchange is the Barbadian dollar (BBD). It is issued by the Central Bank of Barbados. Barbados’ foreign exchange operates under a liberal system. The Barbadian dollar is currently pegged to the United States dollar at a rate of BBD 2.00: USD 1.00 since 1975. As a result, the Barbadian dollar does not fluctuate. This creates a stable currency environment for trade and investment in Barbados.

Remittance Policies

Companies can freely repatriate profits and capital from foreign direct investment if they are registered with the Central Bank of Barbados at the time of investment. The Central Bank of Barbados has the right to stagger these conversions depending on the level of international reserves available to the Bank at the time capital repatriation is requested.

The Ministry of Finance and Economic Affairs controls the flow of foreign exchange and the Exchange Control Division of the Central Bank of Barbados executes foreign exchange policy under the Exchange Control Act. Individuals may apply through a local bank to convert the equivalent of USD 3,750 per year for personal travel and up to a maximum of USD 25,000 for business travel. One must apply to the CBB to convert any amount over these limits. International businesses, including exempt insurance and qualifying insurance companies, are exempt from these exchange control regulations.

Barbados is a member of the Caribbean Financial Action Task Force. In 2014, the government of Barbados signed an Intergovernmental Agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

Sovereign Wealth Funds

The Central Bank of Barbados does not maintain a Sovereign Wealth Fund.

Belarus

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The GOB states attracting FDI is one of the priorities of the country’s foreign policy, and net inflows of FDI have been included in the list of government performance targets since December 2015. The GOB also does not have any specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, reportedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus by incorporating separate legal entities. However, the existing laws and practices often discriminate against the private sector, including foreign investors regardless of the country of their origin.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB asserts foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. The GOB also states there are no general limits (statutory, de facto, or otherwise) on foreign ownership or control. In reality, however, the GOB establishes such limits on a case-by-case basis. The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region. Belarus, in particular, limits foreign equity ownership in service industries. Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership. In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above. Those monopolies, together with a high-perceived difficulty of obtaining required operating licenses, make it difficult for foreign companies to invest in Belarus. Another example is that under local law, foreign ownership cannot exceed 30 percent in charter funds of Belarusian insurance companies. Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, public health, as well as rights and freedoms of people.

Although the GOB claims that it does not screen, review, or approve FDI, the above practices suggest the opposite. Belarus retains elements of a Soviet-style command economy, which prescreens and approves all significant foreign investment.

Belarus’s Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).

Other Investment Policy Reviews

The UN Conference on Trade and Development reviewed Belarus’s investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf 

Business Facilitation

Individuals and legal persons can apply for business registration via the web portal of the Single State Register (http://egr.gov.by/egrn/index.jsp?language=en ) – a resource which includes all relevant information on establishing a business.

Belarus has a regime allowing for a simplified taxation system for small and medium-sized, and foreign-owned businesses.

Belarus defines enterprises as follows:

  • Micro enterprises – less than 15 employees;
  • Small enterprises – from 16 to 100 employees;
  • Medium-sized enterprises – from 101 to 250 employees.

Belarus’s investment promotion agency is the National Agency of Investments and Privatization (NAIP). NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country. The Agency states it is a one-stop shop with services available to all investors for:

  • organizing fact-finding missions to Belarus, including assisting with visa formalities;
  • providing information on investment opportunities, special regimes and benefits, state programs, and procedures necessary for making investment decisions;
  • selecting investment projects; and
  • providing solutions and post-project support, i.e. aftercare.

To maintain an ongoing dialog with investors, Belarus also has the Foreign Investment Advisory Council (FIAC). Its activities include, but are not limited to:

  • developing proposals to improve investment legislation;
  • participating in examining corresponding regulatory and legal acts;
  • approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts which restrict the rights of investors. The FIAC is chaired by the Prime Minister of Belarus and includes the heads of government agencies and other state organizations subordinate to the GOB, heads of international organizations, foreign companies and corporations.

Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad. According to government statistics, Belarusian businesses’ outward investments in 2017 totaled $5.2 billion.

3. Legal Regime

Transparency of the Regulatory System

The government states that its policies are transparent and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the game. However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses. In particular, SOEs often receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness. Such beneficial treatment is generally unavailable to private sector companies.

According to Belarusian legislation, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion. Draft legislation is published on government agencies’ websites.

International Financial Reporting Standards (IFRS) have been a part of Belarus legislative framework since 2016. Public-interest entities, which include banks, insurance companies and public corporations with subsidiary companies, are required to publish their financial statements, which comply with IFRS. Such statements are subject to statutory audit.

IFRS in Belarus can be accessed through the Ministry of Finance at the following links:

Belarus has no informal regulatory processes managed by nongovernmental organizations or private sector associations.

International Regulatory Considerations

Belarus is not a WTO member but announced in April 2016 it will step up efforts to join the organization. Belarus has previously committed to hasten efforts to join the WTO without taking corresponding decisions to speed up its possible entry into the WTO. After a 12-year break between meetings of the Working Party on Belarus’s Accession to the WTO, the group met for the eighth time in Washington in January 2017 and the ninth time in September in Geneva. A Belarusian delegation also attended WTO Ministerial conference in Buenos Aires in December 2017 at which time the MFA announced that Belarus still needed to conclude bilateral negotiations on market access for goods and services with 11 WTO members, including the United States, before it can accede to the organization.

Legal System and Judicial Independence

The Belarusian legal system is a civil law system with a legal separation of branches and institutions and with the main source of law being legal act, not precedent. Presidential edicts and decrees, however, typically carry more force than legal acts adopted by the legislature, which risks weakening investor protections and incentives previously passed into law. There is sometimes a public comment process during drafting of presidential decrees, but the process is often not transparent or sufficiently inclusive of investors’ concerns. There are also questions about the judiciary’s independence, which could limit investors’ recourse against the government and SOEs. Article 44 of Belarus’s Constitution guarantees the inviolability of property. Article 11 of the Civil Code safeguards property rights. Belarus has a written and consistently applied commercial law, which is broadly codified. The law, however, contains many inconsistencies and is not always considered to be business friendly.

Each of Belarus’s six regions and the capital city of Minsk have economic courts to address commercial and economic issues. In addition, the Supreme Court has a judicial panel on economic issues. In 2000, Belarus established a judicial panel on intellectual property rights (IPR) protection. Under the Labor Code any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues. However, the judiciary’s lack of independence from the executive branch impedes its role as a reliable and impartial mechanism for resolving disputes, whether labor, economic, commercial, or otherwise.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Belarus is governed by the July 12, 2013 laws On Investments, and On Concessions as well as Presidential Decree No. 10 On the Creation of Additional Conditions for Investment Activity in Belarus which was signed on August 6, 2009) and other legislation as well as international and investment agreements signed and ratified by Belarus. The GOB declares there is no executive or any other interference in the court system that could affect foreign investors. In reality, however, there have been instances of executive interference in the judiciary that have harmed foreign investors’ operations in Belarus.

The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors:

Competition and Anti-Trust Laws

The June 3, 2016 presidential edict number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote competition in Belarus’s markets.

Expropriation and Compensation

According to Article 12 of the Investment Code, neither Party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than: for the public benefit; on nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment,

Belarus has signed 66 bilateral agreements on the mutual protection and encouragement of investments. According to such agreements, neither party may expropriate or nationalize investments either directly or indirectly by means or measures similar to expropriation or nationalization, for purposes other than public benefit or according to the appropriate legal procedure.

Expropriation of private property sometimes occurs in Belarus in the form of de-privatization. That is, the government sometimes seeks to secure majority share in some joint stock companies under various pretexts, e.g. securing the interests of workers, long record of profit-loss, etc. Some successful local businessmen have been forced out of business through bureaucratic methods. In the past there have been instances of confiscation of business property as a penalty for violations of law. Although under the Investment Code, fair compensation for the expropriated property should be offered, the government usually refers to breaches of domestic laws and offers no compensation.

Confiscations are not usually related to any particular industry and are not targeted exclusively at international firms. Both foreign and domestic assets sometimes become subject to expropriation.

Dispute Settlement

There were no known investment disputes with American investors in 2017.

ICSID Convention and New York Convention

Belarus is a party of the Conventions on the Settlement of Investment Disputes between States and Nationals of Other States of March 18, 1965 (ICSID Convention) and of August 9, 1992, and Conventions on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 and February 13, 1961.

The GOB states that local courts recognize and enforce foreign arbitral awards in compliance with the above conventions, national laws and regulations. The enforcement of arbitral awards in Belarus is governed by Chapter 28 of the Code of Commercial Procedure.

Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-state disputes and recognize the binding force of the awards issued in investment arbitrations.

Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty shall prevail.

Investor-State Dispute Settlement

Local economic court proceedings normally do not exceed two months. The term of such proceedings with the participation of foreign persons is normally no longer than seven months, unless established otherwise by the international agreement signed by Belarus.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus. Courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes between private parties. In principle, the GOB accepts binding international arbitration of investment disputes between foreign investors and the state, although the Embassy is not aware of any cases where this has been put to the test. The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The July 12, 2013 law on mediation, as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Bankruptcy Regulations

Belarus has a written bankruptcy law adopted on July 13, 2012 and several additional presidential edicts, which are not always consistently applied, especially with regard to SOEs. Some other legal acts, such as the Civil Code, also include certain regulations on bankruptcy-related issues.

Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency. According to the World Bank’s 2018 Doing Business Report, Belarus was ranked 68 in Resolving Insolvency, up from 69 in 2017 and 95 in 2016 (rankings available at: http://www.doingbusiness.org/data/exploreeconomies/belarus ).

6. Financial Sector

Capital Markets and Portfolio Investment

The Belarusian government welcomes portfolio investment and has taken steps to safeguard such investment and ensure a free flow of financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain criteria, which are often burdensome for many companies, especially private ones. Private companies must be profitable and have net assets of at least 1 million Euro. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’s corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 11 percent (as of October 2017) makes it too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized, reduced interest loans.

Starting in March 2016, Belarus’s National Bank allowed businesses to buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Previously they could only buy or sell foreign currencies from or to banks. As part of its liberalizing monetary policy, the National Bank reduced the mandatory sale requirement for businesses from 20 to 10 percent in October 2017, saying at the time “the reduction of the mandatory sale requirement for foreign currency proceeds will contribute to the development of the export potential of economic entities of the Republic of Belarus and will become a consistent step aimed at harmonizing currency regulations within the framework of the Eurasian Economic Union.” The National Bank is said to be poised to abolish mandatory sales by businesses of foreign currency revenues altogether in the first half of 2018.

Money and Banking System

Belarus has a central banking system. The country’s main bank, the National Bank of the Republic of Belarus, represents the interest of the state. It is the main regulator of the country’s banking system. The President of Belarus appoints the Chairperson and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report.

As of January 1, 2018, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of troubled loans in the banking sector was 12.9 percent as of January 1, 2018. The country’s five largest commercial banks, one of which is fully private, account for 77 percent of the total assets of the country’s banking sector, totaling the equivalent of some USD26 billion. To the best of the Embassy’s knowledge, rules on hostile take-overs are clear, and applied on a non-discriminatory basis.

Foreign Exchange and Remittances

Foreign Exchange Policies

According to the GOB, Belarus’s foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since June 1, 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit their bids for buying and selling foreign currency into the trading system during the entire period of the trading session. During the trades the bids are honored if and when the specified exchange rates are met. The average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session is used by the National Bank as the official exchange rate of the Belarusian ruble versus the above-mentioned currencies from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quotation becomes effective on the next calendar day and is valid till the new official exchange rate of the Belarusian ruble versus these foreign currencies comes into force. The IMF has listed Belarus’s exchange rate regime in the floating exchange rate category.

Remittance Policies

There have not been reports of problems exchanging currency and/or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus has the State Budget Fund of National Development, which is used for implementing major economic and social projects in the country.

Belgium

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Belgium has traditionally maintained an open economy that is highly dependent on international trade. Since WWII, foreign investment has played a vital role in the Belgian economy, providing technology and employment. It is one of the key economic policies of the current center-right government to make Belgium a more attractive destination to foreign investment. Though the federal government regulates important elements of foreign direct investment such as salaries and labor conditions, it is primarily the responsibility of the regions to attract FDI. Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX) and Brussels Invest and Export are the three investment promotion agencies who seek to attract FDI to Flanders, Wallonia and the Brussels Capital Region, respectively.

The regional investment promotion agencies have focused their industrial strategy on key sectors including aerospace and defense; agribusiness, automotive and ground transportation; architecture and engineering; chemicals, petrochemicals, plastics and composites; environmental technologies; food processing and packaging; health technologies; information and communication; and services.

Foreign corporations account for about one-third of the top 3,000 corporations in Belgium. According to Graydon, a Belgian company specializing in commercial and marketing information, there are currently more than one million companies registered in Belgium. The federal government and the regions do not specifically prioritize investment retention or maintain an ongoing “facilitation” dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign ownership or control in Belgium. There are no distinctions between Belgian and foreign companies when establishing or owning a business or setting up a remunerative activity.

Other Investment Policy Reviews

Over the past three years, the country has not been the subject of third-party investment policy reviews (IPRs) through a multilateral organization such as the OECD, WTO, or UNCTAD.

Business Facilitation

In order to set up a business in Belgium, one has to take the following steps:

  1. Deposit at least 20 percent of the initial capital with a Belgian credit institution and obtain a standard certification confirming that the amount is held in a blocked capital account;
  2. Deposit a financial plan with a notary, sign the deed of incorporation and the by-laws in the presence of a notary, who authenticates the documents and registers the deed of incorporation. The authentication act must be drawn up in either French, Dutch or German (Belgium’s three official languages);
  3. Register with one of the Registers of legal entities, VAT and social security at a centralized company docket and obtain a company number.

In most cases, the business registration process can be completed within one week.

https://www.business.belgium.be/en/managing_your_business/setting_up_your_business 

Based on the number of employees, the projected annual turnover and the shareholder class, a company will qualify as a small or medium-sized enterprise (SME) according to the meaning of the Promotion of Independent Enterprise Act of February 10, 1998. For a small or medium-sized enterprise, registration will only be possible once a certificate of competence has been obtained. The person in charge of the daily management of the company must prove his or her knowledge of business management, with diplomas and/or practical experience. In the Global Enterprise Register, Belgium currently scores 7 out of 10 for ease of setting up a limited liability company.

Business facilitation agencies provide for equitable treatment of women and underrepresented minorities in the economy.

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors.

Outward Investment

The Belgian government does not actively promote outward investment; neither does it impose restrictions to certain countries or sectors, other than those where Belgium applies UN resolutions.

3. Legal Regime

Transparency of the Regulatory System

The Belgian government maintains a generally transparent competition policy that encompasses tax, labor, health, safety, and other policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states. Foreign and domestic investors in some sectors face stringent regulations designed to protect small- and medium-sized enterprises. Many companies in Belgium also try to limit their number of employees to 49, the threshold above which certain employee committees must be set up, such as for safety and trade union interests.

The American Chamber of Commerce has called attention to the adverse impact of cumbersome procedures and unnecessary red tape on foreign investors, although foreign companies do not appear to be impacted more than Belgian firms. Draft bills are not made available for public comment, but rather go through an independent court for vetting and consistency. Recognizing the need to streamline administrative procedures in many areas, in 2015 the federal government set up a special task force to simplify official procedures, so far with little result. It also agreed to streamline laws regarding the telecommunications sector into one comprehensive volume after new entrants in this sector had complained about a lack of transparency. Additionally the government reinforced its Competition Policy Authority with a number of academic experts and additional resources. Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all public comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001; balance sheet and profit and loss statements follow international accounting norms. Cash flow positions and reporting changes in non-borrowed capital formation are not required. However, contrary to IAS/IFRS standards, Belgian accounting rules do require an extensive annual policy report.

Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Le Moniteur Belge (www.moniteur.be ).

International Regulatory Considerations

As a founding member of the EU, Belgium enforces EU directives and occasionally applies stricter rules, as has been the case for data privacy issues. On May 25, 2018 Belgium implemented the General Data Protection Regulation (GDPR) (EU) 2016/679, an EU regulation on data protection and privacy for all individuals within the European Union.

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT). The country does not maintain any measures that are inconsistent with the Agreement on Trade-Related Investment Measures (TRIMs) obligations.

Legal System and Judicial Independence

Belgium’s (civil) legal system enjoys judicial independent and is an efficient means for resolving commercial disputes or protecting property rights. Belgium has a wide-ranging codified law system since 1830. There are specialized commercial courts which apply the existing commercial and contractual laws. As in many countries, the Belgian courts labor under a growing caseload, and backlogs cause delays. There are several levels of appeal.

Laws and Regulations on Foreign Direct Investment

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Belgium has no debt-to-equity requirements. Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Since there are three different regional Investment Authorities, the links to their respective websites are given below.

Flanders: www.flandersinvestmentandtrade.com ;
Wallonia: www.awex.be ;
Brussels: www.investinbrussels.com .

Competition and Anti-Trust Laws

The contact address for competition-related concerns:

Federal Competition Authority
City Atrium, 6th floor
Vooruitgangsstraat 50
1210 Brussels
tel: +32 2 277 5272
fax: +32 2 277 5323
email: info@bma-abc.be
website: www.bma-abc.be 

In 2017, the Belgian Competition Authority ruled in the case of the merger between a Belgian and a Dutch supermarket chain. The Authority ruled that the newly created supermarket chain would be in a position to abuse its dominant market position and ordered the chain to shed 19 stores.

Expropriation and Compensation

There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgium.

When the Belgian government uses its eminent domain powers to acquire property compulsorily for a public purpose, adequate compensation is paid to the property owners. Recourse to the courts is available if necessary. The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansion, roads, and railroads.

Dispute Settlement

ICSID Convention and New York Convention

Belgium is a member of the International Center for the Settlement of Investment Disputes (ICSID) and regularly includes provision for ICSID arbitration in investment agreements.

Investor-State Dispute Settlement

The government accepts binding international arbitration of disputes between foreign investors and the state. There have been no investment disputes involving a U.S. person within the past 10 years. Local courts are expected to enforce foreign arbitral awards issued against the government. To date, there has been no evidence of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

  • Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution;
  • Belgium has no domestic arbitration bodies;
  • Local courts recognize and enforce foreign arbitral awards. Judgments of foreign courts are recognized and enforceable under the local courts.

Bankruptcy Regulations

Belgian bankruptcy law is governed by the Bankruptcy Act of 1997 and is under the jurisdiction of the commercial courts. The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees. Belgian bankruptcy law recognizes several classes of preferred or secured creditors. A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy. The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization. These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery. In the World Bank’s Doing Business Report, Belgium ranks number 11 (out of 198) for the ease of resolving insolvency.

6. Financial Sector

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives. At the same time, Belgium currently ranks 138th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

Bruges (Now Belgium) established the world’s first stock market almost 600 years ago, and the bourse is well-established today. On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders. A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries. Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a board member of the European Central Bank.

Belgium is one of the countries with the highest number of banks per capita in the world. The banking system is considered sound but was particularly hard hit by the financial crisis that began in the fall of 2008, when federal and regional governments had to step in with lending and guarantees for the three largest banks. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemic Belgian banks shifted to the ECB. The country has not lost any correspondent banking relationship in the past three years, nor are there any correspondent banking relationships currently in jeopardy.

The developments since September 2008 have also resulted in a major de-risking of the Belgian banks’ balance sheets, on the back of a rising share of exposure to the public sector – albeit more concentrated on Belgium – and a gradual further expansion of the domestic mortgage loan portfolio. Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions”.

In 2017, the banking sector conducted its business in a context of only gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5 percent capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank). The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75 percent. These surcharges will be phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2017, according to the National Bank of Belgium, particularly in the risky derivative markets. KBC, the country’s largest bank, has total assets equivalent to € 292.3 billion. According to the NBB, 3 percent of all the currently outstanding loans are considered to be non-performing, compared to an average of 8 percent in the Euro area.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) has its headquarters in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status. FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

Some Belgian banks have already made great progress with blockchain technology. For instance, one Belgian bank offers a product called MyCar, a digital ecosystem that connects all the players in a car purchase with blockchain technology, creating a single, trusted source of confidence and a centralized workflow that takes the hassle out of buying a car.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network. Unlike many other EU countries, Belgium has no cryptocurrency ATMs, and the NBB has repeatedly warned about the potential consequences of the use of cryptocurrencies for financial stability.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company, a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis. The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2017, its total assets amounted to € 2 billion. Due to the origins of the fund, the majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF routinely fulfills all legal obligations, is required by law to publish an annual report, and is subject to domestic and international accounting standards and rules. It is not a member of the International Forum of Sovereign Wealth Funds, and as such not a subscriber to the Santiago Principles.

Belize

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

While the Government of Belize is interested in attracting foreign direct investment (FDI), certain regulatory requirements serve to impede growth and transparency.

There are no laws that explicitly discriminate against foreign investors. In practice, however, investors complain that they do not always receive the full extent of the incentives available, that land titles are not always reliably secure, and that bureaucratic delays or corruption can be hindrances to starting a business in Belize. There is a sense among investors that incentives are administered in an ad hoc manner, with frequent delays or payments not issued as originally guaranteed.

According to the International Monetary Fund (IMF), Belize’s attractiveness to foreign investors could be improved by reducing the cost of doing business, particularly the costs of inputs (energy, transportation and telecommunications), and combating crime.

The Belize Trade and Investment Development Service (BELTRAIDE; www.belizeinvest.org.bz ), a statutory body of the Government of Belize, is the investment and export promotion agency. BELTRAIDE promotes FDI through various types of incentive packages and identified priority sectors for investment as agriculture, agro-processing, aquaculture, light manufacturing, food processing and packaging, tourism and tourism-related industries, business process outsourcing (BPOs), and renewable energy.

The Government created the Economic Development Council to increase the national dialogue on private sector development and better inform policies for growth and development. The Cabinet has also created a Sub–Committee on Investment composed of Ministers whose portfolios are directly involved in considering and approving investment proposals.

Limits on Foreign Control and Right to Private Ownership and Establishment

Generally, Belize has no restrictions on foreign ownership and control of companies; however, foreign investments in Belize must be registered at the Central Bank of Belize. In addition, foreigners will need to apply with a Belizean partner or someone with a permanent residence to be able to register a business name.

Some investment incentives show preference to Belizean-owned companies. For example, the Small and Medium Enterprise (SME) Fiscal Incentive, offered by BELTRAIDE, stipulates that an entity applying for benefits under the SME incentive must have a minimum of 51 percent Belizean ownership. If this condition is met, the incentive provides for a lower application fee structure.

According to the Belize Tourism Board (http://www.travelbelize.org ), a company must have a minimum of 51 percent Belizean ownership to qualify for a Tour Operator License. This qualification is negotiable particularly in the event a tour operation would expand into a new sector of the market and does not result in competition with local operators.

Foreign investments in Belize must be registered and obtain an “Approved Status” from the Central Bank in order to facilitate inflows and outflows of foreign currency. “Approved Status” investments will ordinarily be granted approval for repatriation of funds from profits, dividends, loan payments, and interest. The Central Bank reserves the right to request evidence-supporting applications for repatriation.

Additionally, persons seeking to open a bank account must also comply with Central Bank regulations, which differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account.

The Government of Belize’s Cabinet Sub-Committee on Investment considers investment projects which do not fall within Belize’s incentive regime or which may require special considerations. For example, an investment may require legislative changes, a customized memorandum of understanding or agreement from the government, or a public–private partnership. Proposals are generally assessed based on size, scope, and subsidy requested. In addition, proposals are assessed on a five-point system that analyses socio-economic acceptability of the project, revenues to the government, employment, foreign exchange earnings and environmental considerations. The Cabinet Sub-Committee is composed of five Cabinet-level officials of government including the minister with responsibility over Investment, Trade and Commerce as Chairperson. The other members include the ministers with responsibility for Tourism and Culture; the Environment and Sustainable Development; and Natural Resources and Immigration, along with the Attorney General. There is no set timeframe for considering projects as this would largely depend on the nature and complexity of the project.

When considering investment, foreign investors undertaking large capital investments must be aware of Belize’s environmental laws and regulations. There is a requirement to prepare an Environmental Impact Assessment (EIA) when a project meets certain land area, location, and/or industry criteria. When purchasing land or planning to develop in or near an ecologically sensitive zone, it is recommended that the EIA fully address any measures by the investor to mitigate environmental risks. Environmental clearance must be obtained prior to the start of site development. The Department of Environment website, http://www.doe.gov.bz  has more information on the Environmental Protection Act and other regulations, applications and guidelines.

In 2015, the Caribbean Court of Justice issued its landmark decision issuing a consent order to the Government to create “an effective mechanism to identify and protect Mayan customary land rights.” The parties have still not decided how and when to implement the court ruling because of disagreement between the government and the Maya communities.

Other Investment Policy Reviews

In the past three years, there has been no investment policy review of Belize by the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD). Belize concluded its third Trade Policy Review in the World Trade Organization (WTO) in April 2017.

Business Facilitation

Belize does not operate a single window registration process. The Belize Companies Corporate Affairs Registry (tel: (501) 822 0421; email: belizecompaniesregistry@yahoo.com; website: www.belizecompaniesregistry.gov.bz ) is responsible for the registration process of all business and companies.

Businesses must also register with the tax department to pay business and general sales tax. They must also register with their local city council or town board to obtain a trade license to operate a business. An employer should also register employees for social security. The 2018 Doing Business report (http://www.doingbusiness.org ) estimates it takes on average 43 days to start up a company in Belize. The same report ranks Belize at 121 of 190 economies on the ease of starting a business.

Belize also has offshore business services legislation, which allows offshore banking, and the establishment of International Business Companies (IBCs) and trusts. In 2017, the IBC Act was amended to allow, inter alia, for the elimination of bearer shares as well as the requirement for companies to maintain a register of directors and a register of beneficial owners. For more information on Belize’s offshore financial sector visit http://www.ibcbelize.com/ .

BELTRAIDE (http://www.belizeinvest.org.bz/ ), a statutory body of the Government of Belize, operates as the country’s investment and export promotion agency. Its investment facilitation services are open to all investors. While there are support measures to advance greater inclusion of women and minorities in entrepreneurial initiatives and training, the business facilitation measures do not distinguish by gender or economic status.

Outward Investment

The government does not promote or incentivize outward investments. Domestic investors are not restricted from investing abroad. However, the Central Bank places currency controls that limit foreign currency outflows.

3. Legal Regime

Transparency of the Regulatory System

Regulatory authority exists both at the local and national levels with national laws and regulations being most relevant to foreign businesses. The government publishes a Gazette that includes proposed as well as enacted laws and regulations. Government ministries also make available policies, laws, and regulations pertinent to their portfolio available on their respective ministry websites. Since 2016, enacted laws have been published on the website of the National Assembly. There is usually a delay updating the website.

Despite these measures, some investors complain that the regime for incentives did not always meet their needs, that land titles are not always reliable and secure, and that bureaucratic delays or corruption can be hindrances to doing business in Belize.

There are quasi-governmental organizations mandated by law to manage specified regulatory processes on behalf of the Government of Belize, e.g. the Belize Tourism Board, BELTRAIDE, and the Belize Agricultural Health Authority. There are no reports that these processes significantly distort or discriminate against foreign investors.

The cabinet dictates government policies that are enacted by the legislature and implemented by the various government ministries. Regulations exist at the local level, primarily relating to property taxes and registering for trade licenses to operate businesses in the municipality.

Accounting, legal, and regulatory systems are consistent with international norms. Publicly owned companies are generally audited annually and the reports are prepared in accordance with International Financial Reporting Standards and International Standards on Auditing.

Draft bills are published in the Gazette by the Government of Belize printers and are publicly available for a minimal fee. Draft bills are generally open to public comment. Once introduced in the House of Representatives, they are passed to Standing Committees of the House of Representatives which then meet and invite the public and interested persons to review, recommend changes, or object to draft laws prior to further debate. Public comments on draft legislation are not generally posted online nor made publicly available. It would be the prerogative of an interested party to attend public consultations, committee meetings, or to request the public comments from the National Assembly or relevant Ministry. Additionally, laws are sometimes passed quickly without meaningful publication or public review, as was the case with the Central Bank of Belize (International Immunities Act) 2017 and the Crown Proceedings (Amendment Act), 2017.

Regulatory decisions are subject to judicial review.

International Regulatory Considerations

As a full member of the Caribbean Community (CARICOM), Belize’s foreign, economic and trade policies regarding non-members are coordinated regionally. The country’s import tariffs are largely defined by CARICOM’s Common External Tariffs.

Belize is also a member of several other treaties as a result of its membership within CARICOM. A primary example is the Economic Partnership Agreement (EPA) between CARIFORUM and the European Union (EU).

Outside of CARICOM, Belize is also a member of the Central American Integration System (SICA) at a political level, but is not a part of the Secretariat of Central American Economic Integration (SIECA) that supports economic integration of Central America.

Belize is a member of the WTO and CARICOM and adheres to the norms established by these organizations. Belize also ratified the Trade Facilitation Agreement in 2015 and is at 33.6 percent rate of implementation.

The Belize Bureau of Standards (BBS) is the national standards body responsible for preparing, promoting and implementing standards for goods, services, and processes. The BBS operates in in accordance with the WTO Agreement on Technical Barriers to Trade and the CARICOM Regional Organization for Standards and Quality.

Legal System and Judicial Independence

The Belize Constitution is founded on the principle of separation of powers with independence of the judiciary from the executive and legislative branches of government. As a former British colony, Belize follows the English Common Law legal system, which is based on established case law. Belize has a written Contract Act, which is supported by precedents from the national courts as well as from the wider English speaking and Commonwealth case law. Contracts are legally enforced through the courts. In 2010, Belize adopted the Caribbean Court of Justice (CCJ) as its final appellate court on civil and criminal matters. This replaced the Judicial Committee of the Privy Council of the United Kingdom.

General information relating to Belize’s judicial and legal system, including links to Belize’s Constitution, Laws and judicial decisions are available at the Judiciary of Belize website www.belizejudiciary.org. 

There are specialized courts that deal with family related matters including divorce and child custody but no specialized courts to deal with commercial disputes or cases.

The current judicial process faces systematic challenges that relate both to civil and criminal cases, including frequent adjournments, delays, and a backlog of cases. Several measures are being implemented to improve the country’s judiciary. The training of mediators and the introduction of court-connected mediation support alternative methods to dispute settlement. This effort along with better case management procedures is expected to decrease the court’s caseload, time delays, and cost particularly for smaller claim civil cases.

Regulations and enforcement actions are appealable. Judgments by the Belize Supreme Court and the Court of Appeal are available at http://www.belizejudiciary.org . Judgments by the Caribbean Court of Justice, Belize’s highest appellate court are available at http://www.caribbeancourtofjustice.org .

Laws and Regulations on Foreign Direct Investment

The laws, rules, procedures, and report requirements related to investors differ depending on the nature of the investment. BELTRAIDE provides advisory services and other related information for foreign investors relating to procedures for doing business in Belize and incentives available to qualifying investors. Further information is available at the BELTRAIDE website: http://www.belizeinvest.org.bz/ .

Enacted laws are generally available in the National Assembly’s website at www.nationalassembly.gov.bz . See above for judicial decisions from the higher courts. Examples of key legislation passed in 2017 include:

  • Central Bank of Belize (International Immunities) Act;
  • Crown Proceedings (Amendment) Act;
  • Income and Business Tax (Amendment) Act- excise duty on fuel products;
  • Business Tax;
  • National Payments System Act to establish a National Payment System;
  • Moneylenders (Amendment) Act;
  • Mutual Administrative Assistance in Tax Matters (Amendment) Act;
  • Stamp Duties (Amendment) Act raise duty to 1.75 percent;
  • Statutory Bodies (Development Contribution).

Competition and Anti-Trust Laws

Belize does not have any laws governing competition, but there are attempts to limit outside competition in certain industries (such as food and agriculture) by levying high import duties.

Expropriation and Compensation

There have been several cases in which the government used eminent domain to appropriate private property, including land belonging to foreign investors. There were no new expropriation cases. However, there are allegations that several previous expropriations were done for personal or political gain. Belizean law requires that the government assess and compensate according to fair market value. These types of expropriation cases can take many years to settle and there are numerous cases where there was no compensation or compensation is still pending. In the cases of expropriations, the claimants affirm that the Government failed to adhere to agreements entered into by a previous administration.

The process to acquire land titles has issues with cases of private as well as government manipulation of land titles involving foreigners and Belizeans. Although the government recognizes this flaw, efforts at improving the land title system remain ongoing.

In late 2017, the Government of Belize made final payments for the nationalized Belize Telemedia Limited (BTL) in line with a judgment issued by the Permanent Court of Arbitration. The final settlement cost the government approximately USD 250 million and almost eight years of lengthy legal battles against the Ashcroft Alliance.

Since July 2015, the U.S. courts have upheld four arbitration judgments against the government including one related to the BTL nationalization. The Government of Belize has chosen to ignore these judgments holding the view that enforcement actions need to proceed through Belizean courts and should be appealed up to the Caribbean Court of Justice.

Dispute Settlement

ICSID Convention and New York Convention

The Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) was extended to Belize by an act of the United Kingdom when Belize was a colony. After independence, Belize did not ratify the Convention nor is it listed as a contracting state. Nevertheless, arbitration is governed by the Arbitration Act (Chapter 125) of the Laws of Belize. Part IV of the Arbitration Act specifically addresses the New York Convention and empowers domestic courts to enforce awards under the Convention. A 2013 judgment of the Caribbean Court of Justice restored Part IV of the Arbitration Act for the enforcement of arbitral awards.

Belize signed on to but has not yet ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID convention). For more information visit: http://sice.oas.org/dispute/comarb/icsid/w_conv1.asp .

Investor-State Dispute Settlement

Please see Section 2 above- Bilateral Investment Agreements and Taxation Agreements.

Belize is also a member of the Caribbean Community (CARICOM) Single Market and Economy as well as a party to a regional Economic Partnership Agreement (EPA) between CARIFORUM and the European Union (EU). Both these regional arrangements make provisions for the settlement of investor-state disputes.

Since Belize is not a party to any Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States, investment disputes involving U.S. persons are taken either before the courts or before international arbitration panels.

Local courts would recognize and enforce foreign arbitral awards against the government but these would likely be adjudicated to the Caribbean Court of Justice (CCJ), Belize’s highest appellate court.

There has not been a history of extrajudicial actions against foreign investors.

International Commercial Arbitration and Foreign Courts

Belize’s Arbitration Act allows the Supreme Court of Belize to support and supervise dispute settlement between private parties by arbitration. In 2013, the Supreme Court introduced the process of court-connected mediation as an alternative method to dispute settlement between private parties and as a means of reducing costs and duration of litigation.

There are numerous instances of cases involving State Owned Enterprises (SOEs) which went before domestic courts with ruling both in favor and against the SOE.

In January 2017, the Crown Proceedings (Amendment) Act and the Central Bank of Belize (International Immunities) Act were passed which affect the enforcement of foreign arbitral awards against the government. Essentially, the Crown Proceedings Amendment Act provides that if a foreign judgment is entered against the government and later declared as “unlawful, void or otherwise invalid” by a court in Belize, the foreign judgement would not be enforced in or outside Belize. The Act also provides for hefty penalties of fines and or imprisonment on a person, individual or legal, seeking to enforce the foreign judgment. The Central Bank (International Immunities) Act restates the immunity of the Central Bank of Belize assets “from legal proceedings in other states.” The Central Bank International Immunities Act similarly provides for penalties of fines and/or imprisonment on a person, individual or legal, which initiates any such proceedings.

Bankruptcy Regulations

Chapter 244 of the Laws of Belize (Bankruptcy Act) provides and allows for bankruptcy filings. The Act provides for the establishment of receivership, trustees, adjudication and seizures of the property of the bankrupt. The court may order the arrest of the debtor and seizure of assets and documents in the event the debtor will flee or avoid payment to creditors. The Act also provides for imprisonment on conviction of certain specified offenses. The Director of Public Prosecutions may also institute prosecution proceedings for offenses emanating or related to the bankruptcy proceedings.

6. Financial Sector

Capital Markets and Portfolio Investment

Belize’s financial system is small with limited to non-existent foreign portfolio investment transactions. The major participants in the domestic financial market include the domestic commercial banks and the Central Bank of Belize. Most international banks also provide corporate formation services to register International Business Companies as well as the establishment of trusts.

Ten credit unions operate as non-profit cooperatives that function as savings banks, offering mainly savings accounts and consumer, education, and residential loans to their shareholders. The Development Finance Corporation (DFC), a state owned development bank offers loan financing services in various sectors, including agriculture, aquaculture, tourism, eco-products, housing, education, and micro and small enterprises. To qualify for a loan from DFC, an individual must be a Belizean resident or citizen, while a company must be majority 51 percent Belizean owned. The National Bank of Belize is state owned bank that provides concessionary credit to public officers, teachers, and low income Belizeans.

Belize does not have its own stock market and capital market operations are rudimentary. Private sector participation as both suppliers and buyers of securities in the financial market is generally not significant.

Foreign investments in Belize must be registered at the Central Bank. See Foreign Currency and Remittances below. The government does not restrict payments for international transactions.

Belize has onshore and offshore financial activities. Generally, Belizean citizens and foreigners with official residency status are allowed to deposit and borrow only from onshore banks while non-residents are only allowed to use offshore banks. Exceptions may be made only with the Central Bank’s explicit approval. See below Money and Banking System for further information.

Credit is made available on market terms. Despite the fact that this is regulated by the Central Bank, interest rates are largely set by local market conditions prevailing within the commercial banks.

Money and Banking System

The Central Bank of Belize (https://www.centralbank.org.bz ) is responsible for formulating and implementing monetary policy focusing on the stability of the exchange rate and economic growth. Persons seeking to open a bank account must also comply with Central Bank regulations, which differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account. Like many countries with fixed currency rates, the Belize banking sector is split into two branches: onshore (domestic banks that cater only to residents) and offshore (international banks intended for non-residents of Belize to freely move foreign exchange in and out of the country). The Government of Belize asserts this design is to prevent disruptions of the local economy (and the peg to the US dollar) due to large foreign exchange fluctuations.

Belize’s financial system remains underdeveloped with a banking sector that may be characterized as stable but fragile. In 2017, net foreign assets of the banking system were approximately USD 5.8 billion and contracted due to the governments’ external debt servicing to bondholders as well as the second compensation payment for the BTL arbitration settlement. The largest domestic commercial bank holds approximately USD 465 million in total assets. For 2017, non-performing loans (NPLs) for commercial banks remained steady at 2.4 percent well below the 5 percent threshold required by the Central Bank.

In the past three years, two onshore banks had their correspondent banking services terminated along with other banks operating in the offshore banking sector. While all banks have current correspondent banking relations, there is still uncertainty with regard to the longevity of those relationships, delay in transactions, and fewer services being offered by the correspondent banks at higher costs. The business community continues to be concerned by negative impacts related to derisking including higher costs and longer wait times for processing wire transactions, increased obstacles in paying for imports, and tougher access to credit for import purchases.

Foreign banks and branches are allowed to operate in the country. Two of the five commercial banks operating onshore are local subsidiaries of international banks. There are five international banks that offer banking services in foreign currencies exclusively to non-residents. All banks are subject to Central Bank measures and regulations.

Persons seeking to open a bank account must also comply with Central Bank regulations, which differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account.

In 2017, the Moneylenders (Amendment) Act was passed to modernize the moneylenders sector and enhance the supervisory and enforcement powers of the Central Bank of Belize. In late 2016, the Central Bank of Belize launched the Automated Payment and Securities Settlement System to facilitate electronic payments, electronic auctions, and improve the ease of doing business in Belize. In 2017, accompanying legislation for the national payments system was also passed.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are currency controls in Belize and foreign investors seeking to convert, transfer, or repatriate funds must comply with Central Bank regulations.

Foreign investments in Belize must be registered at the Central Bank in order to facilitate inflows and outflows of foreign currency transactions, including transfers, and repatriation of profits and dividends. Foreign investors should notify and register their inflow of funds with the Central Bank of Belize to obtain an “Approved Status” for their investment. These “Approved Status” investments will ordinarily be granted approval for repatriation of funds from profits, dividends, loan payments, and interest. The Central Bank does, however, reserve the right to request evidence supporting applications for repatriation.

The Belize dollar has been pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZD 2.00 to the USD 1.00. There are reports of shortages and delays in obtaining foreign exchange.

Remittance Policies

There are no changes to investment remittance policies. There are currency controls in Belize. Foreign investors may repatriate their investments and profits provided they register transactions with the Central Bank. As mentioned above, foreign investors should notify and register their inflow of funds with the Central Bank of Belize to obtain an “Approved Status” for their investment.

Sovereign Wealth Funds

Belize does not have a sovereign wealth fund.

Benin

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

The Government of Benin (GOB) actively encourages foreign investment. The creation of APIEX in 2015 resulted in a dialogue between the Government and investors to implement reforms and improve Benin’s business environment. The APIEX mission is to reduce and, where possible, eliminate administrative barriers to doing business and to attracting additional foreign direct investment. The agency has significantly reduced processing times for construction permits (from 90 to 30 days) and registration of new companies (from 15 days to one day). In July 2016, Benin passed a law establishing a commercial tribunal of first instance and a commercial appellate court, a move that is expected to expedite the settlement of business-related disputes. The full-service office that expedites customs clearances, reduces the cost of clearances, and minimizes processing barriers to clearing cargo at the Port of Cotonou makes it possible to obtain cargo clearance within 48 hours of the date of its off-loading at the Port of Cotonou, though in practice this tends to take somewhat longer. The reinstitution of the cargo inspection and scanning program known as PVI, first tried in 2012, resumed operations at the Port of Cotonou in 2017.

Limits on Foreign Control and Right to Private Ownership and Establishment

Beninese law guarantees the right to own and transfer private property. The court system enforces contracts, but the judicial process is inefficient, plagued by corruption, and enforcement of rulings is problematic. Most firms entering the market work with an established local partner and retain a competent Beninese attorney. A list of English-speaking lawyers and legal counselors is available on the Embassy’s website https://bj.usembassy.gov/u-s-citizen-services/attorneys/.

Other Investment Policy Reviews

In 2015 the Beninese government conducted an investment policy review (IPR) jointly through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), and the United Nations Conference on Trade and Development (UNCTAD). Further to a 2016 fact-finding mission, the UNCTAD Report on the Implementation of the IPR of Benin assesses progress in implementing the original recommendations of the IPR, and highlights a few more policy issues to be addressed in the investment climate. The full report may be found at http://investmentpolicyhub.unctad.org/Upload/BeninIR2016.pdf 

Business Facilitation

In an effort to attract Foreign Direct Investment (FDI), Benin has instituted a visa-free system for African nationals. Those traveling on non-African passports can obtain e-visas through an online process for short stays. The country is also planning to open four new trade offices abroad to enhance Benin’s international business opportunities. One is already underway in Shenzhen, China; others will be located in Europe, the United States, and the Middle East.

Benin made property registration simpler and less expensive in order to boost the real estate market and improve access to credit. The measures apply to real personal property, estate and mortgage taxes, and property purchase receipts, with the aim of reducing corruption in the property registration process. In order to register property, individuals and businesses must present a taxpayer identification number (registration for which is now free). Land registration and property purchase certifications are free, but there is a fee for obtaining a property title. In a related measure, the government issued 2,513 titles free of charge in 2016 for owners of land that had been registered with the financial and technical assistance of the Millennium Challenge Corporation’s first compact with Benin.

It should take roughly 24 hours to register a business, and there is no need for a notary’s assistance. APIEX serves as the single investment promotion center and conduit of information between the foreign investor and the Beninese government.

Benin defines:

  • Micro-enterprises as having less than five employees;
  • Small and medium size enterprises (SMEs) as having between five and 99 employees. SMEs may be a subsidiary of an international firm.

A full-service office – run by a private company under the supervision of the Ministry of Infrastructure and Transport – expedites customs clearances, reduces the cost of clearances, and minimizes processing barriers to clearing cargo at the Port of Cotonou. This office makes it possible to obtain cargo clearance within as little as 48 hours after its off-loading at the Port of Cotonou, though in practice this tends to take somewhat longer.

Outward Investment

The Beninese government has no policy or incentive in place to encourage the country’s businessmen to invest abroad. The Beninese government does not restrict domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

Benin is a member of UNCTAD’s international network of transparent investment procedures. Foreign and domestic investors can find detailed information on administrative procedures applicable to investment and income generating operations at http://benin.eregulations.org/ , including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures. There is no rule to prevent a monopoly over a particular business sector. The Benin Private Investment Council-CIPB is the only business-related think-tank or body that advocates for investors, http://www.cipb.bj/ . Generally, draft bills are not available for public comment. However, individuals (including non-citizens) have the option to file appeals about or challenge passed or enacted bills with the country’s Constitutional Court.

International Regulatory Considerations

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies within French-speaking African member countries. Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID). OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and the creditor may file for liquidation only.

Legal System and Judicial Independence

The preamble of the Beninese Constitution, adopted on December 11, 1990, highlights the attachment of the Beninese people “to principles of democracy and human rights as they have been defined by the Charter of the United Nations of 1945 and the Universal Declaration of Human Rights of 1948, the African Charter on Human and Peoples’ Rights adopted in 1981 by the Organization of African Unity and ratified by Benin on 20 January 1986 and whose provisions form an integral part of this present Constitution and of Beninese law and have a value superior to the internal law.”

Benin’s domestic law includes various legislative and regulatory texts covering family law, land law, labor law, criminal law, criminal procedure, and civil, commercial, social, and administrative proceedings. The newly created commercial court enforces commercial related issues. Court cases tend to proceed slowly and there may be challenges in the enforcement of court decisions. Magistrates and judges, though appointed by the Executive, remain independent. Benin’s courts enforce rulings of foreign courts and international arbitration.

Laws and Regulations on Foreign Direct Investment

Benin is a member of OHADA’s Common Court of Justice and Arbitration (CCJA) and the International Center for the Settlement of Investment Disputes (ICSID). Investors may include arbitration provisions in their contracts in order to avoid prolonged entanglements in the Beninese courts. The United Nations’ http://www.theiguides.org/guides/benin.pdf  details investment procedures in Benin. In 2014, CCJA judged that the Beninese government had illegally seized the ginning assets of the cotton company SODECO (Societe de Developpement du Coton, a public-private joint venture), and had illegally revoked the Port of Cotonou cargo inspection contract with the private company Benin Control. The CCJA ordered payment of USD 267 million in compensation to the two companies owned or largely controlled by then-cotton tycoon, and current Head of State, Patrice Talon (see http://www.ohada.org/index.php/fr/ohada-au-quotidien/role-des-audiences-publiques-de-la-cour-ccja ).

The APIEX one-stop-shop website, http://benin.eregulations.org/ , provides information on regulations and procedures for investment in Benin.

Competition and Anti-Trust Laws

There is no existing agency that reviews transactions for competition-related concerns. Only the local court or international arbitration courts may address these concerns filed with them. There are no recent or existing competition cases to highlight.

Expropriation and Compensation

Based on a 1992 privatization law, the Government is forbidden from nationalizing private enterprises operating in Benin.

In conformity with World Bank structural reform commitments, the government opened the cotton sector and its related components (namely ginning and inputs) to the private sector in the 1990s, and in 2008 divested the ginning industry part of its agricultural parastatal SONAPRA (Societe Nationale pour la Promotion Agricole) moving the ginning assets and regulatory control functions to SODECO. SODECO is a public-private joint venture: 35 percent government, 45 percent private (owned by now-president Patrice Talon), and the remainder split between stock market, local communities, cotton growers, and staff members. In October 2012, prompted by concerns over performance and mismanagement, the government reassumed control of cotton production and ginning holdings under SONAPRA. Under President Talon’s administration, in 2016 SODECO took back control of its ginning facilities and SONAPRA has been dissolved.

In 2006, the government took over the management of previously privatized oil company SONACOP on the grounds that the company was in financial disarray, lacked funds for its operations, and was unable to supply gas stations throughout the country. SONACOP remains a state-owned enterprise today, charged with import and distribution of petroleum products.

In February 2017, the Council of Ministers announced that the government was terminating concessions for the management of four state-owned hotels (two in Cotonou and two in northern Benin), and instructed the Minister of Justice to file reparations claims against the concessionaires on the grounds that they had not fulfilled their concession agreements.

In 2012, the government took control of the private bank Banque Internationale du Benin (BIBE) stating that poor management risked leading the bank to bankruptcy and possible systemic risk to the banking sector. BIBE is still in government hands.

Dispute Settlement

ICSID Convention and New York Convention

Benin is a member of the International Center for the Settlement of Investment Disputes (ICSID) and New York Convention.

Investor-State Dispute Settlement

Post has no reports of government interference in judicial handling of investment disputes.

All three known past investment disputes between U.S. investors and the Beninese government were resolved in favor of the U.S. investors. However, in 2016, the government revoked the contract of U.S.-based company SECURIPORT for the provision of civil aviation and immigration security services; this dispute remains unresolved. The local courts recognize and enforce foreign arbitral awards issued against the government. In 2010, Benin’s civil society challenged a contract awarded by the government in the communications sector and the award decision was reversed.

There is an investment incentive agreement between the Government of the United States of America and the Government of Benin.

International Commercial Arbitration and Foreign Courts

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies. Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID) and as such enforces foreign arbitral awards as well as foreign court rulings. Post is unaware of any investment dispute resolution made in favor of a state-owned enterprise by domestic courts.

Bankruptcy Regulations

OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and creditors may file for liquidation only.

Benin’s score of 105 on the 2018 World Bank Group Doing Business report’s ‘Resolving Insolvency” category is an upgrade from the 2017 score of 115.

6. Financial Sector

Capital Markets and Portfolio Investment

Government policy supports free financial markets, subject to oversight by the Ministry of Finance and Economy and the Central Bank of West African States (BCEAO). Fourteen commercial banks operate in Benin, where the access rate to banking services is estimated at 12 percent. Foreign investors may seek credit from Benin’s private financial institutions and the West Africa Economic and Monetary Union (WAEMU) Regional Stock Exchange (Bureau Regional des Valeurs Mobilieres – BRVM) headquartered in Abidjan, Cote d’Ivoire with local branches in each WAEMU member country.

There are no restrictions for foreign investors to establish a bank account in Benin and get loans on the local market. However, proof of residency or evidence of company registration is required to open a bank account.

Money and Banking System

The banking sector has been generally reliable. Fourteen private commercial banks operate in Benin in addition to the regional central bank (BCEAO) and a soon-to-open subsidiary of the African Development Bank. Only 12 percent of the Beninese population uses banking services. If microfinance institutions are taken into account, banking access may be as high as 18 percent. In recent years, non-performing loans have been growing at an alarming rate. Fifteen percent of total banking sector assets are estimated to be non-performing. Benin is part of WAEMU. The BCEAO regulates the banks in Benin and is present in all member states including Benin.

Foreign banks are required to obtain a banking license before operating branches in Benin. They are subject to the same prudential regulations as local or regional banks. Benin has lost no correspondent banking relationships during the last three years. There is no known current correspondent banking relationship in jeopardy. Foreigners are required to present proof of residency to open bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

All funds entering the country from abroad for investment purposes require reporting and registration with the Ministry of Economy and Finance at the time of arrival of funds. Evidence of registration is required to justify remittances of investment capital, earnings, loan/lease repayments or royalties. Such remittances are allowed without restrictions.

Funds entering the country from abroad for investment purposes must be converted into local currency. For the purposes of repatriating such funds, either the invested funds or the interest/earnings or royalties can be converted into any world currency.

The currency of Benin is BCEAO-CFA Franc (international code: XOF). XOF has a fixed parity with the Euro and fluctuates against all other currencies based on this parity. This parity was established at the time of the Euro’s creation (January 1, 1999) and has not changed since then. The parity stands at XOF 655.957= EUR 1.00, guaranteed by the French government under an arrangement between the Treasury of France and the European Union.

Remittance Policies

There have been no recent plans to change investment remittance policies. Banks require documents to justify remittances related to investments. The waiting time to remit investment returns does not exceed 60 days in practice.

Sovereign Wealth Funds

Benin has no Sovereign Wealth Fund.

Bermuda

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Bermuda’s investment climate welcomes foreign direct investment (FDI). The Bermuda Business Development Agency (BDA) is an independent, public-private partnership funded by both the Bermuda government and the private sector. The agency is governed by a Board of Directors comprised of senior industry professionals representing the diversity of Bermuda’s financial services sector. The BDA carries out pro-active, targeted marketing and business development strategies to stimulate growth in the Bermuda economy and create and maintain jobs. (http://bda.bm/overview/ )

The BDA acts as a partner for existing Bermuda-based companies and also assists entities that are considering establishing operations in Bermuda. It connects prospective companies with industry partners and relevant representatives in the Bermuda Monetary Authority (BMA) and the Bermuda Government’s Business Development Unit, making formal introductions, trouble-shooting and following up with clients to simplify the process.

The BDA has segmented its business development efforts into four distinct pillars or industry areas of focus: Risk (insurance, reinsurance, captives, and insurance linked securities), Asset Management, Trust & Private Client, and International Commerce (technology, international markets, etc.). These are key sectors of the Bermuda marketplace, or areas for potential growth, and the BDA has separate business development managers, strategies and goals for each.

The BDA’s Concierge Service provides a one-stop-shop for businesses considering relocating or starting up operations in Bermuda. The Concierge team is the primary point of contact to connect clients with industry professionals, Government and regulatory officials, and service providers such as realtors, law firms, auditors and relocation experts. Their goal is to help get business off the ground quickly and make doing business in Bermuda beneficial and straightforward.

The GOB has not implemented its plans to privatize, mutualize (a form of privatization in which employees are shareholders), and/or outsource non-core government functions. In November 2014 the GOB signed an exclusive agreement with the semi-public Canadian Commercial Corporation to build a new USD 200 million airport terminal pursuant to a public-private partnership to be financed from future airport revenues.

Limits on Foreign Control and Right to Private Ownership and Establishment

Reference the section on Laws/Regulations of Foreign Direct Investment for information regarding the 60/40 Rule.

Other Investment Policy Reviews

Bermuda is a World Trade Organization (WTO) member through the United Kingdom. Bermuda has not conducted an investment policy review through the OECD, WTO, or UNCTAD in the last five years.

Business Facilitation

The Investment Business Act 2003 is the statutory basis for regulating investment business in Bermuda. The act provides a licensing regime for any person or entity (unless otherwise exempted or excluded) engaging in investment business, as defined by the act, either in or from Bermuda.

The Registrar of Companies (ROC) is a Bermuda government department falling under the Ministry of Economic Development. It oversees the day-to-day responsibilities in regards to the administration of companies, name reservation, fees, insolvency and real estate. https://www.roc.gov.bm/roc/rocweb.nsf/roc?OpenFrameSet .

Foreign companies may not use the online registration system; the services of a local corporate service provider must be retained in order to set up a company in Bermuda. At a minimum, a company must typically register with the Registrar of Companies, the Tax Commissioner, the Social Insurance Department, and the Bermuda Monetary Authority if it is a regulated company. The Registrar of Companies usually takes 24 days from the date of consent from the BMA for a typical incorporation. Time needs to be taken into account for the corporate service provider’s vetting and the Know Your Customer process. There is no provision allowing simplified business creation without a notary.

Under the Bermuda Economic Development Corporation (BEDC) Act 1980, a “small business” is defined as a Bermudian-owned and owner-operated business enterprise having an annual gross payroll not exceeding USD 500,000 or having annual sales revenues of less than one million dollars. A “medium sized business” is a Bermudian-owned and owner-operated business enterprise with at least three of the following attributes: gross annual revenues USD 1 million-USD 5 million; annual payroll USD 500,000-USD USD 2.5 million; a minimum of 11 and a maximum of 50 employees; in operation for a minimum of 10 years; and net assets of less than USD USD 2.5 million.

The BEDC grants loans or other forms of financial assistance to support establishing, carrying on or expanding small businesses, medium-sized businesses and entities within economic empowerment zones (EEZs). It also provides technical advice or assistance to persons who are seeking or who are granted financial assistance; operates and manage markets; oversees and manages the development and implementation of economic empowerment zones; and maintains a register of small businesses, medium-sized business and EEZ business entities.

The BEDC’s financial products include loan guarantees up to 50 percent of a loan up to a maximum of USD USD 200,000; micro loans guarantees of 100 percent of a small loan up to USD USD 7,500; bank preferential rates and terms for business formation and relocation into the Northeast Hamilton Economic Empowerment Zone (EEZ) payroll tax concessions in all three EEZs for nine tax periods; EEZ customs duty deferment up to five years for businesses and residences that undertake capital projects or purchases in the three EEZs; a 100 percent guaranteed letter of credit to allow duty payment on retail goods to be deferred for three months on each importation up to a credit limit of USD USD 10,000; and graduates of the BEDC’s mobilization loan program have preferential rates up to one year backed by a 100 percent guarantee from BEDC. While these benefits are only available to Bermudian-owned and owner-operated businesses, local businesses that meet the requirements of the 60/40 Rule (60 percent Bermudian-owned and 40 percent foreign ownership) may take advantage of BEDC’s financial products. All can use its advisory services.

Outward Investment

Bermuda is not involved in outward investment.

3. Legal Regime

Transparency of the Regulatory System

Bermuda’s legal, regulatory and accounting systems adhere to high ethical and transparency standards. As noted previously, the legal and regulatory systems are grounded in UK law. Accounting systems and auditing standards typically follow Canadian Generally Accepted Accounting Principles (GAAP). A Bermudian company may choose to follow the GAAP of any other jurisdiction, subject to full disclosure of its accounts.

Bermuda is a member of regulatory standard-setting bodies for banking (via the Basel Committee on Bank Supervision), insurance (via the International Association of Insurance Supervisors or IAIS), and investment business (via the Financial Services Authority or FSA). In December 2013, Bermuda signed the Foreign Account Transaction Compliance Act (FATCA) Intergovernmental Model 2 Agreement with the U.S. to promote transparency on tax matters, having concluded a FATCA-type agreement with the UK in the previous month. Bermuda financial institutions now automatically transmit FATCA information to the U.S. and UK.

The BMA is Bermuda’s sole regulatory body for financial services, responsible for the licensing, supervision, and regulation of financial institutions conducting deposit-taking, insurance, investment, and trust business on the island. The GOB continues to strengthen its anti-money laundering and anti-terrorism financing (AML/ATF) framework to ensure a high level of compliance with international standards. Amendments to the Proceeds of Crime Act in 2013 created an obligation to report suspicions of money laundering or terrorist financing and to allow civil proceedings before the Supreme Court for the recovery of property obtained through unlawful conduct.

The BMA’s Guidance Notes for AML/ATF Regulated Financial Institutions on Anti-money Laundering and Anti-terrorist Financing outline and interpret the legal and regulatory framework, propose good industry practices, and assist institutions to design and implement systems and controls to limit AML/ATF risks to institutions. In this respect, Bermuda laws and regulations do not distinguish between businesses operating in the local economy and exempt companies operating internationally from within Bermuda. Neither unlicensed nor unregistered entities are permitted to operate in the financial services sector.

Bermuda’s Financial Intelligence Agency is a member of the Egmont Group of Financial Intelligence Units. It shares information with other agencies, within and outside Bermuda. The BMA Amendment (No. 3) Act 2004 clarified the power of the BMA to share information with other overseas authorities. Other laws that authorize the sharing of information with overseas regulators include the Banks and Deposit Companies Act 1999, the Trusts (Regulation of Trust Business) Act 2001, and the Investment Act 2003.

The Investment Business Amendment Act 2012, the Trust (Regulation of Trust Business) Amendment Act 2012, and the Banks and Deposit Companies Amendment Act 2012 regulate investment businesses, trusts, and banks in the areas of civil penalties, public censure, prohibitions against providing certain services, and publication of decisions. The Investment Business Act 2003 granted the BMA stronger intervention powers, including the ability to cooperate with foreign bodies, while the Investment Business Investment Act 2012 brought the Bermuda Stock Exchange (BSX) under the regulation of the BMA. Other provisions provide for criminal penalties, e.g., the Banks and Deposit Companies Amendment Act.

The BMA regulates collective investment schemes (CIS). The 1997 Proceeds of Crime Act (POCA) and the 2006 Investment Funds Act (IFA) regulate fund administrators. CIS are also subject to IFA, which clarifies and codifies the current regulation of funds in order to strengthen Bermuda’s position in the international funds market.

For Bermuda laws in general, see www.bermudalaws.bm . The GOB posts new laws and regulations in the Royal Gazette newspaper (the official public record). Draft bills are made available at http://www.parliament.bm . The GOB often consults with organizations prior to introducing proposed legislation.

International Regulatory Considerations

See previous section on transparency of regulatory system.

Legal System and Judicial Independence

Bermuda’s legal system is based on English statutory and common law and principles of equity. The system is generally effective at enforcing property, commercial and contractual rights.

There is no government interference in the court system. Three courts preside in Bermuda; the Magistrates Courts, the Supreme Court, and the Court of Appeal. The Commercial Court, a division of the Supreme Court, in effect since January 2006, was established to provide a forum in which commercial litigation is tried expeditiously by an experienced commercial judge in accordance with the best modern practice. The court of last resort is London’s Privy Council.

Foreign money judgments can be enforced under Bermudian statutory law. Under the 1958 Judgments Reciprocal Enforcement Act (JRE), local courts must recognize and enforce foreign judgments. The JRE follows the same procedure as the UK Foreign Judgments (Reciprocal Enforcement) Act of 1933. Bermuda also has arbitration legislation.

Laws and Regulations on Foreign Direct Investment

The Minister of Economic Development has broad discretion to approve privatization applications under the Companies Act 1981. The Ministry of Finance treats foreign and local investors equally when privatization opportunities arise. There is no government interference in the court system that could affect foreign investors.

The Bermuda Monetary Authority (BMA) at www.bma.bm , regulates the financial services sector in Bermuda, providing rigorous vetting, supervision, and inspection of all financial institutions operating in or from within Bermuda. It also assists other authorities in Bermuda to detect and prevent financial crime and develops risk-based financial regulations that it applies to the supervision of Bermuda’s banks, trust companies, investment businesses, and insurance companies. The Companies Act 1981 as amended is the principal statute governing the formation and operation of Bermuda companies and foreign investment.

Most international business (IB) companies are classified as exempt, a term that addresses ownership, not taxation. Bermuda’s tax system applies equally to local and exempt companies. An exempt company may be 100 percent owned by non-Bermudians. For information about local companies, see below. Being exempt does not relieve exempt companies of the supervisory, regulatory, or fiscal rules governing local, non-exempt companies (more about non-exempt companies below).

An exempt company may not do business within the local economy, except to the extent that it is so authorized by its constitutional documents and has been granted a license by the Minister of Finance, who decides if the granting of such a license is in the best interest of Bermuda. Certain activities are expressly excluded from the requirement for a license, including doing business with other exempted undertakings; dealing in securities of exempted undertakings, local companies or partnerships; carrying on business as manager or agent for, or consultant or advisor to, any exempted company or permit company which is affiliated (whether or not incorporated in Bermuda) with the exempted company or an exempted partnership in which the exempted company is a partner or, in the case of mutual funds, selling or distributing their shares in Bermuda. An exempt company may buy its locally-needed supplies or services from local companies, such as accounting, banking, legal, management and office supply services.

An exempt company is exempt from the ownership regulations – otherwise known as the 60/40 Rule – governing local, non-exempt companies, which are permitted to do business within the local economy. To be classified as a local or non-exempt company, Bermudians must be beneficial owners of at least 60 percent of the shares in the company; exercise at least 60 percent of the total voting rights in the company; and make up at least 60 percent of the directors of the company.

In July 2012, in an effort to ease foreign ownership restrictions and boost the economy, Bermuda amended the Companies Act to allow companies listed on the BSX to apply for a license to seek foreign investment over and above the 40 percent maximum foreign ownership. Previously, foreign investors interested in doing business in Bermuda had to adhere to the 60/40 Rule. Many hotels and telecommunications companies fall into this category, as do Bermuda’s four banks.

Compliance with Organization for Economic Cooperation and Development (OECD) guidelines that seek to eliminate separate regulatory regimes for local and international companies may have been a factor contributing to the decision to ease ownership restrictions. Some local businesses support relaxing the 60/40 rule to encourage FDI, increase liquidity in the local market, and boost the economy. Other businesses oppose it out of concern that they might not be able to compete with majority foreign-owned businesses. The current government is exploring relaxing this rule, with the Premier announcing this intent in the fall of 2017.

Overseas and resident investors may form partnerships under the Partnership Act 1902, which may be local or exempted and general or limited. A local partnership is composed of Bermudian partners only and is permitted to conduct business locally and abroad. If one or more of the partners is not Bermudian, the partnership is considered an exempted partnership and may only conduct business outside Bermuda from a principal place of business within Bermuda. An overseas partnership formed outside Bermuda may, through the BMA, apply to the Minister of Finance for a permit to operate in Bermuda or outside Bermuda from a place of business in Bermuda. These partnerships must appoint and maintain a resident representative on the island.

Bermuda strives to be innovative with new financial services and products. For example, in an effort to make Bermuda more competitive in the hedge fund management arena, the Investment Fund Amendment Act 2013 exempts certain hedge funds from authorization and supervision requirements, provides two new classes of exempt funds, and grandfathers currently-exempt funds. Exempt class A funds, which must be regulated by a recognized authority or have at least USD 1000 million in assets under management, are eligible for expedited registration. To encourage improvements in telecommunication, the Customs Tariff Amendment (No 2) Act 2013 gives full customs duty relief on the importation of goods, apparatus, and machinery imported by holders of integrated communications operating licenses to be used to build or maintain telecommunications network infrastructure.

Bermuda generally prohibits the establishment of foreign franchises, with the exception of franchise hotels. The Companies Act gives the Ministry of Economic Development the authority to grant investors special permission to establish a franchise on the island.

As an overseas UK territory, Bermuda does not receive separate mention in many third-party data information sources, such as the World Bank or Transparency International. Because it is not a member of the Organization for Economic Cooperation and Development (OECD), International Monetary Fund (IMF) or World Bank, it does not participate in any of those organizations’ routine reviews. Bermuda is part of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes (see http://www.oecd.org/tax/transparency/ ), so it is reviewed under this initiative. Neither the World Trade Organization nor the UN Committee on Trade and Development has reviewed Bermuda’s investment policy.

Competition and Anti-Trust Laws

Bermuda has some traditional state-owned enterprises (SOEs) that compete with the private sector, including public transit, waste management, and the postal service. Governance of SOEs is led by a politically-appointed Cabinet Minister. SOEs must provide financial information to the Minister, who submits the information annually to the Auditor General. Most SOEs are prohibited from having a board of directors but may have an advisory board.

Bermuda also has quasi-autonomous, non-governmental organizations (QUANGOs)/Public Authorities, established under their respective legislative incorporation acts. The GOB controls several other organizations either through the possession of shares or voting rights or by some other means. These organizations include the National Sports Center, Port Royal Golf Course, Ocean View Golf Course, Bermuda College, Bermuda Housing Trust, Bermuda Housing Corporation, Bermuda Land Development Corporation, West End Development Corporation, Bermuda Hospitals Board, Bermuda Health Council, the Regulatory Authority (telecommunications), Bermuda Tourism Authority, Bermuda Economic Development Corporation, Pension Commission, and parish councils.

Bermuda is not a party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization.

Expropriation and Compensation

The Housing Loan Insurance (Mortgage) Regulations 1984 and the Municipalities Act 1923 regulate expropriations. There is no history of expropriation in Bermuda without proper compensation and no expropriator acts against foreign investors.

Dispute Settlement

ICSID Convention and New York Convention

Through the United Kingdom, Bermuda has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Under the convention, foreign arbitral awards are enforceable within Bermuda’s domestic courts. Likewise under the United Kingdom, Bermuda is also a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention).

Investor-State Dispute Settlement

Mexico Infrastructure Finance, LLC (MIF), a U.S. company, loaned money to a Bermuda company to enable it to source financing for a hotel development in Hamilton, Bermuda. The Corporation of Hamilton (“the Corporation” a statutory municipal corporation) guaranteed the loan. The local company defaulted on the loan and on 31st December 2014 MIF issued a demand to the Corporation, in its capacity as guarantor, to pay the entire outstanding balance of USD 18 million plus interest. When payment was not forthcoming, MIF brought an action against the Corporation in the Supreme Court to enforce the Guarantee. The Corporation consented to judgment but then petitioned the court to withdraw its consent and argue that it did not have the statutory authority to give the guarantee in the first place. In a decision dated November 2016, the Bermuda Supreme Court (Hellman, J) ruled that the municipality did not have the authority in its statute to give a guarantee for the proposed purpose of a hotel development, and nullified the consent judgment: see Corporation of Hamilton v. Mexico Infrastructure [2016] SC (Bda) 94 Com (18 November 2016). The appeal by MIF of that case was heard, but a judgment is pending. MIF’s insurers have filed a civil case in New York against a Bermudian law firm for failing “to exercise the care and skill to be expected of reasonably competent attorneys.”

International Commercial Arbitration and Foreign Courts

The growth in commercial arbitration is directly linked to the presence of international companies, which operate primarily in the insurance and reinsurance industry. Arbitration within Bermuda has become increasingly popular and it is often named as the seat for arbitration. The GOB has considered promoting Bermuda as a global center for international arbitration.

Bermuda has its own arbitration legislation. The Bermuda International Conciliation and Arbitration Act of 1993 adopted the UN Commission on International Trade Law (UNCITRAL model law) as their rules for governing arbitration procedures. Under the umbrella of the United Kingdom, the ratification of the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York convention) was extended to Bermuda who became a member state in 1980.

Under Bermuda law, arbitrators and foreign legal counsel traveling to Bermuda for the purposes of participating in arbitration do not need to be locally licensed. The Department of Immigration does however require advance notice of their presence in the jurisdiction.

The judicial system handles investment disputes unless the parties have agreed to submit their disputes to arbitration.

Bankruptcy Regulations

The Bankruptcy Act 1989, the Companies Act 1981, and the Companies (Winding Up) Rules 1982 govern bankruptcy and the winding-up of companies. The Supreme Court (the first instance court of general jurisdiction) administers the bankruptcy process. A foreign creditor may apply for the bankruptcy of an individual or for the winding-up of a company provided the creditor follows the procedures set out in the aforementioned statutes.

6. Financial Sector

Capital Markets and Portfolio Investment

The Bermuda Stock Exchange (BSX) is the world’s preeminent fully – electronic, offshore securities exchange, offering a variety of domestic and international listing options. Established in 1971, the BSX is globally recognized for its commercially sensible listing requirements and partners with the Bermuda Monetary Authority (BMA) and Bermuda Business Development Agency (BBDA) to further develop Bermuda’s reputation.

Bermuda does not have a central bank, but the BMA issues and redeems notes and coins, supervises, regulates, and inspects financial institutions which operate in or from Bermuda, and generally promotes the financial stability and soundness of financial institutions. The BMA does not, however, determine interest rates, which are set by the market, regulated by the Ministry of Finance, and usually follow the Federal Reserve System rates.

Bermuda does not have developed capital markets and does not control monetary policy. Commercial credit lines are normally arranged through U.S. or other overseas institutions. Credit is allocated on market terms, and foreign investors may get credit on the local and international markets. The private sector has access to various credit instruments via local banks. Many companies, particularly the larger ones, maintain external banking relationships

Money and Banking System

The Bermuda Dollar (BMD) is interchangeable with U.S. currency with an exchange rate of 1:1. Bermuda has four banks, all of which are exempt from the 60/40 Rule. The Banks and Deposit Companies Act 1999 implemented the Base Committee’s Core Principles for Effective Banking Supervision. Bermuda banks are compliant with the Basel II Accord and have either implemented or are moving toward full implementation of Basel III.

Liquidity and solvency are important concerns for Bermuda’s banks as there is no monetary policy, no lender of last resort, and no implied guaranty. In July 2011, the GOB passed the Deposit Insurance Act, which lays out proposals for implementing a Deposit Insurance Scheme (DIS) for the Bermuda market; it has yet to be implemented. The DIS would provide insurance coverage to small depositors in banks and credit unions. In February 2016, the House of Assembly passed the Banking (Special Resolutions Regime) Act 2016 to allow the government to temporarily take over a failing bank.

According to the BMA’s December 2016 Regulatory Update, the primary regulatory form of capital, as measured by the Common Equity Tier 1 (CET1) ratio, rose from 18.2 percent to 18.6 percent in Q4 while the Risk Asset Ratio (RAR) capital measure decreased from 21.9 percent to 20.4 percent. The sector’s capital adequacy remains above the minimum requirements per the adopted Basel III standards. Risk-Weighted Assets (RWAs) fell by 2.2 percent during Q4 as banks continued to reduce their credit risk exposures.

As of January 1, 2016, banks were required to meet the Capital Conservation Buffer of 0.6 percent which will increase to 1.2 percent effective January 1, 2017. Banks that are designated as systemically important to the local economy were required to include an additional capital buffer, ranging from 0.0 percent to 3.0 percent. All newly implemented measures are in line with the Authority’s prudential regulatory framework.

Banking at the capital level continues to exceed regulatory requirements. The Banking sector aggregated balance sheet recorded a small increase in Q4 206 while profitability increased significantly compared to Q3 2016. Following the US Federal Reserve’s announcement to increase their short-term interest rate by 25 basis points, some local banks revised their base lending rate by 0.25 percent.

Liquidity conditions remained sound in Q4 as loans-to-deposits experienced a modest decline during the period from 47.3 percent to 43.4 percent. Customer deposits continued to be the primary source of funding, with banks receiving more customer deposits, up by 3.7 percent during the period relative to decline by 4.9 percent, widening the overall funding gap. Loan growth was steady during the quarter, with the real estate sector experiencing a small increase to 50.8 percent of total loans. Loans classified as “other” consisting primarily of other forms of loans and personal loans fell from 34.7 percent to 32.0 percent. At the end of Q4 2016, all banks were in compliance with the Authority’s 70 percent phased-in Liquidity Coverage Ratio requirement. The Bermuda dollar supply was USD USD 3.5 billion in Q4 2016 which was 2.7 percent higher year-on-year.

Bermuda’s reinsurance industry posted higher losses in Q4 compared to last year, while the aggregate balance sheet improved by 6.1 percent. Reported gross profit of USD USD 1.3 billion was 20.8 percent lower compared to Q4 2015, as the combination of higher losses and capital losses negatively impacted profitability. Return on invested assets remained low, as profitability indicators showed Return on Investments close to 0.6 percent while Return on Equity was 0.9 percent.

The Bermuda Stock Exchange (BSX) total market capitalization (excluding funds) was USD USD 343.8 billion at the end of Q4 2016, an increase of USD USD 25.4 billion from the USD USD 318.4 billion recorded in Q3 2016. Most of the activity arose from higher trading volume, which rose to 8,269,818 shares (up from 6,948,612 shares in the prior quarter). Total market value was USD USD 46.4 million (up from USD USD 37 million in the prior quarter). BSX recorded positive returns during the quarter, bolstered by the Bank of Butterfield’s initial public offering. The Insurance Linked Securities (ILS) market had a total of 84 deals listed on the BSX, with an aggregate nominal value of approximately USD USD 20.1 billion.

The Federal Reserve’s confidence in the US economy was marked by an increase in short-term interest rates in December, while the response to the Brexit vote has triggered legal challenges in the UK. The Federal Open Market Committee (FOMC) intends to increase rates at a faster pace in 2017, with policy makers anticipating three rate increases in 2017. The Federal Reserve projects that the US economy grew 1.9 percent in 2016 and will grow 2.1 percent in 2017. In the UK, the economy has performed well since the Brexit vote and growth beat expectations in the fourth quarter at 0.6 percent. However, expansion of the UK economy is still being almost entirely driven by services and consumer spending, continuing the trend of lopsided growth seen in recent years. Households are borrowing more and saving less. An expected pickup in inflation through 2017 raises the risk of an income squeeze.

In 1996, U.S. Securities and Exchange Commission recognized the Bermuda Stock Exchange (BSX) as a Designated Offshore Securities Market. In 1999, the BSX became a full member of the International Federation of Stock Exchanges. In 2005, the UK Financial Services Authority granted the BSX Designated Investment Exchange status. The BMA provides oversight of the BSX and its trading activity. The BSX employs the Bermuda Securities Depository (BSD) – an electronic clearing, settlement and registration system – under BMA oversight. The BSD was designed to facilitate more efficient trade settlement for BSX-listed securities by allowing book entry settlement rather than paper-based settlement. Currently, over 600 companies are listed on the BSX.

Protection from hostile takeovers falls under the Insurance Amendment Act 2013 and the Companies Act 1981. The Insurance Amendment Act is designed to improve insurance group supervision by requiring that certain material changes be reported to the BMA, such as amalgamation with another firm or acquisition of a controlling interest in a business. The Companies Act requires notification of shareholders of amalgamation agreements.

Foreign Exchange and Remittances

USD currency is widely used and accepted in Bermuda. It is par to the Bermuda dollar. In Bermuda, both currencies are freely interchangeable and transferable without any restrictions.

The BMA issues Bermuda’s national currency and manages exchange control transactions. It administers the Exchange Control Act 1972 that states that no capital or exchange controls apply to non-residents or to the various forms of offshore entities, which are free to import and export funds in all currencies.

The Exchange Control Regulations 1973 and the Companies Act 1981 regulate the issue, transfer, redemption, and repurchase of securities. For exchange control purposes, the BMA must give prior approval for issues to and transfers of securities in Bermuda companies involving non-residents, except where general permission has been granted pursuant to the Notice to the Public of June 2005.

The 2009 Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Amendment gave the BMA the authority to oversee all money transactions involving wire transfers. The act requires financial institutions to verify the accuracy and completeness of the information on the payer before authorizing the transfer of funds. The institution must also retain all the records pertaining to the transaction for a period of no less than five years. In 2013, amendments created an obligation to report suspicious money transactions which could possibly be linked to money laundering or to monies being used to fund terrorism. It established a civil proceeding before the Supreme Court for the purpose of recovering money obtained through unlawful conduct.

In 2009, Bermuda updated the 1898 Revenue Act to strengthen the requirements related to cross-border transporting of currency and negotiable instruments. The threshold was set at USD 10,000, after a financial transaction surpasses that amount; the financial institution is automatically required to report the transaction. Passengers arriving to Bermuda (regardless of point of embarkation) must complete a mandatory declaration form. This mandatory disclosure system applies to all outgoing passengers traveling to the U.S., Canada, and the UK.

The 2010 Foreign Currency Purchase Tax Amendment Act is applied to the purchase of all non-local currencies, including the USD. In 2010, the foreign currency purchase tax doubled from 0.5 percent to 1 percent per transaction.

Bermuda is a member of the Caribbean Financial Action Task Force (CFATF), an organization of states and territories of the Caribbean basin which have agreed to implement common counter-measures against money laundering and it is listed under the 2014 International Narcotics Control Strategy Report (INCSR) as being a monitored country.

The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Their main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. In May 2008, the BFN was granted a Money Service Business License from the Bermuda Monetary Authority (BMA) in conjunction with the launch of its Western Union agency in Bermuda which offers international money transfer services. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas. The Moneyshop is another business providing financial services in Bermuda with money transfer options through MoneyGram or wire transfers.

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

Not applicable/information unavailable.

Bolivia

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

In general, Bolivia remains open to foreign direct investment. The 2014 investment law guarantees equal treatment for national and foreign firms, however it also stipulates that public investment has priority over private investment (both national and foreign) and that the Bolivian Government will determine which sectors require private investment.

U.S. companies interested in investing in Bolivia should note that in 2012 Bolivia abrogated the Bilateral Investment Treaties (BIT) it signed with the United States and a number of other countries. The Bolivian Government claimed the abrogation was necessary for Bolivia to comply with the 2009 Constitution. Companies that invested under the U.S. –Bolivia BIT will be covered until June 10, 2022, but investments made after June 10, 2012 are not covered.

Pursuant to Article 320 of the 2009 Constitution, Bolivia no longer recognizes international arbitration forums for disputes involving the government. The parties also cannot settle the dispute in an international court. However, the implementation of this article is still uncertain.

Specifically, Article 320 of the Bolivian Constitution states:

  1. Bolivian investment takes priority over foreign investment.
  2. Every foreign investment will be subject to Bolivian jurisdiction, laws, and authorities, and no one may invoke a situation for exception, nor appeal to diplomatic claims to obtain more favorable treatment.
  3. Economic relations with foreign states or enterprises shall be conducted under conditions of independence, mutual respect and equity. More favorable conditions may not be granted to foreign states or enterprises than those established for Bolivians.
  4. The state makes all decisions on internal economic policy independently and will not accept demands or conditions imposed on this policy by states, banks or Bolivian or foreign financial institutions, multilateral entities or transnational enterprises.
  5. Public policies will promote internal consumption of products made in Bolivia.

Article 262 of the Constitution states:

“The fifty kilometers from the border constitute the zone of border security. No foreign person, individual, or company may acquire property in this space, directly or indirectly, nor possess any property right in the waters, soil or subsoil, except in the case of state necessity declared by express law approved by two thirds of the Plurinational Legislative Assembly. The property or the possession affected in case of non-compliance with this prohibition will pass to the benefit of the state, without any indemnity.”

The judicial system faces a huge backlog of cases, is short staffed, lacks resources, has problems with corruption, and is believed to be influenced by political actors. Swift resolution of cases, either initiated by investors or against them, is unlikely. The Marcelo Quiroga Anti-Corruption law of 2010 makes companies and their signatories criminally liable for breach of contract with the government, and the law can be applied retroactively. Authorities can use this threat of criminal prosecution to force settlement of disputes. Commercial disputes can often lead to criminal charges and cases are often processed slowly. See our Human Rights Report as background on the judicial system, labor rights and other important issues.

Article 129 of the Bolivian Arbitration Law No. 708, established that all controversies and disputes that arise regarding investment in Bolivia will have to be addressed inside Bolivia under Bolivian Laws. Consequently, international arbitration is not allowed.

Bolivia does not currently have an investment promotion agency to facilitate foreign investment. However, the government has said that it is working to create an investment promotion agency in order to attract investment in the non-traditional and industrial sectors.

The government does maintain ongoing dialogue with the private sector through several working groups, one of which addresses the investment climate.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in remunerative activity.

There are some areas where investors may judge that special treatment is being given to their Bolivian competitors, for example in key sectors where private companies compete with state owned enterprises. Additionally, foreign investment is not allowed in matters relating directly to national security. And only the government can own most natural resources.

The Constitution specifies that all hydrocarbon resources are the property of the Bolivian people and that the state will assume control over their exploration, exploitation, industrialization, transport, and marketing (Articles 348 and 351). The state-owned and operated company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) manages hydrocarbons transport and sales and is responsible for ensuring that the domestic market demand is satisfied at prices set by the hydrocarbons regulator before allowing any hydrocarbon exports. YPFB benefitted from government action in 2006 that required operators to turn over their production to YPFB and to sign new contracts that gave YPFB control over the distribution of gasoline, diesel, and liquid petroleum gas (LPG) to gas stations. The law allows YPFB to enter into joint venture contracts for limited periods with national or foreign individuals or companies wishing to exploit or trade hydrocarbons or their derivatives. For companies working in the industry, contracts are negotiated on a service contract basis and there are no restrictions on ownership percentages of the companies providing the services.

The Constitution (Article 366) specifies that every foreign enterprise that conducts activities in the hydrocarbons production chain will submit to the sovereignty of the state, and to the laws and authority of the state. No foreign court case or foreign jurisdiction will be recognized, and foreign investors may not invoke any exceptional situation for international arbitration, nor appeal to diplomatic claims.

According to the Constitution, no concessions or contracts may transfer the ownership of natural resources or other strategic industries to private interests. Instead temporary authorizations to use these resources may be requested at the pertinent ministry (Mining, Water and Environment, Public Works, etc.). The Bolivian Government is still renegotiating commercial agreements related to forestry, mining, telecommunications, electricity, and water services, in order to comply with these regulations.

The Telecommunications, Technology and Communications General Law (Law 164, Article 28) stipulates that the licenses for radio broadcasts will not be given to foreign persons or entities. Further, in the case of broadcasting associations, the share of foreign investors cannot exceed 25 percent of the total investment, except in those cases approved by the state or by international treaties.

The Central Bank of Bolivia is responsible for registering all foreign investments. According to the 2014 investment law, any investment will be monitored by the ministry related to the particular sector. For example, the Mining Ministry is in charge of overseeing all public and private mining investments. Each Ministry assesses industry compliance with the incentive objectives. To date, only the Ministry of Hydrocarbons and Energy has enacted a Law (N 767) to incentivize the exploration and production of hydrocarbons.

Other Investment Policy Reviews

Bolivia underwent a WTO trade policy review in 2017. In concluding remarks by the Chairperson, the Chairperson noted that several WTO members raised challenges impacting investor confidence in Bolivia, due primarily to Bolivia’s abrogation of 22 BITs following the passage of its 2009 constitution. However, some WTO members also commended Bolivia for enacting a new investment promotion law in 2014 and a law on conciliation and arbitration, both of which increased legal certainty for investors, according to those members.

Business Facilitation

According to the World Bank’s Doing Business 2017 rankings, Bolivia ranks 147 out of 190 countries on the ease of doing business, much lower than most countries in the region. Bolivia ranks 177 out of 190 on the ease of starting a business.

FUNDEMPRESA is a mixed public/private organization authorized by the central government to register and certify new businesses. Its website is www.fundempresa.org.bo  and the business registration process is laid out clearly within the tab labeled “processes, requirements and forms,” however the registration cannot be completed entirely online. A user can download the required forms from the site and can fill them out online, but then has to mail the completed forms or deliver them to the relevant offices. A foreign applicant would be able to use the registration forms. The forms do ask for a “cedula de identidad,” which is a national identification document; however foreign users usually enter their passport numbers instead. Once a company submits all documents required to FUNDEMPRESA, the process takes between 2-4 working days.

The steps to register a business are: (1) register and receive a certificate from Fundempresa; (2) register with the Bolivian Internal Revenue Service (Servicio de Impuestos Nacionales) and receive a tax identification number; (3) register and receive authorization to operate from the municipal government in which the company will be established; (4) if the company has employees, it must register with the national health insurance service and the national retirement pension agency in order to contribute on the employees’ behalf; and (5) if the company has employees, it must register with the Ministry of Labor. According to Fundempresa, the process should take 30 days from start to finish. All steps are required and there is no simplified business creation regime.

Outward Investment

The Bolivian Government does not promote or incentivize outward investment. Nor does the government restrict domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

Bolivia has no laws or policies that directly foster competition on a non-discriminatory basis. However, Article 66 of the Commercial Code (Law 14379, 1977) states that unfair competition, such as maintaining an import, production, or distribution monopoly, should be penalized according to criminal law. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

Regulatory authority regarding investment exists at the national level in Bolivia. There are no informal regulatory procedures.

The Commercial Code requires that all companies keep adequate accounting records and legal records for transparency. However, there is a large informal sector that does not follow these practices. Most accounting regulations follow international principles, but the regulations do not always conform to international standards. Large private companies and some government institutions, such as the Central Bank and the Banking Supervision Authority, have transparent and consistent accounting systems.

Formal bureaucratic procedures are generally considered to be lengthy, difficult to manage and navigate, and sometimes debilitating. Many firms complain that a lack of administrative infrastructure, corruption, and political motives impede their ability to perform. The one exception is when registering a new company in Bolivia. Once a company submits all documents required to the FUNDEMPRESA, the process usually takes less than one week.

There is no established public comment process allowing social, political, and economic interests to provide advice and comment on new laws and decrees. However, the government generally — but not always — discusses proposed laws with the relevant sector. The lack of laws to implement the 2009 Constitution creates legal discrepancies between constitutional guarantees and the dated policies currently enforced, and thus an uncertain investment climate. Draft text or summaries are usually published on the National Assembly’s website.

Online regulatory disclosures by the Bolivian Government can be found in the “Gaceta Judicial” at: http://www.gacetaoficialdebolivia.gob.bo/ .

Supreme Decree 71 in 2009 created a Business Auditing Authority (AEMP), which is tasked with regulating the business activities of public, private, mixed, or cooperative entities across all business sectors. AEMP’s decisions are legally reviewable through appeal. However, should an entity wish to file a second appeal, the ultimate decision-making responsibility rests with the Bolivian Government ministry with jurisdiction over the economic sector in question. This has led to a perception that enforcement mechanisms are neither transparent nor independent.

Environmental regulations can slow projects due to the constitutional requirement of “prior consultation” for any projects that could affect local and indigenous communities. This has affected projects related to the exploitation of natural resources, both renewable and nonrenewable, as well as public works projects. Issuance of environmental licenses has been slow and subject to political influence and corruption.

In 2010, the new pension fund was enacted; it increased the contributions that companies have to pay from 1.71 percent of payroll to 4.71 percent.

International Regulatory Considerations

Bolivia is a full member of the Andean Community of Nations (CAN), comprised of Bolivia, Colombia, Ecuador, and Peru. Bolivia is also in the process of joining the Southern Common Market (MERCOSUR) as a full member. The CAN’s norms are considered supranational in character and have automatic application in the regional economic block’s member countries. The government does notify the WTO Committee on Technical Barriers to Trade regarding draft technical regulations.

Legal System and Judicial Independence

Property and contractual rights are enforced in Bolivian courts under a civil law system, but some have complained that the legal process is time consuming and has been subject to political influence and corruption. Although many of its provisions have been modified and supplanted by more specific legislation, Bolivia’s Commercial Code continues to provide general guidance for commercial activities. The constitution has precedence over international law and treaties (Article 410), and stipulates that the state will be directly involved in resolving conflicts between employers and employees (Article 50). There have been allegations of corruption within the judiciary in high profile cases. Regulatory and enforcement actions are appealable.

Laws and Regulations on Foreign Direct Investment

No major laws, regulations, or judicial decisions impacting foreign investment came out in the past year. There is no primary central point-of-contact for investment that provides all the relevant information to investors.

Competition and Anti-Trust Laws

Bolivia does not have a competition law, but cases related to unfair competition can be presented to AEMP. Article 314 of the 2009 Constitution prohibits private monopolies. Based on this article, in 2009 the Bolivian Government created an office to supervise and control private companies (http://www.autoridadempresas.gob.bo/ ). Among its most important goals are: regulating, promoting, and protecting free competition; trade relations between traders; implementing control mechanisms and social projects, and voluntary corporate responsibility; corporate restructuring, supervising, verifying and monitoring companies with economic activities in the country in the field of commercial registration and seeking compliance with legal and financial development of its activities; and qualifying institutional management efficiency, timeliness, transparency and social commitment to contribute to the achievement of corporate goals.

Expropriation and Compensation

The Bolivian Constitution allows the central government or local governments to expropriate property for the public good or when the property does not fulfill a “social purpose” (Article 57). In the case of land, this social purpose (FES) is understood as “sustainable land use to develop productive activities, according to its best use capacity, for the benefit of society, the collective interest and its owner.” In all other cases where this article has been applied, the Bolivian Government has no official definition of “collective interest” and makes decisions on a case-by-case basis. Noncompliance with the social function of land, tax evasion, or the holding of large acreage is cause for reversion, at which point the land passes to “the Bolivian people” (Article 401). In cases where the expropriation of land is deemed a necessity of the state or for the public good, such as when building roads or laying electricity lines, payment of just indemnification is required, and the Bolivian Government has paid for the land taken in such cases. However, in cases where there is non-compliance, or accusations of such, the Bolivian Government is not required to pay for the land and the land title reverts to the state.

The constitution also gives workers the right to reactivate and reorganize companies that are in the process of bankruptcy, insolvency, or liquidation, or those closed in an unjust manner, into employee-owned cooperatives (Article 54). The mining code of 1997 (last updated in 2007) and hydrocarbons law of 2005 both outline procedures for expropriating land to develop underlying concessions.

Between 2006 and 2014, the Bolivian Government nationalized companies that were previously privatized in the 1990s. The government nationalized the hydrocarbons sector, the majority of the electricity sector, some mining companies (including mines and a tin smelting plant), and a cement plant. To take control of these companies, the government forced private entities to sell shares to the government, often at below market prices. Some of the affected companies have cases pending with international arbitration bodies. All outsourcing private contracts were canceled and assigned to public companies (such as airport administration and water provision).

There are still some former state companies that are under private control, including the railroad, and some electricity transport and distribution companies. The first non-former state company was nationalized in December of 2012. Government nationalizations have not discriminated by country; some of the countries affected were the United States, France, the United Kingdom, Spain, Argentina, and Chile. In numerous cases the Bolivian Government has nationalized private interests in order to appease social groups protesting within Bolivia.

Dispute Settlement

ICSID Convention and New York Convention

In November 2007, Bolivia became the first country ever to withdraw from ICSID. In August 2010, the Bolivian Minister of Legal Defense of the State said that the Bolivian Government would not accept ICSID rulings in the cases brought against them by the Chilean company Quiborax and Italian company Euro Telcom. However, the Bolivian Government agreed to pay USD 100 million to Euro Telecom for its nationalization; this agreement was ratified by a Supreme Decree 692 on November 3, 2010. Additionally, in 2014, a British company that owned the biggest electric generation plant in Bolivia (Guaracachi) won an arbitration case against Bolivia for USD 41 million. In 2014, an Indian company won a USD 22.5 million international arbitration award in a dispute over the development of an iron ore project. The Bolivian Government has appealed that award.

In another case, a Canadian mining company with significant U.S. interests failed to complete an investment required by its contract with the state-owned mining company. The foreign company asserts it could not complete the project because the state mining company did not deliver the required property rights. The foreign company entered into national arbitration (their contract does not allow for international arbitration) and in January 2011, the parties announced a settlement of USD 750,000, which the company says will be used to pay taxes, employee benefits, and pending debts — essentially leaving them without compensation for the USD 5 million investment they had made. They also retained responsibility for future liabilities.

Investor-State Dispute Settlement

Conflicting Bolivian law has made international arbitration in some cases effectively impossible. Previous investment contracts between the Bolivian Government and the international companies granted the right to pursue international arbitration in all sectors and stated that international agreements, such as the ICSID and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, must be honored. However, the government claims these rights conflict with the 2009 Constitution, which states (Articles 320 and 366) that international arbitration is not recognized in any case and cannot proceed under any diplomatic claim, and specifically limits foreign companies’ access to international arbitration in the case of conflicts with the government. The 2009 Constitution also states that all bilateral investment treaties must be renegotiated to incorporate relevant provisions of the new constitution. The Investment Law of 2014 was enacted in late 2015. Under the 2015 Arbitration Law (Law 708), international arbitration is not permitted when the dispute is against the government or a state-owned company.

A variety of companies of varying nationality were affected by the government’s nationalization policy between 2006 and 2014. In 2014, President Morales announced there would be no more nationalizations. The same year, one Brazilian company was nationalized, but that had been previously agreed to with the owner under the previous nationalization policy.

International Commercial Arbitration and Foreign Courts

In Bolivia, two institutions have arbitration bodies, including the National Chamber of Commerce and the Chamber of Industry and Commerce of Santa Cruz (CAINCO). In order to utilize these domestic arbitration bodies, the private parties must include arbitration within their contracts. Depending on the contract between the parties, UNCITRAL or Bolivia’s Arbitration Law (No. 708) may be used. Local courts recognize and enforce foreign arbitral awards and judgments. There are no statistics available regarding SOE involvement in investment disputes.

Bankruptcy Regulations

Bolivia ranks above regional averages for resolving insolvency according to the World Bank’s Doing Business Report. The average time to complete bankruptcy procedures to close a business in Bolivia is 20 months. The Bolivian Commercial Code includes (Article 1654) three different categories of bankruptcy:

  1. No Fault Bankruptcy – when the owner of the company is not directly responsible for its inability to pay its obligations.
  2. At- Fault Bankruptcy – when the owner is guilty or liable due to the lack of due diligence to avoid harm to the company.
  3. Bankruptcy due to Fraud – when the owner intentionally tries to cause harm to the company.

In general, the application of laws related to commercial disputes and bankruptcy has been perceived as inconsistent, and charges of corruption are common. Foreign creditors often have little redress beyond Bolivian courts, and judgments are generally more favorable to local claimants than international ones. If a company declares bankruptcy, the company must pay employee benefits before other obligations. Workers have broad-ranging rights to recover pay and benefits from foreign firms in bankruptcy, and criminal actions can be taken against individuals the Bolivian Government deems responsible for failure to pay in these matters.

No credit bureaus or credit monitoring authorities serve the Bolivian market.

6. Financial Sector

Capital Markets and Portfolio Investment

The government’s general attitude toward foreign portfolio investment is neutral. Established Bolivian firms may issue short or medium-term debt in local capital markets, which act primarily as secondary markets for fixed-return securities. Bolivian capital markets have sought to expand their handling of local corporate bond issues and equity instruments. Over the last few years, several Bolivian companies and some foreign firms have been able to raise funds through local capital markets. However, the stock exchange is small and is highly concentrated in bonds and debt instruments (more than 95 percent of transactions). The amount of total transactions per year generally hovers at around one-third of the GDP.

Since 2008, the financial markets have experienced high liquidity, which has led to historically low interest rates. However, liquidity has been returning to normal levels in recent years and there are some pressures to increase interest rates. The Bolivian financial system is not well integrated with the international system and there is only one foreign bank among the top ten banks of Bolivia.

In October 2012, Bolivia returned to global credit markets for the first time in nearly a century, selling USD 500 million worth of 10-year bonds at the New York Stock Exchange. The sovereign bonds were offered with an interest rate of 4.875 percent and demand for the bonds well surpassed the offer, reaching USD 1.5 billion. U.S. financial companies Bank of America, Merrill Lynch, and Goldman Sachs were the lead managers of the deal. In 2013, Bolivia sold another USD 500 million at 5.95 percent for ten years. HSBC, Bank of America, and Merrill Lynch were the lead managers of the deal. In 2017, Bolivia sold another USD 1 billion at 4.5 percent for ten years, with Bank of America and JP Morgan managing the deal. According to the Ministry of Economy, the resources gained from the sales will be used to finance infrastructure projects.

The government and central bank respect their obligations under IMF Article VIII, as the exchange system is free of restrictions on payments and transfers for international transactions.

Foreign investors legally established in Bolivia are able to get credits on the local market. However, due to the size of the market, large credits are rare and may require operations involving several banks. Credit access through other financial instruments is limited to bond issuances in the capital market. A recent financial services law directs credit towards the productive sectors and caps interest rates.

Money and Banking System

The Bolivian banking system is small, composed of 16 banks, 6 banks specialized in mortgage lending, 3 private financial funds, 30 savings and credit cooperatives, and 8 institutions specialized in microcredit. Of the total number of personal deposits made in Bolivia through December 2017 (USD 24.8 billion), the banking sector accounted for 80 percent of the total financial system. Similarly, of the total loans and credits made to private individuals (USD 23.3 billion) through December 2017, 80 percent were made by the banking sector, while private financial funds and the savings and credit cooperatives accounted for the other 20 percent.

Bolivian banks have developed the capacity to adjudicate credit risk and evaluate expected rates of return in line with international norms. The banking sector is stable and healthy with delinquency rates at less than 2 percent in 2017.

In 2013, a new Financial Services Law entered into force. This new law enacted major changes to the banking sector, including deposit rate floors and lending rate ceilings, mandatory lending allocations to certain sectors of the economy and an upgrade of banks’ solvency requirements in line with the international Basel standards. The law also requires banks to spend more on improving consumer protection, as well as providing increased access to financing in rural parts of the country.

Credit is now allocated on government-established rates for productive activities, but foreign investors may find it difficult to qualify for loans from local banks due to the requirement that domestic loans be issued exclusively against domestic collateral. Since commercial credit is generally extended on a short-term basis, most foreign investors prefer to obtain credit abroad. Most Bolivian borrowers are small and medium-sized enterprises (SMEs).

In 2007, the government created a Productive Development Bank to boost the production of small, medium-sized and family-run businesses. The bank was created to provide loans to credit institutions which meet specific development conditions and goals, for example by giving out loans to farmers, small businesses, and other development focused investors. The loans are long term and have lower interest rates than private banks can offer in order to allow for growth of investments and poverty reduction.

In September 2010, the Bolivian Government bought the local private bank Banco Union as part of a plan to gain control of part of the financial market. Banco Union is one of the largest banks, with a share of 10.8 percent of total national credits and 12.7 percent of the total deposits; one of its principal activities is managing public sector accounts. Bolivian Government ownership of Banco Union was illegal until December 2012, when the government enacted the State Bank Law, allowing for state participation in the banking sector.

There is no strong evidence of “cross-shareholding” and “stable-shareholding” arrangements used by private firms to restrict foreign investment, and the 2009 Constitution forbids monopolies and supports antitrust measures. In addition, there is no evidence of hostile takeovers (other than government nationalizations that took place from 2006-14).

The Financial sector is regulated by ASFI (Supervising Authority of Financial Institutions), a decentralized institution that is under the Ministry of Economy. The Central Bank of Bolivia (BCB) oversees all financial institutions, provides liquidity when necessary, and acts as lender of last resort. The BCB is the only monetary authority and is in charge of managing the payment system, international reserves, and the exchange rate.

Foreigners are able to establish bank accounts only with residency status in Bolivia.

Blockchain technologies in Bolivia are still in the early stages. Currently, the banking sector is analyzing blockchain technologies and the sector intends to propose a regulatory framework in coordination with ASFI in the future.

Three different settlement mechanisms are available in Bolivia: (1) the high-value payment system administered by the Central Bank for inter-bank operations; (2) a system of low value payments utilizing checks and credit and debit cards administered by the local association of private banks (ASOBAN); and (3) the deferred settlement payment system designed for small financial institutions such as credit cooperatives. This mechanism is also administered by the Central Bank.

Foreign Exchange and Remittances

Foreign Exchange Policies

The Banking Law (#393, 2013) establishes regulations for foreign currency hedging and authorizes banks to maintain accounts in foreign currencies. A significant, but dropping, percentage of deposits are denominated in U.S. dollars (currently less than 14 percent of total deposits). Bolivian law currently allows repatriation of profits, with a 12.5 percent withholding tax. However, a provision of the 2009 Constitution (Article 351.2) requires reinvestment within Bolivia of private profits from natural resources. Until specific implementing legislation is passed, it is unclear how this provision will be applied. In addition, all bank transfers in U.S. dollars within the financial system and leaving the country must pay a Financial Transaction Tax (ITF) of .03 percent. This tax applies to foreign transactions for U.S. dollars leaving Bolivia, not to money transferred internally.

Any banking transaction above USD 10,000 (in one operation or over three consecutive days) requires a form stating the source of funds. In addition, any hard currency cash transfer from or to Bolivia equal to or greater than USD 10,000 must be registered with the customs office. Amounts between USD 50,000 and USD 500,000 require authorization by the Central Bank and quantities above USD 500,000 require authorization by the Ministry of the Economy and Public Finance. The fine for underreporting any cash transaction is equal to 30 percent of the difference between the declared amount and the quantity of money found. The reporting standard is international, but many private companies in Bolivia find the application cumbersome due to the government requirement for detailed transaction breakdowns rather than allowing for blanket transaction reporting.

Administrative Resolution 398/10 approved in June 2010 forces Bolivian banks to reduce their investments and/or assets outside the country to an amount that does not exceed 50 percent of the value of their net equity.

The Central Bank charges a fee for different kinds of international transactions related to banking and trade. The current list of fees and the details can be found at: https://www.bcb.gob.bo/webdocs/01_resoluciones/RD%20181%202017.pdf .

Law 843 on tax reform directly affects the transfer of all money to foreign countries. All companies are charged 25 percent tax, except for banks which can be charged 37.5 percent, on profits under the Tax Reform Law, but when a company sends money abroad, the presumption of the Bolivian Tax Authority is that 50 percent of all money transmitted is profit. Under this presumption, the 25 percent tax is applied to half of all money transferred abroad, whether actual or only presumed profit. In practical terms it means there is a payment of 12.5 percent as a transfer tax.

Currency is freely convertible at Bolivian banks and exchange houses. The Bolivian Government describes its official exchange system as an “incomplete crawling peg.” Under this system, the exchange rate is fixed, but undergoes micro-readjustments which are not pre-announced to the public. There is a spread of ten basis points between the exchange rate for buying and selling U.S. dollars. The Peso Boliviano (Bs) has remained fixed at 6.96 Bs/USD 1 for selling and 6.86 Bs/USD 1 for buying since October 2011. The parallel rate closely tracks the official rate, suggesting the market finds the Central Bank’s policy acceptable. In order to avoid distortions in the exchange rate market, the Central Bank requires all currency exchange to occur at the official rate ±1 basis point.

Remittance Policies

Each remittance transaction from Bolivia to other countries has a USD 2,500 limit per transaction, but there is no limit to the number of transactions that an individual can remit. The volume of remittances sent to and from Bolivia has increased considerably in the past five years, and the central bank and banking regulator are currently analyzing whether to impose more regulations sometime in the future. Foreign investors are theoretically able to remit through a legal parallel market utilizing convertible, negotiable instruments, but, in practice, the availability of these financial instruments is limited in Bolivia. For example, the Bolivian Government mainly issues bonds in Bolivianos and the majority of corporate bonds are also issued in Bolivianos.

The official exchange rate between Bolivianos and dollars is the same as the informal rate. The government allows account holders to maintain bank accounts in Bolivianos or dollars and make transfers freely between them. Business travelers may bring up to USD 10,000 in cash into the country. For amounts greater than USD 10,000, government permission is needed through sworn declaration.

Sovereign Wealth Funds

Neither the Bolivian Government nor any government-affiliated entity maintains a sovereign wealth fund.

Bosnia and Herzegovina

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Bosnia and Herzegovina struggles to attract foreign investment. Complex labor and pension laws, the lack of a single economic space, and inadequate judicial and regulatory protections deter investment. Under the BiH constitution, established through the Dayton Accords, Bosnia and Herzegovina (henceforth “the state”) is divided into two “entities,” the Federation of BiH (the Federation) and the Republika Srpska (RS). A third, smaller area, the Brcko District, operates under a separate administration. The Federation is further divided into ten cantons, each with its own government and responsibilities. There are also 143 municipalities in BiH: 63 in the RS and 80 in the Federation. As a result, BiH has a multi-tiered legal and regulatory framework that can be duplicative and contradictory, and is not conducive to attracting foreign investors.

Employers bear a heavy burden toward governments. They must contribute 69 percent on top of wages in the Federation and 52 percent in the RS to the health and pension systems. The labor and pension laws are also deterrents to investment, though both are being reformed to decrease burdens on employers. While corporate income taxes in the two entities and Brcko District are now harmonized at 10 percent, entity business registration requirements are not harmonized. The RS has its own registration requirements, which apply to the entire entity. Each of the Federation’s ten cantons has different business regulations and administrative procedures affecting companies. Simplifying and streamlining this framework is essential to improving the investment climate. The EU Reform Agenda targets changes that should improve the investment climate by clarifying and simplifying regulation and procedures while decreasing fees faced by businesses at the entity, canton, and municipal levels.

Generally, BiH’s legal framework does not discriminate against foreign investors. However, given the high level of corruption, foreign investors can be at a significant disadvantage in relation to entrenched local companies, especially those with formal or informal backing by BiH’s various levels of government.

The Foreign Investment Promotion Agency (FIPA) is a state-level organization mandated by the Council of Ministers to facilitate and support FDI. FIPA provides data, analysis, and advice on the business and investment climate to foreign investors. All FIPA services are free of charge.

BiH does not maintain an ongoing, formal dialogue with foreign investors. Sporadically, high-ranking government officials give media statements inviting foreign investments in the energy, transportation, and agriculture industries; however, the announcements are rarely supported by tangible, commercially-viable investment opportunities.

Limits on Foreign Control and Right to Private Ownership and Establishment

According to the Law on the Policy of FDI, foreign investors are entitled to invest in any sector of the economy in the same form and under the same conditions as those defined for local residents. There are two exceptions: the defense industry and some areas of publishing and media where foreign ownership is restricted to 49 percent, and electric power transmission, which is closed to foreign investment. In practice, additional sectors are dominated by government monopolies (such as airport operation), or characterized by oligopolistic market structures (such as telecommunications and electricity generation), making it difficult for foreign investors to engage.

Other Investment Policy Reviews

In the past three years, the BiH government has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD); the World Trade Organization (WTO); or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

Establishing a business in BiH can be an extremely burdensome and time-consuming process for investors. The World Bank estimates there are an average of 12 procedures (actual number depends on the type of business), taking a total of 65 days, to register a new business in the capital city of Sarajevo. Registration in BiH can sometimes be expedited if companies retain a local lawyer to follow up at each step of the process. In 2013, the RS established a one-stop shop for business registration in the entity. On paper, this dramatically reduced the time required to register a business in the RS, bringing the government-reported time to register a company down to an average of 7 to 14 days. Some businesses, however, report that in practice it can take significantly longer.

The entity, cantonal, and municipal levels of government each establish their own laws and regulations on business operations, creating redundant and inconsistent procedures that enable corruption. It is often difficult to understand all the laws and rules that might apply to certain business activities, given overlapping jurisdictions and the lack of a central information source. It is therefore critical that foreign investors obtain local assistance and advice. Investors in the Federation may register their business as a branch in the RS and vice versa.

The most common U.S. business presence found in BiH are representative offices. A representative office is not considered to be a legal entity and its activities are limited to market research, contract or investment preparations, technical cooperation, and similar business facilitation activities. The BiH Law on Foreign Trade Policy governs the establishment of a representative office. To open a representative office, a company must register with the Registry of Representative Offices, maintained by the BiH Ministry of Foreign Trade and Economic Affairs (MoFTER) and the appropriate entity’s ministry of trade.

Additional English-language information on the business registration process can be found at:

BiH Ministry of Foreign Trade & Economic Relations (MoFTER):
Ph: +387-33-220-093
www.mvteo.gov.ba 

BiH Foreign Investment Promotion Agency (FIPA):
Ph: + 387 33 278 080
www.fipa.gov.ba 

Republika Srpska Company Registration Website:
http://www.investsrpska.net 

Outward Investment

The government does not restrict domestic investors from investing abroad. There are no programs to promote or incentivize outward investment.

3. Legal Regime

Transparency of the Regulatory System

The government has adequate laws to foster competition; however, due to corruption, laws are often not implemented transparently or efficiently. The multitude of state, entity, cantonal (in the Federation only), and municipal administrations – each with the power to establish laws and regulations affecting business – creates a heavily bureaucratic, non-transparent system. Ministries and/or regulatory agencies are not typically obligated to publish the text of proposed regulations before they are enacted. Some local and international companies have expressed frustration with generally limited opportunities to provide input and influence/improve draft legislation that impacts the business community.

Foreign investors have criticized government and public procurement tenders for a lack of openness and transparency. Dispute resolution is also challenging as the judicial system moves slowly, often does not adhere to existing deadlines, and provides no recourse if the company in question re-registers under a different name.

In an effort to promote the growth of business in its entity, the Republika Srpska government passed a series of amendments in 2013 to create an RS one-stop-shop for business registration. This institution centralizes the process of registering a business, ostensibly making it easier, faster, and cheaper for new business owners to register their companies in the RS. The Federation’s announced plans to establish a one-stop-shop have long been delayed.

Businesses are subject to inspections from a number of entity and cantonal/municipal agencies, including the financial police, labor inspectorate, market inspectorate, sanitary inspectorate, health inspectorate, fire-fighting inspectorate, environmental inspectorate, institution for the protection of cultural monuments, tourism and food inspectorate, construction inspectorate, communal inspectorate, and veterinary inspectorate. Some investors have complained about non-transparent fees levied during inspections, changing rules and regulations, and an ineffective appeals process to protest these fines.

International Regulatory Considerations

BiH is not a part of the EU, the WTO, or a signatory to the TFA.

Legal System and Judicial Independence

BiH has a clogged court system and it often takes several years for a case to be brought to trial. Moreover, commercial cases with subject matter that judges do not have experience adjudicating, such as intellectual property cases, are often left unresolved for lengthy periods of time. Most judges have little to no in-depth knowledge of adjudicating international commercial disputes and require training on applicable international treaties and laws. Regulations or enforcement actions can be appealed, and appeals are adjudicated in the national court system.

The U.S. Government has provided training to judges, trustees, attorneys, and other stakeholders at the state and entity levels to assist in the development of bankruptcy and intellectual property rights laws. Those laws are now in effect at both the entity and state levels, but have not been fully implemented.

Laws and Regulations on Foreign Direct Investment

The state-level Law on the Policy of Foreign Direct Investment accords foreign investors the same rights as domestic investors and guarantees foreign investors national treatment, protection against nationalization/expropriation, and the right to dispose of profits and transfer funds. In practice, most business sectors in Bosnia and Herzegovina are fully open to foreign equity ownership. Notable exceptions to this general rule are select strategic sectors, such as defense; electric power transmission, which is closed to foreign investment; and some areas of publishing and media, where foreign ownership is restricted to 49 percent (see below). However, an Entity Government may decide that companies normally subject to this limitation are not subject to restrictions.

According to legal amendments adopted in March 2015, foreign investors can now own more than 49 percent of capital business entities dealing with media activities, such as publishing newspapers, magazines and other journals, publishing of periodical publications, production and distribution of television programs, privately owned broadcasting of radio and TV programs, and other forms of daily or periodic publications. The new law maintains the restriction that foreign investors cannot own more than 49 percent of public television and radio services. The March 2015 amendments also set conditions to enhance legal security and clarity for foreign direct investment flows. The Foreign Investment Promotion Agency maintains a list of laws relevant to investors on its website: http://www.fipa.gov.ba/publikacije_materijali/zakoni/default.aspx?id=317&langTag=en-US .

The complex legal environment in BiH underlines the utility of local legal representation for foreign investors. Bosnian attorneys’ experience base is still limited with respect to legal questions and the issues that arise in a market-oriented economy. However, local lawyers are quickly gaining experience in working with international organizations and companies operating in BiH. Companies’ in-house legal counsel should be prepared to oversee their in-country counsel, with explicit explanations and directions regarding objectives. The U.S. Embassy maintains a list of local lawyers willing to represent U.S. citizens and companies in BiH. The list can be accessed at https://ba.usembassy.gov/u-s-citizen-services/attorneys/.

Competition and Anti-Trust Laws

BiH has a Competition Council, designed to be an independent public institution to enforce anti-trust laws, prevent monopolies, and enhance private sector competition. The Council reviews and approves foreign investments in cases of mergers and acquisitions of local companies by foreign companies. The Competition Council consists of six members appointed for six-year terms of office with the possibility of one reappointment. The BiH Council of Ministers appoints three Competition Council members, the Federation Government appoints two members, and the RS Government appoints one member. From the six-member Competition Council, the BiH Council of Ministers affirms a president of the Council for a one-year term without the possibility of reappointment.

Expropriation and Compensation

BiH investment law forbids expropriation of investments, except in the public interest. According to Article 16, “Foreign investment shall not be subject to any act of nationalization, expropriation, requisition, or measures that have similar effects, except where the public interest may require otherwise.” In such cases of public interest, expropriation of investments would be executed in accordance with applicable laws and regulations, be free from discrimination, and include payment of appropriate compensation. Neither the entity governments nor the state government have expropriated any foreign investments to date.

Dispute Settlement

ICSID Convention and New York Convention

BiH is a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Bosnia and Herzegovina is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID), also known as the Washington Convention.

Investor-State Dispute Settlement

Over the last decade, there have been two cases of legal disputes involving U.S. investors and the local government. While efforts are being made to improve BiH’s commercial court system, its current capacity and practical inefficiencies limit timely resolution of commercial disputes.

International Commercial Arbitration and Foreign Courts

BiH has been a member of the International Center for the Settlement of Investment Disputes since 1997. BiH does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United StatesIt accepts international arbitration to settle private investment disputes if the parties outline this option in a contract.

The only domestic arbitration body in BiH, the Arbitration Court of the BiH Foreign Trade Chamber, is an inexperienced institution. It needs updated and modernized laws and regulations to comply with international norms and standards. The Arbitration Court would benefit from licensed and trained arbitrators. Domestic arbitration legislation is encompassed within the Civil Procedure Code and is not currently modeled on internationally-accepted regulations. As for the legislation, arbitration is generally poorly addressed. Namely, there are few provisions in the entities’ laws that regulate litigation procedures, which are the legal basis for parties in dispute to entrust the dispute to arbitration. There is no legislation that is modelled on internationally accepted regulations, such as the model law of the United Nations Commission on International Trade Law (UNICITRAL).

Bankruptcy Regulations

Both the Federation and Republika Srpska entities have Laws on Bankruptcy. However, bankruptcy proceedings are not resolved in a timely manner, and there is insufficient emphasis placed on companies’ rehabilitation and/or reorganization. The entities’ laws define the rights of creditors, equity shareholders, and holders of other financial contracts. Foreign contract holders enjoy the same rights as local contract holders. Bankruptcy is not criminalized. The U.S. Government provided recent training to judges on international bankruptcy principles.

6. Financial Sector

Capital Markets and Portfolio Investment

Capital markets remain underdeveloped in BiH. Both entities have created their own modern stock market infrastructure with separate stock exchanges in Sarajevo (SASE) and Banja Luka (BLSE), both of which started trading in 2002. The small size of the markets, lack of privatization, weak shareholder protection, and public mistrust of previous privatization programs has impeded the development of the capital market. During the global economic crisis, foreign investment dwindled and investors saw previous gains dissipate on both exchanges. Foreign investment has shown few signs of growth since 2008, shaped not only by the global financial crisis but also by BiH’s lack of political stability and slowdown of reforms.

Both the RS and Federation issued government securities for the first time during 2011, as part of their plans to raise capital in support of their budget deficits during this period of economic stress. Both entity governments continue to issue government securities in order to fill budget gaps. These securities are also available for secondary market trading on the stock exchanges.

In February 2018, Moody’s affirmed BiH a B3 credit rating with a stable outlook, forecasting the Bosnian economy will expand and GDP will grow 3.7 percent in 2018. Moody’s concluded BiH’s rating is constrained by challenges related to government effectiveness, a wide external deficit, and high unemployment. The challenging political environment has hindered progress on the EU’s Reform Agenda. According to Moody’s, the rating could increase with structural, institution-strengthening reforms, streamlined policymaking processes, and compliance with the current IMF agreement to ensure government debt sustainability. By contrast, downward rating pressures could occur if the country were to fail to comply with the ongoing IMF deal, which would increase uncertainty about the government’s ability to roll over the large IMF repayments due over the coming years.

Money and Banking System

The banking and financial system has been stable with the most significant investments coming from Austria. As of March 2018, there are 23 commercial banks operating in BiH: 15 with headquarters in the Federation and 8 in the Republika Srpska. Twenty two commercial banks are members of a deposit insurance program, which provides for deposit insurance of KM 50,000 (USD 28,000). In 2015, two commercial banks in the RS, Bobar Banka (Bijeljina) and Banka Srpske (Banja Luka) collapsed, and both are in bankruptcy proceedings. The banking sector is divided between the two entities with entity Banking Agencies responsible for banking supervision. The BiH Central Bank defines and controls the implementation of monetary policy (via its currency board) and supports and maintains payment and settlement systems. It also coordinates the activities of the entity Banking Agencies, which are in charge of bank licensing and supervision. Reforms of the banking sector, mandated by the IMF and performed in conjunction with the IMF and World Bank, are in progress.

BiH passed a state-level framework law in 2010 mandating the use of international accounting standards, and both entities passed legislation that eliminated differences in standards between the entities and Brcko District. All governments have implemented accounting practices that are fully in line with international norms.

Foreign Exchange and Remittances

Foreign Exchange

The Law on Foreign Direct Investment guarantees the immediate right to transfer and repatriate profits and remittances. Local and foreign companies may hold accounts in one or more banks authorized to initiate or receive payments in foreign currency. The implementing laws in both entities include transfer and repatriation rights. The Central Bank’s adoption of a currency board in 1997 guarantees the local currency, the convertible mark or KM (aka BAM), is fully convertible to the euro with a fixed exchange rate of KM 1.95583 = EUR 1.00.

Remittance Policies

BiH has no remittance policy, although remittances are generally high due to a large diaspora. Remittances are estimated to range up to 15 percent of total GDP. Based on the two entities’ Laws on Foreign Currency Exchange, all payments in the country must be in national currency.

Sovereign Wealth Funds

BiH does not have a government-affiliated Sovereign Wealth Fund.

Botswana

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The GOB publicly emphasizes the importance of attracting foreign direct investment (FDI). It is currently drafting an investment facilitation law, as recommended by the 2014 Organization for Economic Cooperation and Development (OECD) investment review. United Nations Conference on Trade and Development (UNCTAD) is providing technical assistance in support of the legislation. The GOB has launched initiatives to promote economic activity and foreign investment in specific areas, including the establishment of hubs to promote economic growth in the agriculture, diamond, education, health and transportation sectors. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure. Economists have also noted Botswana’s considerable potential in the mining, mineral processing, energy, cattle, tourism, and financial services sectors. BITC, the GOB’s investment and trade promotion authority, assists foreign investors with projects that will diversify Botswana’s economy away from diamond mining, create employment, and transfer skills to Botswana citizens.

Limits on Foreign Control and Right to Private Ownership and Establishment

Botswana’s 2003 Trade Act reserves licenses for 35 sectors for citizens, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excludes chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying. The law allows foreigners to participate in these sectors as minority joint venture partners in medium-sized businesses. Foreigners can hold the majority share if they obtain written approval from the trade minister.

The Ministry of Investment, Trade and Industry (MITI), which administers the citizen participation initiative, has taken an expansive interpretation of the term chain stores, so that it encompasses any store with more than one outlet. This broad interpretation has resulted in the need to apply exemptions to certain supermarkets, simple specialty operations, and general trading stores. These exceptions were generally granted prior to 2015 and many large general merchandise markets, restaurants, and grocery networks are owned by foreigners as a result. Since 2015, the GOB has denied some exception requests, but reports they have approved some based on localization agreements directly negotiated between the ministry and the applying company. These agreements reportedly include commitments to purchase supplies locally and capacity building for local workers and industry.

Other Investment Policy Reviews

In December of 2014, the OECD released an Investment Policy Review on Botswana: http://www.oecd-ilibrary.org/finance-and-investment/oecd-investment-policy-reviews-botswana-2014_9789264203365-en .

Botswana has been a World Trade Organization (WTO) member since 1995. As a member of the Southern African Customs Union, the WTO last conducted a trade policy review in 2009: https://www.wto.org/english/tratop_e/tpr_e/tp322_e.htm .

Business Facilitation

To operate a business in Botswana, business owners need to register a company with the GOB’s CIPA. The registration forms can be downloaded online from the CIPA website: http://www.cipa.co.bw/forms-fees?qt-display_cipa_forms=2. According to CIPA the company registration process takes about 14 days, and it takes approximately 48 days to complete additional required registrations such as tax registrations, opening bank accounts, and obtaining necessary licenses and permits. The World Bank ranked Botswana 153 out of 190 for ease of starting a business. CIPA announced in April 2018 that in conjunction with a New Zealand company, a new online registration system will be put in place to cut down company registration from 14 days to one.

BITC, the GOB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors to set up a business and find a location for operation. BITC’s ability to streamline procedures varies based on GOB entity and bureaucratic requirements. Its website is: www.bitc.co.bw . BITC’s criteria for support for investment projects is whether the project will diversify the economy away from dependence on diamond mining, and whether it will create jobs for and transfer skills to Botswana citizens.

Botswana has a number of incentives and preferences for both citizen-owned and locally-based companies. Foreign-owned companies can benefit from local procurement preferences, which are usually required for government tenders. MITI instituted a program in 2015 to give locally-based small companies a 15 percent preferential price margin in GOB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a 5 percent margin. Under this policy, MITI defines large companies as having less than BWP 5 million in annual turnover reflected in their financial statements, medium companies with BWP 5,000,001 to BWP 19,999,999 in turnover, and large companies with BWP 20 million or more. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range consultancy services.

For Companies Act registration purposes, enterprises are classified as follows: Micro Enterprises — less than six employees including owner and annual turnover of up to BWP 60,000; Small Enterprises — less than 25 employees and annual revenue between BWP 60,000 and BWP 1,500,000; Medium Enterprises — less than 100 employees and an annual revenue between BWP 1,500,000 and BWP 5,000,000; Large Enterprises —more than 100 employees and an annual revenue between BWP 5,000,000 or more. This classification is used for the purposes of permitting foreigner participation as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

Outward Investment

The GOB neither promotes nor restricts outward investment.

3. Legal Regime

Transparency of the Regulatory System

Bureaucratic procedures necessary to start and maintain a business tend to be open, though slow, and regulatory procedures can be cumbersome to navigate. Foreign investor complaints generally focus on the inefficiency and/or unresponsiveness of mid-level and low-level bureaucrats in government. The government has introduced a Performance Management System to improve the service and accountability of government employees. Unfair business practices or conduct can be reported to the Competition Authority, which seeks to level the playing field for all business operators and foster a conducive environment for business. Bills in Botswana, including investment laws, pass through a public consultation process and are made available for public comment. Bills are also debated in Parliament whose sessions are open to the public.

The Companies Act of 2004 requires all companies registered in Botswana to prepare annual Financial Statements on the basis of generally accepted accounting principles. It further requires that every public company including non-exempt private companies, prepare their Financial Statement in accordance with the International Financial Reporting Standards.

The Public Procurement and Asset Disposal Board (PPADB) oversees all government tenders. Prospective government contractors are required to register with the PPADB. The PPADB maintains a process by which tender decisions can be challenged, and a bidder can also challenge a tender procedure in the courts. The PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors.

The PPADB Act calls for preferential procurement of citizen-owned contractors for works, service and supplies, as well as specific, disadvantaged women’s communities, though it states that such preferences must be time-bound, phased in and out as necessary, and consistent with the country’s external obligations and its “market-oriented, macroeconomic framework.” When a procuring entity wishes to reserve a tender for citizen-only participation, it is required to publish a notice to that effect either in the bid document or the pre-qualification notice.

Health and safety laws, embodied in the Factories Act of 1973, provide basic protection for workers from unsafe working conditions. Minimum working conditions required on work premises include cleanliness of the premises, adequate ventilation and sanitation, sufficient lighting and the provision of safety precautions. Health inspectors and the Botswana Bureau of Standards carry out periodic checks at both new and operating factories.

International Regulatory Considerations

Botswana is a member of SACU and SADC. Neither have authority over member state national regulatory systems. Botswana is a member of the WTO and notifies all draft technical regulations to the WTO’s Technical Barriers to Trade (TBT) Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The local Constitution provides for an independent judiciary system. The legal system of Botswana is based on Roman-Dutch law as influenced by English common law. This type of system cohabits with legislation, judicial decisions, and local customary law. The courts enforce commercial contracts, and the judicial system is widely regarded as being fair, though high profile cases challenging the Executive’s role in judicial appointments, and the suspension of four high court judges in September 2015 (suspension lifted in March 2017) have generated speculation judicial independence has eroded. Both foreign and domestic investors have equal access to the judicial system. Botswana does not have a dedicated commercial court. The Industrial Court set up by the Trade Dispute Act of 2004 primarily addresses labor matters.

The GOB is planning to create a corps of commercially specialized judges within the civil court system. Under the new system, commercial cases will be overseen by these commercial judges in order to expedite handling and ensure relevant expertise.

Some U.S. litigants have reported that the time taken to obtain and enforce a judgment in a commercial dispute is unreasonably long. The turnaround time for civil cases is approximately two years. In an effort to create more efficient adjudications, the government has established land tribunal, industrial, small claims and corruption courts. During the past several years, some dockets have improved, but progress has been uneven.

Local laws are accessible through the Botswana Attorney General’s Office website: http://www.elaws.gov.bw/ . It can take up to 24 months for a law, once passed, to appear on the website.

Laws and Regulations on Foreign Direct Investment

Under Botswana’s Company Act, foreigners who wish to operate a business are required to register as well as obtain the relevant licenses and permits as prescribed by the Trade Act of 2008.

Licenses are required for a wide spectrum of businesses, including banking, non-bank financial services, transportation, medical services, mining, energy provision, and alcohol sales. Although amendments to the Trade Act have eliminated the catch-all miscellaneous business license category, investors have reported on local authorities insisting a business apply for a license even when it does not fall within the established categories. In addition, some businesses have observed the enforcement of licenses, as well as the time taken for inspections to comply with licensing requirements, varies widely across local government authorities.

Competition and Anti-Trust Laws

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in the business environment. Under the Competition Act, the Competition Authority is now monitoring mergers and acquisitions. During the year 2016/2017 the Authority dealt with a number of cases to address the non-competitive business conduct and these included bid rigging cases. The Competition Authority is empowered to reject mergers when they are deemed not to be in the public’s best interest. It has interpreted this ability to mean that it can prohibit mergers when the end result is the concentration of a majority of shares in the hands of foreign investors.

Expropriation and Compensation

Section 8 of the country’s Constitution prohibits the nationalization of private property. The GOB has never pursued a policy of forced nationalization and is highly unlikely to adopt one. The Acquisition of Property Act provides a process for any expropriation, including parameters to determine market value and receive compensation. The 2007 Amendment to the Electricity Supply Act allows the GOB to revoke an Independent Power Producer’s license and confiscate the operations with compensation for public interest purposes.

Dispute Settlement

ICSID Convention and New York Convention

It has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). It is also a member state to the International Centre for the Settlement of Investment Disputes (ICSID convention), and the Multilateral Investment Guarantee Agency (MIGA).

Investor-State Dispute Settlement

There are no known investment disputes involving U.S. persons. Botswana accepts international arbitration to settle investment disputes. Judgments by foreign courts recognized by the GOB are enforceable under the local courts where the appropriate bilateral agreements between the countries exist.

International Commercial Arbitration and Foreign Courts

There are no known complaints about transparency or discrimination by local courts in Botswana.

Bankruptcy Regulations

Botswana’s commercial and bankruptcy laws are comprehensive. Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings to those in the United States.

6. Financial Sector

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors. It also embraces the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill existing gaps where finance is not commercially available. There are nine commercial banks, a merchant bank, an offshore bank, a statutory deposit-taking institution, and a credit union operating in Botswana. All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana (Source: Bank of Botswana). A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The central bank, the Bank of Botswana, acts as banker and financial advisor to the government and is responsible for the management of the country’s foreign exchange reserves, the administration of monetary and exchange rate policies, and the regulation and supervision of financial institutions in the country. Monetary policy in Botswana is widely regarded as prudent and the government has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of 3 to 6 percent.

Banks may lend to non-resident controlled companies without seeking approval from the Bank of Botswana. Foreign investors usually enjoy better access to credit than local firms do. In July 2014, USAID’s Development Credit Authority, in collaboration with the Barclays Bank of Botswana, implemented a program to allow small- and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the current economy.

As of the end of 2017, there were 24 companies on the Domestic Board and 11 companies on the Foreign Equities Board. In addition, four exchange traded funds were listed on the exchange. The total market capitalization for listed companies as of 2016 was USD 43.74 billion though one company constitutes the majority of that figure, Anglo-American Plc, which has a market capitalization of some USD 35.9 billion (Source: Botswana Stock Exchange). The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility. Laws prohibiting insider trading and securities fraud are still under development.

The government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and companies incorporated in Botswana to open foreign currency accounts in specified currencies. The designated currencies are the U.S. Dollar, Pound Sterling, Euro and South African Rand. There are no known practices by private firms to restrict foreign investment participation or control in domestic enterprises. Private firms are not permitted to adopt articles of incorporation or association which limit or prohibit foreign investment, participation or control.

In general, Botswana exercises careful control over credit expansion, the Pula exchange rate, interest rates, and foreign and domestic borrowing. Banking legislation is largely in line with industry norms for regulation, supervision, and payments, and its anti-money laundering and combating the financing of terrorism regime is improving (see section two).

The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector. It extends know-your-customer practices to non-bank financial institutions, and is intended to help deter money laundering and terrorist financing. NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions. Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose, and other details prior to processing funds transfer requests or loan applications. The finance ministry monitors data collected on the forms for statistical information on capital flows, but the form does not require government approval prior to the processing of a transaction and does not delay capital transfers.

To encourage portfolio investment, develop domestic capital markets, and diversify investment instruments, non-residents are able to trade in and issue Botswana Pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE). Botswana’s Letlole Saving Certificate (equivalent to a U.S. Treasury bond) can be purchased only by Botswana citizens. Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry, but they are required to declare to customs at the port of departure any cash amount in excess of BWP 10,000 (USD 1,200). There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana. Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand. Businesses and other bodies incorporated or registered domestically may open accounts without prior approval from the Bank of Botswana. The government also permits the issuance of foreign currency denominated loans.

Upon disinvestment by a non-resident, the non-resident is allowed immediate repatriation of all proceeds including profits, rents, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies comprised of the South African Rand, whose weighting has been adjusted from 50 percent to 45 percent in January 2017, with the IMF’s Special Drawing Rights (consisting of the U.S. dollar, the Euro, British pound, Japanese yen, and the newly added Chinese Renminbi) comprising the remaining 55 percent. The upward rate of crawl was also reduced from 0.38 percent to 0.26 percent (Source: Bank of Botswana). Under the regular five year review of the composition of the SDR, the IMF added the Chinese Renminbi to the pool. The Pula continues to be heavily influenced by movements of the South African Rand against the U.S. Dollar. There is no difficulty in obtaining foreign exchange. Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund, with an estimated value of some USD 5.06 billion as of 2016, was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues (Source: Bank of Botswana). The Pula Fund is wholly invested in foreign currency -denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms. All realized market and currency gains or losses are reported in the Bank of Botswana’s income statement. Botswana is among the founding members of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008. More information is available at: http://www.bankofbotswana.bw/assets/uploaded/BOTSWANA%20PULA%20FUND%20-%20SANTIAGO%20PRINCIPLES%20(2).pdf .

Brazil

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Brazil was the world’s seventh largest destination for Foreign Direct Investment (FDI) in 2016, with inflows of USD 58.7 billion, according to UNCTAD. The GOB actively encourages FDI – particularly in the automobile, renewable energy, life sciences, oil and gas, and transportation infrastructure sectors – to introduce greater innovation into Brazil’s economy and to generate economic growth. GOB investment incentives include tax exemptions and low-cost financing with no distinction made between domestic and foreign investors. Foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, insurance, and air transport sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

A 1995 constitutional amendment (EC 6/1995) eliminated distinctions between foreign and local capital, ending favorable treatment (e.g. tax incentives, preference for winning bids) for companies using only local capital. However, constitutional law restricts foreign investment in the health (Law 13097/2015), mass media (Law 10610/2002), telecommunications (Law 12485/2011), aerospace (Law 7565/1986 and Decree 6834/2009, updated by Law 12970/2014, Law 13133/2015, and Law 13319/2016), rural property (Law 5709/