Transparency of the Regulatory System

On the 2018 Global Innovations Index, the Dominican Republic ranks 104 out of 127 for regulatory environment and 73 out of 127 for regulatory quality.  The World Economic Forum 2018 Global Competitiveness Report ranked the Dominican Republic 95 out of 140 countries in efficiency of the legal framework in challenging regulations, and 99 out of 140 in burden of government regulations.

The World Bank Global Indicators of Regulatory Governance states that Dominican ministries and regulatory agencies do not develop forward regulatory plans.  In other words, they do not publish a list of anticipated regulatory changes or proposals intended for adoption or implementation within a specific timeframe.  Law 200-04 requires regulatory agencies to give notice of proposed regulations in public consultations and mandates publication of the full text of draft regulations on a unified website: http://www.consultoria.gov.do/  .  Foreign investors, however, claim that these requirements are not always met in practice.  Moreover, many businesses note that the scope of the website content is not always adequate for investors or interested parties.  Some report that individual ministries sometimes upload proposed regulations to their websites or post them in national newspapers.  Ministries sometimes form working groups with key public and private sector stakeholders participating in the drafting of proposed regulations.   

Some Ministries and regulatory agencies solicit comments on proposed legislation from the public; however, public outreach is generally limited to stakeholders.  Comments are not publicly accessible. Some ministries and agencies prepare consolidated reports on the results of the consultation, which they distribute directly to interested stakeholders.  Ministries and agencies do not conduct impact assessments of regulations or ex post reviews. Affected parties cannot request reconsideration or appeal of adopted regulations. 

The Dominican Institute of Certified Public Accountants (ICPARD) is the country’s legally recognized professional accounting organization and has authority to establish accounting standards in accordance with Law 479-08, which also declares (as amended by Law 31-11) financial statements should be prepared in accordance with generally accepted accounting standards nationally and internationally.  The ICPARD and the country’s stock market regulator (Superintendencia del Mercado de Valores) require the use of International Financial Reporting Standards (IFRS) and IFRS for small and medium-sized entities (SMEs).

By law, the Office of Public Credit produces a quarterly report on the status of the non-financial public sector debt.  The Office of Public Credit presents a wide array of information and statistics on public debt bonds and projections on its website. www.creditopublico.gov.do/publicaciones/informes_trimestrales.htm  

 In addition to the public debt addressed by the office of Public Credit, the Central Bank maintains on its balance sheet approximately USD 11 billion in “quasi-fiscal” debt. Added to other borrowing, it puts the Debt-to-GDP ratio near 53 percent, and the Debt Service Ratio near 30 percent.

International Regulatory Considerations

Since 2003, the Dominican Republic has presented 226 regular notifications to the WTO Committee on Technical Barriers to Trade (TBT).  In recent years, the Dominican Republic has frequently changed technical requirements (e.g., for steel rebar imports and sanitary registrations, among others) and has failed to notify these requirements under the WTO TBT agreement and CAFTA-DR.

Legal System and Judicial Independence

The World Economic Forum 2018 Global Competitiveness report ranked the Dominican Republic 125 out of 140 countries in judicial independence and 95 of 140 in the efficiency of the legal framework in settling disputes.  On the 2018 Global Innovations Index, the Dominican Republic ranked 78 out of 126 countries for rule of law.

The judicial branch is an independent branch of the Dominican government.  According to Article 69 of the Constitution, all persons, including foreigners, have the right to appear in court.  The basic concepts of the Dominican legal system and the forms of legal reasoning derive from French law. The five basic French Codes (Civil, Civil Procedure, Commerce, Penal, and Criminal Procedure) were translated into Spanish and passed as legislation in 1884.  Some of these codes have since been amended and parts have been replaced. Subsequent Dominican laws are not of French origin.

The country is divided into 12 Judicial Departments, each one headed by a Court of Appeals with jurisdiction over civil and criminal matters in 35 Judicial Districts.  Justices of the Peace handle small claims, certain traffic accidents, landlord-tenant disputes, and other matters. There are also specialized courts with jurisdiction over labor cases, disputes involving registered land, cases involving minors, and administrative matters.  The Supreme Court is the highest court, with jurisdiction to handle most appeals from the courts of appeal, and first instance jurisdiction in criminal matters involving certain high-level government officials. The Constitutional Tribunal rules on the constitutionality of laws, decrees, and treaties and decides cases involving constitutional questions.

Some investors complain of long wait times for a decision by the judiciary.  According to the World Bank’s Doing Business report, while Dominican law mandates overall time standards for the completion of key events in a civil case, these standards frequently are not met. The Civil Procedure Code dates from 1884, and there have been few modifications.  The resolution of a civil case normally takes two to four years, although some take longer. Some investors have complained that the local court system is unreliable, biased against them, and that special interests and powerful individuals are able to use the legal system in their favor.

U.S. firms indicate that corruption on all levels – business, government, and judicial – impedes their access to justice. Several large U.S. firms have been subjects of injunctions issued by lower courts on behalf of distributors with whom they are engaged in a contract dispute.  According to some reports, these disputes are often the result of the firm seeking to end the relationship in accordance with the contract, and the distributor uses the injunction as a way of obtaining a more beneficial settlement. Many companies have noted that these injunctions often disrupt distribution activities, with negative effects on sales.  In order to engage effectively in the Dominican market, many U.S. companies seek local partners that are well-connected and understand the local business environment.

Decree No. 610-07 placed the Directorate of Foreign Commerce (DICOEX) in charge of commercial dispute settlement, including disputes related to the Investment Chapter of CAFTA-DR.  The main laws governing commercial disputes are the Commercial Code; Law No. 479-08, the Commercial Societies Law; Law No. 3-02, concerning Business Registration; Commercial Arbitration Law No. 489-08; Law No. 141-15 concerning Restructuring and Liquidation of Business Entities; and Law No. 126-02, concerning e-Commerce and Digital Documents and Signatures.

Laws and Regulations on Foreign Direct Investment

The Export and Investment Center of the Dominican Republic (CEI-RD) aims to be the one-stop-shop for investment information, registration, and investor after-care services.  CEI-RD maintains a user-friendly website for guidance on the government’s priority sectors for inward investment and on the range of investment incentives (http://cei-rd.gob.do/  ).

Competition and Anti-Trust Laws

The National Commission for the Defense of Competition (Pro-Competencia) has the power to review transactions for competition related concerns.  Private sector contacts note, however, that strong public pressure is required for Pro-Competencia to take action.

Expropriation and Compensation

The Dominican constitution permits the government’s exercise of eminent domain; however, it also mandates fair market compensation in advance of the use of land taken.  Nevertheless, there are many outstanding disputes between U.S. investors and the Dominican government concerning unpaid government contracts or expropriated property and businesses.  Property claims make up the majority of cases. Most, but not all, expropriations have been used for infrastructure or commercial development. Many claims remain unresolved for years.

Investors and lenders have reported that they typically do not receive prompt payment of fair market value for their losses.  They have complained of difficulties in the subsequent enforcement even in cases in which the Dominican courts, including the Supreme Court, have ordered compensation or when the government has recognized a claim.  In other cases, some indicate that lengthy delays in compensation payments are blamed on errors committed by government-contracted property assessors, slow processes to correct land title errors, a lack of budgeted funds, and other technical problems.  There are also cases of regulatory action that investors say they could be argued to be indirect expropriation. For example, they note that government decrees mandating atypical setbacks from roads or other public infrastructure may deprive investors of the economic benefits of their investments.

Many companies report that the procedures to resolve expropriations lack transparency and, to a foreigner, may appear antiquated.  Few examples exist where government officials are held accountable for failing to pay a recognized claim or failing to pay in a timely manner.

Dispute Settlement

ICSID Convention and New York Convention

In 2000, the Dominican Republic signed the International Center for the Settlement of Investment Disputes (Washington Convention), however, the Dominican Congress did not ratify the agreement as required by the constitution.  In 2001, the Dominican Republic became a contracting state to the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The agreement entered into force by Congressional Resolution 178-01.

Investor-State Dispute Settlement

The Dominican Republic has entered into 12 bilateral investment treaties, most of which contain dispute resolution provisions that submit the parties to arbitration.  As a signatory to CAFTA-DR, the Dominican Republic is bound by the investment chapter of CAFTA-DR. There are currently three pending U.S. investor-state dispute cases filed against the Dominican Republic under CAFTA-DR.

The Embassy is aware of at least 28 U.S. investors who are involved in ongoing legal disputes with the Dominican government and parastatal firms involving payments, expropriations, contractual obligations, or regulatory obligations.  The investors range from large firms to private individuals and the disputes are at various levels of legal review.

International Commercial Arbitration and Foreign Courts

Law 489-08 on commercial arbitration governs the enforcement of arbitration awards, arbitral agreements, and arbitration proceedings in the Dominican Republic.  Per law 489-09, arbitration may be ad-hoc or institutional, meaning the parties may either agree on the rules of procedure applicable to their claim, or they may adopt the rules of a particular institution.  Fundamental aspects of the United Nations Commission on International Trade (UNCITRAL) model law are incorporated into Law 489-08. In addition, Law 181-09 created an institutional procedure for the Alternative Dispute Resolution Center of the Chamber of Commerce Santo Domingo (http://www.camarasantodomingo.do/  ).

Foreign arbitral awards are enforceable in the Dominican Republic in accordance with Law 489-09 and applicable treaties, including the New York Convention.  U.S. investors complain that the judicial process is slow and that domestic claimants with political connections have an advantage.

Bankruptcy Regulations

Law 141-15 provides the legal framework for bankruptcy.  It allows a debtor company to continue to operate for up to five years during reorganization proceedings by staying legal proceedings.  It also authorizes specialized bankruptcy courts; contemplates the appointment of conciliators, verifiers, experts, and employee representatives; allows the debtor to contract for new debt which will have priority status in relation to other secured and unsecured claims; stipulates civil and criminal sanctions for non-compliance; and permits the possibility of coordinating cross-border proceedings based on recommendations of the UNCITRAL Model Law of 1997.  In March 2019, a specialized bankruptcy court was established in Santo Domingo. The national juridical school is still training specialized bankruptcy judges.

The Dominican Republic scores lower than the regional average and comparator economies on resolving insolvency, according to the World Bank’s Doing Business Report.

The government does not have an official position or policy on responsible business conduct, including corporate social responsibility (CSR).  Although there is not a local culture of CSR, large foreign companies normally have active CSR programs, as do some of the larger local business groups.  While most local firms do not follow OECD principles regarding CSR, the firms that do are viewed favorably, especially when their CSR programs are effectively publicized.

The Dominican Constitution states “Everyone has the right to have quality goods and services, to objective, truthful and timely information about the content and characteristics of the products and services that they use and consume”  To that end, the national consumer protection agency, Pro Consumidor, offers consumer advocacy services.

The country joined the Extractive Industries Transparency Initiative (EITI) as candidate in 2016.  The government incorporates EITI standards into its mining transparency framework. In 2019, EITI is conducting a validation study of the Dominican Republic’s implementation of EITI standards.

The Dominican Republic has a legal framework that includes laws, regulations and criminal penalties to combat corruption.  Foreign investors, however, indicate that corruption and official impunity are endemic in the security forces, government, and private sector.  Many companies complain of the often ineffectiveness in enforcing existing laws. Some report that corruption and the need for reform are an openly and widely discussed public grievance.  The 2018 Transparency International Corruption Perception Index ranked the Dominican Republic 129th out of 180 countries assessed. The World Economic Forum’s 2018 Global Competitiveness report ranked the Dominican Republic as 113 of 140 countries for incidence of corruption.  U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act.

In December 2016, high-level public officials in the Dominican Republic were among those implicated in the far-reaching corruption scandal involving Brazilian construction giant Odebrecht.  In a plea agreement with the United States Department of Justice, Odebrecht admitted to paying more than USD 92 million in kickbacks to Dominican officials to secure public works contracts. U.S. companies say the government’s slow response to this scandal contributes to a culture of perceived impunity for high-level government officials, which fuels widespread acceptance and tolerance of corruption at all levels.

Civil society is engaged in anti-corruption campaigns. Several non-governmental organizations are particularly active in transparency and anti-corruption, notably the Foundation for Institutionalization and Justice (FINJUS), Citizen Participation (Participación Ciudadana), and the Dominican Alliance Against Corruption (ADOCCO).

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The Dominican Republic signed and ratified the UN Anticorruption Convention.  The Dominican Republic is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Contact for government agency responsible for combating corruption:

Procuraduría Especializada contra la Corrupción Administrativa (PEPCA)
Calle Hipólito Herrera Billini esq. Calle Juan B. Pérez
Centro de los Heroes, Santo Domingo, República Dominicana
Telephone: (809) 533-3522
Fax: (809) 533-4098
Email: info@pepca.pgr.gob.do

Government service for filing complaints and denunciations:

Linea 311
Phone: 311 (from inside the country)
Website: http://www.311.gob.do/ 

Contact for “watchdog” organization that monitors corruption:

Participación Ciudadana
Phone: 809 685 6200
Fax: 809 685 6631
Email: info@pciudadana.org

There is no recent history of widespread, politically motivated violence.  In 2017, there were multiple, mostly-peaceful protests throughout the country over corruption, access to identity documents for Dominicans of Haitian descent, and labor disputes.  There are no examples of significant politically motivated damage to projects or installations in the last 10 years.

In polling, Dominicans consistently cite crime and violence as among the largest challenges affecting daily life.  The World Economic Forum 2018 Global Competitiveness report ranked the Dominican Republic 123 out of 140 countries in overall security imposing costs on business and 100 of 140 in terms of organized crime imposing costs on businesses.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Data not available (country not reported on IMF/CDIS website)

Table 4: Sources of Portfolio Investment

Data not available (country not reported on IMF/CDIS website)