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 designated 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 and territory investment promotion agencies also support international investment at the state level and in key sectors.

Within Australia, foreign and domestic private entities may establish and own business enterprises and may 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 11 million) are subject to screening. This threshold applies 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 the Australia-United States Free Trade Agreement (AUSFTA). The current threshold is AUD 1.25 billion (USD 925 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment.

The Foreign Investment Review Board (FIRB), which advises Australia’s Treasurer, may impose conditions when approving foreign investments. These conditions can be diverse and may include: retention of a minimum proportion of Australian directors; certain requirements on business activities, such as the requirement not to divest certain assets; and certain taxation requirements. Such conditions are in keeping with Australia’s policy of ensuring foreign investments are in the national interest.

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. The WTO reviewed Australia’s trade policies and practices in 2019, and the final report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp496_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. The 2021 Benchmark Report can be found at: http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report .

Australia’s private sector frequently provides policy recommendations to the government, including as part of annual federal budget reviews and ad hoc policy reviews. In 2021 the American Chamber of Commerce in Australia published a report titled “The Opportunity is Now: Attracting U.S. Investors to Australia,” which provides a range of recommendations to government relating to Australia’s investment screening and general investment environment. The report is available via the following link: https://www.pwc.com.au/amcham-pwc-opportunity-is-now.html

Business registration in Australia is relatively straightforward and is facilitated through a number of government websites. The government’s business.gov.au website 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, ASIC’s website provides information and guides on starting and managing a business or company in the country.

In registering a business, individuals and entities are required to register as a company with 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 two days, and Australia ranks 7th globally on this indicator.

Australia generally looks positively towards outward investment as a way to grow its economy. There are no restrictions on investing abroad. Austrade, Export Finance Australia (EFA), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist. The United States is the top destination, by far, for Australian investment overseas.

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. Details of the Australian government’s approach to regulation and regulatory impact analysis can be found on the Department of Prime Minister and Cabinet’s website: https://www.pmc.gov.au/regulation 

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 industry can demonstrate that the size of the risks are manageable and that there are mechanisms for 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 of regulations 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. In 2019, the Australian Government established a Deregulation Taskforce within its Treasury Department, stating its goal was to “drive improvements to the design, administration and effectiveness of the stock of government regulation to ensure it is fit for purpose.” The taskforce’s work is ongoing.

Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board (AASB), 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.

Australian government financing arrangements are transparent and well governed. Legislation governing the type of financial arrangements the government and its agencies may enter into is publicly available and adhered to. Updates on the Government’s financial position are regularly posted on the Department of Finance and Treasury websites. Issuance of government debt is managed by the Australian Office of Financial Management, which holds regular tenders for the sale of government debt and the outcomes of these tenders are publicly available. The Australian Government also publishes and adheres to strict procurement guidelines. Australia formally joined the WTO Agreement on Government Procurement in 2019.

Environmental Social Governance (ESG) reporting is not currently mandated for companies in Australia. However, companies are required to disclose any information that shareholders may deem relevant in assessing the performance of value of the company and this may include ESG components. Companies are also increasingly disclosing ESG aspects of their operations in response to shareholder demands and in order to secure an advantage over competitors. Further, financial services companies are required to disclose their exposure to climate risk as part of their standard risk disclosures (see further detail here: https://asic.gov.au/about-asic/news-centre/speeches/corporate-governance-update-climate-change-risk-and-disclosure/ )

Australia is a member of the WTO, G20, OECD, and the Asia-Pacific Economic Cooperation (APEC), and became the first Association of Southeast Nations (ASEAN) Dialogue Partner 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. Details of Australia’s involvement in these international organizations can be found on the Department of Foreign Affairs and Trade’s website: https://www.dfat.gov.au/trade/organisations/Pages/wto-g20-oecd-apec 

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. Australia’s judicial system is fully independent and separate from the executive branch of government.

Information regarding investing in Australia can be found in Austrade’s “Guide to Investing” 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.

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) is a non-statutory body, comprising independent board members advised by a division within the Treasury Department, established to advise the Treasurer 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. In January 2021 new legislation, the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, took effect. This legislation tightened Australia’s investment screening rules by introducing the concept of a “national security business” and “national security land,” the acquisition of which trigger a FIRB review. Further details on national security considerations, including the definitions of national security businesses, are available on the FIRB website: https://firb.gov.au/guidance-resources/guidance-notes/gn8.

The Australian Government applies a “national interest” consideration in reviewing foreign investment applications. “National interest” covers a broader set of considerations than national security alone and may include tax or competition implications of an investment. Further information on foreign investment screening, including screening thresholds for certain sectors and countries, can be found at FIRB’s website: https://firb.gov.au/ . Under the AUSFTA agreement, all U.S. greenfield investments are exempt from FIRB screening.

The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 and a range of additional legislation, promotes competition, and 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. The ACCC also engages in consumer protection enforcement and has, in recent years, been given expanded responsibilities to monitor energy assets, the national gas market, and digital industries.

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.

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, 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.

The Australian parliament passed the Corporations Amendment (Corporation Insolvency Reforms) Act 2020 in December 2020. The legislation is a response to the economic impacts of the COVID-19 pandemic and is designed to both assist viable businesses remain solvent and simplify the liquidation process for insolvent businesses. The new insolvency process under this legislation came into effect in January 2021.

Australia ranks 20th globally on the World Bank’s Doing Business Report “resolving insolvency” measure.

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment. Types of assistance available vary by location, industry, and the nature of the business activity. Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries. State and territory governments similarly offer a suite of financial and non-financial incentives.

The Commonwealth Government also provides incentives for companies engaging in research and development (R&D) and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year. R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by government’s AusIndustry program and the Australian Taxation Office (ATO). The Australian Government typically does not offer guarantees on, or jointly finance projects with, foreign investors.

The Australian government announced a new USD 1.1 billion Modern Manufacturing Strategy in 2020 in response to the COVID-19 pandemic. The Strategy is primarily grants-based and provides funding to businesses to commercialize ideas and scale-up production in six target industries: resources technology and critical minerals processing; food and beverage; medical products; clean energy; defense; and space industry. Further details of the Strategy can be found on the Department of Industry, Science, Energy and Resources’ website:

https://www.industry.gov.au/data-and-publications/make-it-happen-the-australian-governments-modern-manufacturing-strategy/our-modern-manufacturing-strategy 

The Australian government provides a range of incentives for business investments in clean energy technologies, administered by the Clean Energy Regulator within the Department of Industry, Science, Energy and Resources and funded through the Emission Reduction Fund. Details on the Fund and how to apply are available on the Department’s website via the following link: https://www.industry.gov.au/policies-and-initiatives/emissions-reduction-fund . The government also encourages voluntary investment in emission reduction, including through certifying carbon reductions resulting from business investments as part of the Climate Active initiative: https://www.industry.gov.au/regulations-and-standards/climate-active.

Australia does not have any free trade zones or free ports.

As a general rule, foreign firms establishing themselves in Australia are not subject to local employment or forced localization requirements, performance requirements and incentives, including to senior management and board of directors. Proprietary companies must have at least one director resident in Australia, while public companies are required to have a minimum of two resident directors. See Section 12 below for further information on rules pertaining to the hiring of foreign labor.

Under the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2015, telecommunications service providers are required to: retain and secure, for two years, telecommunications data (not including content); protect retained data through encryption; and prevent unauthorized interference and access. The Bill limits the range of agencies allowed to access telecommunications data and stored communications, and establishes a “journalist information warrants regime.” Australia’s Personally Controlled Electronic Health Records Act prohibits the transfer of health data out of Australia in some situations.

Australia has a strong framework for the protection of intellectual property (IP), including software source code. Foreign providers are not required to provide source code to the government in exchange for operating in Australia. In February 2021, the Australian parliament passed the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021, which among other things requires designated digital platforms to notify media companies of significant changes to their algorithms with at least 14-days’ notice of such changes. However, technology companies are not required to provide source code for algorithms, or any other such IP, to the government for any purpose.

Companies are generally not restricted in terms of how they store or transmit data within their operations. The exception to this is the Personally Controlled Electronic Health Records Act (2012) which does require that certain personal health information is stored in Australia. The Privacy Act (1988) and associated legislation place restrictions on the communication of personal information between and within entities. The requirements placed on international companies, and the transmission of data outside of Australia, are not treated differently under this legislation. The Australian Attorney-General’s Department is the responsible agency for most legislation relating to data and storage requirements.

Strong legal frameworks protect property rights in Australia and operate to police corruption. Mortgages are commercially available, and foreigners are allowed to buy real property subject to certain registration and approval requirements. Property lending may be securitized, and Australia has one of the most highly developed securitization sectors in the world. Beyond the private sector property market, securitization products are being developed to assist local and state government financing. Australia has no legislation specifically relating to securitization, although issuers are governed by a range of other financial sector legislation and disclosure requirements.

Australia generally provides strong intellectual property rights (IPR) protection and enforcement through legislation that, among other things, criminalizes copyright piracy and trademark counterfeiting. Australia is not listed in USTR’s Special 301 report or on USTR’s Notorious Markets report.

Enforcement of counterfeit goods is overseen by the Australian Department of Home Affairs through the Notice of Objection Scheme, which allows the Australian Border Force to seize goods suspected of being counterfeit. Penalties for sale or importation of counterfeit goods include fines and up to five years imprisonment.

IP Australia is the responsible agency for administering Australia’s responsibilities and treaties under the World Intellectual Property Organization (WIPO). Australia is a member of a range of international treaties developed through WIPO. Australia does not have specific legislation relating to trade secrets, however common law governs information protected through such means as confidentiality agreements or other means of illegally obtaining confidential or proprietary information.

Australia was an active participant in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations and signed ACTA in October 2011. It has not yet ratified the agreement. ACTA would establish an international framework to assist Parties in their efforts to effectively combat the infringement of intellectual property rights, in particular the proliferation of counterfeiting and piracy.

Under the AUSFTA, Australia must notify the holder of a pharmaceutical patent of a request for marketing approval by a third party for a product claimed by that patent. U.S. and Australian pharmaceutical companies have raised concerns that unnecessary delays in this notification process restrict their options for action against third parties that would infringe their patents if granted marketing approval by the Australian Therapeutic Goods Administration (TGA). In March 2020 the government recommended changes to the notification process whereby generic product owners must notify the patent holder of an intent to market a new product at the point they lodge an application for evaluation with the TGA. These changes have not been legislated at the time of writing.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

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 savings. Australian capital markets are generally efficient and 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 face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity, and smaller firms are more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, driving many Australian companies to issue debt instruments in the U.S. market. Foreign investors are able to obtain credit from domestic institutions on market terms. Australia’s stock market is the Australian Securities Exchange (ASX).

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 Australian banks at the end of 2020 was USD4.2 trillion and the sector has delivered an annual average return on equity of around 10 percent (only falling to six percent in 2020 during the COVID-19 pandemic, before rebounding to 11 percent in 2021).

According to Australia’s central bank, the Reserve Bank of Australia (RBA), the ratio of non-performing assets to total loans was approximately one percent at the end of 2021, having remained at around that level for the last five years after falling from highs of nearly two 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. The RBA is also responsible for monitoring and regulating payments systems in Australia.

Further details on the size and performance of Australia’s banking sector are available on the websites of the Australian Prudential Regulatory Authority (APRA) and the RBA:
https://www.apra.gov.au/statistics 
https://www.rba.gov.au/chart-pack/banking-indicators.html 

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.

Australia’s main 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 Governments to discharge unfunded superannuation (pension) liabilities. As a founding member of the International Forum of Sovereign Wealth Funds (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”).

The Future Fund’s investment mandate is to achieve a long-term return of at least inflation plus 4-5 percent per annum. As of December 2021, the Fund’s portfolio consists of: 23 percent global equities, 8 percent Australian equities, 25 percent private equity (including 8 percent in infrastructure and 7 percent in property), and the remaining 37 percent in debt, cash, and alternative investments.

In addition to the Future Fund, the Australian Government manages five other specific-purpose funds: the DisabilityCare Australia Fund; the Medical Research Future Fund; the Emergency Response Fund; the Future Drought Fund; and the Aboriginal and Torres Strait Islander Land and Sea Future Fund. In total, these five funds have assets of AUD 50 billion (USD 37 billion), while the main Future Fund has assets of AUD 204 billion (USD 150 billion) as of December 31, 2021.

Further details of these funds are available at: https://www.futurefund.gov.au/ 

In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is “government business enterprise” (GBE). According to the Department of Finance, there are nine GBEs: two corporate Commonwealth entities and seven Commonwealth companies. (See: https://www.finance.gov.au/resource-management/governance/gbe/ ) Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises.

Australia does not have a formal and explicit national privatization program. Individual state and territory governments may have their own privatization programs. Foreign investors are welcome to participate in any privatization programs subject to the rules and approvals governing foreign investment.

There is general business awareness and promotion of responsible business conduct (RBC) in Australia. The Commonwealth Government states that companies operating in Australia and Australian companies operating overseas are expected to act in accordance with the principles set out in the OECD Guidelines for Multinational Enterprises and to perform to the standards they suggest. In seeking to promote the OECD Guidelines, the Commonwealth Government maintains a National Contact Point (NCP), the current NCP being currently the General Manager of the Foreign Investment and Trade Policy Division at the Commonwealth Treasury, who is able to draw on expertise from other government agencies through an informal inter-governmental network. An NCP Web site links to the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” noting that the objective is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Commonwealth Government’s export credit agency, EFA, also promotes the OECD Guidelines as the key set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from adhering countries.

Australian companies have very few instances of human rights or labor rights abuses and domestic law prohibits such actions. In 2018 the Australian parliament passed the Modern Slavery Act, new legislation requiring large companies to assess risks of modern slavery in their supply chains and take action to limit these risks.

Australia began implementing the principles of the Extractive Industries Transparency Initiative (EITI) in 2016.

Australia has ratified the Montreux Document on Private Military and Security Companies, and was a founding member of the International Code of Conduct for Private Security Service Providers Association.

The Australian government announced a net-zero emissions target for 2050 in October 2021. Since 2015, the government has not revised its interim target of a 26-28 percent reduction in emissions from 2005 levels by 2030, which its own projections indicate Australia is likely to exceed. The opposition Labor Party has a 2030 target of a 43 percent reduction relative to 2005 levels.

Australia’s climate policies are set out on a sector-by-sector basis and Australia does not have an economy-wide carbon tax or emissions trading scheme. Companies considered to be large emitters are subject to the Safeguard Mechanism, a regulatory requirement that places caps on the emissions intensity of a company’s output. Companies may face penalties for exceeding their regulated emissions intensity level. Further details of the Safeguard Mechanism, along with the government’s other emissions reductions policies, are available on the Department of Industry, Science, Energy and Resources website at: https://www.industry.gov.au/policies-and-initiatives/australias-climate-change-strategies 

The Australian government has a strong emphasis on investing in clean energy technologies and has set out its technology priorities in its Technology Investment Roadmap. The Roadmap incentivizes research, investment and deployment of emissions reducing equipment through the Australian Renewable Energy Agency, which invests in new technologies in the early stage of development, and the Emissions Reduction Fund which provides funding to companies with eligible projects. Details on these programs are available through the link above.

Australia has a strong focus on emission reduction through improved land use management and has supported initiatives aimed at better measuring soil carbon. The Department of Agriculture, Water, and the Environment has also implemented an Agriculture Biodiversity Stewardship Package. This program allows farmers to receive payments not only for carbon abatement, but also now for delivering improvements in biodiversity on-farm.  The package also aims to create a trading platform to help farmers connect with buyers and kick-start private sector biodiversity markets.

Although Australia has a range of policies to achieve its emission reduction targets, it typically ranks low on various measure of climate and environmental sustainability. The MIT Green Future Index ranks Australia 36th out of 76 countries and 49th on the carbon emissions sub-index.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Australia maintains a comprehensive system of laws and regulations designed to counter corruption. In addition, the government procurement system is generally transparent and well regulated. Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, nor to exporting goods and services to Australia. Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels.

Australia is an active participant in international efforts to end the bribery of foreign officials. Legislation exists to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery. Legislation explicitly disallows tax deductions for bribes of foreign officials. At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department.

The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums. These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups. Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

The legislation covering bribery of foreign officials is the Criminal Code Act 1995. Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary, or required. The maximum penalty for an individual is 10 years imprisonment and/or a fine of AUD 2. million (approximately USD 1.6 million). For a corporate entity, the maximum penalty is the greatest of: 1) AUD 22.2 million (approximately USD 16.4 million); 2) three times the value of the benefits obtained; or 3) 10 percent of the previous 12-month turnover of the company concerned.

A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems. The Australian Commission for Law Enforcement Integrity (ACLEI) has the mandate to prevent, detect, and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture.

Various independent commissions exist at the state level to investigate instances of corruption. Details of these bodies are provided below.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Australia has signed and ratified the United Nations Convention against Corruption and is a signatory to the OECD Anti-Bribery Convention.

Resources to Report Corruption

Western Australia – Corruption and Crime Commission
86 St Georges Terrace
Perth, Western Australia
Tel. +61 8 9215 4888
https://www.ccc.wa.gov.au/ 

Queensland – Corruption and Crime Commission
Level 2, North Tower Green Square
515 St Pauls Terrace
Fortitude Valley, Queensland
Tel. +61 7 3360 6060
https://www.ccc.qld.gov.au/ 

Victoria – Independent Broad-based Anti-corruption Commission
Level 1, North Tower, 459 Collins Street
Melbourne, Victoria
Tel. +61 1300 735 135
https://ibac.vic.gov.au 

New South Wales – Independent Commission against Corruption
Level 7, 255 Elizabeth Street
Sydney NSW 2000
Tel. +61 2 8281 5999
https://www.icac.nsw.gov.au/ 

South Australia – Independent Commission against Corruption
Level 1, 55 Currie Street
Adelaide, South Australia
Tel. +61 8 8463 5173
https://icac.sa.gov.au 

Political protests (including rallies, demonstrations, marches, public conflicts between competing interests) form an integral, though generally minor, part of Australian cultural life. Such protests rarely degenerate into violence.

Australia’s unemployment rate peaked at 7.5 percent during the COVID-19 pandemic but had fallen to 4 percent by early 2022. Average weekly earnings for full-time workers in Australia were AUD 1,748 (approximately USD 1,290) as of November 2021. The minimum wage is set annually and is significantly higher than that of the United States, currently sitting at AUD 2033 (USD 15.00). Overall wage growth has been low in recent years, growing at approximately the rate of inflation.

The Australian Government and its state and territory counterparts are active in assessing and forecasting labor skills gaps across industries. Tertiary education is subsidized by both levels of governments, and these subsidies are based in part on an assessment of the skills needed by industry. These assessments also inform immigration policy through the various working visas and associated skilled occupation lists. Occupations on these lists are updated annually based on assessment of the skills most needed by industry.

Immigration has always been an important source for skilled labor in Australia. The Department of Home Affairs publishes an annual list of occupations with skill shortages to be used by potential applicants seeking to work in Australia. The visas available to applicants, and length of stay allowed for, differ by occupation. The main working visa is the Temporary Skills Shortage visa (subclass 482). Applicants must have a nominated occupation when they apply which is applicable to their circumstances, and applications are subject to local labor market testing rules. These rules preference the hiring of Australian labor over foreign workers so long as local workers can be found to fill the advertised job.

Most Australian workplaces are governed by a system created by the Fair Work Act 2009. Enterprise bargaining takes place through collective agreements made at an enterprise level covering terms and conditions of employment. Such agreements are widely used in Australia. A Fair Work Ombudsman assists employees, employers, contractors, and the community to understand and comply with the system. The Fair Work Act 2009 establishes a set of clear rules and obligations about how this process is to occur, including rules about bargaining, the content of enterprise agreements, and how an agreement is made and approved. Unfair dismissal laws also exist to protect workers who have been unfairly fired from a job. Australia is a founding member of the International Labour Organization (ILO) and has ratified 58 of the ILO’s conventions.

Chapter 18 of the AUSFTA agreement deals with labor market issues. The chapter sets out the responsibilities of each party, including the commitment of each country to uphold its obligations as a member of the ILO and the associated ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998).

* Source for Host Country Data: Australian Bureau of Statistics

Economic Counselor Doug Sonnek
U.S. Embassy Canberra
21 Moonah Place, Yarralumla, ACT+61 2 6214 5759
SonnekDE@state.gov 

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 limited restrictions on foreign investment. American investors have not complained of discriminatory laws against foreign investors. Austria’s investment screening law, which requires government approval of transactions leading to 10 percent or more foreign ownership in sensitive sectors, has resulted in an increase in the number of investments screened, from less than three per year, to 50 completed screenings from July 2020 to July 2021, the first full year law has been in effect. The majority of these screenings (31 in total) were for U.S.-based investments. Please see the “Laws and Regulations on Foreign Investment” section below for further details on the law and its applications.

The corporate tax rate, a 25 percent flat tax, is above the EU average. The government is planning to reduce it to 24 percent in 2023 and 23 percent in 2024. U.S. citizens and investors have occasionally reported that it is difficult to establish and maintain banking services since the U.S.-Austria 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 be aware of Austria’s lengthy environmental impact assessments in their investment decision-making. Some sectors also suffer from heavy regulation that may affect certain investments. For example, the requirement that over 50 percent of energy providers must be publicly owned places a potential cap on 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. The mining and transportation sectors are also heavily regulated.

Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations 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.

The Austrian Economic Chamber (WKO) and the American Chamber of Commerce in Austria (Amcham) are also good resources for foreign investors. Both conduct annual polls of their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems identified by investors.

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly established 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 regulated trade sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.

There are limited restrictions on foreign ownership of private businesses. Austria’s investment screening law, requires an investment screening process to review potential foreign acquisitions of 25 percent or more of a company essential to the country’s infrastructure, lowering the threshold to 10 percent for sensitive sectors (see the “Laws and Regulations on Foreign Investment” section below for further details). In April 2019, the EU Regulation on establishing a framework for the screening of foreign direct investments into the Union entered into force. It creates a cooperation mechanism through which EU countries and the European Commission will exchange information and raise concerns related to specific investments which could potentially threaten the security of EU countries.

The American Chamber of Commerce (AmCham) commented on Austria’s strengthened investment screening law following implementation in 2020, that the two-month screening process takes too long and places an undue administrative burden on companies. The AmCham advocated for expedited screenings for proposed investments with no clear threat to national security. Business interest groups, such as the Austrian Economic Chamber and the Federation of Austrian Industries also commented during the legislation’s draft and review process that the strengthened screening measures would impose an undue administrative burden on businesses, the definition of sectors requiring screening was too wide, and the updated legislation would reduce the attractiveness of Austria as an investment location.

Austria generally ranked in the top 30 countries in the world in the past World Bank “Ease of Doing Business” reports, but starting a business takes time. The average time to set up a company is 21 days, while the average time in OECD high income countries is 9.2 days.

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 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.

For sole proprietorships, it is possible under certain conditions to use an online registration process via government websites in German to either found or register a company: https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html, or www.gisa.gv.at/online-gewerbeanmeldung. It is advisable to seek information from ABA or the WKO before applying to register a firm.

The website of the ABA contains further details and contact information and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/.

The Austrian government encourages outward investment. Advantage Austria, the “Austrian Foreign Trade Service,” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates five offices in the United States (Washington D.C., New York, Atlanta, Los Angeles, and San Francisco). Overall, it has about 100 trade offices in 70 countries across the world, reflecting Austria’s strong export focus and the important role the WKO plays. (https://www.wko.at/service/aussenwirtschaft/aussenwirtschaftscenter.html#heading_aussenwirtschaftscenter) The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants for market access costs and provides “soft subsidies,” such as counseling, legal advice, and marketing support.

Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms. The government does not provide assistance in distinguishing between high- and low-quality investments, leaving this up to the market.

Federal ministries generally publish draft laws and regulations, including investment laws, for public comment prior to their adoption by Austria’s cabinet and/or Parliament. Relevant stakeholders such as the “Social Partners” (Economic Chamber, Agricultural Chamber, Labor Chamber, and Trade Union Association), the Federation of Industries, and research institutions are invited to provide comments and suggestions on draft laws and regulations, directly online, which may be taken into account before adoption of laws. These comments are publicly available. Austria’s nine provinces can also adopt laws relevant to investments; their review processes are generally less extensive, but local laws are less important for investments than federal laws. The judicial system is independent from the executive branch, helping ensure the government follows administrative processes. The government is required to follow administrative processes and its compliance is monitored by the courts, primarily the Court of Auditors. Individuals can file proceedings against the government in Austria’s courts, if the government did not act in accordance with the law. Similarly, the public prosecution service can file cases against the government.

Draft legislation by ministries (“Ministerialentwürfe”) 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 database, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx.

The effectiveness of regulations is not reviewed as a regular process, only on an as-needed basis. 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.

Public finances are transparent and easily accessible, through the Finance Ministry’s website, Austria’s Central Bank, and various economic research institutes. Overall, Austria has no legal restrictions, formally or informally, that discriminate against foreign investors.

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.

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 legislative instrument. The full text of each legislative act is available online for reference. All final Austrian laws can be accessed through a government database, 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 branch does not interfere in judicial matters.

The legal system provides an effective means for protecting property and contractual rights of nationals and foreigners. Sensitive cases must be reported to the Ministry of Justice, which 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 in the last instance, to the Supreme Court.

Austria has restrictions on investments in industries designated as critical infrastructure, technology, resources, and industries with access to sensitive information and involved in freedom and plurality of the media. The government must approve any foreign acquisition of a 25 percent or higher stake in any companies that generally fall within these areas. The threshold is 10 percent for sensitive sectors, defined as military goods and technology, operators of critical energy or digital infrastructure and water, system operators charged with guarding Austria’s data sovereignty and R&D in medicine and pharmaceutical products. Additional screenings are required when an investor in the above categories plans to increase the stake above the thresholds of 25 percent or 50 percent. The investment screening review period generally takes 2 months. The number of filed applications has increased significantly since the law was implemented, from three per year to 50 completed screenings in the first 12 months after the updated investment screening law went into effect (from July 2020 to July 2021). None of the completed screenings were rejected, and two were approved with amendments to safeguard domestic supply of the product/service in question.

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 may deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income.

The “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), allows federal funding of up to 25 percent of the total investment amount of a project to “modernize” a municipality. The Austrian Business Agency serves as a central contact point for companies looking to invest in Austria. It does not serve as a one-stop-shop but can help answer any questions potential investors may have (https://investinaustria.at/en/).

Austria’s Antitrust Act (ATA) is in line with European Union antitrust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states. The Austrian Antitrust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Antitrust Prosecutor (FAP) are responsible for administering antitrust laws. The FCA can conduct investigations and request information from firms. The FAP is subject to instructions issued by the Justice Ministry and can bring actions before Austria’s Cartel Court. Additionally, the Commission on Competition may issue expert opinions on competition policy and give recommendations on notified mergers. The most recent amendment to the ATA was in 2017. This amendment facilitated enforcing private damage claims, strengthened merger control, and enabled appeals against verdicts from the Cartel Court.

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 antitrust 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. Austrian courts have also held that shareholders owe a duty of loyalty to each other and must consider the interests of fellow shareholders in good faith.

According to the European Convention on Human Rights 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 based on 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. For example, in 2017-18, the government expropriated Hitler’s birth house in order to prevent it from becoming a place of pilgrimage for neo-Nazis, paying the former owner EUR 1.5 million (USD 1.8 million) in compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms. There is no indication that further expropriations will take place in the foreseeable future.

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings. Reorganization requires a restructuring plan and the debtor to be able to cover costs or advance some of the costs up to a maximum of EUR 4,000 (USD 4,720). The plan must offer creditors at least 20 percent of what is owed, payable within two years of the date the debtor’s obligation is determined. The plan must be approved by a majority of all creditors and a majority of creditors holding at least 50 percent of all claims.

If the restructuring plan is not accepted, a bankruptcy proceeding is begun. Bankruptcy proceedings take place in court upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributing proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person performed all his documentation and reporting obligations on time and 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.

Financial incentives and business subsidies provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants. Most incentives are targeted to investments that meet specified criteria, including job-creation and promotion of education, use of cutting-edge technology, improving regional infrastructure, strengthening SMEs, promoting research and development, supporting environmental protection, increasing renewable energy production, and promoting startups. Under these conditions, the EU ban on state aid would not apply.

Austria’s Wirtschaftsservice (AWS) is the governmental institution that provides most federal government financial incentives for businesses. Information on targeted investment incentives is available at https://www.aws.at/en/. More detailed information on investment incentives and promotion in English language is also available on the ABA website (see chapter 1) at http://investinaustria.at/en/.

The AWS also focuses on promoting investments, particularly for small and medium-sized companies (SMEs), providing guarantees of up to EUR 25 million (USD 29.5 million) over 5 to 10 years for investments in Austria. Companies can also profit from growing their already existing investments, resulting in a 10 to 15 percent additional grant for this expansion.

Various government agencies in Austria offer incentives for research and development (R&D) activities, including grants of up to 14 percent of investors’ total research expenditures. The incentives are also available for foreign-owned enterprises. The agencies providing incentives include: The Austrian Research Promotion Agency (FFG) (https://www.ffg.at/en); the Austrian Science Fund (FWF), which is the country’s central body for the promotion of basic research (https://www.fwf.ac.at/en/); and AWS (above).

Austria’s 2022 tax reform, as of January 2023, foresees a new 10-15 percent (eco-) investment tax allowance for purchasing new commodities or business assets that have a life span of at least four years and/or have an ecological impact on the business of the company (which the government will further define by ordinance before this aspect of the tax reform enters into force).

In 2022, Austria plans to fund investments in the life sciences sector with up to EUR 29 million (USD 34 million), particularly for production of pharmaceuticals such as penicillin.

A law to expand the production of renewable energy provides for investment subsidies and subsidies to sell renewable energy on the market for investors installing new wind, solar, biomass, and hydropower plants, which entered into force in February 2022. The subsidies are subject to installed capacities and environmental conditions.

Not applicable

If investors want to employ foreign workers from outside the EU in Austria, they need to apply for a work permit with the immigration authority in one of the Austrian provinces. The Austrian Labor Service (AMS) then certifies whether there is no comparable person in the pool of registered unemployed persons in Austria, which is a prerequisite for employing non-EU workers. This does not apply to senior management positions, researchers, highly qualified personnel, and a limited set of other categories.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty. Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points-based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills). This Red-White-Red card (RWR) model allows firms to react flexibly to rising demand for talent in different occupations. It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals. Applicants must have an offer of employment to apply for the RWR. Highly qualified individuals holding U.S. citizenship may apply locally in Austria or opt to find a potential employer from abroad and have the company apply in Austria on their behalf.

Austrian immigration law requires those applying for residency permits in some categories to take German language courses and exams. There is a specific visa category under the RWR model for independent key specialists and founders of start-up enterprises to support Austria’s push to expand its innovation economy.

A less bureaucratic alternative is the EU Blue Card, which entitles applicants to a fixed-term residency of 24 months, and employment is tied to a specific employer. However, there is a threshold of a gross annual income of at least one and a half times the average gross annual income for full-time employees (in 2021: at least EUR 66,563 (USD 78,544); annual salary plus special payments).

While there is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, EU and Austrian data protection stipulations apply. The EU General Data Protection Regulation (GDPR) as adopted by Austria in 2018, places restrictions on companies’ ability to store and use customer data. It also requires specific user consent for companies to send out promotional materials (previously, implied consent was sufficient). Transmission of customer or business-related data is therefore subject to EU GDPR regulations. Austria’s Data Protection Authority is in charge of enforcing all GDPR-related matters, which include GDPR rules on data storage.

In January 2022, the Austrian Data Protection Authority ruled that the website netdoktor.at violated EU GDPR rules for its use of Google Analytics. The Data Protection Authority found that using Google Analytics violated the GDPR in two key ways: 1) the transfer of personalized data to third countries that do not have stricter than or equal data protection rights as the EU is not allowed under the EU GDPR; and 2) users do not have the opportunity to willfully consent to the transfer. The data privacy organization noyb, which brought the case forward, filed over 100 similar cases across the EU. Similar rulings across EU countries are expected to follow over the course of the year.

The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to apply for tax incentives. There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in the production of goods or technology.

The Austrian legal system protects secured interests in property. For any real estate agreement to be effective, owners must register with the land registry. Mortgages and liens must also be registered. As a rule, property for sale must be unencumbered. In case of rededication of land, approval of the land transfer commission or the office of the state governor is required. The land registry is a reliable system for recording interests in property, and access to the registry is public.

Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land. Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized. Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization.

Austria has a strong legal structure to protect intellectual property rights, including patent and trademark laws, a law protecting industrial designs and models, and a copyright law. Austria is a party to the World Intellectual Property Organization (WIPO), the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and several international property conventions. Austria also participates in the Patent Prosecution Highway (PPH) program with the USPTO (started in 2014), which allows filing of streamlined applications for inventions determined to be patentable in other participating countries.

Austria’s Copyright Act conforms to EU directives on intellectual property rights. It grants authors exclusive rights to publish, distribute, copy, adapt, translate, and broadcast their work. The law also regulates copyrights of digital media (restrictions on private copies), works on the Internet, protection of computer programs, and related damage compensation. Infringement proceedings, however, can be time-consuming and costly. Austria implemented the EU Directive on Copyright in the Digital Single Market (2019/790) by adopting an amendment to the Austrian Copyright Act in December 2021, with the Austrian music and film industry lauding it as “modern, balanced, and taking into account the interests of the related business sector.”

Following a High Court decision from 2014, Austrian Internet providers must prevent access to illegal music and streaming platforms once they are made aware of a copyright violation. They must also block workaround websites from these platforms. In 2020 they registered 27,000 reports of illegal content.

Austria also has a law against trade in counterfeit articles in place (amended 2020, streamlining the customs authorities in charge of tracking violations). In 2020 (latest available report), Austrian customs authorities confiscated pirated goods worth EUR 24 million (USD 28.3 million), which was a 50 percent increase from the previous year.

Austria is not listed in USTR’s Special 301 or notorious markets reports, but its trade secrets regime has historically been a concern for some U.S. businesses. Austrian and U.S. companies have voiced specific concerns about both the scope of protection and the difficulty of adjudicating breaches. Following years of steady U.S. government advocacy, and because Austria was required to implement the 2016 EU Directive on Trade Secrets, the country improved its trade secrets regime in the Law Against Unfair Competition (entered into force in February 2019) to address these concerns. The most relevant change in the law is a requirement for safeguarding the confidentiality of trade secrets (and other business confidential information) in court procedures. The new law also defines injunctive relief and claims for damages in case of breach of trade secrets. The 2020 government program includes a plan to further toughen prosecution of violation of trade secrets that have an impact on Austria as a business location and to tackle industrial espionage, but no specific actions to implement the plan have been taken yet.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

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 that currently includes 64 companies on its regulated market and several others on its multilateral trading facility (MTF). 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 to those listed on the MDAX in Germany. The market capitalization of Austrian listed companies is small compared to the country’s western European counterparts, accounting for 31 percent of Austria’s GDP, compared to 59 percent in Germany or 194 percent in the United States.

Unlike the other market segments in the stock exchange, the Direct Market and Direct Market Plus segments, targeted at SMEs and young, developing companies, are subject only to the Vienna Stock Exchange’s general terms of business, not more stringent EU regulations. These segments have lower reporting requirements but also greater risk for investors, as prices are more likely to fluctuate, due to the respective companies’ low level of market capitalization and lower trading volumes.

Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. Overall, financing is primarily available through banks and government-sponsored funding organizations with very little private venture capital available. The Austrian government is aware of this issue but has taken few tangible steps to improve the availability of private venture capital.

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.

Austria has one of the most fragmented banking networks in Europe with more than 3,800 branch offices registered in 2021. 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 1.0 trillion (USD 1.2 trillion) in 2020 (approximately 2.5 times the country’s GDP). Approximately EUR 460 billion (USD 543 billion) of banking sector assets are held by Austria’s two largest banks, Erste Group and Raiffeisen Bank International (RBI). The Austrian banking sector is considered one of the most stable in the world. Austria’s banking sector is managed and overseen by the Austrian National Bank (OeNB) and the Financial Market Authority (FMA). Four 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 (which was declared insolvent in March 2022, and its operations are now being wound down in a bankruptcy proceeding), and Addiko Bank AG due to their significant cross-border assets, as well as Volksbank Wien AG, due to its importance for the economy. All other Austrian banks continue to be subject to the country’s dual-oversight banking supervisory 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. Foreign banks are allowed to establish operations in the country with no legal restrictions that place them at a disadvantage compared to local banks.

Due to U.S. government financial reporting requirements, Austrian banks are very cautious in committing the time and expense required to accept U.S. clients and U.S. investors without established U.S. corporate headquarters.

Austria has no sovereign wealth funds.

Austria has two major wholly state-owned enterprises (SOEs): The OeBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance, and administration). Other government industry holding companies are bundled in the government holding company OeBAG (http://www.oebag.gv.at)

The government has direct representation in the supervisory boards of its companies (commensurate with its ownership stake), and OeBAG has the authority to buy and sell company shares, as well as purchase minority stakes in strategically relevant companies. Such purchases are subject to approval from an audit committee consisting of government-nominated independent economic experts.

OeBAG holds a 53 percent stake in the Post Office, 51 percent in energy company Verbund, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, as well as a handful of smaller ventures. Local governments own most utilities, the Vienna International Airport, and more than half of Austria’s 270 hospitals and clinics.

Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OeBB) benefit from state-subsidized pension systems. As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors).

The five major OeBAG-controlled companies (Postal Service, Verbund AG, Casinos Austria, OMV, Telekom Austria), are listed on the Vienna Stock Exchange. Senior managers in these companies do not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations.

The government has not privatized any public enterprises since 2007. Austrian public opinion is skeptical regarding further privatization, and there are no indications of any government privatizations on the horizon. In prior privatizations, foreign and domestic investors received equal treatment. Despite a historical government preference for maintaining blocking minority rights for domestic shareholders, foreign investors have successfully gained full control of enterprises in several strategic sectors of the Austrian economy, including in telecommunications, banking, steel, and infrastructure.

Austrian Responsible Business Conduct (RBC)/Corporate Social Responsibility (CSR) standards are laid out in the Austrian Corporate Governance Codex, which is based on the EU Commission’s 2011 “Strategy for Corporate Social Responsibility.” The Austrian Standards Institute’s ONR 192500 acts as the main guidance for CSR and is based on the EU Commission’s published Strategy, which is also compliant with UN guidelines. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports; many also provide information on their health, safety, security, and environmental activities.

Austria adheres to the OECD’s Guidelines for Multinational Enterprises. The Ministry for Labor, Social Affairs, Health, and Consumer Protection is represented in national and international CSR-relevant associations and supports CSR initiatives while working closely together with the Austrian Standards Institute.

The Austrian export credit agency promotes information on CSR issues, principles and standards, including the OECD Guidelines, on its website.

https://www.oekb.at/en/oekb-group/our-claim/corporate-governance.html 

Austria is a signatory to the Montreaux Document on Private Military and Security Companies, which it ratified in 2008.

Austria has a National Climate and Energy Plan in place. It was last updated in 2019, and the government is currently preparing an update that it should have reported to the European Commission by end of 2020, according to the EU Climate and Energy Package, but it has not done so yet. The government, in its 2020 program, set the goal that Austria must be climate-neutral by 2040. According to the EU goals as outlined in the “Green Deal,” Austria is aiming to reduce greenhouse gas emissions by 48 percent by 2030.

To implement the climate goals, Austria introduced a law to expand production and supply of renewable energies (photovoltaics, wind, hydropower, biomass) with annual subsidies of around USD 1 million until 2030. The government plans to invest EUR 17.5 billion (USD 20.7 billion) in the expansion of rail infrastructure and is subsidizing train tickets and the purchase of electric cars (around USD 5,900 per purchase). The Parliament, in 2021, adopted a “green tax reform,” introducing a new CO2 emissions pricing system as of July 2022, that phases in a fixed price, rising from EUR 30 (USD 34) per ton of CO2 in 2022 to EUR 55 (USD 62) in 2025. The tax reform will affect energy-intensive production of the private sector, but the government has not set specific emissions reduction goals for businesses.

In April 2021, the government introduced a comprehensive “biodiversity monitoring” system to provide an overview over the number of (endangered) species and habitats in Austria. The Ministry for Climate, Environment, Energy, Mobility, Innovation and Technology set up a EUR 50 million (USD 59 million) “Biodiversity Fund” to support the monitoring system to be implemented with input from universities and environmental NGOs.

In 2021, the government adopted an “Action Plan Sustainable Procurement,” providing 16 binding ecological criteria for all public procurement beginning in 2022. It includes requiring emission-free cars for the government’s fleet, providing all public buildings with 100 percent electricity from renewable sources, and purchasing organic food for hospitals and school cafeterias.

Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption. Austria ranked 13th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index. Despite this ranking, the Group of States Against Corruption (GRECO) February 2021 report criticized Austria for only fully implementing two of 19 recommendations since the last report was issued in 2017. The criticism largely focused on a lack of transparency on lobbying, receipt of donations, and the income of Members of Parliament.

Bribery of public officials, their family members and political parties, is covered under the Austrian Criminal Code, and corruption does not significantly affect business in Austria. However, the public’s belief in the integrity of the political system was shaken by the 2019 Ibiza scandal, when a 2017 video surfaced in which Vice Chancellor and chair of the right populist Freedom Party (FPOe) Heinz Christian Strache and the FPOe floor leader in Parliament Johann Gudenus were filmed discussing providing government contracts in exchange for favors and political party donations with a woman posing as the niece of a Russian oligarch. This was compounded by further revelations in 2019 that the FPOe had allegedly promised gambling licenses to Casinos Austria in exchange for placing a party loyalist on the company’s executive board. Strache was convicted of corruption and bribery by the Vienna District Court in August 2021 following a separate health care fraud investigation. In October 2021, then-Chancellor Sebastian Kurz of the center-right People’s Party (OeVP) announced his resignation amid allegations that, while he was Foreign Minister in 2016, his inner circle paid newspapers to publish falsified opinion polls in his favor; that investigation by anti-corruption prosecutors is still ongoing. Finance Minister Bluemel (OeVP) also resigned, and prosecutors continue to investigate allegations that he may have facilitated political party donations by Casinos Austria subsidiary Novomatic, in exchange for government assistance with the company’s tax problems.

Anti-corruption cases are often characterized by slow-moving investigations and trials that drag on for years. The trial of former Finance Minister Grasser, which started in 2017, concluded in late 2020, with Grasser receiving a sentence of eight years in prison from the trial court judge. The official verdict was published in January 2022, and Grasser is expected to appeal the sentence.

Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offense with the sentence varying depending on the amount of the bribe. The 2018 Austrian Federal Contracts Act implements EU guidelines prohibiting participating in public procurement contracts if there is a potential conflict of interest and requires measures to be put in place to detect and prevent such conflicts of interest. This required public authorities to set up compliance management systems or amend their existing structures accordingly. Virtually all Austrian companies have internal codes of conduct governing bribery and potential conflicts of interest.

Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors. The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.

Criminal penalties for corruption include imprisonment ranging from six months to ten years, depending on the severity of the offence. Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 2,500 (USD 2,950). No donor is allowed to give more than EUR 7,500 (USD 8,850) and total donations to one political party may not exceed EUR 750,000 (USD 885,000) in a single year. Foreigners are prohibited from making donations to political parties. Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.1 million).

To date, U.S. companies have not reported any instances of corruption inhibiting FDI.

Contacts at government agencies responsible for combating corruption:

Wirtschafts- und Korruptionsstaatsanwaltschaft (Central Public Prosecution for Business Offenses and Corruption)
Dampfschiffstraße 4
1030 Vienna, Austria
Phone: +43-(0)1-52 1 52 0
E-Mail: wksta.leitung@justiz.gv.at

BAK – Bundesamt zur Korruptionsprävention und Korruptionsbekämpfung (Federal Agency for Preventing and Fighting Corruption)
Ministry of the Interior
Herrengasse 7
1010 Vienna, Austria
Phone: +43-(0)1-531 26 – 6800
E-Mail: BMI-III-BAK-SPOC@bak.gv.at

Contact at “watchdog” organization:

Transparency International – Austrian Chapter
Gertrude-Fröhlich-Sandner-Straße 1
1100 Vienna, Austria
Phone: +43-(0)1-960 760

Generally, civil disturbances are rare and the overall security environment in the country is considered to be safe. There have been no incidents of politically motivated damage to foreign businesses. Austria suffered a terrorist attack on November 2, 2020, when a gunman shot and killed four civilians and injured 23 in the center of Vienna.

Austria has a well-educated and productive labor force of 4.3 million, of whom 3.8 million are employees and 500,000 are self-employed or farmers. In line with EU regulations, the free movement of labor from all member states is allowed.

The COVID-19 crisis has led to an increase in unemployment, which reached 5.4 percent in 2020, but has since returned to near-pre-crisis levels. As of February 2022, the unemployment rate was 4.9 percent, compared to 4.5 percent in 2019. At the same time, the number of people unemployed for longer than 12 months has increased by 23 percent since the start of the pandemic. The Labor Ministry is developing initiatives to reintegrate long-term unemployed in the job market and combat the current shortage of skilled labor. To combat the effects of lockdown-related business closures, the government implemented a subsidized reduced hours work program, enabling employers to reduce employees’ hours by up to 90 percent, with assistance to cover up to 80-90 percent of regular pay, which was in place until March 2022 and helped keep the unemployment rate under control.

Foreigners account for almost one-quarter of Austria’s labor force; around 840,000 foreign workers are employed in Austria. Migrant workers come largely from the CEE region, but there are also many workers who arrived during the Syrian refugee crisis who have entered the labor market. Migrant workers often occupy lower-paying jobs and make up a large percentage of workers in the tourism and healthcare sectors.

Youth unemployment is relatively low, compared to European reference countries. Austria’s successful dual-education apprenticeship system, combining on-the-job training with classroom instruction in vocational schools, has helped bring youth into the labor market. The program includes guaranteed placement by the Public Employment Service for those 15–24-year-olds who cannot find an apprenticeship. Austria and the United States signed a Memorandum of Understanding to foster cooperation on apprenticeships and workforce development in April 2022. Austria has a well-balanced labor market but, like many of its neighbors, suffers from a shortage of skilled IT personnel, particularly in the banking and financial sector. Social insurance is compulsory in Austria and is comprised of health insurance, old-age pension insurance, unemployment insurance, and accident insurance. Employers and employees contribute a percentage of total monthly earnings to a compulsory social insurance fund. Austrian laws closely regulate terms of employment, including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, dismissal, and an option for part-time work for parents with children under the age of seven. Problematic areas include increased deficits in the pension and health insurance systems, the shortage of healthcare personnel to care for the increasing number of elderly, and escalating costs for retirement and long-term care. Due to its generous social welfare system, Austria has a high rate of employer non-wage labor costs, amounting to approximately 30 percent of gross wages. Labor laws are commonly adhered to and strictly enforced.

Labor-management relations are relatively harmonious in Austria, which traditionally enjoys a low incidence of industrial unrest. Strikes are uncommon with only two notable incidents over the past decades (2011, 2018). Additionally, all employees are automatically members of the Austrian Labor Chamber.

Collective bargaining revolves mainly around wages and fringe benefits. Approximately 90 percent of the labor force works under a collective bargaining agreement. In 2017, Austria implemented a national minimum wage of EUR 1,500 (approx. USD 1,770) per month, with monthly wages paid 14 times per year. This equates to an hourly wage of EUR 10.09 (approx. USD 11.91), placing Austria in the upper tier among European countries with a minimum wage, ahead of France, Germany and the UK.

Austrian law stipulates a 40-hour maximum workweek limit, but collective bargaining agreements also allow for a workweek of 38 or 38.5 hours per week. Firms may increase the maximum regular hours from 40 to 60 per week in special cases, with no more than 12 hours in a single day. Responsibility for agreements on flextime or reduced workweeks is at the company level. Overtime is paid at an additional 50 percent of the employee’s salary, and, in some cases, such as work on public holidays, 100 percent. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce); the rate of absence due to illness/injury averages 13 workdays annually.

Andreas Lerch
Economic Specialist
U.S. Embassy Vienna, Vienna 1090, Boltzmanngasse 16
+43 1 31339-2387
lercha@state.gov

Belgium maintains an open economy, and its prosperity is highly dependent on international trade.  Since WWII, making Belgium attractive to foreign investors has been the cornerstone of successive Belgian governments’ foreign and commercial policy.  Competence over policies that weigh on the attractiveness of Belgium as a destination for foreign direct investment (FDI) lie predominantly with the federal government, which is responsible for developing domestic competition policy, wage setting policies, labor law, and most of the energy and fiscal policies.  Attracting FDI, however, is the responsibility of Belgium’s three regional governments in Flanders, Wallonia, and the Brussels-Capital Region.  Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX) and Brussels Invest and Export (BIE) are the three investment promotion agencies responsible for attracting FDI to Belgium.  One of their most visible activities is organizing the Royal Trade Missions, which are led by Princess Astrid (the king’s sister), as well as the economic part of the state visits by King Philippe.  In June 2022, Princess Astrid plans to lead a Royal Trade Mission to Atlanta, New York City, and Boston with more than 500 participants. Neither the federal nor the regional governments currently maintain a formal dialogue with investors.

There are no laws in place that discriminate against foreign investors.  [While U.S. companies continue to play key and long-standing roles in the development of the Belgian economy, a major U.S.-based multinational firm operating in the chemical cluster near the Port of Antwerp has raised concerns that Flemish government officials have unfairly regulated the company and subjected it to strict limitations not applied to other companies operating in the same sector and space.  The firm and the Flemish government remain in regular contact to seek a fair and equitable solution; however, the perceived lack of regulatory certainty could lead to a reduction of industry investment and operations in Belgium if unresolved.

There are currently no limits on foreign ownership or control in Belgium, and there are no distinctions between Belgian and foreign companies when establishing or owning a business or setting up a remunerative activity.

Belgian authorities are, however, developing a national security-based investment screening law that will likely establish certain restrictions based on national security concerns.  The draft law is not expected to be finalized and delivered to Parliament for vote before the end of 2022.

In July 2019 the OECD published an in-depth productivity review of Belgium: https://www.oecd.org/belgium/in-depth-productivity-review-of-belgium-88aefcd5-en.htm .  Belgium was included in the WTO Trade Policy Review of the European Union which took place February 18-20, 2020: https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm . In June 2021, Belgium was subject of an IMF Article IV mission: https://www.imf.org/en/News/Articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission 

To set up a business in Belgium, one must:

1. Deposit at least 20% 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, and 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 French, Dutch, or German (Belgium’s three official languages); and

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/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 terms of the Promotion of Independent Enterprise Act of February 10, 1998. For a small or medium-sized enterprise, registration is 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.

A company is expected to allow trade union delegations when employing 20 or more full-time equivalents (FTEs).

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors.

• Flanders: Flanders Investment & Trade, https://www.flandersinvestmentandtrade.com/en 
• Wallonia: Invest in Wallonia, http://www.investinwallonia.be/home 
• Brussels: Why Brussels, http://why.brussels/ 

Belgium does not actively promote outward investment.  There are no restrictions for domestic investors to invest in certain countries, other than those that fall under UN or EU sanction regimes.  In June 2022, the Belgian government plans to lead a Royal Trade Mission to Atlanta, New York City, and Boston with more than 500 participants. The mission will promote both Belgian investment into the United States and encourage foreign direct investment into Belgium.

The Belgian government has adopted a generally transparent competition policy.  The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states. While U.S. companies continue to play key and long-standing roles in the development of the Belgian economy, a major U.S.-based multinational firm operating in the chemical cluster near the Port of Antwerp has raised concerns that Flemish government officials have unfairly regulated the company and subjected it to strict limitations not applied to other companies operating in the same sector and space.  The firm and the Flemish government remain in regular contact to seek a fair and equitable solution; however, the perceived lack of regulatory certainty could lead to a reduction of industry investment and operations in Belgium if unresolved.

Political competences in Belgium are shared between the federal government, the three regions – Flanders, Wallonia, and Brussels-Capital – and the French and German linguistic communities. (Note. Flanders merged the Flemish linguistic community into its regional government. End Note.) Notwithstanding the fact that the regions in Belgium are responsible for attracting foreign investors, most regulations impacting the business environment (taxes, labor market, energy) are controlled at the federal level. In contrast, environmental regulations are developed mostly at the regional level. A regulatory impact assessment (RIA) is mandatory for all primary and some subordinate legislation submitted to the Cabinet of Ministers at the federal level and is usually shared with social partners as a basis for consultation. Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Het Staatsblad/Le Moniteur Belge (https://www.ejustice.just.fgov.be/cgi/welcome.pl ).

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.  Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all stakeholder comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001, and balance sheet and profit and loss statements are in line with 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.

Regarding Environmental, Social and Governance Impacts reporting (ESG), the EU’s Non-Financial Reporting Directive (NFRD) was transposed into Belgian law in 2017. The NFRD requires very large public interest entities (PIEs) to report environmental, social and employee, human rights, anti-bribery, and corruption information on an annual basis. On April 21, 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which will update the NFRD. The CSRD aims to be applicable as of fiscal year 2023 and will significantly extend the scope of reporting requirements to all large companies and all companies listed on regulated markets (except listed micro-enterprises).

Regarding oversight or enforcement mechanisms to ensure governments follow administrative processes, local courts are expected to enforce foreign arbitral awards issued against the government.  Recourse to the courts is available if necessary.

Public finances and debt obligations are generally transparent. Details on government budgets are available online, and the debt agency (https://www.debtagency.be/en ) publishes all relevant data concerning government debt.

Belgium is a founding member of the EU, whose directives and regulations are enforced.  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).  Belgium does not maintain any measures that are inconsistent with the Agreement on Trade-Related Investment Measures (TRIMs) obligations.

Belgium’s (civil) legal system is independent of the government and is a 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 ongoing budget cuts causing backlogs and delays. There are several levels of appeal.

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.

Belgian authorities are currently developing a national security-based investment screening law that will likely establish certain restrictions based on national security concerns.  The law likely will not be finalized and delivered to Parliament for a vote before the end of 2022.

There are three different regional Investment Authorities:

• Flanders: http://www.flandersinvestmentandtrade.com 
• Wallonia: http://www.awex.be 
• Brussels: https://be.brussels/brussels 

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

EU member states are responsible for competition and anti-trust regulations if there are cross-border dimensions. If cross-border effects are present, EU law applies, and European institutions are competent.

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, current market value 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 expansions, roads, and railroads.

Belgian bankruptcy law falls 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 2020 Doing Business Index, Belgium ranks number 9 (out of 190) for the ease of resolving insolvency.

In Belgium, investment incentives and subsidies are the responsibility of Belgian’s three regions: Flanders, Wallonia, and Brussels-Capital.  Nonetheless, most tax measures remain under the control of the federal government as do the parameters (social security, wage agreements) that govern general salary and benefit levels.  In general, all regional and national incentives are available to foreign and domestic investors alike.   The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states.  The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion.

In their investment policies, the regional governments emphasize innovation promotion, research and development, energy savings, environmental protection, exports, and employment. In order achieve this, a wide variety of tax benefits and incentives is available at both the federal and regional levels. The three regional agencies have staff specializing on specific regions of the world, including the United States, and have representation offices in different countries.  In addition, the Finance Ministry has a foreign investment tax unit to provide assistance and to make the tax administration more “user friendly” to foreign investors.

More information about investing in Belgium, the Belgian tax system, tax benefits and incentives can be found at:  https://business.belgium.be/en .

Tax advice and support can be requested, free of charge at the Foreign Investment Tax Unit of the Federal Public Service Finance ( taxinvest@minfin.fed.be ).

There are no foreign trade zones or free ports as such in Belgium.  However, the country utilizes the concept of customs warehouses.  A customs warehouse is approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT.  Only non-EU goods can be placed under a customs warehouse regime.  In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, and country of origin or destination.  Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities.  Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or board of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of military offset programs.  While the government reserves the right to reclaim incentives if the investor fails to meet his employment commitments, enforcement is rare.  However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.

Property rights in Belgium are well protected by law, and the courts are independent and considered effective in enforcing property rights. Mortgages and liens exist through a reliable recording system operated by the Belgian notaries. Industrial spaces that are unused and neglected can be subject to levies. Owners of building plots are not required to build on them within a certain period. However, exceptions exist for plots that retain construction obligations. On those plots, owners are obliged to build within a certain timeframe.

Belgium generally meets very high standards for the protection of intellectual property rights (IPR). The EU has issued a number of directives to promote the protection and enforcement of IPR, which EU Member States are required to implement.  National laws that do not conflict with those of the EU also apply.  Belgium is a member of the World Trade Organization (WTO) and so is party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Belgium is also a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

IPR is administered by the Belgian Office of Intellectual Property (OPRI), which is part of the Directorate-General for Economic Regulation  in the Ministry for Economic Affairs: https://economie.fgov.be/en/themes/intellectual-property/institutions-and-actors/belgian-office-intellectual .  This office manages and provides Belgian IPR titles, oversees public awareness campaigns, drafts legislation, and advises Belgian authorities with regard to national and international issues.  The Belgian Ministry of Justice is responsible for enforcement of IPR.  Belgium experiences a rate of commercial and digital infringement – particularly internet music piracy and illegal copying of software – similar to most EU Member States.

Belgium is not included on USTR’s Special 301 Report.

For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO’s country profiles at http://www.wipo.int/directory/en/ .

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.

Bruges established the world’s first stock market almost 600 years ago, and the Belgian stock exchange 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.

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 member of the Governing Council of the European Central Bank (ECB).  Being a Eurozone member state, the NBB is part of the Euro system, meaning that it has transferred the sovereignty over monetary policy to the ECB.

Since 2017, the supervision of systemically important Belgian banks lies with the ECB. The country has not lost any correspondent banking relationships in the past three years, nor are there any correspondent banking relationships currently in jeopardy. The Belgian non-performing Loan Ratio stood at 0.7% in 2021. Total bank assets amount to about 90% of GDP.

Opening a bank account in the country is linked to residency status.  The U.S. 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.  Belgium implemented a basic banking service law in 2021 which aims to give entrepreneurs otherwise unable to open a bank account the right to do so. For example, companies that have been refused the ability to open a bank account by three credit institutions are entitled to a basic banking service. According to the law, a basic banking service room – administered by the government – will confirm evidence of three refusals, and designate a credit institution in Belgium that must offer the basic banking service to the company.  Even though the law is still not fully implemented, authorities anticipate nationwide implementation in 2022.

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company (FPIM-SFPI), a quasi-independent entity created in 2006 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 2020, its total assets amounted to €1.96 billion. Most of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds.

Belgium has around 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority.  Private enterprises are allowed to compete with SOEs under the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists. Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to legacy networks that were fully amortized years ago.

Belgium currently has no scheduled privatizations. There are no indications that foreign investors would be excluded from eventual privatizations.

The Belgian government encourages both foreign and local enterprises to follow generally accepted Corporate Social Responsibility principles such as the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights. The Belgian government also encourages adherence to the OECD Due Diligence guidance for responsible supply chains of minerals from conflict-affected areas.

When it comes to human rights, labor rights, consumer and environmental protection, or laws/regulations which would protect individuals from adverse business impacts, the Belgian government is generally considered to enforce domestic laws in a fair and effective manner.

There is a general awareness of corporate social responsibility among producers and consumers. Boards of directors are encouraged to pay attention to corporate social responsibility in the 2009 Belgian Code on corporate governance. This Code, also known as the ‘Code Buysse II’ stresses the importance of sound entrepreneurship, good corporate governance, an active board of directors and an advisory council. It deals with unlisted companies and is complementary to existing Belgian legislation. However, adherence to the Code Buysse II is not factored into public procurement decisions. For listed companies, far stricter guidelines apply, which are monitored by the Financial Services and Markets Authority.

Belgium is part of the Extractive Industries Transparency Initiative.  There are currently no alleged or reported human or labor rights concerns relating to responsible business conduct (RBC) that foreign businesses should be aware of. In cases of violations, the Belgian government generally enforces domestic laws effectively and fairly. NGOs and unions that promote or monitor RBC can do so freely.

Department of State

• Country Reports on Human Rights Practices
• Trafficking in Persons Report
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises
• Xinjiang Supply Chain Business Advisory

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain .

Due to the federal state structure of Belgium and the different areas of competence and responsibility, climate policy is divided between the regions and the federal state. More information about Belgian climate policies, as well as the implementation of EU and UN climate-related agreements and guidelines, can be found here: https://klimaat.be/klimaatbeleid/belgisch/nationaal/langetermijnstrategie#:~:text=De%20Belgische%20langetermijnstrategie&text=Deze%20strategie%20omvat%20streefdoelen%20voor,om%20deze%20streefdoelen%20te%20bereiken .

As a member of the EU, Belgium subscribes to the system of emissions trading (the European Emissions Trading System or EU ETS) for industrial installations. The system is applicable to large installations (with a thermal input of more than 20 MW) in industries such as electricity production and aviation, among others. Depending on the concrete activities and characteristics of a company, different environmental permits may be required. Being a regional matter, these requirements can differ depending on the region in which a company is active:

• Flanders: https://www.vlaanderen.be/omgevingsvergunning 
• Wallonia: https://www.wallonie.be/fr/demarches/demander-un-permis-denvironnement-ou-un-permis-unique-pour-un-etablissement-de-classe-1-ou-2 
• Brussels-Capital: https://urbanisme.irisnet.be/lepermisdurbanisme/autres-premis-et-certificats/le-permis-unique?set_language=fr 

Belgian has extensive anti-bribery laws in place. Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention and is a participating member of the OECD Working Group on Bribery.

Anti-bribery legislation provides for jurisdiction in certain cases over persons (foreign as well as Belgian nationals) who commit bribery offenses outside the territory of Belgium. Various limitations apply, however. For example, if the bribe recipient exercises a public function in an EU member state, Belgian prosecution may not proceed without the formal consent of the other state.

Under Belgian law bribery is considered passive if a government official or employer requests or accepts a benefit for him or herself or for somebody else in exchange for behaving in a certain way. Active bribery is defined as the proposal of a promise or benefit in exchange for undertaking a specific action.

Corruption by public officials carries heavy fines and/or imprisonment between 5 (five) and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and two years). The current law not only holds individuals accountable, but also the company for which they work. Recent court cases in Belgium suggest that corruption is most prevalent in government procurement and public works contracting.  American companies have not, however, identified corruption as a barrier to investment.

The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts, and the Ministry of the Interior through the Belgian federal police, which has jurisdiction over all criminal cases. A special unit, the Central Service for Combating Corruption, has been created for enforcement purposes but continues to lack the necessary staff. Belgium is also an active participant in the Global Forum on Asset Recovery.

The Belgian Employers Federation encourages its members to establish internal codes of conduct aimed at prohibiting bribery. To date, U.S. firms have not identified corruption as an obstacle to FDI.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Contact at the government agency or agencies that are responsible for combating corruption:

Office of the Federal Prosecutor of Belgium
Transparency International Belgium
Resources to Report Corruption
Wolstraat 66-1 – 1000 Brussels
T 02 55 777 64
F 02 55 777 94
Transparency Belgium
Nijverheidsstraat 10, 1000 Brussels
tel: +32 (0)2 893 2584
email: info@transparencybelgium.be

NOTE TO DRAFTER: In preparation of this section, drafters should consult with the Post Human Rights Reporting Officer, to ensure consistency with the Corruption section and other sections of the Department’s annual Country Reports on Human Rights Practices.

Belgium is a peaceful, democratic nation comprised of federal, regional, and municipal political units: the Belgian federal government, the regional governments of Flanders, Wallonia, the Brussels-Capital region, and communes (municipalities). Political divisions do exist between the Flemish and the Walloons, but they are addressed in democratic institutions and generally resolved through compromise. The Federal Council of Ministers, headed by the prime minister, remains in office as long as it retains the confidence of the lower house (Chamber of Representatives) of the bicameral parliament.

In 2021, a seven-year-long investigation into an attempted sabotage of the Doel nuclear power plant – perpetrated in 2014 – ended inconclusively in 2021. Investigators concluded that the incident was likely carried out by a plant employee or subcontractor who had a legitimate reason to be in the area where the sabotage occurred.

The Belgian labor force is generally well trained, highly motivated and very productive. Workers have an excellent command of foreign languages, particularly in Flanders. There is a low unemployment rate among skilled workers. EU Enlargement facilitated the entry of skilled workers into Belgium from newer member states. Non-EU nationals must apply for work permits before they can be employed. Minimum wages vary according to the age and responsibility level of the employee and are adjusted for the cost of living.

Belgian workers are highly unionized and usually enjoy good salaries and benefits. Belgian wage and social security contributions, along with those in Germany, are among the highest in Western Europe. For 2019, Belgium’s harmonized unemployment figure was 5.4 percent, below the EU28 average of 6.4 percent (OECD). High wage levels and pockets of high unemployment coexist, reflecting both strong productivity in new technology sector investments and weak skills of Belgium’s long-term unemployed, whose overall education level is significantly lower than that of the general population. There are also significant differences in regional unemployment levels (2019 figures): 3.3 percent in Flanders, against 7.2 percent in Wallonia and 12.7 percent in Brussels.  At the same time, shortages exist, mainly of workers with a degree in the sciences, mathematics, ICT, and engineering.

Given the nature of the informal economy, relatively few reliable figures are available. However, according to the IMF, the importance of the Belgian informal sector stood at around 17% of GDP at the end of 2015. This relatively high percentage can be attributed mainly to the high Belgian personal income tax rates that often make it financially worthwhile to avoid the payment of such taxes through formalized employers. The Belgian Central Bank states the informal economy is mainly based in the construction, catering, and household services sectors.

Belgian’s comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program that guarantees salary in event of illness. Currently, average employer payments to the social security system stand at 25 percent of salary while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.

Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines. The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium exert a strong influence in the country, politically and socially. A national bargaining process covers inter-professional agreements that the trade union confederations negotiate biennially with the government and the employers’ associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level. About 51 percent of employees from the public service and private sector are labor union members. Wage negotiations in Belgium often lead to large manifestations and strikes, which sometimes force public transport and major roads to close temporarily.

Firing a Belgian employee can be very expensive. An employee may be dismissed immediately for cause, such an illegal activity, but when a reduction in force occurs, the procedure is far more complicated. In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the labor courts for a decision. To avoid these complications, some firms include a “trial period” (of up to one year) in any employer-employee contract. Belgium is a strict adherent to ILO labor conventions.

Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994. Its flexible approach to the consultation and information requirements specified in the Directive compares favorably with that of other EU member states.

In 2015, the Belgian government increased the retirement age from the current age of 65 to 66 as of 2027 and 67 as of 2030.  Under the 2015 retirement plan, various schemes for early retirement before the age of 65 will be gradually phased out, and unemployment benefits will decrease over time as an incentive for the unemployed to regain employment.

Wage increases are negotiated by sector within the parameters set by automatic wage indexation and the 1996 Law on Competitiveness. The purpose of automatic wage indexation is to establish a bottom margin that protects employees against inflation: for every increase in consumer price index above 2 percent, wages must be increased by (at least) 2 percent as well. The top margin is determined by the competitiveness law, which requires the Central Economic Council (CCE) to study wage projections in neighboring countries and make a recommendation on the maximum margin that will ensure Belgian competitiveness. The CCE is made up of civil society organizations, primarily representatives from employer and employee organizations, and its mission is to promote a socio-economic compromise in Belgium by providing informed recommendations to the government. The CCE’s projected increases in neighboring countries have historically been higher than their real increases, however, and have caused Belgium’s wages to increase more rapidly than its neighbors. Since 2016 however, that wage gap has decreased substantially.

Belgian labor law provides for dispute settlement procedures, with the labor minister appointing an official as mediator between the employers and employee representatives.

In February 2022, the federal government reached an agreement on a plan to reform aspects of the labor market, including the introduction of a voluntary four-day work week, relaxed rules allowing employees to work longer into the night (8:00 p.m. – 12:00 a.m.) and the right to “disconnect,” a privilege already afforded to civil servants who are no longer obliged to respond to work-related messages during off-hours.

Pieter-Jan VAN STEENKISTE
Economic Specialist
Regentlaan, 27 – BE1000 Brussels
0032 475 706 529
vansteenkistepj@state.gov

Canada actively encourages FDI and maintains a sound enabling environment. Investors are attracted to Canada’s proximity to the United States, highly skilled workforce, strong legal protections, and abundant natural resources. Once established, foreign-owned investments are treated equally to domestic investments. As of 2020, the United States had a stock of USD 422 billion of foreign direct investment in Canada. U.S. FDI stock in Canada represents 44 percent of Canada’s total investment. Canada’s FDI stock in the United States totaled USD 570 billion.

The USMCA modernizes the previous NAFTA investment protection rules and investor-state dispute settlement provisions. Parties to the USMCA agree to treat investors and investments of the other Parties in accordance with the highest international standards, and consistent with U.S. law and practice, while safeguarding each Party’s sovereignty and promoting domestic investment.

Invest in Canada is Canada’s investment attraction and promotion agency. It provides information and advice on doing business in Canada, strategic market intelligence on specific industries, site visits, and introductions to provincial, territorial, and municipal investment promotion agencies. Still, non-tariff barriers to trade across provinces and territories contribute to structural issues that have held back the productivity and competitiveness of Canada’s business sector.

Foreign investment in Canada is regulated under the provisions of the Investment Canada Act (ICA). U.S. FDI in Canada is also subject to the provisions of the World Trade Organization (WTO), the USMCA, and the NAFTA. The ICA mandates the review of significant foreign investments to ensure they provide an economic net benefit and do not harm national security.

Canada is not a party to the USMCA’s chapter on investor-state dispute settlement (ISDS). Ongoing NAFTA arbitrations are not affected by the USMCA, and investors can file new NAFTA claims by July 1, 2023, provided the investment(s) were “established or acquired” when NAFTA was still in force and remained “in existence” on the date the USMCA entered into force. An ISDS mechanism between the United States and Canada will cease following a three-year window for NAFTA-protected legacy investments.

The Canadian government announced revised ICA foreign investment screening guidelines on March 24, 2021. The revised guidelines include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The new guidelines are aligned with Innovation, Science, and Economic Development Canada’s April 2020 update on greater scrutiny for foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services. The 2020-21 Investment Canada Act Annual Report (released February 2, 2022) indicated a record high 24 investments were subject either to formal national security review or heightened screening despite historically fewer total foreign investments in Canada due to COVID-19-related factors. In contrast, a total of 21 investments were subject to similar screening in the four years from 2016 to 2020. Still, some Canadian elected officials and national security experts assess national security standards should be heightened. The government is exploring proposed amendments to the National Security Review of Investments Regulations which would introduce a voluntary filing mechanism for investments by non-Canadians that do not require an application or a notification.

Foreign ownership limits apply to Canadian telecommunication, airline, banking, and cultural sectors. Telecommunication carriers, including internet service providers, that own and operate transmission facilities are subject to foreign investment restrictions if they hold a 10 percent or greater share of total Canadian communication annual market revenues as mandated by The Telecommunications Act. These investments require Canadian ownership of 80 percent of voting shares, Canadians holding 80 percent of director positions, and no indirect control by non-Canadians. If the company is a subsidiary, the parent corporation must be incorporated in Canada and Canadians must hold a minimum of 66.6 percent of the parent’s voting shares. Foreign ownership of Canadian airlines is limited to 49 percent with no individual non-Canadian able to control more than 25 percent by mandate of the 2018 Transportation Modernization Act. Canadian airlines cannot be directly or indirectly controlled by non-Canadians to meet Canadian Transportation Agency “control in fact” licensure requirements. Foreign banks can establish operations in Canada but are generally prohibited from accepting deposits of less than USD 112,000. Foreign banks must receive Department of Finance and the Office of the Superintendent of Financial Institutions (OSFI) approval to enter the Canadian market. Investment in cultural industries also carries restrictions, including a provision under the ICA that foreign investment in book publishing and distribution must be compatible with Canada’s national cultural policies and be of net benefit to Canada.

The World Trade Organization conducted a trade policy review of Canada in 2019. The report is available at: https://www.wto.org/english/tratop_e/tpr_e/tp489_e.htm . The Organization of Economic Cooperation and Development completed an Economic Forecast Summary and released the results in December 2021. The report is available at: http://www.oecd.org/economy/canada-economic-snapshot/ .

Individuals from Canadian civil society organizations, industry, and academic institutions regularly comment on and assess investment policy-related concerns. In January and February 2022, for example, subject matter experts gave evidence to Canada’s House of Commons Standing Committee on Industry and Technology regarding an investment policy decision concerning a high-profile critical mineral sector investment.

The Canadian government provides information necessary for starting a business at: https://www.canada.ca/en/services/business/start.html . Business registration requires federal or provincial government-based incorporation, the application of a federal business number and corporation income tax account from the Canada Revenue Agency, the registration as an extra-provincial or extra-territorial corporation in all other Canadian jurisdictions of business operations, and the application of relevant permits and licenses. In some cases, registration for these accounts is streamlined (a business can receive its business number, tax accounts, and provincial registrations as part of the incorporation process); however, this is not true for all provinces and territories.

Canada prioritizes export promotion and outward investment as a means to enhance future Canadian competitiveness and productivity. Canada’s Trade Commissioner Service offers a number of funding opportunities and support programs for Canadian businesses to break into and expand in international markets: https://www.tradecommissioner.gc.ca/funding_support_programs-programmes_de_financement_de_soutien.aspx?lang=eng&wbdisable=true . Canada does not restrict domestic investors from investing abroad except when recipient countries or businesses are designated under the government’s sanctions regime.

Canada’s regulatory transparency is similar to the United States. Regulatory and accounting systems, including those related to debt obligations, are transparent and consistent with international norms. Proposed legislation is subject to parliamentary debate and public hearings, and regulations are issued in draft form for public comment prior to implementation in the Canada Gazette, the government’s official journal of record. While federal and/or provincial licenses or permits may be needed to engage in economic activities, regulation of these activities is generally for statistical or tax compliance reasons. Under the USMCA, parties agreed to make publicly available any written comments they receive, except to the extent necessary to protect confidential information or withhold personal identifying information or inappropriate content.

Canada published regulatory roadmaps for clean technology, digitalization and technology neutrality, and international standards in June 2021. These roadmaps, part of the federal government’s multi-year Targeted Regulatory Review program, lay out plans to advance regulatory modernization to support economic growth and innovation. Canadian securities legislation does not currently mandate environmental, social, and governance (ESG) disclosure for public or private companies. The Canadian Securities Administrators, an umbrella organization of all provincial and territorial securities regulators, released two proposed ESG disclosure policies for public comment between October 2021 and February 2022. The policies would require climate-related governance disclosures and climate-related strategy, risk management and metrics and targets disclosures if adopted.

Canada publishes an annual budget and debt management report. According to the Ministry of Finance, the design and implementation of the domestic debt program are guided by the key principles of transparency, regularity, prudence, and liquidity.

Canada addresses international regulatory norms through its FTAs and actively engages in bilateral and multilateral regulatory discussions. U.S.-Canada regulatory cooperation is guided by Chapter 28 of the USMCA “Good Regulatory Practices” and the bilateral Regulatory Cooperation Council (RCC). The USMCA aims to promote regulatory quality through greater transparency, objective analysis, accountability, and predictability. The RCC is a bilateral forum focused on harmonizing health, safety, and environmental regulatory differences. Canada-EU regulatory cooperation is guided by Chapter 21 “Regulatory Cooperation” of the CETA and the Regulatory Cooperation Forum (RCF). CETA encourages regulators to exchange experiences and information and identify areas of mutual cooperation. The RCF seeks to reconstitute regulatory cooperation under the previous Canada-EU Framework on Regulatory Cooperation and Transparency. The RCF is mandated to seek regulatory convergence where feasible to facilitate trade. CPTPP Chapter 25 “Regulatory Coherence” seeks to encourage the use of good regulatory practices to promote international trade and investment, economic growth, and employment. The CPTPP also established a Committee on Regulatory Coherence charged with considering developments to regulatory best practices in order to make recommendations to the CPTPP Commission for improving the chapter provisions and enhancing benefits to the trade agreement.

Canada is a member of the WTO and notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Canada is a signatory to the Trade Facilitation Agreement, which it ratified in December 2016.

Canada’s legal system is based on English common law, except for Quebec, which follows civil law. Law-making responsibility is split between the Parliament of Canada (federal law) and provincial/territorial legislatures (provincial/territorial law). Canada has both written commercial law and contractual law, and specialized commercial and civil courts. Canada’s Commercial Law Directorate provides advisory and litigation services to federal departments and agencies whose mandate includes a commercial component and has legal counsel in Montréal and Ottawa.

The judicial branch of government is independent of the executive branch and the current judicial process is considered procedurally competent, fair, and reliable. The provinces administer justice in their jurisdictions, including management of civil and criminal provincial courts.

Foreign investment in Canada is regulated under the provisions of the ICA. U.S. FDI in Canada is also subject to the provisions of the WTO, the USMCA, and the NAFTA. The purpose of the ICA is to review significant foreign investments to ensure they provide an economic net benefit and do not harm national security.

Canada relies on its Invest In Canada promotion agency to provide relevant information to foreign investors: https://www.investcanada.ca/ 

Competition Bureau Canada is an independent law enforcement agency charged with ensuring Canadian businesses and consumers prosper in a competitive and innovative marketplace as stipulated under the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act. The Bureau is housed under the Department of Innovation, Science, and Economic Development (ISED) and is headed by a Commissioner of Competition. Competition cases, excluding criminal cases, are brought before the Competition Tribunal, an adjudicative body independent from the government. The Competition Bureau and Tribunal adhere to transparent norms and procedures. Appeals to Tribunal decisions may be filed with the Federal Court of Appeal as per section 13 of the Competition Tribunal Act. Criminal violations of competition law are investigated by the Competition Bureau and are referred to Canada’s Public Prosecution Service for prosecution in federal court.

The federal government announced in February 2022 an intention to review competition law and policy including specific evaluation of loopholes that allow for harmful conduct, drip pricing, wage fixing agreements, access to justice for those injured by harmful conduct, adaptions to the digital economy, and penalty regime modernization. The announcement cited competition as a key tool to strengthen Canadian post-pandemic economic recovery.

In September 2020, the Bureau signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC) with the Australian Competition and Consumer Commission, the New Zealand Commerce Commission, the United Kingdom Competition & Markets Authority, the U.S. Department of Justice, and the U. S. Federal Trade Commission. The MMAC aims to improve international cooperation through information sharing and inter-organizational training.

Canadian federal and provincial laws recognize both the right of the government to expropriate private property for a public purpose and the obligation to pay compensation. The federal government has not nationalized a foreign firm since the nationalization of Axis property during World War II. Both the federal and provincial governments have assumed control of private firms, usually financially distressed companies, after reaching agreement with the former owners.

The USMCA, like the NAFTA, requires expropriation only be used for a public purpose and done in a nondiscriminatory manner, with prompt, adequate, and effective compensation, and in accordance with due process of law.

Bankruptcy in Canada is governed at the federal level in accordance with the provisions of the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act. Each province also has specific laws for dealing with bankruptcy. Canada’s bankruptcy laws stipulate that unsecured creditors may apply for court-imposed bankruptcy orders. Debtors and unsecured creditors normally work through appointed trustees to resolve claims. Trustees will generally make payments to creditors after selling the debtors assets. Equity claimants are subordinate to all other creditor claims and are paid only after other creditors have been paid in full per Canada’s insolvency ladder. In all claims, provisions are made for cross-border insolvencies and the recognition of foreign proceedings. Secured creditors generally have the right to take independent actions and fall outside the scope of the BIA.

Federal and provincial governments offer a wide array of investment incentives designed to advance broader policy goals, such as boosting research and development, and promoting regional economies. The funds are available to qualified domestic and foreign investors. Export Development Canada offers financial support to inward investments under certain conditions. The government maintains a Strategic Innovation Fund that offers funding to firms advancing “the Canadian innovative ecosystem.” Canada also provides incentives through the Innovation Superclusters Initiative, which is investing more than USD 700 million over five years (2017‑2022) to accelerate economic and investment growth in Canada. The five superclusters focus on digital technology, protein industries, advanced manufacturing, artificial intelligence, and the ocean. Foreign firms may apply for supercluster funding. A 2020 Canada Parliamentary Budget Office report concluded Supercluster Initiative spending lagged budgetary targets and the Initiative was unlikely to meet its ten-year goal to increase GDP by USD 37 billion.

Several provinces also offer incentive programs available to foreign firms. These incentives are normally restricted to firms established in the province or that agree to establish a facility in the province. Quebec is implementing “Plan Nord” (Northern Plan), a 25-year program to incentivize natural resource development in its northern and Arctic regions. The program provides financing to facilitate infrastructure, mining, tourism, and other investments. Ontario provides financial support to investments in targeted sectors (e.g., life sciences) and provincial areas including Northern Ontario, southwest Ontario, rural Ontario, and Eastern Ontario. Alberta offers companies a provincial tax credit worth up to USD 220,000 annually for scientific research and experimental development, as well as Alberta Innovation Vouchers worth up to USD 75,000 to help small early-stage technology and knowledge-driven businesses get their ideas and products to market faster.

The federal government and several provincial governments offer specific incentives for businesses owned by underrepresented investors. The Black Entrepreneurship Program, for example, is a partnership between the Government of Canada, Black-led business organizations, and financial institutions which will provide up to USD 160 million over four years (2021-2025) in loans to help Black Canadian business owners and entrepreneurs grow their businesses.

The federal government and several provincial governments offer incentives aimed at attracting and facilitating green investment. The federal government’s Clean Growth in Natural Resource Sectors Program is a USD 120 million fund to incentivize clean technology investment in the energy, mining, and forestry sectors. In April 2022, the federal government proposed a 50 percent tax credit for the construction of carbon capture, utilization, and storage projects for heavy greenhouse gas emitters.

Incentives for investment in cultural industries at both the federal and provincial level are generally available only to Canadian-controlled firms. Incentives may take the form of grants, loans, loan guarantees, venture capital, or tax credits. Provincial incentive programs for film production in Canada are available to foreign filmmakers.

Under the USMCA, Canada operates as a free trade zone for products made in the United States. Most U.S.-made goods enter Canada duty free.

As a general rule, foreign firms establishing themselves in Canada are not subject to local employment or forced localization requirements, although Canada has some requirements on local employment for boards of directors. Ordinarily, at least 25 percent of the directors of a corporation must be resident Canadians. If a corporation has fewer than four directors, however, at least one of them must be a resident Canadian. In addition, corporations operating in sectors subject to ownership restrictions (such as airlines and telecommunications) or corporations in certain cultural sectors (such as book retailing, video, or film distribution) must have a majority resident Canadian director.

Data localization is an evolving issue in Canada. The province of Quebec adopted a law in September 2021 that amends its data protection regime. Under the new law, the transfer of personal data outside of Quebec is limited to jurisdictions with data protection regimes possessing an adequate level of protection based on generally accepted data protection principles. Implementation of the law will be phased in 2021-2024. The federal government failed to pass a bill to modernize data protection and privacy standards in 2021, but pledged to re-introduce privacy legislation. Privacy rules in Nova Scotia mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of the few limited exceptions applies. The law prevents public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using non-Canadian hosting services. British Columbia maintained similar rules, however, the province passed legislation November 25, 2021 permitting some public bodies to disclose and store personal information outside of Canada to ensure operations, including meeting public health demand during the pandemic. Under the USMCA, parties are prevented from imposing data-localization requirements.

The Canada Revenue Agency stipulates that tax records must be kept at a filer’s place of business or residence in Canada. Current regulations were written over 30 years ago and do not consider current technical realities concerning data storage.

Foreign investors have full and fair access to Canada’s legal system, with private property rights limited only by the rights of governments to establish monopolies and to expropriate for public purposes. Investors under the USMCA have mechanisms available for dispute resolution regarding property expropriation by the Government of Canada. The recording system for mortgages and liens is reliable. Canada is ranked 36 out of 190 countries in the World Bank’s “Ease of Registering Property” 2020 rankings. Approximately 89 percent of Canada’s land area is government owned (Crown Land). Ownership is divided between by federal (41 percent) and provincial (48 percent) governments. The remaining 11 percent of Canadian land is privately owned.

British Columbia and Ontario tax foreign buyers of real property. In British Colombia, foreign buyers of real property in Metro Vancouver, the Fraser Valley, the central Okanagan regional district, Nanaimo, and the Capital Regional District are taxed at 20 percent of the property’s fair market value. In 2018, British Columbia broadened taxation on foreign ownership in Metro Vancouver and enacted a 0.5 percent Speculation and Vacancy Tax, targeting vacant foreign-owned homes. In 2019, the British Colombia Ministry of Finance increased the tax to 2 percent. The tax includes foreign owners and satellite families defined as those who earn most of their income outside of Canada. In Ontario, non-resident buyers of real property are subject to a non-resident speculation tax (NRST) at 15 percent of the property’s fair market value. Ontario extended the NRST in 2022 to apply to real property throughout the province. In 2022, Nova Scotia began levying property taxes on non-residents of Nova Scotia. Residential properties owned by non-residents of Nova Scotia (with exceptions for multi-unit buildings and properties leased for at least twelve months) are subject to a two percent property tax. In addition, non-residents who buy property and do not move to Nova Scotia within six months of closing have to pay a transfer tax of five percent of the property’s value. A federal one percent tax on the value of non-resident, non-Canadian owned residential real estate considered to be vacant or underused is undergoing parliamentary review as of March 2022. In April 2022, the federal government announced a proposed two year ban on sales of residential properties to non-Canadian residents.

In terms of non-resident access to land, including farmland, Ontario, Newfoundland and Labrador, New Brunswick, and Nova Scotia have no restrictions on foreign ownership of land. Prince Edward Island, Quebec, Manitoba, Alberta, and Saskatchewan maintain measures aimed at prohibiting or limiting land acquisition by foreigners. The acreage limits vary by province, from as low as five acres in Prince Edward Island to as high as 40 acres in Manitoba. In certain cases, provincial authorities may grant exemptions from these limits, including for investment projects. In British Columbia, Crown land cannot be acquired by foreigners, while there are no restrictions on acquisition of other land.

Canada took significant steps to improve its intellectual property (IP) provisions when the USMCA came into force July 1, 2020, addressing areas with long-standing concerns, including full national treatment for copyright protections, transparency, and due process with respect to new geographical indications (GIs), more expansive trade secret protection, authority to seize counterfeit goods in transit to other countries, and enforcement measures in the digital environment. Canada must implement three additional provisions, including legislation to implement patent term adjustments to compensate for unreasonable patent prosecution delays by December 2024, legislation to extend copyright protections from 50 years to 70 years after the life of the author by December 2022, and accession to the Brussels Convention Relating to the Distribution of Program-Carrying Signals Transmitted by Satellite by July 2024. The Canadian courts have established meaningful penalties against circumvention devices and services. In 2019, Canada made positive reforms to the Copyright Board related to tariff-setting procedures for the use of copyrighted works, and efforts remain ongoing to implement those measures

Various challenges to IP protection in Canada remain despite this strong legal framework. Canadian IP enforcement of counterfeit and pirated goods at the border and within Canada remains limited. Canada’s system for providing patent term restoration for delays in obtaining marketing approval is also limited in duration, eligibility, and scope of protection. Canada’s ambiguous education-related exemption included in the 2012 copyright law undermines the market for educational publishers and authors.

Canada is on the 2022 Watch List in the Office of the U.S. Trade Representative’s (USTR) Special 301 Report to Congress. The Pacific Mall located in Toronto, Ontario was listed in USTR’s 2021 Review of Notorious Markets for Counterfeiting and Piracy.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Canada’s capital markets are open, accessible, and regulated. Credit is allocated on market terms, the private sector has access to a variety of credit instruments, and foreign investors can get credit on the local market. Canada has several securities markets, the largest of which is the Toronto Stock Exchange, and there is sufficient liquidity in the markets to enter and exit sizeable positions. The Canadian government and Bank of Canada do not place restrictions on payments and transfers for current international transactions.

The Canadian banking system is composed of 35 domestic banks and 16 foreign bank subsidiaries. Six major domestic banks are dominant players in the market and manage close to USD 5.4 trillion in assets. Many large international banks have a presence in Canada through a subsidiary, representative office, or branch. Ninety-nine percent of Canadians have an account with a financial institution. The Canadian banking system is viewed as very stable due to high capitalization rates that are well above the norms set by the Bank for International Settlements. The OSFI, Canada’s primary banking regulator, announced in January 2022 revised capital, leverage, liquidity, and disclosure rules that incorporate the final Basel III banking reforms with additional adjustments to make them suitable for federally regulated deposit-taking institutions. Most of the revised rules will take effect in the second fiscal quarter of 2023, with those related to market risk and credit valuation adjustment risk taking effect in early 2024.

Foreign financial firms interested in investing submit their applications to the OSFI for approval by the Minister of Finance. U.S. and other foreign banks can establish banking subsidiaries in Canada. Several U.S. financial institutions maintain commercially focused operations, principally in the areas of lending, investment banking, and credit card issuance. Foreigners can open bank accounts in Canada with proper identification and residency information.

The Bank of Canada is the nation’s central bank. Its principal role is “to promote the economic and financial welfare of Canada,” as defined in the Bank of Canada Act. The Bank’s four main areas of responsibility are: monetary policy; promoting a safe, sound, and efficient financial system; issuing and distributing currency; and being the fiscal agent for Canada.

Canada does not have a federal sovereign wealth fund. The province of Alberta maintains the Heritage Savings Trust Fund to manage the province’s share of non-renewable resource revenue. The fund’s net financial assets were valued at USD 14 billion as of December 31, 2021. The Fund invests in a globally diversified portfolio of public and private equity, fixed income, and real assets. The Fund follows the voluntary code of good practices known as the “Santiago Principles” and participates in the IMF-hosted International Working Group of SWFs. The Heritage Fund holds approximately 50 percent of its value in equity investments, seventeen percent of which are domestic.

Canada defines responsible business conduct (RBC) as “Canadian companies doing business abroad responsibly in an economic, social, and environmentally sustainable manner.” The Government of Canada has publicly committed to promoting RBC and expects and encourages Canadian companies working internationally to respect human rights and all applicable laws, to meet or exceed international RBC guidelines and standards, to operate transparently and in consultation with host governments and local communities, and to conduct their activities in a socially and environmentally sustainable manner.

Canada encourages RBC by providing RBC-related guidance to the Canadian business community, including through Canadian embassies and missions abroad. Through its Fund for RBC, Global Affairs Canada provides funding to roughly 50 projects and initiatives annually. Canada also promotes RBC multilaterally through the OECD, the G7 Asia Pacific Economic Co-operation, and the Organization of American States. Canada promotes RBC through its trade and investment agreements via voluntary provisions for corporate social responsibility. Global Affairs Canada and the Canadian Trade Commissioner Service issued an Advisory to Canadian companies active abroad or with ties to Xinjiang, China in January 2021. The Advisory set clear compliance expectations for Canadian businesses with respect to forced labor and human rights involving Xinjiang.

The Canadian Ombudsperson for Responsible Enterprise is charged with receiving and reviewing claims of alleged human rights abuses involving Canadian companies foreign operations in the mining, oil and gas, and garment sectors. Contact information for making a complaint is available at: https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/index.aspx?lang=eng .

Canada is active in improving transparency and accountability in the extractive sector. The Extractive Sector Transparency Measures Act was brought into force on June 1, 2015. The Act requires extractive entities active in Canada to publicly disclose, on an annual basis, specific payments made to all governments in Canada and abroad. Canada joined the Extractive Industries Transparency Initiative (EITI) in February 2007, as a supporting country and donor. Canada’s Corporate Social Responsibility strategy, “Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad” is available on the Global Affairs Canada website: http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-strat-rse.aspx?lang=eng .

A comprehensive overview of Canadian RBC information is available at: https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-rse.aspx?lang=eng#:~:text=RBC%20is%20about%20Canadian%20companies,laws%20and%20internationally%20recognized%20standards .

Canada is working toward reconciliation between Indigenous and non-Indigenous peoples including through the settlement of historical claims. The claims, made by First Nations against the Government of Canada, relate to the administration of land and other First Nation assets. As of March 2018 (the latest data provided by Canada), the Government of Canada has negotiated settlements on more than 460 specific claims. Hundreds of specific claims remain outstanding including 250 accepted for negotiation, 71 before the Specific Claims Tribunal, and 160 under review or assessment.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The Canadian Net-Zero Emissions Accountability Act enshrines in law the Government of Canada’s commitment to achieve net-zero greenhouse gas emissions by 2050.  The Act establishes a legally binding process to set five-year national emissions-reduction targets as well as develop credible, science-based emissions-reduction plans to achieve each target.  It establishes the 2030 greenhouse gas emissions target of reductions of 40-45 percent below 2005 levels by 2030 as Canada’s Nationally Determined Contribution (NDC) under the Paris Agreement.  The Act also establishes a requirement to set national emissions reduction targets for 2035, 2040, and 2045, ten years in advance. Canada issued on March 29, 2022, the first Emissions Reduction Plan under the Canadian Net-Zero Emissions Accountability Act. Progress under the plan will be reviewed in progress reports produced in 2023, 2025, and 2027. The 2030 Emissions Reduction Plan describes the measures Canada is undertaking to reduce emissions to 40 to 45 percent below 2005 levels by 2030 and achieve net-zero emissions by 2050.  This Plan reflects economy-wide measures such as carbon pricing and clean fuels, while also targeting actions sector by sector ranging from buildings to vehicles to industry and agriculture. The 2030 plan is designed to be evergreen and governments, businesses, non-profits, and communities across the country are expected to work together to reach these targets.

Canada’s 2020 Natural Climate Solutions Fund has three separate programs to encourage nature-based solutions including the Planting Two Billion Trees Program, Nature Smart Climate Solutions Fund, and the Agricultural Climate Solutions Program.

Canada’s Greening Government Strategy commits that the Government of Canada’s operations will be net-zero emissions by 2050 including government-owned and leased real property; government fleets, business travel, and commuting; procurement of goods and services; and national safety and security operations. The government intends to aid in the net-zero transition through green procurement that includes life-cycle assessment principles and the adoption of clean technologies and green products by including criteria that address greenhouse gas emissions reduction, sustainable plastics, and broader environmental benefits into procurements, among other efforts.

Corruption in Canada is low and similar to that found in the United States. Corruption is not an obstacle to foreign investment. Canada is a party to the UN Convention Against Corruption, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the Inter-American Convention Against Corruption.

Canada’s Criminal Code prohibits corruption, bribery, influence peddling, extortion, and abuse of office. The Corruption of Foreign Public Officials Act prohibits individuals and businesses from bribing foreign government officials to obtain influence and prohibits destruction or falsification of books and records to conceal corrupt payments. The law has extended jurisdiction that permits Canadian courts to prosecute corruption committed by Canadian companies and individuals abroad. Canada’s anti-corruption legislation is vigorously enforced, and companies and officials guilty of violating Canadian law are effectively investigated, prosecuted, and convicted of corruption-related crimes. In March 2014, Public Works and Government Services Canada (now Public Services and Procurement Canada, or PSPC) revised its Integrity Framework for government procurement to ban companies or their foreign affiliates for 10 years from winning government contracts if they have been convicted of corruption. In August 2015, the Canadian government revised the framework to allow suppliers to apply to have their ineligibility reduced to five years where the causes of conduct are addressed and no longer penalizes a supplier for the actions of an affiliate in which it was not involved. PSPC has a Code of Conduct for Procurement, which counters conflict-of-interest in awarding contracts. Canadian firms operating abroad must declare whether they or an affiliate are under charge or have been convicted under Canada’s anti-corruption laws during the past five years to receive assistance from the Trade Commissioner Service.

Contact at the government agency or agencies that are responsible for combating corruption:
Mario Dion
Conflict of Interest and Ethics Commissioner (for appointed and elected officials, House of Commons)
Office of the Conflict of Interest and Ethics Commissioner
Parliament of Canada
66 Slater Street, 22nd Floor
Ottawa, Ontario (Mailing address)

Office of the Conflict of Interest and Ethics Commissioner
Parliament of Canada
Centre Block, P.O. Box 16
Ottawa, Ontario
K1A 0A6

Pierre Legault
Office of the Senate Ethics Officer (for appointed Senators)
Thomas D’Arcy McGee Building
Parliament of Canada
90 Sparks St., Room 526
Ottawa, ON K1P 5B4

Canada is politically stable with rare instances of civil disturbance. In January and February 2022, however, various groups of protestors occupied large parts of the downtown core of Ottawa and blocked commercial trade at several U.S.-Canada ports of entry. The initial protest movement of several hundred individuals claimed to be focused on the reversal of cross-border vaccine mandates. The movement attracted thousands of additional followers with a spectrum of political philosophies and grievances including far right extremist and anti-government groups. The protestors hindered hundreds of millions of dollars in daily two-way trade causing production slowdowns at several factories on both sides of the border. Many Ottawa residents complained of acts of harassment, desecration, and destruction by the protestors including deafening horn honking. The federal government invoked the never-before-used Emergencies Act to provide additional police powers to end the protests. Some commentators characterized the protests as a demonstration of growing politization within Canada.

The federal government and provincial/territorial governments share jurisdiction for labor regulation and standards. Federal employees and those employed in federally regulated industries, including the railroad, airline, and banking sectors, are covered under the federally administered Canada Labor Code. Employees in other sectors are regulated by provincial labor codes. As the laws vary somewhat from one jurisdiction to another, it is advisable to contact a federal or provincial labor office for specifics, such as minimum wage and benefit requirements.

Although labor needs vary by province, Canada faces a national labor shortage in skilled trades professions such as carpenters, engineers, and electricians. Canada launched several initiatives such as the Global Skills Visa to address its skilled labor shortage, including through immigration reform, the inclusion of labor mobility provisions in free trade agreements, including the Canada-EU CETA agreement, the Temporary Foreign Worker Program (TFWP), and the International Mobility Program. The TFWP is jointly managed by Employment and Social Development Canada (ESDC) and Immigration, Refugees, and Citizenship Canada (IRCC). The International Mobility Program (IMP) primarily includes high skill/high wage professions and is not subject to a labor market impact assessment. The number of temporary foreign workers a business can employ is limited. For more information, see the TFWP website: https://www.canada.ca/en/employment-social-development/services/foreign-workers.html 

The impact of COVID-19 on the labor force has yet to be fully realized. As of February 2022, the unemployment rate was 5.5 percent, below the pre-COVID 5.7 percent reported in February 2020. Statistics indicate women and marginalized communities were disproportionately affected by job and other economic losses during the height of the pandemic. The Canadian government administered an emergency wage benefit in response to a significant increase in unemployment caused by the pandemic. Many minority groups including women and Indigenous populations have experienced notable employment gains since the depths of the pandemic.

Canadian labor unions are independent from the government. Canada has labor dispute mechanisms in place and unions practice collective bargaining. As of 2015 (the most recent year of available data), there were 776 unions in Canada. Eight of those unions – five of which were national and three international – represented 100,000 or more workers each and comprised 45 percent of all unionized workers in Canada (https://www.canada.ca/en/employment-social-development/services/collective-bargaining-data/labour-organizations.html). Less than one third of Canadian employees belonged to a union or were covered by a collective agreement as of 2015. In June 2017, Parliament repealed legislation public service unions had claimed contravened International Labor Organization conventions by limiting the number of persons who could strike.

In March 2022, 3,000 Canadian Pacific Railway workers participated in a 2-day strike and concurrent lockout over wage, benefit, and pension concerns. The parties agreed to binding arbitration following federal government mediation.

In August 2021, 9,000 Canadian border agents went on strike over pay and work conditions. The Canadian government and border agents reached a tentative agreement on a new contract following the one-day strike.

Economic Section
490 Sussex Drive, Ottawa, Ontario
613-688-5335

The ROC has a favorable attitude towards FDI and welcomes U.S. investors. There is no discrimination against U.S. investment; however, there are some ownership limitations and licensing restrictions set by law on non-EU investment in certain sectors, such as private land ownership, media, and construction (see Limits on Foreign Control, below). The ROC promotes FDI through a dedicated agency, Invest Cyprus, which is tasked with attracting FDI in the key economic sectors of shipping, education, real estate, tourism and hospitality, energy, investment funds, filming, and innovation and startups. Invest Cyprus is the first point of contact for investors, and provides detailed information on the legal, tax, and business regulatory framework. The ROC and Invest Cyprus also promote an ongoing dialogue with investors through a series of promotion seminars each year. The Cyprus Chamber of Commerce and Industry (CCCI) is a robust organization with country-specific bilateral chambers, including the American Chamber (AmCham Cyprus), that is dedicated to promoting FDI and serving the business interests of foreign companies and trade partners operating in Cyprus.

For more information:

Invest Cyprus
9 Makariou III Avenue
Severis Building, 4th Floor
1965 Nicosia, Cyprus
Tel: +357 22 441133
Fax: +357 22 441134
Email: info@investcyprus.org.cy
Website: https://www.investcyprus.org.cy 

Cyprus Embassy Trade Center – New York
13 East 40th Street
New York, NY 10016
Phone: (212) 213-9100Fax: (212) 213-9100
Website: https://www.cyprustradeny.org/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Turkish Cypriots welcome FDI and are eager to attract investments, particularly those that will lead to the transfer of advanced technology and technical skills. Priority is also given to investments in export-oriented industries. There are no laws or practices that discriminate against FDI. The “Turkish Cypriot Investment Development Agency (YAGA)” provides investment consultancy services, guidance on the legal framework, sector specific advice, and information about investor incentives.

“Turkish Cypriot Investment Development Agency” (“YAGA”)
Tel: +90 392 – 22 82317
Website: https://investnorthcyprus.gov.ct.tr/ 

REPUBLIC OF CYPRUS

The ROC does not currently have a mandatory foreign investment screening mechanism that grants approval to FDI other than sector-specific licenses granted by relevant ministries. Invest Cyprus does grant approvals for investment under the film production incentive scheme. Invest Cyprus often refers projects for review to other agencies.

The following restrictions apply to investing in the ROC:

• Non-EU entities (persons and companies) may purchase only two real estate properties for private use (two holiday homes or a holiday home and a shop or office). This restriction does not apply if the investment property is purchased through a domestic Cypriot company or a corporation elsewhere in the EU. U.S. investment in such companies is welcome.
• Non-EU entities cannot invest in the production, transfer, and provision of electrical energy. The Council of Ministers may refuse granting a license for investment in hydrocarbons prospecting, exploration, and exploitation to a third-country national or company if that third country does not allow similar investment by Cyprus or other EU member states. ROC hydrocarbon exploration is currently led by two U.S. companies.
• Individual non-EU investors may not own more than five percent of a local television or radio station, and total non-EU ownership of any single local TV or radio station is restricted to a maximum of 25 percent.
• The right to register as a building contractor in Cyprus is reserved for citizens of EU member states. Non-EU entities are not allowed to own a majority stake in a local construction company. Non-EU physical persons or legal entities may bid on specific construction projects but only after obtaining a special license from the Council of Ministers.
• Non-EU entities cannot invest directly in private tertiary education institutions but may do so through ownership of Cypriot or EU companies.
• The provision of healthcare services on the island is subject to certain restrictions, applying equally to all non-residents.
• The Central Bank of Cyprus’s prior approval is necessary before any individual person or entity, whether Cypriot or foreign, can acquire more than 9.99 percent of a bank incorporated in Cyprus.

AREA ADMINISTERED BY TURKISH CYPRIOTS

According to the “Registrar of Companies Office,” all non-Turkish Cypriot ownership of construction companies is capped at 49 percent. Currently, the travel agency sector is closed to foreign investment. Registered foreign investors may buy property for investment purposes but are limited to one parcel or property. Foreign natural persons also have the option of forming private liability companies, and foreign investors can form mutual partnerships with one or more foreign or domestic investors.

Nothing to report.

REPUBLIC OF CYPRUS

The Ministry of Energy, Commerce and Industry (MECI) provides a “One Stop Shop” business facilitation service; contact details below. The One-Stop-Shop offers assistance with the logistics of registering a business in Cyprus to all investors, regardless of origin and size. Additionally, since September 2020, MECI offers a Fast Track Business Activation mechanism to provide efficient business registration services to eligible foreign investors who want to establish a physical presence on the island. This program has already generated interest from abroad, attracting several firms in the technology, IT, and communications sectors.

One-Stop-Shop & Point of Single Contact
Ministry of Energy, Commerce, and Industry (MECI)
13-15 Andreas Araouzos
1421 Nicosia, Cyprus
Tel. +357 22 409318 or 321
Fax: +357 22 409432
Email 1: onestopshop@meci.gov.cy
Email 2: psccyprus@meci.gov.cy 
Website: www.businessincyprus.gov.cy 

MECI’s Department of the Registrar of Companies and Official Receiver (DRCOR) provides the following services: Registration of domestic and overseas companies, partnerships, and business names; bankruptcies and liquidations; and trademarks, patents, and intellectual property matters.

Domestic and foreign investors may establish any of the following legal entities or businesses in the ROC:

• Companies (private or public);
• General or limited partnerships;
• Business/trade name;
• European Company (SE); and
• Branches of overseas companies.

The registration process takes approximately two working days and involves completing an application for approval/change of name, followed by the steps outlined in the following link: http://www.businessincyprus.gov.cy/mcit/psc/psc.nsf/All/A2E29870C32D7F17C2257857002E18C9?OpenDocument. 

At the end of 2021, there were a total of 203,545 companies registered in the ROC, 12,604 of which had been registered in 2021 (for more statistics on company registrations, please see: https://www.companies.gov.cy/en/ ).

In addition to registering a business, foreign investors, like domestic business owners, are required to obtain all permits that may be necessary under Cypriot law. At a minimum, they must obtain residence and employment permits, register for social insurance, and register with the tax authorities for both income tax and Valued Added Tax (VAT). In order to use any building or premises for business, including commerce, industry, or any other income-earning activity, one also needs to obtain a municipal license. Additionally, town planning or building permits are required for building new offices or converting existing buildings. There are many sector-specific procedures. Information on all the above procedures is available online at the link above.

The World Bank’s 2020 Doing Business report ( http://www.doingbusiness.org/rankings)  ranked Cyprus 54th out of 190 countries for ease of doing business. Among the ten sub-categories that make up this index, Cyprus performed best in the areas of protecting minority investors (21/190) and paying taxes (29/190), and worst in the areas of enforcing contracts (142/190) and dealing with construction permits (125/190). Cyprus has recorded small gains in almost all subcategories since the 2019 report, with a substantial improvement in the area of paying taxes, achieving a small overall climb in its ranking since last year. Using another metric, in the Global Competitiveness Index, issued by the World Economic Forum, Cyprus maintained its ranking of 44th out of 141 countries in the 2019 edition. The two areas where Cyprus performed the worst in this report were its small market size and relatively low innovation capability. Since 2020, the World Bank Group has discontinued the Doing Business project and is now formulating a new approach to assessing the business and investment climate in economies worldwide.

The ROC follows the EU definition of micro-, small- and medium-sized enterprises (MSMEs), and foreign-owned MSMEs are free to take advantage of programs in Cyprus designed to help such companies.

• https://www.fundingprogrammesportal.gov.cy/en/call/enabling-discovery-and-interoperability-of-federated-research-objects-across-scientific-communities/ 

Foreign investors can take advantage of the services and expertise of Invest Cyprus, an agency registered under the companies’ law and funded mainly by the state, dedicated to attracting investment.

Invest Cyprus
9A Makarios III Ave
Severis Bldg., 4th Flr.
1065 Nicosia
Tel. +357 22 441133
Fax: +357 22 441134
Email: info@investcyprus.org.cy 
Website: http://www.investcyprus.org.cy/ 

Additionally, the Association of Large Investment Projects, under the Cyprus Chamber of Commerce and Industry, can provide useful information on large ongoing investment projects:

Association of Large Investment Projects

38 Grivas Dhigenis Ave. & 3 Deligiorgis Str.,
P.O.Box 21455
1509 Nicosia
Tel: +357 22 889890
Fax: +357 22 667593
Email: bigprojects@ccci.org.cy 

Lastly, the Cyprus Country Profiler website offers some useful background on the ROC: https://www.cyprusprofile.com/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Information available on the “Registrar of Companies’” website is available only in Turkish: http://www.rkmmd.gov.ct.tr/.   An online registration process for domestic or foreign companies does not exist and registration needs to be completed in person.

The “YAGA” website ( https://investnorthcyprus.gov.ct.tr /) provides explanations and guides in English on how to register a company in the area administrated by Turkish Cypriots.

As of March 2021, the “Registrar of Companies Office” statistics indicated there were 23,133 registered companies, 429 foreign companies; and 516 offshore companies.

The area administered by Turkish Cypriots defines MSMEs as entities having fewer than 250 employees. There are several grant programs financed through Turkish aid and EU aid targeting MSMEs.

The Turkish Cypriot Chamber of Commerce (KTTO) publishes an annual Competitiveness Report on the Turkish Cypriot economy, based on the World Economic Forum’s methodology. KTTO’s 2019-2020 report ranked Northern Cyprus 107 among 141 economies, dropping eighteen places from its ranking in 2019. KTTO has not published reports since 2020.

For more information and requirements on establishing a company, obtaining licenses, and doing business visit:

“Turkish Cypriot Investment Development Agency” (“YAGA”)
Tel: +90 392 – 22 82317
Website: https://investnorthcyprus.gov.ct.tr/ 

Turkish Cypriot Chamber of Commerce (KTTO)
https://www.ktto.net/en/ 
Tel: +90 392 – 228 37 60 / 228 36 45
Fax: +90 392 – 227 07 82

REPUBLIC OF CYPRUS

The ROC does not restrict outward investment, other than in compliance with international obligations such as specific UN Security Council Resolutions. In terms of programs to encourage investment, businesses in Cyprus have access to several EU programs promoting entrepreneurship, such as the European Commission’s Next Generation EU economic recovery package, or the Erasmus program for Young Entrepreneurs, in addition to the European Investment Bank’s guarantee facilities for SMEs for projects under USD 4.8 million (EUR 4 million).

AREA ADMINISTERED BY TURKISH CYPRIOTS

Turkish Cypriot “officials” do not incentivize or promote outward investment. The Turkish Cypriot authorities do not restrict domestic investors.

REPUBLIC OF CYPRUS

The ROC achieved a score of 4 out of 6 in the World Bank’s composite Global Indicators of Regulatory Governance score (based on data collected December 2015 to April 2016) designed to explore good regulatory practices in three core areas: publication of proposed regulations, consultation around their content, and the use of regulatory impact assessments. For more information, please see: http://rulemaking.worldbank.org/en/data/explorecountries/cyprus .

U.S. companies competing for ROC government tenders have noted concerns about opaque rules and possible bias by technical committees responsible for preparing specifications and reviewing tender submissions. Overall, however, procedures and regulations are transparent and applied in practice by the government without bias towards foreign investors. The ROC actively promotes good governance and transparency as part of its administrative reform action plan.

In line with the above plan and EU requirements, the ROC launched the National Open Data Portal ( https://www.data.gov.cy/ ) in 2016 to increase transparency in government services. Government agencies are now required to post publicly available information, data, and records, on the entire spectrum of their activities. The number of data sets available through this portal has been growing rapidly, although much of it is in Greek only.

Several agencies and non-governmental organizations (NGOs) share competency on fostering competition and transparency, including the ROC Commission for the Protection of Competition ( http://www.competition.gov.cy/competition/competition.nsf/index_en/index_en?OpenDocument ), the Competition and Consumer Protection Service, under MECI ( https://meci.gov.cy/en/departments-services/consumer-protection-service ), the Cyprus Consumers Association ( https://www.katanalotis.org.cy/ ), and the Cyprus Securities and Exchange Commission ( https://www.cysec.gov.cy/en-GB/home/ ).

Government and independent oversight agencies such as the Cyprus Securities and Exchange Commission actively promote companies’ environmental, social, and governance (ESG) disclosure to facilitate transparency. In 2017, the European Commission published guidelines to help companies disclose environmental and social information, which it supplemented in 2019 with guidelines on reporting climate-related information. These guidelines are not mandatory, but many progressive local companies are adopting them to secure their sustainability and long-term gains.

Most laws and regulations are published only in Greek and obtaining official English translations can be difficult, but expert analysis in English is generally available from local law and accounting firms when the regulation affects international investment or business activity. When passing new legislation or regulations, Cypriot authorities follow the EU acquis communautaire – the body of common rights and obligations that is binding on all EU members. A formal procedure of public notice and comment is not required in Cyprus, except for specific types of laws. In general, the ROC will seek stakeholder feedback directly. Draft legislation must be published in the Official Gazette before it is debated in the House to allow stakeholders an opportunity to submit comments. The ROC House of Representatives typically invites specific stakeholders to offer their feedback when debating bills. Draft regulations, on the other hand, need not be published in the Official Gazette prior to being approved.

In an effort to contribute to global tax transparency, the ROC has adopted the Standard of Automatic Exchange of Information developed by the Organization for Economic Co-Operation and Development (OECD) known as Common Reporting Standard (CRS). Since 2016, the ROC Tax Department requires all financial institutions to confirm their clients’ jurisdiction(s) of Tax Residence and Respective Tax Identification Number, if applicable. Additionally, the ROC has signed the U.S. Foreign Account Tax Compliance Act (FATCA), allowing Cypriot tax authorities to share information with U.S. counterparts.

Public finances and debt obligations are published as part of the annual budget process.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The level of transparency for “lawmaking” and adoption of “regulations” in the “TRNC” lags behind U.S. and EU standards. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. Draft legislation or regulations are made available for public comment for 21 days after the legislation is sent to “parliament.” Almost all legislation and regulations are published only in Turkish.

REPUBLIC OF CYPRUS

As an EU member state since May 1, 2004, the Republic of Cyprus must ensure compliance with the acquis communautaire. The acquis is constantly evolving and comprises of Treaties, international agreements, legislation, declarations, resolutions, and other legal instruments. EU legislation, for its part, is subdivided into:

• Regulations, which are directly applicable to member states and require no further action to have legal effect;
• Directives, which are addressed to and are binding on member states, but the member state may choose the method by which to implement the directive. Generally, a member state must enact national legislation to comply with a directive;
• Decisions, which are binding on those parties to whom they are addressed; and
• Recommendations and opinions, which have no binding force.

When there is conflict between European law and the law of any member state, European law prevails; the norms of national law have to be set aside, under the principle of EU law primacy or supremacy. The ROC is often slow to transpose EU directives into local law, but transposition is generally consistent with EU intent when it happens.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The entire island of Cyprus is considered EU territory, but the acquis communautaire is suspended in the areas administered by Turkish Cypriots and the north is not considered to be within the EU customs area.

REPUBLIC OF CYPRUS

Cyprus is a common law jurisdiction and its legal system is based on English Common Law for both substantive and procedural matters. Cyprus inherited many elements of its legal system from the United Kingdom, including the presumption of innocence, the right to due process, the right to appeal, and the right to a fair public trial. Courts in Cyprus possess the necessary powers to enforce compliance by parties who fail to obey judgments and orders made against them. Public confidence in the integrity of the Cypriot legal system remains strong, although long delays in courts, and the perceived failure of the system collectively to punish those responsible for the island’s financial troubles in 2013 have tended to undermine this trust in recent years.

International disputes are resolved through litigation in Cypriot courts or by alternative dispute resolution methods such as mediation or arbitration. Businesses often complain of court gridlock and judgments on cases generally taking years to be issued, particularly for claims involving property foreclosure.

AREA ADMINISTERED BY TURKISH CYPRIOTS

Investors should note the EU’s acquis communautaire is suspended in the area administered by the Turkish Cypriots.

The “TRNC” is a common law jurisdiction. Judicial power other than the “Supreme Court” is exercised by the “Heavy Penalty Courts,” “District Courts,” and “Family Courts.” Turkish Cypriots inherited many elements of their legal system from British colonial rule before 1960, including the right to appeal and the right to a fair public trial. There is a high level of public confidence in the judicial system in the area administrated by Turkish Cypriots. The judicial process is procedurally competent, fair, and reliable.

Foreign investors can make use of all the rights guaranteed to Turkish Cypriots. Commercial courts and alternative dispute resolution mechanisms are not available in the “TRNC.” The resolution of commercial or investment disputes through the “judicial system” can take several years. The Turkish Cypriot administration has trade and industry “law” and contractual “law.” The Turkish Cypriot administration has several trade and economic cooperation agreements with Turkey. For more information about “legislation,” visit https://investnorthcyprus.gov.ct.tr/ . Because the “TRNC” is not recognized internationally, “TRNC court” decisions and orders may be difficult to enforce outside of the area administered by Turkish Cypriots or Turkey.

REPUBLIC OF CYPRUS

For more information on laws affecting incoming foreign investment see https://www.investcyprus.org.cy/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Visit the “YAGA” website, for more information about laws and regulations on FDI: https://investnorthcyprus.gov.ct.tr/ 

REPUBLIC OF CYPRUS

The oversight agency for competition is the Commission for the Protection of Competition: http://www.competition.gov.cy/competition/competition.nsf/index_en/index_en?OpenDocument 

AREA ADMINISTERED BY TURKISH CYPRIOTS

The oversight “agency” for competition is the “Competition Board:” http://www.rekabet.gov.ct.tr/ 

REPUBLIC OF CYPRUS

Private property may, in exceptional instances, be expropriated for public purposes, in a non-discriminatory manner, and in accordance with established principles of international law and consistent with EU law, rights, and directives. The expropriation process entitles investors to proper compensation, whether through mutual agreement, arbitration, or the local courts. Foreign investors may claim damages resulting from an act of illegal expropriation by means other than litigation. Investors and lenders to expropriated entities receive compensation in the currency in which the investment was made. In the event of any delay in the payment of compensation, the Government is also liable for the payment of interest based on the prevailing six-month interest rate for the relevant currency. Like most other jurisdictions, banks in Cyprus are expected to complete the switch from the London Inter-Bank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) by June 2023.

Following a financial crisis in 2013, the ROC took extraordinary steps as part of the Memorandum of Understanding (MOU) between the Republic of Cyprus and international lenders (European Commission, European Central Bank, and the IMF – the “troika”). Depositors in two of the largest Cypriot banks were forced to take a cut on almost half of their deposits exceeding insured limits. This action sparked 3,000 lawsuits against the ROC and the banks, but the European Court of Justice ruled that the MOU with the troika was not an unlawful act and dismissed actions for compensation. The ROC has not taken any similar extraordinary actions since.

AREA ADMINISTERED BY TURKISH CYPRIOTS

Private property may be expropriated for public purposes. The expropriation process entitles investors to proper compensation. Foreign investors may claim damages resulting from an act of illegal expropriation by means other than litigation.

In expropriation cases involving private owners, they are first notified, the property is then inspected, and, if an agreement is reached regarding the amount, then the owner is compensated. In cases where the owner declines the compensation package, the case relegated to local “courts” for a final decision.

Because the “TRNC” is not recognized internationally, “TRNC court” decisions and orders may be difficult to enforce outside of the area administered by Turkish Cypriots or Turkey.

REPUBLIC OF CYPRUS

New insolvency legislation introduced in 2015 helped overhaul bankruptcy procedures, with a view to resolving the island’s high levels of non-performing loans (NPLs). Bankruptcy procedures can be initiated by a creditor through compulsory liquidation or by the debtor through voluntary liquidation. The court can impose debt rescheduling, in cases where aggregate liabilities do not exceed USD 409,500 (EUR 350,000) and individuals with minimal assets and income may apply to the court via the Insolvency Service for a debt relief order of up to USD 29,250 (EUR 25,000). Discharge from bankruptcy is automatic after three years, provided all debtor assets are sold and the proceeds distributed to creditors. Fraudulent alienation of assets prior to bankruptcy and non-disclosure of assets draws criminal sanctions under the new legislation. Cypriot authorities are closely monitoring implementation of the new insolvency framework. Despite concerted efforts by Cypriot authorities and the banks NPLs remained stubbornly high at 28.5 percent of total loans at the end of 2019, compared to 30.3 percent a year earlier, although two major banks are in the process of selling significant NPL portfolios to investors.

The World Bank’s 2020 Doing Business report ranked Cyprus 31st from the top among 190 countries in terms of the ease with which it resolves insolvency. For additional information, please see: https://www.doingbusiness.org/en/data/exploreeconomies/cyprus#DB_ri  .

AREA ADMINISTERED BY TURKISH CYPRIOTS

In 2013, the “TRNC” passed a debt restructuring “law” aimed at providing incentives to restructure debts and NPLs separately. Turkish Cypriots also have a bankruptcy “law” that defines “collecting power;” conditions under which a creditor can file a bankruptcy application; and the debtor’s bankruptcy application, and agreement plans.

As of the end of the third quarter of 2021, NPLs were 1.5 billion Turkish Lira (USD 10 million).

REPUBLIC OF CYPRUS

The ROC offers investors one of the lowest corporate tax rates in the EU at 12.5 percent, although this rate will likely increase to 15.0 percent in the foreseeable future, in line with global trends. Cyprus’ other tax advantages include:

• One of the EU’s lowest top statutory personal income tax rates at 35 percent;
• An extensive double tax treaties network with 67 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad;
• No withholding tax on dividend income received from subsidiary companies abroad under certain conditions.
• No withholding tax on dividends received from EU subsidiaries; and
• Low Tonnage Tax for shipping.

Effective November 1, 2020, the ROC abolished a program offering Cypriot citizenship through foreign investment, due to abuses. The abrupt abolition of the citizenship program has left a considerable number of high-end residential properties (each valued at around USD 2 million or more) up for sale. The ROC continues to offer a Residency by Investment program, requiring a minimum investment of USD 360,000 (EUR 300,000).

In recent years, the ROC has harmonized and enhanced its regulations regarding investment funds, becoming a more attractive jurisdiction for managing and home-basing investment funds. As a result, the number of financial services companies regulated by the Cyprus Securities and Exchange Commission (CySEC) has tripled in the last eight years, from 249 in 2012 to 746 in 2019, with total assets under management reaching USD 10.2 billion (EUR 9.1 billion) in 2019. Brexit, the withdrawal of the United Kingdom from the EU since January 31, 2020, has also prompted several financial services companies based in the UK to relocate to Cyprus over the past year – a trend ROC authorities are trying to encourage.

Since 2017, the ROC also offers a program to attract foreign investment to Cyprus through third country – i.e., non-European Union – innovative start-ups. The plan invites third-country nationals with start-up capital of at least USD 58,500 (EUR 50,000), undergraduate-level education, and fluent either in Greek or English, to set up their headquarters and tax residence in Cyprus, provided their proposed business is certifiably innovative. The plan made 150 visas available to eligible investors, valid for two years, provided the relevant business is successful. The program was renewed in February 2019 for two more years.

In May 2021, the European Commission approved the ROC’s Recovery and Resilience Plan (RRP), which forms part of the Next Generation EU recovery instrument, envisioning broad-reaching reforms from 2021-26 in exchange for $1.3 billion in EU funding ($1.1 billion in grants and $220 million in loans). Around 41 percent of this funding will go to green transition projects, and another 23 percent to digital transition, with residual funding for many other reforms, including encouraging innovation and advancing the role of women in business. More information on Cyprus’ RRP available at: https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility/cyprus-recovery-and-resilience-plan_en .

AREA ADMINISTERED BY TURKISH CYPRIOTS

There are incentives for tourism and industrial-related investments, including:

• 100 to 200 percent investment allowance on the initial fixed capital investment expenditure for certain regions and sectors;
• Exemption from corporate tax and income tax until the above-mentioned allowance percentages are met;
• Exemption from custom duties when importing machinery and equipment the projects;
• Exemption from construction license fees;
• Exemption from VAT for both imported and locally purchased machinery and equipment; and
• Reduction of stamp duty and mortgage procedure fees.

REPUBLIC OF CYPRUS

The lead government agency handling areas subject to a special customs regime is the Department of Customs and Excise. Specific rules for the two main areas, namely Customs Warehouses and Free Zones, are listed below and are fully harmonized with equivalent EU norms: https://www.mof.gov.cy/mof/customs/customs.nsf/All/6D61C14C3E95345CC22572A6003BCBD5?OpenDocument .

There are two types of Free Zones:

• Control Type I Free Zone, in which controls are principally based on the existence of a fence; and
• Control Type II Free Zone, in which controls are principally based on the formalities carried out in accordance with the requirements of the customs warehousing procedure.

Cyprus has two Control Type II Free Zones (FZs) located in the main seaports of Limassol and Larnaca, which are used for transit trade. These areas are treated as outside normal EU customs territory. Consequently, non-EU goods placed in FZs are not subject to import duties, VAT, or excise tax. FZs are governed under the provisions of relevant EU and ROC legislation. The Department of Customs has jurisdiction over both normal zones and FZs and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods. Additionally, the MECI has management oversight over the Larnaca FZ.

A Customs Warehouse can be set up anywhere in the ROC, provided the right criteria are met and meet with the approval of the Department of Customs. For more information, interested parties may contact:

Department of Customs and ExciseMichali Karaoli Str.1096 NicosiaTel. +357 22 601754 or 55Fax: +357 22 302018Email: headquarters@customs.mof.gov.cy  Website: https://www.mof.gov.cy/mof/customs/customs.nsf/index_en/index_en?OpenDocument 

When larger projects are involved, potential investors interested in establishing their own customs warehouse or seeking to engage existing customs warehouses may also contact the One Stop Shop ( https://www.businessincyprus.gov.cy/ ) for guidance on identifying suitable locations.

Additional information on the Limassol and Larnaca FZs can be obtained from:

Cyprus Ports AuthorityP.O. Box 220071516 Nicosia23 Kritis Street1061 NicosiaTel. +357 22 817200, X-0Fax: +357 22 762050Email: cpa@cpa.gov.cy Website: https://www.cpa.gov.cy/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Famagusta has a “free port and zone,” which is regulated by the Free Ports and Free Zones “Law.”

Operations and activities permitted there include:

• Engaging in all kinds of industry, manufacturing, and production;
• Storage and export of goods imported to the “Free Port and Zone”;
• Assembly and repair of goods imported to the “Free Port and Zone”;
• Building, repair, and assembly of ships; and
• Banking and insurance services.

REPUBLIC OF CYPRUS

There are no requirements for local sourcing, ownership, or employment. Hiring Cypriot and EU staff is quite easy, though a tight labor market prior to the COVID-19 pandemic strained labor supply in certain fields. Securing work permits for non-EU staff can be difficult, particularly in sectors where there is abundant local labor readily available. In order to overcome this problem, a foreign investor must explain to the satisfaction of ROC authorities why the non-EU staff in question is essential to the business. As with other such matters, Invest Cyprus can assist investors in overcoming hiring problems (see Section 2 on Business Facilitation, and Section 12 on Labor Policies and Practices.)

AREA ADMINISTERED BY TURKISH CYPRIOTS

In order to recruit foreign labor, companies or investors apply to the local labor authorities for “work permits.” Once they apply, the vacancy is announced locally. Priority is given to local “TRNC citizens” with the required expertise or skillset. If the skillset is not available locally, employers can recruit foreign labor.

In evaluating a foreign investment incentives application, the “State Planning Office” carries out a feasibility study regarding the type of investment. For more information on employment, visit the labor authorities’ website: http://csgb.gov.ct.tr/en-us/ .

REPUBLIC OF CYPRUS

EU nationals and companies domiciled in any EU country are not subject to any restrictions when buying property in the ROC. By contrast, Cypriot law imposes significant restrictions on direct foreign ownership of real estate by non-EU individuals. Non-EU persons and entities may purchase a maximum of two real estate properties for private use (defined as a holiday home built on land of up to 4,014 square meters; plus a second home or office of up to 250 square meters, or shop of up to 100 square meters). Exceptions can be made for projects requiring larger plots of land but are difficult to obtain and rarely granted. This restriction applies to non-EU citizens or non-EU companies. Foreign investment in Cypriot or EU companies is welcome, but a legal entity is deemed to be controlled by non-EU citizens if it meets any of the conditions listed below:

• 50 percent or more of its board members are non-EU citizens; or
• 50 percent or more of its share capital belongs to non-EU citizens; or
• Control (50 percent or more) belongs to non-EU citizens; or
• Either the company’s Memorandum or Articles of Association provides authority to a non-EU citizen securing the company’s activities are conducted based on his/her will during the real estate acquisition period. In the case that the authority is provided to two or more persons, a legal entity is considered to be controlled by non-EU citizens if 50 percent or more of the people granted such authority are non-EU citizens.

Legal requirements and procedures for acquiring and disposing of property in Cyprus are complex, but professional help from real estate agents and developers to ease the burden is readily available. The ROC Department of Lands and Surveys keeps excellent records and follows internationally accepted procedures. Non-residents are allowed to sell their property and transfer abroad the amount originally paid, plus interest or profits, without restriction.

Additionally, there are restrictions on investing in Turkish Cypriot property located in the ROC. The Turkish Cypriot Property Management Service (TCPMS), established in 1991, administers properties of Turkish Cypriots who are not ordinarily residents of the government-controlled area. This service acts as the temporary custodian for such properties until a comprehensive political settlement is reached. The TCPMS is mandated to administer properties under its custodianship “in the manner most beneficial for the owner.” Ownership of Turkish Cypriot properties cannot change (except for inheritance purposes) except in exceptional cases when this is deemed beneficial for the owner or necessary for the public interest.

The World Bank’s 2020 Doing Business report ranked Cyprus 71st among 190 countries in terms of efficiency and quality for registering property.

AREA ADMINISTERED BY TURKISH CYPRIOTS

Special Note: Investors are advised to consider the risks associated with investing in immovable property in the area administered by Turkish Cypriots. Potential investors are strongly advised to obtain independent legal advice prior to purchasing or leasing property there. Purchase or use of property in the area administered by Turkish Cypriots is a contentious issue in Cyprus, as per the following note posted on the Republic of Cyprus Ministry of Foreign Affairs website: http://www.mfa.gov.cy/mfa/properties/occupiedarea_properties.nsf/index_en/index_en?OpenDocument .

For property in the Turkish Cypriot-administered areas, only pre-1974 title deeds are uncontested. In response to the European Court of Human Rights’ (ECHR) 2005 ruling that Turkey’s “subordinate local authorities” in Cyprus had not provided an adequate local remedy for property disputes, Turkish Cypriot authorities established an Immovable Property Commission (IPC) to handle property claimed by Greek Cypriots. In a March 2010 ruling, the ECHR recognized the IPC as a domestic remedy, but the ROC does not consider the IPC to be a legitimate body. As of March 9, 2022, the IPC had received 7,085 applications, of which 1, 311 have been concluded through friendly settlements, and 34 through formal hearings.

On January 19, 2010, the UK Court of Appeal enforced an earlier court decision taken in the ROC in support of a Greek Cypriot person’s trespassing claim effectively voiding the transfers of Greek Cypriot property in the Turkish Cypriot-administered areas. This landmark decision also establishes precedent in cases where foreign investors purchasing disputed properties outside of the ROC-controlled area can be found liable for damages.

There are significant restrictions on the foreign ownership of real estate. A 2008 “law” requires non- “TRNC” residents to apply to the “Council of Ministers” for permission to purchase real estate, and non-residents are limited to a single small property. Foreigners can, however, own or control more real estate through a “TRNC” registered company.

REPUBLIC OF CYPRUS

ROC intellectual property rights (IPR) law is harmonized with EU directives and the ROC is party to major international IPR instruments. The country promotes itself as a low-tax, high protection (i.e., EU standards) destination for IPR.

Cypriot law (Law 207(I) (2012)) places the burden of proof on the defendant in cases of IPR infringement. The law also allows the police to assess samples of pirated articles in lieu of the whole shipment and introduces the alternative for out-of-court settlement in some cases. Other important IPR laws include Law 103 (2007) on unfair commercial practices and Law 133(I) (2006) strengthening earlier legislation targeting copyright infringement. The Department of Customs and the Police confiscate thousands of counterfeit items every year, including articles of clothing, luggage, accessories, and pirated optical media.

Primary responsibility for enforcing ROC IPR legislation rests with the Cyprus Police and the Department of Customs. The Competition and Consumer Protection Service of the Ministry of Energy, Commerce, and Industry (MECI) also plays a supportive role, while the Registrar of Companies and Official Receiver handles administration of patents and copyrights.

For additional information about treaty obligations and points of contact at local IPR offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

REPUBLIC OF CYPRUS

The Cyprus Stock Exchange (CSE), launched in 1996, is one of the EU’s smallest stock exchanges, with a capitalization of USD 3.7 billion (EUR 3.4 billion) as of March 2022. The CSE and the Athens Stock Exchange (ASE) have operated from a joint trading platform since 2006, allowing capital to move more freely from one exchange to the other, even though both exchanges retain their autonomy and independence. The joint platform has increased capital available to Cypriot firms and improved the CSE’s liquidity, although its small size remains a constraint. The private sector has access to a variety of credit instruments, which has been enhanced through the operation of private venture capital firms. Credit is allocated on market terms to foreign and local investors alike. Foreign investors may acquire up to 100 percent of the share capital of Cypriot companies listed on the CSE with the notable exception of companies in the banking sector.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There is no stock exchange in the area administrated by Turkish Cypriots and no foreign portfolio investment. Foreign investors are able to get credit from the local market, provided they have established domestic legal presence, majority-owned (at least 51 percent) by domestic companies or persons.

REPUBLIC OF CYPRUS

At the end of November 2021, the value of total deposits in ROC banks was USD 56.3 billion (EUR 51.2 billion), and the value of total loans was USD 32.6 billion (EUR 29.6 billion). Currently, there are seven local banks in Cyprus offering a full range of retail and corporate banking services – the largest two of which are the Bank of Cyprus and Hellenic Bank – plus another two dozen or so subsidiaries or branches of foreign banks offering more specialized services. The full list of authorized credit institutions in Cyprus is available on the Central bank of Cyprus website: https://www.centralbank.cy/en/licensing-supervision/banks/register-of-credit-institutions-operating-in-cyprus .

The banking sector has made significant progress since the 2013 financial crisis resulted in a “haircut” of uninsured deposits, followed by numerous bankruptcies and consolidation. The island’s two largest banks – Bank of Cyprus and Hellenic – are now adequately capitalized and have returned to profitability. However, the profitability of the banking sector as a whole is challenged by low interest margins, a high level of liquidity, and a still-elevated volume of NPLs. NPLs in Cyprus are the second-highest in the EU at 15.1 percent of total loans at the end of November 2021, compared to 19.1 percent a year earlier, albeit considerably lower than in 2014, when they reached 47.8 percent. Banks continue striving to reduce NPLs further, either by selling off portfolios of NPLs or using recently amended insolvency and foreclosure frameworks. The economic impacts of the COVID-19 pandemic and political pressure to protect citizens under the current extraordinary circumstances makes reducing NPLs difficult. Aggregate banking sector data is available here: https://www.centralbank.cy/en/licensing-supervision/banks/aggregate-cyprus-banking-sector-data .

Cyprus has a central bank – the Central Bank of Cyprus – which forms part of the European Central Bank. Foreign banks or branches are allowed to establish operations in Cyprus. They are subject to Central Bank of Cyprus supervision, just like domestic banks. JPMorgan, Citibank, Bank of New York Mellon, and HSBC currently provide U.S. dollar correspondent banking services to ROC banks.

Opening a personal or corporate bank account in Cyprus is straightforward, requiring routine documents. But because of a history of money-laundering concerns, banks now carefully scrutinize these documents and can conduct extensive due diligence checks on sources of wealth and income. A local bank account is not necessary for personal household expenses. Opening a corporate bank account is mandatory when registering a company in Cyprus.

Since 2018, Cyprus has taken steps to address recognized regulatory shortcomings in combatting illicit finance in its international banking and financial services sector, tightening controls over non-resident shell companies and bank accounts. Cyprus’ first National Risk Assessment (NRA) of money laundering and terrorist financing, released in November 2018, is available at: http://mof.gov.cy/en/press-office/announcements/national-risk-assessment-of-money-laundering-and-terrorist-financing-risks-cyprus . Cyprus is a member of the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation report of the Cypriot banking sector, released December 2021, can be found at: https://www.coe.int/en/web/moneyval/jurisdictions/cyprus .

AREA ADMINISTERED BY TURKISH CYPRIOTS

The “Central Bank” oversees and regulates local, foreign, and private banks. In addition to the “Central Bank” and the “Development Bank”, there are 21 banks in the area administrated by Turkish Cypriots, of which 16 are Turkish Cypriot-owned banks, and five are branch banks from Turkey. Banks are required to follow “know-your-customer” (KYC) and AML “laws,” which are regulated by the “Ministry of Economy and Energy,” and supervised by the “Central Bank,” but AML practices do not meet international standards. Due to non-recognition issues, Turkish Cypriot banks do not qualify for a SWIFT number to facilitate international transactions. All international transfers depend on routing through Turkish banks.

In the third quarter of 2021, total deposits, which have the largest share in the sector’s total liabilities, reached 48,8 billion TL (USD 3.3 billion).

As of the end of the third quarter of 2021 , NPLs reached 1.5 Billion Turkish Lira (USD 10 million).

REPUBLIC OF CYPRUS

The Parliament passed legislation in March 2019 providing for the establishment of a National Investment Fund (NIF) to manage future offshore hydrocarbons and other natural resources revenue. Section 29 of the NIF Law specifies that the Corporation to be set up shall invest the Fund in a diversified manner with a view to maximizing risk-adjusted financial returns and in a manner consistent with the portfolio management by a prudent institutional investor. The Fund is precluded from investing in securities issued by a Cypriot issuer (including the state) or in real estate located in Cyprus. This provision safeguards against the possibility of speculative development catering to the Fund and political interference favoring domestic investments for purposes other than the best interests of the Fund and the Cypriot people as a whole. Additionally, Section 30 of the law provides that the fund cannot invest, directly or indirectly, to acquire more than five percent of any one company or legal entity. The fund is not yet operational. Regulations for the NIF are being drafted and will require legislative approval, and it will be several years before there are any revenues generated from the ROC’s hydrocarbon assets.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There is no established sovereign wealth fund.

REPUBLIC OF CYPRUS

The ROC maintains exclusive or majority-owned stakes in more than 40 SOEs and is making slow progress towards privatizing some of them (see sections on Privatization and OECD Guidelines on Corporate Governance of SOEs). There is no comprehensive list of all SOEs available but the most significant are the following:

• Electricity Authority of Cyprus (EAC);
• Cyprus Telecommunications Authority (CyTA);
• Cyprus Sports Organization;
• Cyprus Ports Authority;
• Cyprus Broadcasting Corporation (CyBC);
• Cyprus Theatrical Organization; and
• Cyprus Agricultural Payments Organization.

These SOEs operate in a competitive environment (domestically and internationally) and are increasingly responsive to market conditions. The state-owned EAC monopoly on electricity generation and distribution ended in 2014, although competition remains difficult given the small market size and delays in implementing new market rules. As an EU Member State, Cyprus is a party to the WTO Government Procurement Agreement (GPA).

OECD Guidelines on Corporate Governance are not mandatory for ROC SOEs, although some of the larger SOEs have started adopting elements of corporate governance best practices in their operating procedures. Each of the SOEs is subject to dedicated legislation. Most are governed by a board of directors, typically appointed by the government at the start of its term, and for the duration of its term in office. SOE board chairs are typically technocrats, affiliated with the ruling party. Representatives of labor unions and minority shareholders contribute to decision making. Although they enjoy a fair amount of independence, they report to the relevant minister. SOEs are required by law to publish annual reports and submit their books to the Auditor General.

AREA ADMINISTERED BY TURKISH CYPRIOTS

In the area administrated by Turkish Cypriots, there are several “state-owned enterprises” and “semi-state-owned enterprises,” usually common utilities and essential services.

In the Turkish Cypriot administered area, the below-listed institutions are known as “public economic enterprises” (POEs), “semi-public enterprises” and “public institutions,” which aim to provide common utilities and essential services.

Some of these organizations include:

• Turkish Cypriot Electricity Board (KIBTEK);
• BRTK – State Television and Radio Broadcasting Corporation;
• Cyprus Turkish News Agency;
• Turkish Cypriot Milk Industry;
• Cypruvex Ltd. – Citrus Facility;
• EMU – Eastern Mediterranean Foundation Board;
• Agricultural Products Corporation;
• Turkish Cypriot Tobacco Products Corporation;
• Turkish Cypriot Alcoholic Products LTD;
• Coastal Safety and Salvage Services LTD; and
• Turkish Cypriot Development Bank.

REPUBLIC OF CYPRUS

The ROC has made limited progress towards privatizations, despite earlier commitments to international creditors in 2013 to raise USD 1.6 billion (EUR 1.4 billion) from privatizations by 2018. In 2017, opposition parties passed legislation abolishing the Privatizations Unit, an independent body established March 2014. A bill providing the transfer of Cyprus Telecommunications Authority (CyTA) commercial activities to a private legal entity, with the government retaining majority ownership, has been pending since March 2018. In December 2015, under the threat of strikes, the government reversed earlier plans to privatize the Electricity Authority of Cyprus (EAC). However, in recent years, the EAC has been forced to unbundle its operations in line with Cyprus Energy Regulatory Authority (CERA) recommendations and EU regulations. The EAC has created independent units for its core regulated activities, namely Transmission, Distribution, Generation, and Supply. Private firms have been offering renewable energy generation since 2003 and electricity supply since January 1, 2021.

Despite slow progress in electricity and telecommunications, the current administration continues pursuing privatizations in other areas. In August 2020, the government assigned the Larnaca marina and port privatization project to a Cyprus-Israeli consortium, based on a 40-year lease agreement. The project, starting in April 2022, will be completed in four phases by 2037. It provides for port infrastructure, a marina, land redevelopment, a road network, green areas, parks and pedestrian areas as well as residential units and catering and recreation establishments. At a cost of about EUR1.2 billion, this project will be the biggest investment in Cyprus so far.

The government also continues efforts to sell the state lottery, find long-term investors to lease state-owned properties in the Troodos area, and forge a strategic plan on how to handle the Cyprus Stock Exchange.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The airport at Ercan and K-Pet Petroleum Corporation have been converted into public-private partnerships. The concept of privatization continues to be controversial in the Turkish Cypriot community.

In March 2015, Turkish Cypriot authorities signed a public-private partnership agreement with Turkey regarding the management and operation of the water obtained from an underwater pipeline funded by Turkey. Within the area administrated by Turkish Cypriots, there has also been discussion about privatizing the electricity authority “KIBTEK”, Turkish Cypriot telecommunications operations, and the seaports.

REPUBLIC OF CYPRUS

In recent years, responsible business conduct (RBC) awareness among both producers and consumers is growing in Cyprus. Leading foreign and domestic enterprises tend to follow generally accepted RBC principles, and firms pursuing these practices tend to be viewed more favorably by the public. The Cyprus Stock Exchange is among the entities imposing a responsible code of conduct. Most professional associations also promote ethical business conduct among their members, including the Cyprus Bar Association, and the Institute of Certified Public Accountants of Cyprus. For example, the Cyprus Integrity Forum promotes transparency and accountability in business through its Business Integrity Forum certification program – see: https://cyprusintegrityforum.org/business-integrity-forum/ .

The ROC does not specifically adhere to OECD Guidelines for Multinational Enterprises; however, multinationals are expected to follow generally accepted RBC principles. ROC authorities have made some initial soundings considering the possibility of eventually joining the Extractive Industries Transparency Initiative (EITI – https://www.eiti.org/ ).

AREA ADMINISTERED BY TURKISH CYPRIOTS

RBC awareness has grown among both producers, consumers and business in the area administrated by Turkish Cypriots. Firms pursuing these practices tend to be viewed favorably by the public.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

REPUBLIC OF CYPRUS

Promoting green investments is high on the ROC government’s agenda as it looks to make gains toward a green transition. The ROC Recovery and Resilience Plan under the EU’s Next Generation EU recovery instrument envisions a total of 58 reforms in exchange for $1.3 billion in EU funding ($1.1 billion in grants and $220 million in loans). Fully 41 percent of the plan’s allocation for reforms and investments support climate objectives, ranging from green taxation, energy efficiency and renewable energy, and promoting more sustainable transport modes.

REPUBLIC OF CYPRUS

Corruption continues to undermine growth and investment in the ROC, despite the existence of a strong-anti corruption framework. Ninety-five percent of Cypriots think the problem of corruption is widespread, compared to an average of 71 percent in the EU, according to a Eurobarometer survey on corruption conducted by the European Commission in December 2019. In the same survey, 60 percent of Cypriots said they were personally affected by corruption in their daily life, compared to an average of just 26 across the EU. Perhaps even more alarmingly, 69 percent of Cypriots said they thought the level corruption had increased in the past three years, against 42 percent in the EU, who thought the same for their countries. Cypriots put political parties at the top of their list of groups they thought perpetrated corruption (at 63 percent), followed by the healthcare system (59 percent), the police/customs (53 percent), and officials awarding public tenders (52 percent). Corruption, both in the public and private sectors, constitutes a criminal offense. Under the Constitution, the Auditor General controls all government disbursements and receipts and has the right to inspect all accounts on behalf of the Republic, and fear of the Auditor General’s scrutiny is widespread. Government officials sometimes manage procurement efforts with greater concern for the Auditor General than for getting the best outcome for the taxpayer. Private sector concerns focus on the inertia in the system, as reflected in the Auditor General’s annual reports, listing hundreds of alleged incidents of corruption and mismanagement in public administration that usually remain unpunished or unrectified.

Transparency International, the global anti-corruption watchdog, ranked Cyprus 52nd out of 180 countries in its 2021 Corruption Perception Index – from 42nd the year before. Disagreements between the Berlin-based headquarters of Transparency International and its Cypriot division in 2017 led to the dis-accreditation of the latter in 2017 and the launch of a successor organization on the island called the Cyprus Integrity Forum (contact details follow).

GAN Integrity, a business anti-corruption portal with offices in the United States and Denmark, released a report on corruption in Cyprus April 2018 noting the following: “Although Cyprus is generally free from corruption, high-profile corruption cases in recent years have highlighted the presence of corruption risks in the Cypriot banking sector, public procurement, and land administration sector. Businesses may encounter demands for irregular payments, but the government has established a strong legal framework to combat corruption and generally implements it effectively. Bribery, facilitation payments and giving or receiving gifts are criminal offenses under Cypriot law. The government has a strong anti-corruption framework and has developed effective e-governance systems (the Point of Single Contact and the e-Government Gateway project) to assist businesses.” The report can be accessed at: https://www.ganintegrity.com/portal/country-profiles/cyprus/ .

Cyprus cooperates closely with EU and other international authorities to fight corruption and provide mutual assistance in criminal investigations. Cyprus ratified the European Convention on Mutual Assistance in Criminal Matters. Cyprus also uses the foreign Tribunal Evidence Law, Chapter 12, to execute requests from other countries for obtaining evidence in Cyprus in criminal matters. Additionally, Cyprus is an active participant in the Council of Europe’s Multidisciplinary Group on Corruption. Cyprus signed and ratified the Criminal Law Convention on Corruption and has joined the Group of States against Corruption in the Council of Europe (GRECO). GRECO’s second compliance report on Cyprus, released November 17, 2020, is available at: https://www.coe.int/en/web/greco/evaluations/cyprus .

Cyprus is also a member of the UN Anticorruption Convention but it is not a member of the OECD Convention on Combating Bribery.

Government agencies responsible for combating corruption: 

Financial Crime Unit
Cyprus Police Headquarters
Athalassa
1478 Nicosia
Tel. +357 22 808080
E-mail: fcu@police.gov.cy
Website: https://www.police.gov.cy/police/police.nsf/index_gr/index_gr?opendocument

Unit for Combating Money Laundering (MOKAS)
7 Pericleous Str.
2020 Strovolos
Tel. +357 22 446004
E-mail: mokas@mokas.law.gov.cy
Website: http://www.law.gov.cy/law/mokas/mokas.nsf/index_en/index_en?OpenDocument

Auditor General of the Republic
6 Deligiorgi Str.
1406 Nicosia
Tel. +357 22 401300
E-mail: omichaelides@audit.gov.cy
Website: http://www.audit.gov.cy/audit/audit.nsf/home/home?opendocument

Anti-corruption NGO: 

Cyprus Integrity Forum (CIF)
38 Grivas Dhigenis Avenue & 3 Deligiorgis Street
PO Box 21455
1509 Nicosia
T. +357 22 025772
F. +357 22 025773
E-mail: info@cyprusintegrityforum.org 
Website: https://cyprusintegrityforum.org/

AREA ADMINISTERED BY TURKISH CYPRIOTS

Corruption in the area administered by Turkish Cypriots continues to be a major problem, mainly in the public sector, allegedly involving politicians, political parties, and bureaucrats.

Given its small size and disputed status, international anti-corruption organizations do not evaluate conditions in the north.

According to a 2020 Corruption Perception Report carried out by Turkish Cypriot researchers at the Friedrich Ebert Stiftung (FES), a non-profit foundation funded by the German Government, 88 percent of businesspeople responding to the survey believe bribery and corruption occurs in Northern Cyprus, while 58 percent believe corruption is a “very serious problem.” Respondents said bribery is most common in “allocation and lease of public land and buildings” (55 percent), “incentives” (46 per cent), and “public contracts and licenses” (45 per cent).

The “Audit Office” controls all disbursements and receipts and has the right to inspect all accounts. In its annual report, this office identifies specific instances of mismanagement or deviation from proper procedures and anecdotal evidence suggests corruption and patronage continue to be a factor in the economy.

REPUBLIC OF CYPRUS

There have been no incidents of politically-motivated damage to foreign projects and or installations since 1974. U.S. companies have not been the target of violence. There were numerous relatively peaceful protests against the ROC government following the financial crisis of March 2013 and in response to the forced conversion of deposits into equity. Since then, protests against additional austerity measures have been fairly calm.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There have been no incidents of politically-motivated damage to foreign projects and or installations since 1974. U.S. companies have not been the target of violence. Protests and demonstrations, usually targeting the “government,” are commonplace. They are generally peaceful and well-regulated; however, some demonstrations result in scuffles with police or minor damage to buildings.

REPUBLIC OF CYPRUS

As an EU country, Cyprus has robust labor standards, safeguarding the freedom of association and the right to organize and bargain collectively. The Department of Labor Inspection and other bodies effectively guard against forced labor, child labor, employment discrimination, and secure acceptable working conditions with respect to minimum wage, occupational safety and health, and hours of work. There are several social safety net programs, including unemployment insurance. There is likely some undeclared income in the ROC, as in most developed countries, but there are no indications the informal economy plays a decisive role here. Illegal migrants are sometimes used as cheap labor but this does not appear to be a systemic problem, and authorities do not hesitate to fine employers of illegal laborers.

Prior to the COVID-19 pandemic, the rate of unemployment in the ROC had been declining steadily, dropping from 16.1 percent in 2014 to 8.1 percent in Q3 2020 – at par with the Eurozone area. According to Eurostat, Cyprus has a tertiary education attainment level of 36.3 percent of the total population – well above the EU average of 26.7 percent, and one of the highest in the EU. Many of these graduates are from UK and U.S. colleges and universities, resulting in an abundant supply of English-speaking staff. Cyprus’s total labor force was estimated at 402,000 persons in 2020, broken down as follows: services, 77.8 percent; industry and construction, 19.5 percent; and agriculture, 2.7 percent. More women are joining the labor force and their percentage participation has risen from 33.4 percent in 1980 to 47.6 percent today. Applications for work permits for non-EU workers must be submitted to the Civil Registry and Migration Department by the intended employer and should be accompanied by a work contract stamped by the Ministry of Labor and Social Insurance. This ministry must certify that there are no available or adequately qualified Cypriots to carry out the work in question.

Cypriot labor law differentiates between layoffs and firing on redundancy grounds. In order to be eligible for redundancy pay, an employee must have worked in the same position for more than two years and must be laid off either due to: (a) budget constraints leading the employer to abolish the position, or (b) inability on the part of the employee to keep up with technological advances. Employees laid off by their employer are entitled to a redundancy payment depending on their length of service. Redundancy payments are equivalent to between two and four weeks of pay per year of service depending on length of service for up to 25 years, with a maximum of 75 weeks of pay or USD 64,350 (EUR 55,000) per employee, whichever is greater. Redundancy payments come out of a government fund, supported with employer and employee contributions. In addition to redundancy pay, a handful of employers, including banks and SOEs, offer severance pay to their employees, although this is not common in the private sector.

Some employers hire temporary workers or employ staff on personal contract to avoid hiring unionized labor, often offering less than the going rate under collective agreements. Similarly, some employers hire employees for a year in order to benefit from a wage subsidy of up to USD 1,290 (EUR 1,100) per month by the Human Resources Development Authority and then dismiss them as soon as the subsidy expires.

International companies are not required by law to hire union labor, but investors should be aware Cyprus tends to have strong unions in several sectors. As of March 2021, the percentage of the labor force belonging to unions was unofficially estimated at approximately 50 percent, compared to the EU average of approximately 33 percent. The unions remain vocal opponents to privatizations and general austerity measures.

ROC public sector working hours are 07:30 – 15:00, Monday to Friday.

Cyprus imposes a minimum wage for certain professions as follows (unchanged since March 2016):

• Clerks/secretaries, sales assistants, paramedical, live-in maids/domestic helpers, school assistants/child-caregivers: USD 1,044 (EUR 870) per month, rising to USD 1,108 (EUR 924) after six months’ employment.
• Security guards: USD 5.88 (EUR 4.90) per hour, rising to USD 6.24 (EUR 5.20) after six months’ employment.
• Cleaning personnel: USD 5.46 (EUR 4.55) per hour, rising to USD 5.81 (EUR 4.84) after six months’ employment. Non-EU, live-in domestic servants have a separate minimum wage, set at USD 552 (EUR 460) per month, plus their room and board.

For all other professions, there is no minimum wage and wages are set by the employer and employee. Collective bargaining agreements between trade unions and employers cover most sectors of the economy. Wages set in these agreements are typically significantly higher than the legislated minimum wage. In June 2021, the Ministry of Labour initiated consultations with unions and employers to introduce a national minimum wage, but these discussions have so far been inconclusive.

Under the EU single market, EU citizens benefit from the right to free movement of workers. Employers are required to seek work visas for third-country nationals from the Civil Registry and Migration Department. The ROC caps the number of third-country nationals a company may employ. Some companies have noted seeking visas for their third-country national staff can be lengthy and cumbersome.

AREA ADMINISTERED BY TURKISH CYPRIOTS

According to the 2019-2020 Turkish Cypriot Competitiveness Report published by the Turkish Cypriot Chamber of Commerce, the greatest obstacle to doing business was an insufficiently trained workforce.

Reliable labor statistics are often difficult to obtain. The “State Planning Office” (“SPO”) estimated the total number of people employed in 2021 was 125,739. The labor force in the area administered by Turkish Cypriots has a high per capita level of university graduates, including many from U.S. and European universities, and offers an abundant supply of white-collar workers. The unemployment rate was 7.8 percent as of December 2021. Women accounted for approximately 34.9 percent of the labor force. Around 10 percent of private sector workers and more than 65 percent of “semi-public” and “public sector” workers belong to labor unions. Workers are allowed to form and become members of unions. As of February 2021, the minimum wage was USD 410 (6,090 Turkish Lira) per month.

Foreign persons are required to obtain work permits through their employer. Foreign entities may import their key personnel from abroad and are also permitted to hire trainees and part-time workers. A full-time work week is 40 hours for “public sector” employees.

Private sector employees can work up to 8 hours a day. After 8 hours, employees can continue to work up to 4 hours of overtime a day. Overtime during weekdays is paid at 110 percent of the base rate. On weekends and holidays, overtime is paid at 150 percent of the base rate. Employees cannot work on Sundays unless there is an emergency, or an approval by “labor authorities.”

Workers are able to exercise their right to bargain collectively, mainly in the public sector. “Public sector” and “semi-public sector” employees benefit from collective bargaining agreements. The “law” provides for collective bargaining.

According to “authorities,” the majority of foreign workers are from Turkey and work in the service (hotel, restaurant, catering) and construction sectors.

George F. Demetriou
Economic Specialist
U.S. Embassy
Metochiou & Ploutarchou Streets
2407 Engomi
Nicosia, Cyprus
Tel: +357 22 393361
Email: DemetriouGF@state.gov 

As a small country with an open economy, Denmark is highly dependent on foreign trade and investment. Exports comprise the most significant component (60 percent) of GDP. The Economist Intelligence Unit (EIU) ranks Denmark as the world’s sixth-most attractive business environment and the leading nation in the Nordic region. The EIU characterizes Denmark’s business environment as reflecting excellent infrastructure, a friendly policy towards private enterprise and competition, low bureaucracy, and a well-developed digital sector. Principal concerns include low productivity growth, a high personal tax burden, and potential capacity constraints on the labor market. Overall, however, operating conditions for companies are broadly favorable. Denmark ranks highly in multiple categories, including its political and institutional environment, macroeconomic stability, foreign investment policy, private enterprise policy, financing, and infrastructure.

As of February 2022, the EIU rated Denmark an “AA” country on its Country Risk Service, noting the country is on the “cusp of an upgrade.” Denmark ranked tenth out of 140 on the World Economic Forum’s 2019 Global Competitiveness Report and sixth on the EIU 2021 Democracy Index. Denmark has an AAA rating from Standard & Poor’s, Moody’s, and Fitch Group. “Invest in Denmark,” an agency of the Ministry of Foreign Affairs and part of the Danish Trade Council, provides detailed information to potential investors. Invest in Denmark has prioritized six sectors in its strategy to attract foreign investment: tech, cleantech, life sciences, food, maritime, and design and innovation. The website for the agency is https://investindk.com .

As an EU member state, Denmark is bound by EU rules on the free movement of goods, capital, persons, and certain services. Denmark welcomes foreign investment and does not discriminate between EU and other investors.

Denmark’s central and regional governments actively encourage foreign investment on a national-treatment basis, with relatively few foreign control limits, nor any reported bias against foreign companies from municipal or national authorities when compared to domestic investors. A foreign investment screening mechanism came into force July 1, 2021, to prevent threats to national security and public order from foreign direct investment, but there are otherwise no additional permits required by foreign investors. The mechanism requires mandatory notification for five sectors and allows for voluntary notification for all sectors. The sectors requiring mandatory notification are defense, IT security and processing of classified information, companies producing dual-use items, critical technology, and critical infrastructure. Mandatory notification applies for investments reaching 10 percent ownership or control, and voluntary notification can be made for investments where the company reaches 25 percent ownership or control. A pre-screening process exists to determine if the investment is in the critical technology or critical infrastructure sector. Notification and guidance all take place online, handled by the Danish Business Authority: https://businessindenmark.virk.dk/topics/Economy/Investments/ 

A foreign or domestic private entity may freely establish, own, and dispose of a business enterprise in Denmark. The capital requirement for establishing a corporation (Aktieselskab A/S) or Limited Partnership (Partnerselskab P/S) is $63,000 (DKK 400,000) and for establishing a private limited liability company (Anpartsselskab ApS) $6.300 (DKK 40,000). In 2019, the government lowered the capital requirements to set up a private limited liability company, which brought Denmark more in line with other Scandinavian countries. No restrictions apply regarding the residency of directors and managers.

Since October 2004, any private entity may establish a European public limited company (SE company) in Denmark. The legal framework of an SE company is subject to Danish corporate law, but it is possible to change the nationality of the company without liquidation and re-founding. An SE company must be registered at the Danish Business Authority if its official address is in Denmark. The minimum capital requirement is $137,000 (EUR 120,000).

Danish professional certification and/or local Danish experience are required to provide professional services in Denmark. In some instances, Denmark may accept equivalent professional certification from other EU or Nordic countries on a reciprocal basis. EU-wide residency requirements apply to the provision of legal and accountancy services.

In addition to investment screening cases, ownership restrictions apply to the following sectors:

Oil and Gas: Requires 20 percent Danish government participation on a “non-carried interest” basis.

Defense: The Minister of Justice must approve foreign investment in defense companies doing business in Denmark if such investment exceeds 40 percent of the equity or more than 20 percent of the voting rights, or if the investment gives the foreign interest a controlling share. This approval is generally granted unless there are security or other foreign policy considerations weighing against approval.

Maritime Services: There are foreign (non-EU resident) ownership requirements on Danish-flagged vessels other than those owned by an enterprise incorporated in Denmark. Ships owned by Danish citizens, Danish partnerships, or Danish limited liability companies are eligible for registration in the Danish International Ships Register (DIS). Vessels owned by EU or European Economic Area (EEA) entities with a genuine, demonstrable link to Denmark are also eligible for registration. Foreign companies with a significant Danish interest can register a ship in the DIS.

Civil Aviation: For an airline to be established in Denmark, it must have majority ownership and be effectively controlled by an EU state or a national of an EU state, unless otherwise provided for through an international agreement to which the EU is a signatory.

Financial Services: Non-resident financial institutions may engage in securities trading on the Copenhagen Stock Exchange only through subsidiaries incorporated in Denmark.

Real Estate: Ownership of holiday homes, also known as summer houses, is restricted to Danish citizens. Such homes are generally located along the Danish coastline and may not be used as full-year residences. On a case-by-case basis, the Ministry of Justice may waive the citizenship requirement for those with close familial, linguistic, cultural, or other close connections to Denmark or the specific property. In general, EU and EEA citizens may purchase full-year residential property or real estate that supports self-employment without obtaining prior authorization from the Ministry of Justice. Companies domiciled in an EU or an EEA Member State that have set up or will set up subsidiaries or agencies or will provide services in Denmark may, in general, also purchase real property in Denmark without prior authorization. Non-EU/EEA citizens must obtain authorization from the Ministry of Justice to purchase real estate in Denmark, which is generally granted to those with permanent residence in Denmark or who have lived in Denmark for a consecutive period of five years.

The most recent United Nations Conference on Trade and Development (UNCTAD) review of Denmark occurred in March 2013 and is available here:  unctad.org/en/PublicationsLibrary/webdiaeia2013d2_en.pdf . There is no specific mention of Denmark in the latest WTO Trade Policy Review of the European Union, revised in December 2019.

The EU Commission’s European Semester documents for Denmark are available here:  ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/european-semester/european-semester-your-country/denmark_en   A 2017 Foreign Investment Regulation review by DLA Piper can be found here:  www.dlapiper.com/~/media/files/insights/publications/2017/11/denmark.pdf

Denmark ranked first out of 180 in Transparency International’s 2021 Corruption Perceptions Index. In the IMD 2021 World Competitiveness Ranking, Denmark ranked third out of 64 countries. The World Intellectual Property Organization (WIPO) ranked Denmark ninth out of 132 in its 2021 Global Innovation Index.

The Danish Business Authority (DBA) is responsible for business registrations in Denmark. As a part of the DBA, “Business in Denmark” provides information on relevant Danish rules and online registrations to foreign companies in English. The Danish business registration website, www.virk.dk , is the principal digital tool for licensing and registering companies in Denmark and offers a business registration process that is clear and complete.

Registration of sole proprietorships and partnerships is free of charge. For other types of businesses, online registration costs $106 (DKK 670). Registration by email or mail costs $341 (DKK 2,150).

The process for establishing a new business is distinct from that of registration. The Ministry of Foreign Affairs’ “Invest in Denmark” program provides a step-by-step guide to establishing a business at https://investindk.com/publications/step-by-step-guide-to-do-business-in-denmark , along with other relevant resources at https://investindk.com/our-services/how-to-set-up-a-business-in-denmark . The services are free of charge and available to all investors, regardless of country of origin.

The processing time for establishing a new business varies depending on the chosen business entity. Establishing a Danish private limited liability company (ApS), for example, generally takes four to six weeks for a standard application. Establishing a sole proprietorship (Enkeltmandsvirksomhed) is more straightforward, with processing generally taking about one week.

Those providing temporary services in Denmark must provide their company details to the Registry of Foreign Service Providers (RUT). The website ( www.virk.dk ) provides English guidance on registering a service with RUT. A public digital signature, referred to as a NemID or its replacement MitID, is required for those wishing to register a foreign company in Denmark. A CPR number (a 10-digit personal identification number) and valid identification are needed to obtain a NemID/MitID. Danish citizenship is not a requirement.

Denmark defines small enterprises as those with fewer than 50 employees. Annual revenue or the yearly balance sheet total must be lower than $14.1 million (DKK 89 million) or $7.0 million (DKK 44 million), respectively. Medium-sized enterprises cannot have more than 250 employees. Limits on annual revenue or the yearly balance sheet total are $49.7 million (DKK 313 million) or $24.8 million (DKK 156 million).

Danish companies are not restricted from investing abroad, and Danish outward investment has exceeded inward investments for more than a decade.

Denmark’s judicial system is highly regarded and considered fair. Its legal system is independent of the government’s legislative branch and includes written and consistently applied commercial and bankruptcy laws. Secured interests in property are recognized and enforced. The World Economic Forum’s (WEF) 2019 Global Competitiveness Report ranked Denmark as the world’s tenth most competitive economy and fourth among EU member states, characterizing it as having among the best functioning and most transparent institutions in the world. Denmark ranks high on specific WEF indices related to macroeconomic stability (first), labor market (third), business dynamism (third), institutions (seventh), ICT adoption (ninth), and skills (third).

To facilitate business administration, Denmark maintains only two “legislative days” per year—January 1 and July 1—as the only days when new laws and regulations affecting the business sector can come into effect. Danish laws and policies granting national treatment to foreign investments are designed to increase FDI in Denmark. Denmark consistently applies high standards to health, environment, safety, and labor laws. Danish corporate law is generally in conformity with current EU legislation. The legal, regulatory, and accounting systems are relatively transparent and follow international standards.

Bureaucratic procedures are streamlined and transparent; proposed laws and regulations are published in draft form for public comment. Public finances and debt obligations are transparent.

The government uses transparent policies and effective laws to foster competition and establish “clear rules of the game,” consistent with international norms and applicable equally to Danish and foreign entities. The Danish Competition and Consumer Authority (CCA) works to make markets well-functioning so that businesses compete efficiently on all parameters. The CCA is a government agency under the Danish Ministry of Industry, Business, and Financial Affairs. It enforces the Danish Competition Act. This Act, along with Danish consumer legislation, aims to promote efficient resource allocation in society, promote efficient competition, create a level playing field for enterprises, and protect consumers.

Corporate tax records of all companies, associations, and foundations that pay taxes in Denmark are published by the tax authorities according to public law since December 2012 and are updated annually. The corporate tax rate is 22 percent. Greenland and the Faroe Islands retain autonomy for their respective tax policies.

Publicly listed companies in Denmark must adhere to the Danish Financial Statements Act when preparing their annual reports. The accounting principles are International Accounting Standards (IAS), International Financial Reporting Standards (IFRS), and Danish Generally Accepted Accounting Principles (GAAP). Financial statements must be prepared annually. The Danish Financial Statements Act covers all businesses.

Private limited companies, public limited companies, and corporate funds are obliged to prepare financial statements under accounting classes determined by company size. There are four different accounting classes: A, B, C and D. Accounting class B is further divided into micro B and B, and C is divided into medium-sized C and large C. The smallest companies belong to accounting class A, while the largest belong to accounting class D. The classification is based on the assessed size of the company based on two out of three parameters: net revenue, balance sheet, and number of employees.

Personal companies as well as companies with limited liability (Class A): Less than an annual average of 10 full-time employees and total assets not exceeding $1.1 million (DKK 7 million) or net revenue not exceeding $2.2 million (DKK 14 million) during the fiscal year. According to the Danish Financial Statements Act, personally-owned businesses, personally-owned general partnerships (multiple owners), and general funds are characterized as Class A; there is no requirement to prepare financial statements unless the owner voluntarily chooses to do so.

Class B. Private limited liability companies, commercial funds, and companies with limited liability. Micro businesses (Class micro B): Less than an annual average of 10 full-time employees and total assets not exceeding $429,000 (DKK 2.7 million) or net revenue not exceeding $858,000 (DKK 5.4 million) during the fiscal year.

Small businesses (Class B): Less than an annual average of 50 full-time employees and total assets not exceeding $7.0 million (DKK 44 million) or net revenue not exceeding $14.1 million (DKK 89 million) during the fiscal year.

Medium-sized enterprises (Class C medium): Less than an annual average of 250 full-time employees and total assets not exceeding $24.8 million (DKK 156 million) or net revenue not exceeding $49.7 million (DKK 313 million) during the fiscal year.

Large companies (Class C large): Companies that are neither small nor medium companies, and have an annual average of at least 250 full-time employees, total assets in excess of $24.8 million (DKK 156 million), or net revenue in excess of $49.7 million (DKK 313 million) during the fiscal year, but are not a class D company.

Accounting class D: Publicly-traded companies and state-owned stock-based enterprises.

Large companies (Class C and D) are required to report annually on environmental, social, and governance (ESG) efforts. This includes reporting on environmental; social; labor and human rights; and anti-corruption and bribery efforts. The reporting requirement covers four components: the company’s business model, material risks associated with each of the four issue areas, non-financial key performance indicators, and integrative referral to the financial amounts provided elsewhere in the annual report. There is no requirement for companies to have policies on the four issues, though they are required to follow a do-or-explain principle that requires companies to explain their policies in substance or explain why they have decided not to have a policy on the issue. For implemented policies, companies are required to disclose the substance of the policy and how they translate policies into action.

The rules on reporting generally follow EU Directive 2014/95/EU on disclosure of non-financial information though certain issues, including reporting on the company’s impact on climate change, are stricter in Denmark than the directive. The rules on reporting on these issues allow for an exception if the companies report on similar issues using international standards such as UN Global Compact’s Communication on Progress.

All government draft proposed regulations are published at “Høringsportalen” ( www.hoeringsportalen.dk ) and are available for comment from interested parties. Following the comment period, the government may revise draft regulations before publication on the Danish Parliament’s website ( www.ft.dk ). Final regulations are published at www.lovtidende.dk  and www.ft.dk . All ministries and agencies are required to publish proposed regulations. Denmark has a World Bank composite score of 4.75 for the Global Indicators of Regulatory Governance, on a zero to five scale. Concerning governance, the World Bank suggests the following areas for improvement:

Affected parties cannot request reconsideration or appeal adopted regulations to the relevant administrative agency.

There is no existing requirement that regulations be periodically reviewed to see whether they should be revised or eliminated.

Denmark is a member of the European Union and is an active supporter of the internal market. As a result, many aspects of business regulation are dictated by the EU and hence aligned with other EU Member States.

Denmark adheres to the WTO Agreement on Trade-Related Investment Measures (TRIMs); no inconsistencies have been reported.

Denmark’s decision-making power is divided into the legislative, executive, and judicial branches. The principles of separation of power and an independent judiciary help ensure democracy and Danish citizens’ legal rights. The district courts, the high courts, and the Supreme Court represent the Danish legal system’s three basic levels. The legal system also comprises other institutions with special functions, e.g., the Maritime and Commercial Court.

For further information, please see:  domstol.dk/om-os/english/the-danish-judicial-system/

As an EU member state, Denmark is bound by EU rules on the free movement of goods, capital, persons, and certain services. The government agency “Invest in Denmark” is part of the Danish Trade Council and is situated within the Ministry of Foreign Affairs. The agency provides detailed information to potential investors. The website for the agency is  investindk.com . The Faroese government promotes Faroese trade and investment through its website  faroeislands.fo/economy-business . For further information concerning Greenland’s investment potential, please see Greenland Venture at  www.venture.gl  or the Greenland Tourism & Business Council at  visitgreenland.com .

The Danish Competition and Consumer Authority (CCA) reviews transactions for competition-related concerns. A merger or takeover is subject to approval by the CCA. Large-scale mergers also require approval from EU competition authorities. According to the Danish Competition Act, the CCA requires notification of mergers and takeovers if the aggregate annual revenue in Denmark of all undertakings involved is more than $134 million (DKK 900 million) and the aggregate yearly revenue in Denmark of each of at least two of the undertakings concerned is more than $15.9 million (DKK 100 million), or if the aggregate annual revenue in Denmark of at least one of the undertakings involved is more than $604 million (DKK 3.8 billion) and the aggregate yearly worldwide revenue of at least one of the other undertakings concerned is more than $604 million (DKK 3.8 billion). When a merger results from the acquisition of parts of one or more undertakings, the calculation of the revenue referred to shall only comprise the share of the revenue of the seller or sellers that relates to the assets acquired. Merger control provisions are contained in Part Four of the  Danish Competition Act and in the Executive Order on the Notification of Mergers . Revenue is calculated under the Executive Order on the Calculation of Turnover in the Competition Act .

A full notification of a merger must include the information and documents specified in the full notification form, Annex 1 – Information for Full Notification of Mergers . A simplified notification of a merger must include the information and documents specified in the simplified notification form, Annex 2 – Information for Simplified Notification of Mergers . From August 1, 2013, merger fees are payable for merger notifications submitted to the CCA. The fee for a simplified notification amounts to $7,950 (DKK 50,000). The fee for a full notification amounts to 0.015 percent of the aggregate annual turnover in Denmark of the undertakings involved; this fee is capped at $238,400 (DKK 1,500,000).

Additional information concerning notification of mergers is available in the Guidelines to the Executive Order on Notification of Mergers and on Merger Fees . More general information on Danish merger control can be found in the Merger Guidelines .

By law, private property can only be expropriated for public purposes, in a non-discriminatory manner, with reasonable compensation, and under established principles of international law. There have been no recent expropriations of significance in Denmark.

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors’ claims in the following order: (1) costs and debt accrued during the treatment of the bankruptcy; (2) costs, including the court tax, relating to attempts to find a solution other than bankruptcy; (3) wage claims and holiday pay; (4) excise taxes owed to the government; and (5) all other claims.

Performance incentives are available to both foreign and domestic investors. Examples include grants or preferential financing in designated regional development areas. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Denmark is recognized as a global leader in green and renewable energy. The government provides a multitude of support programs to private households and companies for energy efficiency renovations. Similarly, several programs exist for maturation and tech commercialization of green technologies. In December 2021, the Danish parliament reached a political framework agreement for a total of $2.5 billion (DKK 16 billion) support for carbon capture, utilization, and storage (CCUS) between 2022 and 2030. The Energy Technology Development and Demonstration Program (EUDP) supports private companies and universities to develop and demonstrate new energy technologies, in support of Denmark’s goal of a 70 percent carbon reduction by 2030 and climate neutrality by 2050. The EUDP has contributed $905.9 million (DKK 5.7 billion) to more than 1,000 projects since its inception in 2007. An overview of the programs can be found on the Danish Energy Agency’s website in Danish: https://ens.dk/service/tilskuds-stoetteordninger .

The only free port in Denmark is the Copenhagen Free Port, operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmö (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise ship ports; it occupies a key position in the Baltic Sea region for the distribution of cars and transit of oil. The facilities in the Free Port are mainly used for tax-free warehousing of imported goods, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. The processing of cargo and the preparation and finishing of imported automobiles for sale can freely be set up in the Free Port. Manufacturing operations can be established with permission of the customs authorities, which is granted if special reasons exist for having the facility in the Free Port area. The Copenhagen Free Port welcomes foreign companies establishing warehouse and storage facilities.

Danish law mandates performance requirements only in connection with investments in hydrocarbon exploration, where concession terms typically require a fixed work program, including seismic surveys, and in some cases, exploratory drilling, consistent with applicable EU directives. Performance requirements are primarily designed to protect the environment, mainly by encouraging reduced energy and water use. Several environmental and energy requirements are universally applied to households as well as businesses in Denmark, both foreign and domestic. For instance, Denmark was the first of the EU countries, in January 1993, to introduce a carbon dioxide (CO2) tax on business and industry. This includes specific reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding competitiveness.

Performance requirements are governed by Danish legislation and EU regulations and are applied uniformly to domestic and foreign investors. Potential violations of the rules governing this area are punishable by fines or imprisonment.

The Danish government does not follow “forced localization” policies, nor does it require foreign IT providers to turn over source code or provide access to surveillance. The Danish Data Protection Agency, the Ministry of Justice, and the Ministry of Culture are the entities involved with data storage.

Property rights in Denmark are well protected by law and in practice. Real estate is chiefly financed through the well-established Danish mortgage bond credit system, the security of which compares to that of government bonds. In compliance with the covered bond definition in the EU Capital Requirements Directive (CRD), the Danish mortgage banking regulation allows for commercial banks to have the same opportunities as mortgage banks and ship-financing institutions to issue covered bonds. Only issuers that have been granted a license from the Danish Financial Supervisory Authority (FSA) are permitted to issue Danish covered bonds.

Secured interests in property are recognized and enforced in Denmark. All mortgage credits in real estate are recorded in local public registers of mortgages. Except for interests in cars and commercial ships, which are also publicly recorded, other property interests are generally unrecorded. The local public registers are a reliable system of recording security interests. Denmark ranked ninth out of 129 countries in the Property Rights Alliance’s International Property Rights Index 2021, and sixth in its region.

Intellectual property rights (IPR) in Denmark are well protected and enforced. Denmark has ratified and adheres to key international conventions and treaties concerning protection of IPR, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and several treaties administered by the World Intellectual Property Organization (WIPO), including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at www.wipo.int/directory/en .

A list of attorneys in Denmark known to accept foreign clients can be found at dk.usembassy.gov/u-s-citizen-services/attorneys.  This list of attorneys and law firms is provided by the U.S. Embassy as a convenience to U.S. citizens. It is not intended to be a comprehensive list of attorneys in Denmark, and the absence of an attorney from the list is in no way a reflection on competence. A complete list of attorneys in Denmark, Greenland, and the Faroe Islands may be found at the Danish Bar Association web site: www.advokatnoeglen.dk .

Denmark has fully liberalized foreign exchange flows, including those for direct and portfolio investment purposes. Credit is allocated on market terms and is freely available. Denmark adheres to its IMF Article VIII obligations. The Danish banking system is under the regulatory oversight of the Financial Supervisory Authority. Differentiated voting rights – A and B stocks – are used to some extent, and several Danish companies are controlled by foundations, which can restrict potential hostile takeovers, including foreign takeovers.

The Danish stock market functions efficiently. In 2005, the Copenhagen Stock Exchange became part of the integrated Nordic and Baltic marketplace, OMX Exchanges, which is headquartered in Stockholm. Besides Stockholm and Copenhagen, OMX also includes the stock exchanges in Helsinki, Tallinn, Riga, and Vilnius. To increase the access to capital for primarily small companies, the OMX in December 2005 opened a Nordic alternative marketplace – “First North” – in Denmark. In February 2008, the NASDAQ-OMX Group acquired the exchanges. In the World Economic Forum 2019 report, Denmark ranked 11th out of 141 on the metric “Financial System.”

The Danish stock market is divided into four different branches/indexes. The C25 index contains the 25 most valuable companies in Denmark. Other large companies with a market value exceeding $1.05 billion (EUR 1 billion) are in the group of “Large Cap,” companies with a market value between $158 million (EU 150 million) and $1.05 billion (EUR 1 billion) belong to the “Mid Cap” segment, while companies with a market value smaller than $158 million (EU 150 million) belong to the “Small Cap” group.

The major Danish banks are rated by international agencies, and their creditworthiness is rated as high by international standards. The European Central Bank and the Danish National Bank reported that Denmark’s major banks have passed stress tests by considerable margins.

Denmark’s banking sector is relatively large; based on the ratio of consolidated banking assets to GDP, the sector is three times bigger than the national economy. By January 2022, the total of Danish shares valued $673.4 billion (DKK 4.24 trillion) and were owned 55.1 percent by foreign owners and 44.9 percent by Danish owners, including 13.5 percent held by households and 3.9 percent by the government. The three largest Danish banks – Danske Bank, Nordea Bank Danmark, and Jyske Bank – hold approximately 75 percent of the total assets in the Danish banking sector.

The primary goal of the Central Bank (Nationalbanken) is to maintain the peg of the Danish currency to the Euro – with allowed fluctuations of 2.25 percent. It also functions as the general lender to Danish commercial banks and controls the money supply in the economy.

As occurred in many countries, Danish banks experienced significant turbulence in 2008 – 2009. The Danish parliament subsequently passed a series of measures to establish a “safety net” program, provide government lending to financial institutions in need of capital to uphold their solvency requirements, and ensure the orderly winding down of failed banks. The parliament passed an additional measure, named Bank Package 4, in August 2011, which sought to identify systemically important financial institutions, ensure the liquidity of banks that assume control of a troubled bank, support banks acquiring troubled banks by allowing them to write off obligations of the troubled bank to the government, and change the funding mechanism for the sector-funded guarantee fund to a premiums-based, pay-as-you-go system. According to the Danish government, Bank Package 4 provides mechanisms for a sector solution to troubled banks without senior debt holder losses but does not supersede earlier legislation. As such, senior debt holder losses are still a possibility in the event of a bank failure.

On October 10, 2013, the Danish Minister for Business and Growth concluded a political agreement with broad political support which, based on the most recent financial statements, identified specific financial institutions as “systemically important” (SIFI). The SIFIs in Denmark as of June 2021, the most recent designation, are Danske Bank A/S, Nykredit Realkredit A/S, Nordea Kredit Realkreditaktieselskab, Jyske Bank A/S, Sydbank A/S, DLR Kredit A/S, Spar Nord Bank A/S and A/S Arbejdernes Landsbank. The government identified these institutions based on three quantitative measures: 1) a balance sheet to GDP ratio above 6.5 percent; 2) market share of lending in Denmark above 5 percent; or 3) market share of deposits in Denmark above 3 percent. If an institution is above the requirement of any one of the three measures, it will be considered systemically important and must adhere to the stricter requirements on capitalization, liquidity, and resolution. The Faroese SIFIs are P/F BankNordik, and Betri Banki P/F, while Grønlandsbanken is the only SIFI in Greenland.

The Danish government projected in May 2022 that Denmark’s debt to GDP ratio will decrease from approximately 42 percent at the end of 2020 to 33 percent by the end of 2023. The Ministry of Finance announced in May 2022 that Denmark ran a 2.3 percent budget surplus in 2021, and projects budget surpluses of 0.6 percent and 0.2 percent in 2022 and 2023, respectively.

Denmark maintains no sovereign wealth funds.

Denmark is party to the Government Procurement Agreement (GPA) within the framework of the WTO. State-owned enterprises (SOEs) hold dominant positions in rail, energy, utilities, and broadcast media in Denmark. Large-scale public procurement must go through public tender in accordance with EU legislation. Competition from SOEs is not considered a barrier to foreign investment in Denmark. As an OECD member, Denmark promotes and upholds the OECD Corporate Governance Principles and subsidiary SOE Guidelines.

Denmark has no current plans to privatize its SOEs.

As an OECD member, Denmark promotes, through the Danish Business Authority (DBA), the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Denmark’s National Contact Point can be reached at: mneguidelines.oecd.org/National-Contact-Points-Website-Contact-Details.pdf 

From January 1, 2016, the largest companies must account for their responsible business conduct, including with respect to human rights and to reducing the climate impact of the company’s activities. Additionally, target figures for the gender composition of the board of directors, as well as policies for increasing the proportion of the underrepresented gender at the company’s management levels, must be reported (Danish Financial Statements Act, sections 99a and 99b). The mandate has also applied to medium-sized businesses (exempting small and micro companies) since January 2018.

The DBA published a National Action Plan to advance Corporate Social Responsibility (CSR) and Responsible Business Conduct (RBC) in Denmark in 2012, covering the 2012 – 2015 period. It contained 42 initiatives focusing on business-driven CSR. In October 2019, the government launched a public hearing process to “investigate how reporting can be made more comparable and create more transparency for the benefit of society and the companies themselves. The purpose is to increase transparency about whether companies are living up to their corporate social responsibility, that sustainable companies have better access to investment and that companies experience a positive value from their CSR reporting.” The government received recommendations in October 2020 and is working on new initiatives. The government hosts www.csrkompasset.dk/  (English language version www.csrcompass.com/ ), a free online tool that can help companies implement responsible supply chain management. The tool is targeted at small and medium-sized production, trade, and service companies. The structure of the CSR Compass and its advice and guidelines are in line with national and international trends and best practice standards, including the UN Global Compact, OECD’s guidelines for multinational companies, Business for Social Responsibility (BSR), the Business Social Compliance Initiative (BSCI), the Danish Ethical Trading Initiative (DIEH), and the Danish Council on Corporate Social Responsibility’s guidelines for responsible supply chain management.

Denmark is a signatory of the Montreux Document on Private Military and Security Companies.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Denmark is considered a leading country in facilitating the green transition. It ranks in the top three on most rankings on the green transition and climate change mitigation, including second on the ITIF’s Global Energy Innovation Index, MIT Technology Review’s Green Future Index, and the Global Green Growth Institute’s (GGGI) Global Green Growth Index.

In 2020, the Danish parliament passed the Danish Climate Act, which established a statutory target for reducing greenhouse gas emissions 70 percent from 1990 levels by 2030 and achieving net zero by 2050. The act introduced a duty to act on the government to ensure Denmark meets the targets. The Climate Act established the Danish Council on Climate Change as an independent expert advisory body, tasked with publishing an annual assessment of progress towards the targets and providing policy recommendations to meet the targets. In September 2021, the government published its “Timetable for a Green Denmark” setting out the agreements and reforms it expects to introduce by 2025 to meet the 2030 and 2050 targets.

The Danish parliament has reached several broad agreements to ensure Denmark meets its green transition and net zero targets, with negotiations announced on additional proposals. An April 2022 reform proposal on Danish energy policy aims to quadruple the combined onshore wind and solar power production capacity by 2030; an expansion of district heating; and contributing to European independence from Russian gas by also increasing production of biogas as well as natural gas from the North Sea. The government subsequently announced a proposal in April 2022 for a higher and more uniform CO2 tax covering more industries to reduce CO2 emissions by 3.7 million tons in 2030, to be implemented on top of the EU Emissions Trading System (EU ETS). Negotiations for the 2022 energy proposal and CO2 tax are ongoing as of May 2022.

Denmark has several schemes and pools of funding to increase energy efficiency in industry and business to facilitate the green transition. A list of programs can be found in Danish on the Danish Energy Agency’s website: https://ens.dk/service/tilskuds-stoetteordninger . A multitude of programs for energy efficiency renovations for private or commercial real estate exist, as well as tech maturation and marketization programs. A 2021 agreement on carbon capture, utilization and storage intends to invest $2.5 billion (DKK 16 billion) between 2022 and 2030. The Danish government has also announced plans to build two massive “energy islands” to accelerate the movement to electrification, including via green fuels, potentially with the capacity for generation and distribution of 10 GW of electricity. In May 2022, heads of governments from Denmark, Germany, Belgium, and the Netherlands co-signed a joint declaration to install at least 150 GW of offshore wind in the North Sea before 2050. The joint declaration sets a combined target for total offshore wind capacity of at least 65 GW by 2030, increasing to at least 150 GW by 2050. Negotiations on agriculture and transportation sector tax reforms are scheduled for the fall of 2022.

Denmark is perceived as the least corrupt country in the world according to the 2021 Corruption Perceptions Index by Transparency International, which has local representation in Denmark. The Ministry of Justice is responsible for combating corruption, which is covered under the Danish Penal Code. Penalties for violations range from fines to imprisonment of up to four years for a private individual’s involvement and up to six years for a public employee’s involvement. Since 1998, Danish businesses cannot claim a tax deduction for the cost of bribes paid to officials abroad.

Denmark is a signatory to the OECD Convention on Combating Bribery, the UN Anticorruption Convention, and a participating member of the OECD Working Group on Bribery. In the Working Group’s 2015 Phase 3 follow-up report on Denmark, the Working Group concluded “that Denmark has partially implemented most of its Phase 3 recommendations. However, concerns remain over Denmark’s enforcement of the foreign bribery offence.”

Contact at the government agency or agencies that are responsible for combating corruption:

The Danish State Prosecutor for Serious Economic and International Crime
Kampmannsgade, 11604 København V
Phone: +45 72 68 90 00
Fax: +45 45 15 01 19
Email:  saoek@ankl.dk 

To report any knowledge of corruption within Danish Ministry of Foreign Affairs development assistance agency DANIDA projects or among staff, or DANIDA partners:

um.dk/en/danida-en/about-danida/Danida-transparency/anti-corruption/report-corruption/  

Contact at a “watchdog” organization:

Transparency International Danmark
c/o CBSDalgas Have 15, 2. sal, lokale V.2.352000 Frederiksberg
Email: sekretariatet@transparency.dk 

Contact at Embassy Copenhagen responsible for combating corruption:

Aaron Daviet
Political Officer
U.S. Department of State
Dag Hammarskjolds Alle 24, 2100 Copenhagen, Denmark
+45 3341 7100
CopenhagenICS@state.gov 

Denmark is a politically stable country. Incidents involving politically motivated damage to projects or installations are very rare. The EIU rates Denmark “AAA” for political risk.

The Danish labor force is generally well-educated and efficient. English-language skills are good, and English is considered a natural second language among a very high proportion of Danes. The labor market is stable and flexible. U.S. companies operating in Denmark have indicated that Danish rules on hiring and firing employees generally enable employers to adjust the workforce quickly to changing market conditions.

The Danish labor force amounted to approximately 3.08 million people at the end of 2021. Of these, 946,000 were employed in the public sector, which accounts for about 31 percent of the labor force. Denmark’s OECD-harmonized unemployment rate was 4.5 percent in March 2022, lower than the EU-27’s average rate of 6.2 percent and OECD average of 5.12 percent. Denmark faces labor shortages in certain sectors, which may be abated by the projected slowdown in growth but may otherwise present a challenge for foreign investors.

The labor force participation rate for women is among the highest in the world. In 2020, 75.9 percent of working-age women participated in the labor force, and the employment rate was 72.8 percent. The working-age male labor force participation rate and employment rate were 79.4 percent and 76.3 percent, respectively.

The Danish labor force is highly organized, with 66.5 percent belonging to a union in 2018, the second highest in the OECD. Labor disputes and strikes occur only sporadically. In general, private sector labor/management relations are excellent, based on dialogue and consensus rather than confrontation. Working conditions are established through a complex system of legislation and organizational agreements, where most aspects of wage and working conditions are determined through collective bargaining rather than legislation.

The contractual work week for most wage earners is 37.5 hours. By law, employees are entitled to five weeks of paid annual leave. In practice, most of the labor force has the right to six weeks of paid annual leave, gained through other labor market agreements.

Denmark has well-functioning unemployment insurance and sick-pay schemes, self-financed or financed by the state. Employees have a right to take maternity or paternity leave which in Denmark is a total of 52 weeks, 18 of which are reserved for the mother (four weeks prior to birth, 14 after) and two for the father to be taken within the first 14 weeks after birth. In addition, most employees have maternity/paternity leave for at least 14 weeks fully paid by the employer, while the government supports the remainder of the leave. In August 2022, the system will change due to EU legislation being implemented.

Danish wages are high by international standards and have prompted the use of capital-intensive technologies in many sectors. Some investors report that the high average wage level is detrimental to Danish competitiveness. Although high wages and generous benefits, including time off, reduce competitiveness, high productivity and low direct costs to employers can result in per employee costs that are lower than in other industrialized countries. Real wages increased on average by 4.2 percent from 2020 to 2021. The government forecast that nominal wages will increase significantly in 2022, though increasing inflation will affect real wage increases.

Generally, personal income tax rates in Denmark are among the highest in the world. However, foreign employees making more than an amount specified annually by the Danish Immigration Service and certain researchers may choose to be subject to a 27 percent income tax rate, plus a labor market contribution tax amounting to 32.84 percent income tax in the first seven years of working in Denmark. Certain conditions must be fulfilled for key employees to be eligible for the 27 percent tax rate: for example, since January 1, 2022, wages must total at least $11,200 (DKK 70,400) per month before the deduction of labor market contributions and after Danish labor market supplementary pension contributions. There are also limits based on an individual’s previous work history in the Danish labor market. Compared with the general Danish progressive income tax system, this is an attractive incentive. Further information can be obtained from Danish embassies or from the Danish Immigration Service ( www.nyidanmark.dk ).

Danish work permits are not required for citizens of EU countries. U.S. companies have reported that in general, work permits for foreign managerial staff may be readily obtained. However, permits for non-managerial workers from countries outside the EU and the Nordic countries are granted only if substantial professional or labor-related conditions warrant. Special rules detailed by the Danish Immigration Service in its “Positive List Scheme” apply to certain professional fields experiencing a shortage of qualified manpower. The list is updated twice annually. Foreigners who have been hired in the designated fields will be immediately eligible for residence and work permits. The minimum educational level required for a position on the Positive List is an occupational Bachelor’s degree, a series of education usually 3.5 years in length combining theoretical and practical experience. In some cases, a Danish authorization must be obtained, which the Positive List will explicitly state if applicable (e.g., non-Danish trained doctors must be authorized by the Danish Patient Safety Authority). Professions covered by the Positive List Scheme include engineers, scientists, doctors, nurses, IT specialists, marine biologists, lawyers, accountants and a wide range of other master’s or bachelor’s degree positions.

Persons who have been offered a highly paid job have particularly easy access to the Danish labor market through the Pay Limit Scheme. As of 2022, the Pay Limit Scheme extends to positions with an annual pay of no less than $71,200 (DKK 448,000), regardless of the field or specific nature of the job. The length of work and residence permits granted under the Pay Limit Scheme depend on the length of the employment contract in Denmark. For permanent employment contracts, work permits are granted for an initial period of four years. After this period, the permit can be extended if the same job is held. There are several other schemes meant to make it easier for certified companies to bring employees with special skills or qualifications to Denmark. These schemes vary in duration and requirements.

Danish immigration law also allows issuance of residency permits of up to 18 months’ duration based on an individual evaluation, using a point system based on education, language skills, and adaptability.

Denmark has ratified all eight ILO Core Conventions and been an ILO member since 1919.

Kristen Stolt
Economic Officer
U.S. Embassy Denmark
Dag Hammarskjölds Alle 24
2100 Copenhagen, Denmark
Email: CopenhagenICS@state.gov

The Faroe Islands have an open economy and multiple trade agreements with other countries. For more than two centuries, the Faroese economy has relied on fisheries and related industries. Fisheries (including agriculture, hunting, and forestry) account for 22 percent of the Faroe Islands’ domestic factor income. About 95 percent of goods exports are fish products. Salmon alone accounts for 38 percent of goods exports. As a non-EU member, the Faroe Islands had open access to the Russian market post-2014, despite Russia’s retaliatory trade embargo on certain food imports from the EU. This allowed the Faroese to sell increased quantities of salmon to the Russian market at a premium even while prices dropped significantly in the European market. The Faroese government announced in February 2022 that it supports Western sanctions against Russia in the wake of its invasion of Ukraine and passed legislation in May to enable it to implement sanctions against Russia and Belarus.

The islands exported $1.59 billion (DKK 10 billion) worth of goods in 2021, 95 percent of which were fish products, with the remainder being marine vessels and aircraft resales. In recent years, construction, transportation, banking, and other financial services sectors have grown, and offshore oil and gas exploration is developing, though commercially viable finds have not been made. In 2021, the top destination for goods exports was Russia (23.3 percent), followed by Denmark (12.6 percent), the United States (10.6 percent), and the United Kingdom (10.5 percent). Goods imports totaled $1.46 billion (DKK 9.2 billion) in 2021, with the vast majority from Europe. Of total Faroes’ goods imports, 23.2 percent came from Denmark, followed by Norway (12.8 percent), Germany (9.2 percent), the Netherlands (7.5 percent), and China (6.9 percent). Direct imports from the United States were 1.6 percent of total imports. Major import categories were inputs to industry (22.5 percent), household consumption (21.0 percent), fuels (14.5 percent), and machinery and capital equipment (10.7 percent).

The Faroe Islands’ small, open, but non-diversified economy makes it vulnerable to changes in international markets. The Faroe Islands have full autonomy to set tax rates and fees, and to set levels of spending on the services they provide. Denmark provides an annual block grant indexed to Danish inflation. In 2021 it was $103.4 million (DKK 650.7 million).

COVID-19 reached the Faroe Islands in March 2020. The Faroese government quickly instituted short-term measures, similar to Denmark’s, to contain the infection. The Faroes were virus-free by July 2020, and experienced brief upticks throughout 2020 and 2021, though without the need for major shutdowns. The virus returned in earnest in late 2021, culminating in January – February 2022, but without putting the hospital system under pressure. On February 28, 2022, the government lifted all remaining COVID-19 restrictions.

The global economic downturn in the wake of COVID-19 and long-term uncertainty lowered worldwide demand and fish prices, the Faroes’ main export. Some fisheries used their existing supply chains to convert a large portion of their sales from restaurant customers to retail trade customers. At the same time, corporate investment appetite has remained intact, as corporations were well consolidated before the virus outbreak. This has helped mitigate some of the negative economic impact of the pandemic. Labor market compensation schemes further supported the economy. By September 2020, the government phased out its wage cost compensation scheme and employment and unemployment levels were roughly back to their pre-pandemic levels. The pandemic acutely impacted the tourism sector, but this sector makes up only a small portion of the Faroese economy.

Official statistics list 2020 as the most recent year available for GDP figures, at $3.4 billion (DKK 21.2 billion). According to Statistics Faroe Islands, nominal GDP rose 8.7 percent in 2016 followed by growth of 3.7 percent in 2017, 2.3 percent in 2018, and 7.9 percent in 2019. GDP contracted by 2.8 percent in 2020 mainly due to COVID-19 and related price effects on fish prices. According to the Danish Central Bank, the strongest underlying drivers for recent years’ growth are substantial price increases for farmed salmon and larger catches of mackerel and herring in particular, combined with considerable productivity gains. Activity has been concentrated in fewer farms and shipping companies, both in aquaculture and in the pelagic fisheries, making these industries more profitable. These factors have boosted incomes and led to higher private and public sector demand. Employment has risen notably, and the labor market participation rate is high, which has pushed down unemployment from 7 percent in 2011 to 0.9 percent in 2021. The need for labor has increasingly been met via high net immigration, which has prolonged the economic upswing. According to the Danish Central Bank, all industries are experiencing labor shortages. The many new inhabitants, however, have put the housing market under pressure, especially in and around the capital Tórshavn.

Construction of the tunnels to the islands Eysturoy and Sandoy, with an expected cost of approximately $420 million (DKK 2.64 billion) or 16 percent of GDP, are proceeding as planned. The Eysturoy tunnel opened for traffic on December 19, 2020, and the Sandoy tunnel is set to open in December 2023.

In the longer term, the aging Faroese population will weaken the sustainability of public finances, according to the Economic Council for the Faroe Islands. The Council suggests that in order to maintain the high level of service to citizens established over many years, the Faroese government must prioritize this issue in due course. Currently, there are four people of working age (16 to 66), for every person aged 67 or older. By 2050, the Council estimates there to be 2.1 persons for every dependent retiree. The Council estimates that a permanent fiscal improvement of 5 percent of GDP will be required to stabilize government debt, which is currently at a low level. On August 6, 2021, credit agency Moody’s maintained its Aa2 long-term issuer rating of the Government of the Faroe Islands. The Aa2 rating is the third-highest rating on Moody’s 21-tier scale. The outlook remains stable and Moody’s concludes that the Faroe Islands has a healthy degree of financial independence, a low level of refinancing risk, and that, despite a state budget deficit in 2020 and 2021 caused primarily by the COVID-19 pandemic, the debt-to-income ratio will most likely return to healthy levels in the coming years. Moody’s assesses the stable and historical relationship with Denmark as an additional strength.

The Faroe Islands opened its own securities exchange in 2000; active trading of shares followed in 2005. The exchange is a collaboration with the VMF Icelandic exchange on the Nasdaq OMX Nordic Exchange Iceland.

Foreign Direct Investment into the Faroe Islands totaled $22.2 million (DKK 139.4 million) in 2019, and outward FDI was $699 million (DKK 4.4 billion). The Faroese government has indicated an interest in attracting further foreign investment. “Invest in the Faroes” is the Faroese government unit promoting Faroese trade. The website is http://www.government.fo .

The Faroe Islands have over the years engaged in several disputes with the EU over fishing quotas, so far culminating with the EU adopting measures that allowed it to impose sanctions on the Faroe Islands in 2012. In March 2013, the Faroe Islands unilaterally increased its quota for herring and mackerel. EU member states responded by voting in favor of imposing sanctions, which went into force in August 2013. The EU lifted sanctions in 2014 after reaching a political understanding with the Faroe Islands on herring catches. Subsequently, the Faroe Islands and the other coastal states in the North Atlantic signed a five-year agreement on mackerel quotas, reducing uncertainty for fisheries and improving profitability since the agreement allows for more sustainable harvesting. The Faroe Islands negotiates reciprocal exchanges of fishing opportunities with the EU, Norway, and the United Kingdom annually.

The Government of the Faroe Islands retains control over most internal affairs, including the conservation and management of living marine resources within the 200 nautical mile fisheries zone, natural resources, financial regulation and supervision, and transport. Denmark continues to exercise control over foreign affairs, security, and defense, in consultation with the Faroese government.

The labor force comprised 31,968 people in 2021, of which 664 were unemployed. In many areas, the Faroese labor market model resembles other Nordic countries, with high standards of living, well-established welfare schemes, and independent labor unions. Most people in the Faroe Islands are bilingual or multilingual, with Danish and English being the most widely spoken languages after Faroese. The Islands boast well-developed physical and telecommunications infrastructure and have well-established political, legal, and social structures. The standard of living for the population of 53,664 (which exceeded 50,000 for the first time in May 2017) is high by world standards, with Gross National Disposable Income per capita similar to that of Denmark.

Contact for more information on the Faroe Islands:

Kristen Stolt
Economic Officer
U.S. Embassy Denmark
Dag Hammarskjölds Alle, 242100 Copenhagen, Denmark
Email:  CopenhagenICS@state.gov 

The Greenlandic government is actively pursuing foreign investment to diversify the economy, advance climate goals, and increase trade.

Greenland is a self-governing area within the Kingdom of Denmark, yet it is not an EU member. Greenland originally joined the EU with Denmark in 1973 but left in 1985 and is today one of the EU’s Overseas Countries and Territories (OCTs).

Two-thirds of Greenland lies above the Arctic Circle, and its northern tip is less than 500 miles from the North Pole. Greenland can be reached by air from Denmark or Iceland. There are currently no direct commercial flights to or from the United States. With approximately 60 kilometers of road in the whole territory, people and goods are transported either by air or by sea.

Greenland’s GDP was estimated at $3.19 billion (DKK 20.19 billion) in 2020. Denmark’s annual block grant to Greenland equals approximately 20 percent of GDP.

The preponderance of jobs is in the public sector or with Government of Greenland-owned enterprises that comprise the telecommunication, power, and transportation sectors. Fishing is Greenland’s single most important commercial industry, accounting for 93 percent of exports. The sector is dominated by two companies, the Government of Greenland-owned Royal Greenland and the privately-owned Polar Seafood. The government is promoting the development of tourism and the extractive minerals sector, as well as hydropower projects. Greenland has large deposits of critical minerals and rare earth elements. Greenland owns and has disposal rights over all mineral resources, including oil and gas resources. The Greenlandic government announced in July 2021 its decision to cease issuing licenses for hydrocarbon exploration.

Greenland’s status within the Kingdom of Denmark is outlined in the Self Rule Act (SRA) of 2009, which details the Greenlandic government’s right to assume a number of additional responsibilities from the Danish government, including the administration of justice, business and labor, aviation, immigration and border control, and financial regulation and supervision. Before 2009, Greenland had already acquired control over taxation, fisheries, internal labor negotiations, natural resources, and oversight of offshore labor, environment, and safety regulations. Denmark continues to have control over the Realm’s foreign affairs, security, and defense policy, in consultation with Greenland and the Faroe Islands. Denmark also retains authority over border control issues, including immigration into Greenland. The annual block grant Denmark provides to Greenland is indexed to inflation and accounts for about half of the Greenlandic government’s revenue. In 2021, this grant was $636 million (DKK 4.0 billion).

The Greenlandic government seeks to increase economic growth and government revenues by promoting the further development of fisheries, extractive resources, energy production, and tourism while periodically trimming the public sector through privatization of enterprises currently owned by the government. Key initiatives include improving access to and localizing financing for new businesses and enhancing Greenland’s corporate tax competitiveness. Over the past decade, rising prices for fish and shellfish, the predominant Greenlandic exports, have generated solid earnings for large parts of the fisheries sector, though they were negatively impacted by COVID-19 border closures in China. The Greenlandic government directed state-owned enterprises to stop trading with Russia in February 2022 and announced the government’s intent to join EU sanctions against Russia. The Greenlandic parliament adopted legislation in May 2022 providing the framework for the government to impose sanctions against Russia.

To meet anticipated demand, the Government of Greenland has extensive plans to improve infrastructure. The capital Nuuk (population 19,000) is growing in large part through economic migration from within the country. The government is expanding the airport to accommodate direct international flights, has a multilingual workforce, an active shipping and cruise port, and additional planned investments in roads, housing, and port expansion. The government is improving access to Greenland’s primary tourist destination Ilulissat (population 4,670) through an airport expansion. Both airport expansions in Nuuk and Ilulissat are expected to be completed in 2024. Additionally, the Government of Greenland is planning a new airport in Qaqortoq, the municipal seat of South Greenland, with plans for additional infrastructure improvements as well. Lastly Sisimiut, the second-largest town (population 5,600) in Greenland, is home to Greenland’s northernmost port that remains ice free year-round. Private partnerships are underway to expand adventure tourism from the shoreline to the polar ice cap and to increase access to the area’s UNESCO World Heritage Site. Other efforts to develop tourism include increases in hotel capacity, a reduction in passenger tax for cruise ships, and a focus on promoting foreign language education to create a more multilingual workforce. The government is calling for stricter safety requirements for navigation in Greenlandic waters.

Greenland offers world-class deposits of rare earths and critical minerals. In the mineral extractives sector, two smaller mines (ruby and anorthosite) are in production. The government granted a company an exploitation license to restart a gold mine in southern Greenland. The Dundas ilmenite project is actively being developed, while an Australia-based company is working to develop one of the world’s largest zinc deposits located in northeast Greenland. Two small Australia-based companies are vying to extract rare earth elements in South Greenland. The resources in both of these projects are globally significant; each would rank in the top five worldwide if they were developed. One of the projects, Kringlerne, received an exploitation license in late 2020. The developer of the Kvanefjeld project has requested arbitration proceedings in its dispute with the Government of Greenland and the Government of the Kingdom of Denmark following Greenland’s passage of a law in November 2021 banning mining of minerals containing more than 100 parts per million (ppm) of uranium, a limit which exploitation of the rare earth elements in Kvanefjeld would exceed.

Greenland weathered the first year of the COVID-19 pandemic better than most other countries. While most parts of the world reported a sharp decline in activity in 2020, Greenland experienced positive growth of nearly 1 percent that year. In recent years there has been strong economic growth, mainly driven by large catches and high prices of fish and shellfish, but also supported by consumption, investments, and the resource extraction industry. The Greenlandic Economic Council (GEC) – an independent advisory council – estimated that real GDP grew on average by 2.4 percent annually from 2014 to 2018. The GEC expects growth to reach 1.8 percent for 2021 and 2.5 percent for 2022. A strong economy in recent years has led to labor shortages, both geographically and by sector, especially in connection with large construction projects. The GEC estimated unemployment declined from about 10 percent in 2014 to a projected 4.1 percent in 2021. Currently, 70 percent of all available jobs are in the capital Nuuk, and 90 percent of all available jobs are in just three locations: Nuuk (in which a third of the population resides), Sisimiut, and Pituffik (Thule Air Base).

Greenland’s remote geographical location and the ability to effectively mitigate the risk of infection through travel restrictions reduced the need for lockdowns and restrictions with their attendant adverse economic consequences. The tourism and travel industries bore the brunt of the negative impacts of the pandemic, as lockdowns and travel restrictions in other countries effectively wiped out the 2020 and 2021 tourism seasons in Greenland, but the industry is expecting a sharp upturn in 2022. Following two years of no port calls by the cruise industry, cruise ship reservations for 2022 are the highest numbers Greenland has seen.

The Greenland parliament (“Inatsisartut”) and the Government of Greenland (“Naalakkersuisut”) adopted a Budget Act in 2016, which mandates the budget not be in deficit over four contiguous years. The public budget had run surpluses since 2015, but the COVID pandemic forced a deficit of $21.4 million (DKK 135 million) in 2020, significantly below the initial estimates, and the 2020–2023 budget barely upheld the Budget Law requirement. The government projects a deficit of $12.1 million (DKK 76 million) in 2022. The Government of Greenland adopted a number of financial support measures, which increased public expenditures in 2020 and 2021 for health care, social benefits, and emergency aviation, while fisheries taxes fell. Public consumption in Greenland was 44.7 percent of GDP in 2020, compared to 24.7 percent in Denmark.

The Budget Act is currently under revision and the new revised act will come into force in 2023 with adjustments but in line with the basic concept. The government and government-owned enterprises had a gross debt of approximately 20 percent of GDP in 2020, and the debt is projected to increase from $636 million (DKK 4 billion) in 2020 to $1.1 billion (DKK 7.2 billion) in 2024. The GEC reported initially in 2017 that “projections for the public finances show a major sustainability problem.” The GEC has reaffirmed that finding in subsequent reports, including their latest report from the fall of 2021 in which it projected the fiscal sustainability problem to amount to -5.4 percent of GDP up to 2050. The GEC has warned about the effects of increasing public expenditures as larger portions of the population age into retirement, resulting in fewer wage earners in the labor market. The GEC has also noted that a realistic plan to close the gap between expected expenditures and revenues could require the Greenlandic government to cut social spending, raise the retirement age, and increase vocational education and training. For Greenland to become a more self-sufficient economy, the GEC asserted that the extractive and tourism sectors would need further development. The GEC noted that Greenland has not sufficiently addressed its sustainability challenges and estimated that the public budget would need to be reinforced by $159 million (DKK 1 billion) annually by 2040 to accommodate the aging population.

The vast majority of Greenlandic exports and imports pass through Denmark to and from the rest of the world but are reported as trade between the two. Greenland imports goods from all over the world, primarily through Denmark, and to a lesser extent, via Iceland. Some 93 percent of Greenlandic exports, measured in local currency, are fish products, with the remainder being mainly raw materials and machinery. Royal Greenland and Polar Seafood are the two main seafood exporters. Royal Greenland’s largest country market is China, and one-third of its revenues are generated in Asia, half in Europe, and 10 percent in North America, which the company views as a growth market. After experiencing major losses of exports to China in 2020 due to tightened import restrictions in China as a reaction to COVID-19, Royal Greenland has sought diversification in markets and products to spread risk. Polar Seafood has its main markets in Scandinavia, China, and Japan.

Due to its vast geographic expanse, Greenland’s physical and telecommunications infrastructure is less interconnected and developed than in other parts of the Kingdom of Denmark. Greenland’s government-owned telecommunications company predominantly uses Ericsson equipment and announced that it would continue to do so for future upgrades, including 5G.

Danish business (CVR) registration through indberet.virk.dk is required to conduct business in Greenland. Furthermore, companies planning to have employees must register as an employer with the employer register Sulinal: https://sulinal.nanoq.gl . In July 2018, an updated Companies Act entered into force that opened new ways of establishing a company, e.g., with reduced share capital requirements with the possibility of partial payment of the share capital, and the possibility of establishing entrepreneur companies with a share capital of $0.16 (DKK 1). Foreign companies may start their businesses in Greenland either through a subsidiary (both ApS and A/S type companies) or via a registered branch office.

ApS and A/S

An ApS (private limited company) or A/S (public limited company) is a separate legal entity with limited liability for its shareholders. The main difference between a private (ApS) and a public (A/S) limited company is that the shares of a private limited company cannot be issued publicly. Therefore, an ApS cannot be subject to listing or otherwise issue shares to the public to secure more capital. In addition, there are a few differences concerning capital and management requirements. Under the Companies Act, the minimum share capital requirement for an ApS is $6,350 (DKK 40,000). The minimum share capital requirement for an A/S is $63,500 (DKK 400,000). However, under the Danish Companies Act, it is possible to incorporate an A/S and only pay 25 percent of this amount (i.e., $15,875 (DKK 100,000)), leaving the company with a receivable on the shareholders for the outstanding amount (i.e., $47,625 (DKK 300,000)). A founder of a company may be foreign or Greenlandic individuals or corporate entities. Both ApS and A/S companies can be registered via the Danish Business Authority’s (DBA) online system. No registration fees are required.

A foreign company may typically establish a registered branch office in Greenland instead of establishing a Greenlandic company. A branch of a foreign company may be created through an application with the DBA. Companies within the EU and European Economic Area (EEA) may set up a branch in Greenland and Denmark without further approval from the DBA. However, companies outside of the EU/EEA must obtain approval before registering.

A foreign company can do business in Greenland in a consecutive or non-consecutive 90-day period over 12 months without being required to register as a business.

The Greenlandic tax system is based on flat-rate taxation of business profits for both resident and non-resident corporations. Greenland operates with a net income principle, where the taxable income is calculated as a total net amount after deductions. The net income principle means that all income is treated equally, regardless of whether the income comes from employment, self-employment, investment income, or pensions, etc. As the rules of taxation for businesses can be complicated, potential investors may seek to retain guidance from the Greenlandic Tax Agency ( www.aka.gl ) or professional consultants.

Greenland has double taxation agreements with Denmark, the Faroe Islands, Iceland, Norway, Canada, the United States, Cayman Islands, Isle of Man, Bermuda, Jersey, and Guernsey. Greenland signed a Foreign Account Tax Compliance Act (FATCA) agreement with the United States.

The corporate income tax rate is 25 percent (down from 30 percent in 2019); an additional surcharge of 6 percent of the tax payable brings the total corporate tax rate to 26.5 percent.

The taxation of royalty payments is 30 percent. Greenland has no value-added tax (VAT) system, property tax, sales tax, or similar taxes. There are, however, some payable duties, such as taxes for cruise liners, ports duties, etc. There are four types of depreciation in the Greenlandic tax law. Buildings can be depreciated 5 percent annually. Ships, planes, and hydrocarbon prospecting can be depreciated 10 percent annually. Mineral licenses can be depreciated 25 percent each year for four years, and operating equipment can be depreciated at a rate of 30 percent annually. Assets with a cost of less than $15,875 (DKK 100,000) may be depreciated in the year of acquisition.

Greenlandic permanent establishments of foreign companies are taxed under the same rules and rates as Greenlandic resident companies. There is no branch profits remittance tax or other similar tax on branch profits. If a foreign company has more than one location or permanent establishment in Greenland, these are treated as separate taxable entities with no possibility of consolidation.

The Greenlandic labor force was 26,978 persons in 2020. Average unemployment for 2020 was 5.3 percent – lower than the OECD average of 7.2 percent, and a decrease from 10.3 percent in 2014. Unemployment has decreased significantly, especially in Nuuk. According to the most recent report by Statistics Greenland, 49.2 percent of the Greenlandic workforce in 2019 had an education beyond municipal primary and lower secondary school. Of the workforce, 27.4 percent had vocational education, while 15.6 percent had a tertiary education. Among the unemployed, 84 percent have no education beyond municipal primary and lower secondary school.

In December 2012, Greenland passed legislation known as the “Large Scale Act,” which allows companies to use foreign labor during the construction phase of development when project costs exceed $795 million (DKK 5 billion) and workforce requirements exceed the local labor supply. The Act is intended for potential mining or infrastructure projects in Greenland. The Act lays out the framework for politically negotiated Impact Benefit Agreements (IBA) for the Government of Greenland and the employer to agree on the exact conditions of employment for foreign labor. The scale of Greenlandic labor utilized will be negotiated for each project and will vary depending on local capacity and the negotiated agreement for each project.

Foreign workers enjoy the same legal protections as Greenlandic workers, including the same $16 (DKK 100.47) per hour minimum wage and retention of the right to strike.

In 2021, Greenland implemented the Fast Track Scheme. This arrangement allows businesses in industries facing labor shortages to hire foreign workers who can begin working before they are approved for a work permit.

Greenland possesses sizable discovered and undiscovered mineral resource potential. Some deposits are among the largest in the world. The country’s resources include iron and ferroalloys (iron, nickel, molybdenum, tungsten, and others), base metals (copper, zinc, and lead), specialty metals (rare earth elements, uranium, niobium, tantalum, and others), precious metals (platinum, gold, and others) and gemstones (diamonds, rubies, and sapphires). Mining industry experts anticipate that Greenland’s retreating ice will make the island’s rich stores of raw materials more easily accessible. However, exploration and exploitation projects will still face higher costs because of remote locations, lack of infrastructure, harsh climate, and distance to world markets. In 2021 the government implemented a limit of 100 ppm for uranium collocated with these deposits and granted the government authority to ban or limit mineral resource extraction for other types of radioactive elements.

With the 2009 SRA, Greenland gained rights to its mineral and hydrocarbon resources, and it acquired the regulatory authority over these on January 1, 2010. The SRA also created a revenue mechanism: if Greenland’s natural resources’ exploitation becomes commercially viable, Greenland will keep the first $11.92 million (DKK 75 million) in annual revenues derived from these resources. Additional revenues will be split equally between the Danish and Greenlandic governments. Denmark’s share will be transferred by deducting the equivalent amount from the annual block grant to Greenland of $636 million (DKK 4.0 billion). Once the block grant’s total value is reached, any additional revenue will be subject to negotiations between the Danish and Greenlandic governments. In 2021, the Greenlandic government determined it would no longer permit hydrocarbon exploration.

Most of Greenland’s identified rare earth deposits are licensed by the Mineral License and Safety Authority, and some have reached advanced stages of exploration. In 2021, Greenland dropped significantly in the Canadian Fraser Institute’s Investment Attractiveness Index from 41st out of 77 jurisdictions to 61st of 84 jurisdictions. The survey highlights the ban on exploration and production of uranium, political instability, and the lack of qualified officials as creating uncertainty for investors.

Information about the Greenlandic government can be found at http://naalakkersuisut.gl/en  . Information from the Greenlandic government on natural resource exploration and extraction can be found at http://www.govmin.gl  . Information about doing business in Greenland can be found at https://www.businessingreenland.gl/en  . Statistics on Greenland can be found at http://www.stat.gl/default.asp?lang=en  .

By law, private property can only be expropriated for public purposes in areas where the Greenlandic government has the competencies, in a non-discriminatory manner, and with reasonable compensation. There have been no recent expropriations of significance in Greenland.

In Greenland it is not possible to acquire private ownership of land, but a right of use may be sold for an area, i.e. if you buy property, you own the building, not the land on which it sits.

There have been no significant disputes over foreign investment in Greenland in recent years, however, in March 2022, Australia-based Greenland Minerals requested arbitration in its dispute with the Governments of Greenland and the Kingdom of Denmark over the future of its Kvanefjeld rare earths project. While it is common that disputes are settled in Greenlandic courts, the Danish Supreme Court remains the highest appeals court for disputes in Greenland. If a dispute is very specialized and within the purview of the Danish Administration of Justice Act, the parties involved can choose the Danish Maritime and Commercial Court as a court of first instance.

While Greenland’s democratic institutions and legal framework in general are strong, there have been some concerns about legislation being passed by parliament without significant hearing processes and public input.

Louise Grønvold
Political and Economic Specialist
U.S. Consulate Nuuk, Greenland
Email: USConsulateNuuk@state.gov 

The Securities Market Act (SMA) contains regulations on corporate disclosure procedures and requirements, responsibility for flagging share ownership, insider regulations and offenses, the issuing and marketing of securities, and trading. The clearing of securities trades is subject to licensing and is supervised by the Financial Supervision Authority. The SMA is at https://www.finlex.fi/en/laki/kaannokset/2012/en20120746_20130258.pdf .

See the Financial Supervisory Authority’s overview of regulations for listed companies here: https://www.finanssivalvonta.fi/en/capital-markets/issuers-and-investors/regulation-of-listed-companies/ . Finland is currently not a member of the UNCTAD Business Facilitation Program https://unctad.org/topic/enterprise-development/business-facilitation

The Act on the Openness of Public Documents establishes the openness of all records in the possession of officials of the state, municipalities, registered religious communities, and corporations that perform legally mandated public duties, such as pension funds and public utilities. Exceptions can only be made by law or by an executive order for reasons such as national security. For more information, see the Ministry of Justice’s page on Openness: https://oikeusministerio.fi/en/act-on-the-openness-of-government-activities . The Act on the Openness of Government Activities can be found here: https://www.finlex.fi/en/laki/kaannokset/1999/en19990621 .

In September 2021, the Ministry of Economic Affairs and Employment released a Sustainable Development Goals (SDG) Finance Roadmap – Finnish Roadmap for Financing a Decade of SDG Action 2021- report, where environmental, social and corporate governance (ESG) is promoted, as records show increasingly a positive relation between good ESG practices and investment returns and volatility. More information here: https://tem.fi/en/developing-finlands-sustainable-finance-ecosystems .

Finland ranks third on the World Justice Project (WJP) Rule of Law Index (2021) regarding constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice and criminal justice. For more, see: https://worldjusticeproject.org/our-work/research-and-data/wjp-rule-law-index-2021 Finland ranks fourth on World Bank’s Global Indicators of Regulatory Governance: http://rulemaking.worldbank.org/en/data/explorecountries/finland .

Availability of official information in Finland is the best in the EU, according to a report by the Center for Data Information (2017). The newly established Digital and Population Data Services Agency (2020) is responsible for developing and maintaining the national open data portal https://www.avoindata.fi/en

In 2019, Finland passed the EU’s General Data Protection Regulation (GDPR) directive, which in parts rules conditions for the secondary use of private-sector health and social data. A single data permit authority (Findata) was established to oversee the entire data-sharing process: https://findata.fi/en/

Finland joined the Open Government Partnership Initiative (OGP) in April 2013. The global OGP-initiative aims at promoting more transparent, effective, and accountable public administration. The goal is to develop dialogue between citizens and administration and to enhance citizen engagement. The OGP aims at concrete commitments from participating countries to promote transparency, to fight corruption, to citizen participation and to the use of new technologies. Finland’s 4th national Open Government Action Plan for 2019–2023 was published in September 2019.

The current Government Program (issued in December 2019) sets openness of public information, including open data, application programming interface APIs and open source software, as key goals of the administration.

The status of Finland’s public finances is available at Statistics Finland, Finland’s official statistics agency: https://www.stat.fi/til/jul_en.html

The status of Finland’s national debt is available at the State Treasury: https://www.treasuryfinland.fi/statistics/statistics-on-central-government-debt/

Finland respects EU common rules and expects other Member States to do the same. The Government seeks to constructively combine national and joint European interests in Finland’s EU policy and seeks better and lighter regulation that incorporates flexibility for SMEs. The Government will not increase burdens detrimental to competitiveness during its national implementation of EU acts.

Finland, as a member of the WTO, is required under the Agreement on Technical Barriers to Trade (TBT Agreement) to report to the WTO all proposed technical regulations that could affect trade with other Member countries. In 2021, Finland submitted two notifications of technical regulations and conformity assessment procedures to the WTO and has submitted 105 notifications since 1995. Finland is a signatory to the WTO Trade Facilitation Agreement (TFA), which entered into force on February 22, 2017.

Finland follows European Union (EU) internal market practices, which define Finland’s trade relations both inside the EU and with non-EU countries. Restrictions apply to certain items such as products containing alcohol, pharmaceuticals, narcotics and dangerous drugs, explosives, etc. The import of beef cattle bred on hormones is forbidden. Other restrictions apply to farm products under the EU’s Common Agricultural Policy (CAP).

In March 1997 EU commitments required the establishment of a tax border between the autonomously governed, but territorially Finnish, Aland Islands and the rest of Finland. As a result, the trade of goods and services between the Aland Islands and the rest of Finland is treated as if it were trade with a non-EU area. The Aland Islands belong to the customs territory of the EU but not to the EU fiscal territory. The tax border separates the Aland Islands from the VAT and excise territory of the EU. VAT and excise are levied on goods imported across the tax border, but no customs duty is levied. In tax border trade, goods can be sold with a tax free invoice in accordance with the detailed taxation instructions of the Finnish Tax Administration.

Finland has a civil law system. European Community (EC) law is directly applicable in Finland and takes precedence over national legislation. The Market Court is a special court for rulings in commercial law, competition, and public procurement cases, and may issue injunctions and penalties against the illegal restriction of competition. It also governs mergers and acquisitions and may overturn public procurement decisions and require compensatory payments. The Court has jurisdiction over disputes regarding whether goods or services have been marketed unfairly. The Court also hears industrial and civil IPR cases.

Amendments to the Finnish Competition Act (948/2011) entered into force on June 17, 2019, and on January 1, 2020. The amendments include, most notably, changes to the Finnish Competition and Consumer Authority FCCA’s dawn raid practices, information exchange practices between national authorities and the calculation of merger control deadlines, which are now calculated in working days, rather than calendar days. On June 24, 2021, the Finnish Competition Act was amended to implement the EU ECN+ Directive, helping competition authorities to be more effective enforcers and to ensure proper functioning of the internal market. More information here: https://valtioneuvosto.fi/en/-/1410877/competition-act-amendments-aimed-at-improving-enforcement-enter-into-force-on-24-june

Finland is a party of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1962. The provisions of the Convention have been included in the Arbitration Act (957/1992).

The Oikeus.fi website (https://oikeus.fi/en/index.html) contains information about the Finnish judicial system and links to the websites of the independent courts, the public legal aid and guardianship districts, the National Prosecution Authority, the National Enforcement Authority Finland, and the Criminal Sanctions Agency.

There is no primary or “one-stop-shop” website that provides all relevant laws, rules, procedures and reporting requirements for investors. A non-European Economic Area (EEA) resident (persons or companies) operating in Finland must obtain a license or a notification when starting a business in a regulated industry. A comprehensive list of regulated industries can be found at: https://www.suomi.fi/company/responsibilities-and-obligations/permits-and-obligations .

See also the Ministry of Employment and the Economy’s Regulated Trade guidelines: https://tem.fi/en/regulation-of-business-operations . The autonomously governed Aland Islands, however are an exception. Right of domicile is acquired at birth if it is possessed by either parent. Property ownership and the right to conduct business are limited to those with the right of domicile in the Aland Islands. The Aland Government can occasionally grant exemptions from the requirement of right of domicile for those wishing to acquire real property or conduct a business in Aland. This does not prevent people from settling in, or trading with, the Aland Islands. Provided they are Finnish citizens, immigrants who have lived in Aland for five years and have adequate Swedish may apply for domicile and the Aland Government can grant exemptions.

The Competition Act allows the government to block mergers where the result would harm market competition.

A December 2021 study on the need to expand the merger filing obligation by the Finnish Competition and Consumer Authority (FCCA) shows that the current national turnover thresholds allow harmful merges to escape the scrutiny of the authority. FCCA proposes that the current turnover thresholds in merger control should be lowered and, in addition, the FCCA be granted the right to require a notification when the thresholds are not met: https://www.kkv.fi/en/current/press-releases/fcca-study-expanding-the-obligation-to-notify-mergers-would-create-significant-consumer-benefit/#main-content

FCCA issued merger control guidelines in 2011: https://arkisto.kkv.fi/globalassets/kkv-suomi/julkaisut/suuntaviivat/en/guidelines-1-2011-mergers.pdf

EnterpriseFinland/Suomi.fi ( https://www.suomi.fi/company/ ) is a free online service offering information and services for starting, growing and developing a company. Users may also ask for advice through the My Enterprise Finland website: https://oma.yrityssuomi.fi/en#. Finnish legislation is available in the free online databank Finlex in Finnish, where some English translations can also be found: https://www.finlex.fi/en/laki/kaannokset/ .

The Finnish Competition and Consumer Authority FCCA protects competition by intervening in cases regarding restrictive practices, such as cartels and abuse of dominant position, and violations of the Competition Act and the Treaty on the Functioning of the European Union (TFEU). Investigations occur on the FCCA’s initiative and on the basis of complaints. Where necessary, the FCCA makes proposals to the Market Court regarding penalties. In international competition matters, the FCCA’s key stakeholders are the European Commission (DG Competition), the OECD Competition Committee, the Nordic competition authorities and the International Competition Network (ICN). FCCA rulings and decisions can be found in the archive in Finnish. More information at: https://www.kkv.fi/en/facts-and-advice/competition-affairs/ .

In September 2020, the Nordic Competition Authorities released a joint memorandum on digital platforms, setting out the Nordic perspective on issues of competition in digital markets in Europe. For more see: https://www.kkv.fi/globalassets/kkv-suomi/julkaisut/pm-yhteisraportit/nordic-report-2020-digital-platforms-and-the-potential-changes-to-competition-law-at-the-european-level.pdf

Finnish law protects private property rights. Citizen property is protected by the Constitution which includes basic provisions in the event of expropriation. Private property is only expropriated for public purposes (eminent domain), in a non-discriminatory manner, with reasonable compensation, and in accordance with established international law. Expropriation is usually based on a permit given by the government or on a confirmed plan and is performed by the District Survey Office. An expropriation permit granted by the Government may be appealed against to the Supreme Administrative Court. Compensation is awarded at full market price, but may exclude the rise in value due only to planning decisions.

Besides normal expropriation according to the Expropriation Act, a municipality or the State has the right to expropriate land for planning purposes. Expropriation is mainly for acquiring land for common needs, such as street areas, parks and civic buildings. The method is rarely used: less than one percent of land acquired by the municipalities is expropriated. Credendo Group ranks Finland’s expropriation risk as low (1), on a scale from 1 to 7: https://credendo.com/en/country-risk/finland .

ICSID Convention and New York Convention

In 1969, Finland became a member state to the World Bank-based International Center for Settlement of Investment Disputes (ICSID; Washington Convention). Finland is a signatory to the Convention of the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

The Finnish Arbitration Act (967/1992) is applied without distinction to both domestic and international arbitration. Sections 1 to 50 apply to arbitration in Finland and Sections 51 to 55 to arbitration agreements providing for arbitration abroad and the recognition and enforcement of foreign arbitral awards in Finland. Of 229 parties in 2021, the majority (208) were from Finland. There have been no reported investment disputes in Finland in recent years.

International Commercial Arbitration and Foreign Courts

Finland has a long tradition of institutional arbitration and its legal framework dates back to 1928. Today, arbitration procedures are governed by the 1992 Arbitration Act (as amended), which largely mirrors the UNCITRAL Model Law on International Commercial Arbitration of 1985 (with amendments, as adopted in 2006). The UNCITRAL Model law has not yet, however, been incorporated into Finnish Law.

Finland’s Act on Mediation in Civil Disputes and Certification of Settlements by Courts (394/2011) aims to facilitate alternative dispute resolution (ADR) and promote amicable settlements by encouraging mediation, and applies to settlements concluded in other EU member states: https://www.finlex.fi/en/laki/kaannokset/2011/en20110394.pdf . In June 2016, the Finland Arbitration Institute of the Chamber of Commerce (FAI) launched its Mediation Rules under which FAI will administer mediations: https://arbitration.fi/mediation/mediation_rules/ .Any dispute in a civil or commercial matter, international or domestic, which can be settled by agreement may be referred to arbitration. Arbitration is frequently used to settle commercial disputes and is usually faster than court proceedings. An arbitration award is final and binding. FAI promotes the settlement of disputes through arbitration, commonly using the “FAI Arbitration/Expedited Arbitration Rules”, which were updated in 2020: https://arbitration.fi/wp-content/uploads/sites/22/2020/01/arbitration-rules-of-the-finland-chamber-of-commerce-2020.pdf

The Finland Arbitration Institute (FAI) appoints arbitrators both to domestic and international arbitration proceedings, and administers domestic and international arbitrations governed by its rules. It also appoints arbitrators in ad hoc cases when the arbitration agreement so provides, and acts as appointing authority under the UNCITRAL Arbitration Rules. The Finnish Arbitration Act (967/1992) states that foreign nationals can act as arbitrators. For more information see: https://arbitration.fi/arbitration/

Finland signed the UN Convention on Transparency in Treaty-based Investor-State Arbitration (“Mauritius Convention”) in March 2015. Under these rules, all documents and hearings are open to the public, interested parties may submit statements, and protection for confidential information has been strengthened.

The Finnish Bankruptcy Act was amended and the amendments took effect on July 1, 2019. The main objectives of these amendments were to simplify, digitize and speed-up bankruptcy proceedings. The amended Bankruptcy Act allows administrators to send notices and invitations to creditor addresses registered in the Trade Register. This will improve accessibility for foreign companies that have established a branch in Finland. Administrators of bankruptcy and restructuring proceedings must upload data and documentation to the bankruptcy and restructuring proceedings case management system (KOSTI). KOSTI is available only in Finnish for creditors located in Finland due to the strong ID requirements.

The Reorganization of Enterprises Act (1993/47), https://www.finlex.fi/fi/laki/kaannokset/1993/en19930047, establishes a legal framework for reorganization with the aim to provide an alternative to bankruptcy proceedings. The Act excludes credit and insurance institutions and certain other financial institutions. Recognition of restructuring or insolvency processes initiated outside of the EU requires an exequatur from a Finnish court.

The bankruptcy ombudsman, https://www.konkurssiasiamies.fi/en/index.html , supervises the administration of bankruptcy estates in Finland. The Act on the Supervision of the Administration of Bankruptcy Estates dictates related Finnish law: https://www.konkurssiasiamies.fi/material/attachments/konkurssiasiamies/konkurssiasiamiehentoimistonliitteet/6JZrLGPN1/Act_on_the_Supervision_of_the_Administration_of_Bankruptcy_Estates.pdf .

Finland can be considered creditor-friendly; enforcement of liabilities through bankruptcy proceedings as well as execution outside bankruptcy proceedings are both effective. Bankruptcy proceedings are creditor-driven, with no formal powers granted to the debtor and its shareholders. The rights of a secured creditor are also quite extensive.

According to data collected by the World Bank’s 2020 Doing Business Report, resolving insolvency takes 11 months on average and costs 3.5 percent of the debtor’s estate. The average recovery rate is 88 cents on the dollar. Globally, Finland ranked first of 190 countries on the ease of resolving insolvency in the Doing Business 2020 report : https://www.doingbusiness.org/content/dam/doingBusiness/country/f/finland/FIN.pdf

Foreign-owned companies in Finland are eligible for government and EU incentives on an equal footing with Finnish-owned companies. Support is given in the form of grants, loans, tax benefits, equity participation, guarantees, and employee training.

Assistance is administered through one of Finland’s Centers for Economic Development, Transport, and the Environment (ELY) that provide advisory, training, and expert services as well as grant funding for investment and development projects. Investment aid can be granted to companies in the regional development areas, especially small and medium enterprises (SMEs). Large companies may also qualify if they have a major employment impact in the region. Aid to business development can be granted to improve or facilitate the company’s establishment and operation, know-how, internationalization, product development or process enhancement. Subsidies for start-up companies are available for establishing and expanding business operations during the first 24 months. Transport aid may be granted for deliveries of goods produced to sparsely populated areas. Energy subsidies can be granted to companies for investments in energy efficiency and conservation. EU finance is largely also channeled through the ELY Centers. http://www.ely-keskus.fi/en/web/ely-en/business-and-industry;jsessionid=0B09A1B237B74FAC485AAD7C8E068DBF .

Business Finland provides low-interest loans and grants to challenging and innovative projects potentially leading to global success stories. The organization offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland. Besides funding technological breakthroughs, Business Finland emphasizes also service-related, design, business, and social innovations. Startups and both SMEs and large companies can benefit from Business Finland incentives.

A company can use guarantees from the state-owned financing company Finnvera: https://www.finnvera.fi/eng/start/applying-for-financing-when-setting-up-a-business . Finnvera offers services to businesses in most sectors and is also Finland’s official Export Credit Agency (ECA).

Business Finland helps foreign investors set up a business in Finland. Its services are free of charge, and range from data collection and matchmaking to location management. Business Finland’s innovation funding provides low-interest loans and grants to challenging and innovative projects potentially leading to global success stories. The organization offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland: https://www.businessfinland.fi/en/do-business-with-finland/invest-in-finland/invest-in-finland. More on Business Finland’s incentives: https://www.businessfinland.fi/en/do-business-with-finland/invest-in-finland/business-environment/incentives/incentives-short and incentives fact sheet : https://mediabank.businessfinland.fi/l/CGccrMLqwN5d

Support for innovative business ventures can also be obtained from the Foundation for Finnish Inventions: https://www.wipo.int/members/en/details.jsp?country_id=57  https://www.keksintosaatio.fi/en/keksintosaatio-etusivu-english/

As part of the Sustainable Growth Program (the recovery and resilience plan), Finland is promoting energy investment and energy infrastructure projects that reduce greenhouse gas emissions in Finland and support Finland’s 2035 carbon neutrality target. The 520 million eur funding promotes climate objectives and new business opportunities in sustainable growth for companies. For more see: https://tem.fi/en/-/energy-investments-of-finland-s-sustainable-growth-programme-promote-the-green-transition )

Finland’s feed-in premium scheme for renewable electricity production (wind power, biogas, forest chips and wood fuels) entered into force in 2011 (Act No. 1396/2010). Wind power, biogas power and wood-based fuel power stations accepted in the feed-in system were paid a subsidy meeting the difference between the target price and the electricity’s market price for a 12-year period. Support for wind power was closed the end of 2017, biogas and wood-based fuel power plant end of 2018 and wood chip power plants in mid-March 2021.

Finnish tax legislation provides certain tax incentives for using renewable energy sources (for example, simplified excise taxation and possibility to apply for a tax refund). For more see: https://www.vero.fi/en/About-us/newsroom/news/uutiset/2021/taxation-changes-2022/

Government aid is available for the implementation of energy audits, investments that conserve energy and investments related to the use of renewable energy as well as for European Skills, Competences, Qualifications and Occupations (ESCO) projects. For more see: https://www.motiva.fi/en/solutions/policy_instruments/energy_aid

In Finland, the level of energy taxation is higher than the minimum tax levels set by the EU. According to Finnish Energy, a lobby organization for the energy sector, companies operating in Finland are disadvantaged in international competition due to Finland’s high energy taxation. Electricity tax on industry is lower than that on consumers and other businesses, but it is still high on the international scale.

In Finland, the current national policy is to tax energy production based on the carbon intensity of the fuel used, leaving renewable energy sources outside this tax. These carbon-based tax incentives for renewable energy production promote technologies with higher maturity and lower subsidy needs.

Free trade zone area regulations have been harmonized in the EU by the Community Customs Code. The European Union Customs Code UCC, its Delegated Act and Implementing Act entered into force on May 1, 2016, and will be implemented gradually; the free zone of control type II was abolished and the operator authorizations were changed into customs warehouse authorizations on Customs’ initiative. In Finland, uncleared goods can be stored in temporary warehouses or customs warehouses. There are no free zones or special economic zones in Finland.

The Code also allows the processing of non-Union goods without import duties and other charges. For more see: https://tulli.fi/en/businesses/customs-declarations/entry-and-temporary-storage

There are no performance requirements or commitments imposed on foreign investment in Finland. However, to conduct business in Finland, some residency requirements must be met. The Limited Liability Companies (LLC) Act of Finland is at: http://finlex.fi/en/laki/kaannokset/2006/en20060624 . A LLC must be reported for registration within three months from the signing of the memorandum of association: https://www.prh.fi/en/kaupparekisteri/yrityksen_perustaminen/osakeyhtio.html . There is no forced localization policy for foreign investments in Finland.

The legal basis for the limitation on admission of third country nationals for the purpose of employment is set out in the Council Resolution C274/3 of 1994. Labor Market Tests (LMT) are mechanisms that aim to ensure that migrant workers are only admitted after employers have seriously and unsuccessfully searched for local workers. As a tool to manage labor migration and to facilitate entry of certain categories of third-country national workers, Finland applies various exemptions from the LMT for certain categories of worker, according to national labor market needs. These categories include: highly qualified workers or top specialists, inter-corporate transferees (ICTs), posted workers, persons holding high ranking positions, sports professionals, workers in the field of research, science, art, and culture. LMT for persons already working in Finland and transferring to other sectors was removed in June 2019 in order to improve the labor mobility of foreign citizens already in the labor market.

To improve availability of workforce in sectors with labor shortage, a regional LMT pilot was launched in September 2021 through February 2023. Common guidelines on work permits in selected areas are introduced to increase labor mobility between regions and ease permit processes.

Finland participates actively in the development of the EU’s Digital Single Market (DSM) and, aside from privacy issues, encourages a light regulatory approach in this area. Since May 2018, data transfers from Finland to non-EU countries must abide by EU General Data Protection Regulation (GDPR) (EU) 2016/679. Finland supports the EU Commission’s view on promoting European digitalization and creating a single market for data.

In February 2021, an Advisory Board for Network Security (NSAB) was established to assess and develop the security of domestic communications networks and to support decision-making by the authorities. The Board operation is based on the new provisions of the Act on Electronic Communications Services that entered into force in early 2021, and is part of the implementation of the EU guidelines and 5G security toolbox in Finland.

Personal data may be transferred across borders per the Finnish Personal Data Act (PDA) at: http://finlex.fi/en/laki/kaannokset/1999/en19990523, which states that personal data may be transferred outside the European Union or the European Economic Area only if the country in question guarantees an adequate level of data protection. Office of the Data Protection Ombudsman legislation is at: https://tietosuoja.fi/en/organisations .

In November 2020, the Office of the Data Protection Ombudsman and the Finnish Information Society Development Center TIEKE started a pilot program providing micro enterprises and SMEs with information and tools to help ensure effective data protection. More information here: https://tietosuoja.fi/en/-/data-protection-opening-doors-into-europe-for-smes

The Finnish legal system protects and enforces property rights and secured interests in property, both movable and real. Finland ranked fourth in the world of 129 countries in the Property Rights Alliance 2021 International Property Rights Index (IPRI) which concentrates on a country’s legal and political environment, physical property rights, and intellectual property rights (IPR).

Mortgages exist in Finland and can be applied to both owned and rented real estate. Finland ranks 34th out of 190 countries in the ease of Registering Property according to the World Bank’s 2020 Doing Business Report. In Finland, real property formation, development, land consolidation, cadastral mapping, registration of real properties, ownership and legal rights, real property valuation, and taxation are all combined within one basic cadastral system (real estate register) maintained by the National Land Survey: – https://www.maanmittauslaitos.fi/en/apartments-and-real-property .

The Finnish legal system protects intellectual property rights (IPR), and Finland adheres to numerous related international agreements. One of Prime Minister Marin’s goals is to draft a National IPR Strategy for Finland. A draft government resolution has been prepared on the intellectual property rights (IRP) strategy. The aim of the draft IRP strategy, which was circulated for comment in January 2022, is that in 2030 the Finnish IPR legislation will support innovations and creative work. Treaties: Finland is a member of the World International Property Organization (WIPO) and party to a number of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention). Finland is party to the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Copyrights: The Finnish Copyright Act can be found at: https://wipolex.wipo.int/en/text/397616. Assessment of the Finnish Copyright system can be found at: https://www.cupore.fi/en/research/research-projects/assessment-of-the-finnish-copyright-system Distribution of information on copyright and surveillance of rights is performed by the Copyright Information and Anti-Piracy Centre (CIAPC).

Trademarks: The new Finnish Trademarks Act entered into force in May 2019. With this Act, Finland implemented the revised EU Trademark Directive, enforces the Singapore Treaty on the Law of Trademarks, and brings the 1964 trademark regulations up to date. Provisions concerning collective marks and control marks are included in the Act, which nullified the Act on Collective Marks. The Act also includes amendments to related legislation such as the Finnish Company Names Act, the Criminal Code, and relevant procedural acts. Trademark applicants or proprietors not domiciled in Finland are required to have a representative resident in the European Economic Area. Finland is party to the Madrid Protocol.

Trade secrets: In August 2018, Finland adopted a new Trade Secrets Act to incorporate the provisions of the EU Directive 2016/943 on Trade Secrets. The new Act replaces the Unfair Business Practices Act and provides harmonized definitions at the EU level for trade secrets, their lawful and unlawful acquisition, and their use and disclosure. The Act also includes a whistleblower provision according to which a person (e.g. an employee) is allowed to disclose a trade secret in order to reveal malpractice or illegal activity, so long as it is done to protect the public interest and the person has significant reasons to reveal the information. The Trade Secrets Act can be found at: https://www.finlex.fi/en/laki/kaannokset/2018/en20180595 . The Finnish Act implementing the EU Whistleblower Protection Directive is scheduled to be presented to Parliament in spring 2022. According to the Finnish draft act, all companies employing 50 people or more must establish an internal reporting channel, with a transition period for businesses employing 50–249 people extending to December 2023.

Patents: Patent rights in Finland are consistent with international standards, and a granted patent is valid for 20 years. The Finnish Patent and Registration Office (PRH) website contains unofficial translations in English of the Patents Act, Patents Decree, and Patent Regulations https://www.prh.fi/en/patentit/lainsaadantoa.html . The regulatory framework for process patents filed before 1995, and pending in 1996, denied adequate protection to many of the top-selling U.S. pharmaceutical products currently on the Finnish market. For this reason, Finland was placed on USTR’s Special 301 Report Watch List in 2009 but was removed in 2015 when the term for relevant patents expired.

Designs: Finland is party to the Locarno Agreement and the Hague Agreement for Industrial Designs, and design are protected by the Finnish Registered Designs Act. The Designs Register at the Finnish Patent and Registration Office (PRH) contains entries about national designs, i.e. design rights, applied for and registered in Finland: https://mallioikeustietopalvelu.prh.fi/en .

Finnish Customs officers have ex-officio authority to seize and destroy counterfeit goods. IPR enforcement in Finland is based on EU Regulation 608/2013. In 2021, according to the Grey Economy Crime statistics, Finnish customs authorities inspected 17,530 suspected counterfeit goods (with a value of USD 2 074). The number and value of counterfeit goods detained by Finnish Customs have been in decline since 2013. The long-term trend indicates a decline in counterfeit goods detected in large volume shipments. The further decline is most recently due to a steep slowdown in transports from Russia in addition to the impact of the COVID pandemic. However, due to increased online purchases, small volume shipments via postal and express freight traffic have increased in number, and these are more difficult to screen for counterfeits.

Finland is mentioned in USTR’s 2021 Notorious Markets List for reportedly hosting a Flokinet server associated with infringing activity, and reportedly hosting FLVTO web server in Finland.

The link to WIPO’s list of IPR legislation can be found at: https://wipolex.wipo.int/en/legislation/profile/FI .

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles here: https://www.wipo.int/members/en/details.jsp?country_id=57

Finland is open to foreign portfolio investment and has an effective regulatory system. According to the Bank of Finland, in end December 2021 Finland had USD 17.5 billion worth of official reserve assets, mainly in foreign currency reserves and securities. Credit is allocated on market terms and is made available to foreign investors in a non-discriminatory manner, and private sector companies have access to a variety of credit instruments. Legal, regulatory, and accounting systems are transparent and consistent with international norms.

The Helsinki Stock Exchange is part of OMX, referred to as NASDAQ OMX Helsinki (OMXH). NASDAQ OMX Helsinki is part of the NASDAQ OMX Nordic division, together with the Stockholm, Copenhagen, Iceland, and Baltic (Tallinn, Riga, and Vilnius) stock exchanges.

Finland accepts the obligations under IMF Article VIII, Sections 2(a), 3, and 4 of the Fund’s Articles of Agreement. It maintains an exchange system free of restrictions on payments and transfers for current international transactions, except for those measures imposed for security reasons in accordance with Regulations of the Council of the European Union.

Banking is open to foreign competition. Due to in-group mergers, the number of credit institutions operating in Finland dropped by 18 to 228 in 2020. Total assets of the domestic banking groups and branches of foreign banks operating in Finland amounted to USD 951 billion in Q3 2021 . For more information see: https://www.finanssiala.fi/wp-content/uploads/2021/07/FA-Julkaisu-Finnish_Banking_2020.pdf

In October 2021, Handelsbanken, Finland’s fifth biggest banking group with a 5 percent market share, announced decision to divest its businesses in Finland.

Foreign nationals can in principle open bank accounts in the same manner as Finns. However, banks must identify customers and this may prove more difficult for foreign nationals. In addition to personal and address data, the bank often needs to know the person’s identifier code (i.e. social security number), and a number of banks require a work permit, a certificate of studies, or a letter of recommendation from a trustworthy bank, and details regarding the nature of transactions to be made with the account. All authorized deposit-taking banks are members of the Deposit Guarantee Fund, which guarantees customers’ deposits to a maximum of EUR 100,000 per depositor.

In 2020 the capital adequacy ratio of the Finnish banking sector was 21.2 percent, above the EU average. Measured in Core Tier 1 Capital, the ratio was 18.1 percent. The capital adequacy of the Finnish banking sector remains well above the EU average. The Finnish banking sector’s return on equity (ROE) was 6.4 percent, well above the average ROE for all EU banking sectors (2.3 percent). Standard & Poor’s in March 2022 reaffirmed Finland’s AA+ long term credit rating and stable outlook while Fitch kept Finland’s credit rating at AA+ in November 2021. The Finnish banking sector is dominated by four major banks (OP Financial Group, Nordea, Municipality Finance and Danske Bank), which together hold 80 percent of the market.

Nordea, which relocated its headquarters from Sweden to Finland in 2018, has the leading market position among household and corporate customers in Finland. The relocation increased the Finnish banking sector to over three times the size of Finland’s GDP. Nordea’s balance sheet is approximately twice the size of the GDP of any of the Nordic economies. Consequently, Finland’s banking sector is one of Europe’s largest relative to the size of the national economy.

Nordea became a member of the “we.trade” consortium in November 2017, a blockchain based trade platform for customers of the European wide consortium of banks signed up for the platform. “we.trade” makes domestic and cross-border commerce easier for European companies by harnessing the power of distributed ledger and block chain technology. Commercially launched in January 2019, the we.trade’s technology is currently licensed by 17 banks across 15 countries.

The Act on Virtual Currency providers (572/2019) entered into force in May, 2019. The Financial Supervisory Authority (FIN-FSA) acts as the registration authority for virtual currency providers. The primary objective of the Act is to introduce virtual currency providers into the scope of anti-money laundering regulation. Only virtual currency providers meeting statutory requirements are able to carry on their activities in Finland, and only a FIN-FSA registered virtual currency provider may market its currency and services in Finland

The Finnish Tax Administration released guidelines on the taxation of cryptocurrency in May 2018, updates were made in October 2019, and new guidelines were released in January 2020 : https://www.vero.fi/en/detailed-guidance/guidance/48411/taxation-of-virtual-currencies3/

Foreign Exchange

Finland adopted the Euro as its official currency in January 1999. Finland maintains an exchange system free of restrictions on the making of payments and transfers for international transactions, except for those measures imposed for security reasons.

Remittance Policies

There are no legal obstacles to direct foreign investment in Finnish securities or exchange controls regarding payments into and out of Finland. Banks must identify their customers and report suspected cases of money laundering or the financing of terrorism. Banks and credit institutions must also report single payments or transfers of EUR 15,000 or more. If the origin of funds is suspect, banks must immediately inform the National Bureau of Investigation. There are no restrictions on current transfers or repatriation of profits. Residents and non-residents may hold foreign exchange accounts. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records.

Travelers carrying more than EUR 10,000 must make a declaration upon entering or leaving the EU.

As a Financial Action Task Force (FATF) member, Finland observes most of FATF’s 40 recommendations. In its Mutual Evaluation Report of Finland, released October 5, 2021, FATF concluded that Finland’s measures to combat money laundering and terrorist financing are delivering good results, but that deficiencies on the lack of specific requirements for risk-based supervision and monitoring of non-profit organizations (NPOs) at risk of terrorist financing (TF) abuse and sharing information promptly with competent authorities remain unaddressed. Finland passed new legislation (the Act on Money Collection 2020), completed its National Risk Assessment of Money Laundering and Terrorist Financing (NRA 2021) in March 2021 and developed an Action Plan for National Risk Assessment of Money Laundering and Terrorist Financing 2021– 2023. Finland’s AML/CFT legislation was amended in 2019 to introduce the Finnish Trade Register of beneficial owners of legal entities and foreign trusts. The National AML/CFT Coordination Group has also developed a public AML/CFT website to improve the understanding of ML/TF risks and provide guidance on reporting suspicious transactions for obliged entities. FATF’s Mutual Evaluation Report of Finland, October 2021: https://www.fatf-gafi.org/publications/mutualevaluations/documents/fur-finland-2021.html

In Finland, the Fifth Anti-Money Laundering Directive was implemented, among other things, by means of the Act on the Bank and Payment Accounts Control System, which entered into force on May 1, 2019. In accordance with the Act, Customs has established a bank and payment accounts register and issue a regulation on a data retrieval system, which entered into force on September 1, 2020. Finland is in the process of amending the Act on the Bank and Payment Accounts Control System and the Act on the Financial Intelligence Unit (FIU) to implement the EU Directive on access to financial information.

Solidium is a holding company that is fully owned by the State of Finland. Although it is not explicitly a sovereign wealth fund, Solidium’s mission is to manage and increase the long-term value of the listed shareholdings of the Finnish State. Solidium is a minority owner in 12 listed companies; the market value of Solidium’s equity holdings is approximately USD 9.2 billion (March 2022), https://www.solidium.fi/en/holdings/holdings/

The Government promotes Corporate Social Responsibility (CSR) through the Ministry of Employment and the Economy CSR Guidelines ( https://tem.fi/en/key-guidelines-on-csr ). The Committee on Corporate Social Responsibility acts as the Finnish National Contact Point (NCP) for the effective implementation of the OECD Guidelines for Multinational Enterprises (MNEs), together with the Ministry of Economic Affairs and Employment: https://tem.fi/en/handling-specific-instances-of-the-oecd-guidelines-for-multinational-enterprises .

The government’s SOE policy establishes CSR as a core value of SOEs. Finnish companies perceive that the central component of responsible business conduct or corporate responsibility is to conduct due diligence to ensure compliance with law and regulations. There are no national codes for CSR in Finland; rather, Finnish companies and public authorities have promoted global CSR codes, such as the OECD Guidelines for Multinational Enterprises; the UN Global Compact for Business and Human Rights; ILO principles; EMAS; ISO standards; and the Global Reporting Initiative (GRI). As the EU-level CSR legislation is being drafted, a proposal for an EU Directive on corporate sustainability due diligence was released in March 2022, Finland is preparing to draft national CSR legislation based on the Government Program.

The Directive of the European Parliament and the Council on the disclosure of non-financial information has been implemented via amendments to the Finnish Accounting Act, requiring affected organizations to report on their CSR. The obligation to report non-financial information and corporate responsibility reports apply to large public interest entities i.e. listed companies, credit institutions and insurance companies with more than 500 employees. In addition, turnover must be greater than USD 45.4 million or balance sheet exceed more than USD 22.7 million.

Importing tin, tantalum, tungsten, and gold from conflict zones into the EU requires new procedures from businesses as of January 2021. The Act on the placing on the market of conflict minerals and their ores, which entered into force on January 1, 2021, improves the transparency of supply chains, and brings Finland’s conflict minerals regime into line with EU regulations.

Tukes, the Finnish Safety and Chemicals Agency, is the competent authority in Finland and Customs is given tasks related to the implementation of the Act. For more information: https://tukes.fi/en/industry/conflict-minerals .

Finland is committed to the implementation of the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, and the tripartite declaration of principles concerning multinational enterprises and social policy by the ILO.

Finland has joined the Extractive Industries Transparency Initiative (EITI), which supports improved governance in resource-rich countries. Finland is not a member of the Voluntary Principles on Security and Human Rights Initiative.

Finland is a supporter of the Montreux Document on pertinent international legal obligations and good practices for states related to operations of private military and security companies during armed conflict, but the Finnish government is not a member of ICoCA, the international Code of Conduct for Private Security Service providers’ Association.

The Finnish Ministry of Economic Affairs and Employment (TEM) has appointed a working group to support preparations on due diligence, in addition to review a judicial analysis on a CSR Act. The Committee’s term is January 2021 to December 2023.

Labor and environmental laws and regulations are not waived to attract or retain investments and the Government published a guide to socially responsible public procurement in November 2017: http://julkaisut.valtioneuvosto.fi/handle/10024/160318 .

The Corporate Responsibility Network (FiBS) is the largest corporate responsibility network in the Nordic countries and has more than 300 members: https://www.fibsry.fi/briefly-in-english/ . The Human Rights Center (HRC), administratively linked to the Office of the Parliamentary Ombudsman, encourages foreign and local enterprises to follow the most important international norms: https://www.humanrightscentre.fi/monitoring/.

The MVO Nederland CSR Risk Checker identified two country risks for Finland: Labor rights (labor conditions/contracts and working hours) and Environment (soil and ground water contamination). More info here: https://www.mvorisicochecker.nl/en/worldmap

The Securities Market Association, https://cgfinland.fi/en/, developed and updated (2020) the Finnish Corporate Governance Code for companies listed on the Helsinki Stock Exchange: https://cgfinland.fi/en/corporate-governance-code/ and https://business.nasdaq.com/list/Rules-and-Regulations/European-rules/nasdaq-helsinki/index.html .

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain

Climate Issues

Finland is strongly committed to the EU’s joint reduction target under the UNFCCC and the Paris Agreement and is aiming to become the world’s first carbon-neutral welfare society by 2035. Finland is updating the Climate Change Act to develop more stringent targets for emissions by 2030. Finland’s Annual Climate Report 2021 suggests that while emissions declined in 2020, achieving carbon neutrality by 2035 will require additional action.

The national targets set in the Finnish Government Plan (2019) are more stringent than EU-imposed obligations. Under current legislation, Finland’s national target is to achieve a minimum reduction of 80 percent in emissions by 2050 compared to 1990 levels. PM Marin’s government has set a goal to achieve carbon neutral status by 2035 and carbon negative status shortly thereafter.

Finland was the first country in the world to set a carbon tax in 1990, and Finnish power plants and industries have participated in the EU Emissions Trading System since 2005. Finland supports the development of carbon markets also around the world and promote the gradual phase-out of fossil fuel subsidies.

In 2020, the Finnish Government announced plans to form a Climate Fund focusing on combating climate change, boosting low-carbon industry and promoting digitalization. Approximately 65 percent of the Climate Fund’s investments relate to climate change and about 35 percent to climate-related digitalization. Depending on the funding category and target, the funding by the Climate Fund can vary between 1 and 20 million euros.

Finland ranks first on the 2021 Information Technology and Innovation Foundation’s (ITIF’s) Global Energy Innovation Index (GEII). The GEII reveals varied contributions nations make to the global innovation system. Finland, a top contributor overall to the global energy innovation system, ranks first for entrepreneurial experimentation and market formation, a ranking it also held in 2016. Finland’s top score is in market readiness and technology adoption, which assesses a nation’s demand-pull on clean energy innovation through its energy efficiency and clean energy consumption.

On MIT’s Green Future Index, Finland ranked sixth among 76 leading countries and territories. The index measures progress and commitment towards building low carbon future. According to the index, Finland fosters an extensive green tech R&D ecosystem, with leading-edge renewables (such as green hydrogen) and food tech.

Finland ranked sixth on the 2020 Green Growth Index, measuring performance in meeting Sustainable Development Goal (SDG) targets.

Ecological sustainability is one of Finland’s main goals and Finland also aims to be a forerunner of ecological public procurement. Finland’s first National Public Procurement Strategy, launched September 2020, focuses on developing strategic management and promoting procurement expertise. To support the achievement of ecological, social and economic goals in society through public procurement it is important to develop a strong culture of knowledge-based management. For more see: https://vm.fi/en/-/national-public-procurement-strategy-identifies-concrete-ways-in-which-public-procurement-can-help-achieve-wider-goals-in-society

In April 2021, the Finnish Government adopted a government resolution on Finland’s national risk assessment and action plan on money laundering and terrorist financing. The assessment found that all sectors experience challenges in identifying signs of terrorist financing and sectors with the highest risk of money laundering are money remitters (hawala operators) and virtual currency providers.

Finland’s money laundering and terrorist financing national action plan (2021-2023) sets out measures to reduce the risks of money laundering and terrorist financing. More information here: https://valtioneuvosto.fi/en/-/10623/highest-risk-sectors-are-money-remittances-and-provision-of-virtual-currencies

The National Risk Assessment of 2018 does not list corruption as a risk in Finland, nor does the 2017 Security Strategy for Society.

Over the past decade, Finland has ranked in the top three on Transparency International’s (TI) Corruption Perceptions Index (CPI). In 2021, Finland was ranked first on the CPI, and ranked third in the world on the Democracy Index civil liberties score with an overall score of 9.27. Finland scored 10 in electoral process and pluralism, 9.29 in the functioning of the government, 8.89 in political participation, 8.75 in political culture and 8.41 in civil liberties. Corruption in Finland is covered by the Criminal Code and penalties range from fines to imprisonment of up to four years. The Criminal Code divides bribery offences into two categories, giving of bribes to public officials or acceptance of bribes and giving or acceptance of bribes in business. Finland has statutory tax rules concerning non-deductibility of bribes. Finland does not have an authority specifically charged to prevent corruption, instead several authorities and agencies contribute to anti-corruption work. The Ministry of Justice coordinates anti-corruption matters, but Finland’s EU anti-corruption contact is the Ministry of the Interior. The National Bureau of Investigation also monitors corruption, while the tax administration has guidelines obliging tax officials to report suspected offences, including foreign bribery, and the Ministry of Finance has guidelines on hospitality, benefits, and gifts. The Ministry of Justice describes its anti-corruption efforts at https://oikeusministerio.fi/en/anti-corruption-activities .

In 2020, Ministry of Employment and Economy released an Anti-Corruption guide intended for companies, especially SMEs, to provide them with guidance and support for promoting good business practices and corruption-free business relations both in Finland and abroad. For more see: https://tem.fi/en/-/guide-offers-smes-practical-anti-corruption-tips The Ministry of Justice is maintaining an Anti-Corruption.fi website, https://korruptiontorjunta.fi/en/combating-corruption-in-finland, providing both ordinary citizens and professional operators with impartial and fact-based information on corruption and its prevention in Finland. The goal is a transparent, impartial, and corruption-free culture and society.

The Act on a Candidate’s Election Funding (273/2009) delineates election funding and disclosure rules. The Act requires presidential candidates, Members of Parliament, and Deputy Members to declare total campaign financing, the financial value of each contribution, and donor names for donations exceeding EUR 1,500: https://www.finlex.fi/en/laki/kaannokset/2009/en20090273.pdf . The Act on Political Parties (10/1969) concerning the funding of political parties is at: https://www.finlex.fi/fi/laki/kaannokset/1969/en19690010.pdf . The National Audit Office of Finland keeps a register containing election-funding disclosures at: http://www.vaalirahoitusvalvonta.fi/en/index.html . Election funding disclosures must be filed with the National Audit Office of Finland within two months of election results being confirmed.

Finland does not regulate lobbying; there is no requirement for lobbyists to register or report contact with public officials. However, in March 2020, a parliamentary working group was set up to establish a transparency lobbying register. In December 2021, the working group report on the Transparency Register was sent out for comments, with the aim of having the government proposal before Parliament in spring 2022. The Finnish Association of Communications Professionals (ProCom) keeps a voluntary lobbyist registry (in Finnish).

The ethical Guidelines of the Finnish Prosecution Service can be found from a new website that was opened on October 1, 2019. https://syyttajalaitos.fi/en/the-ethical-guidelines .

The following are ratified or in force in Finland: the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; the Council of Europe Civil Law Convention on Corruption; the Criminal Law Convention on Corruption; the UN Convention against Transnational Organized Crime; and, the UN Anticorruption Convention. Finland is a member of the European Partners against Corruption (EPAC).

Finland is a signatory to the OECD Convention on Anti-Bribery. In October 2020, the OECD working group on bribery said it recognizes Finland’s commitment to combat corruption, but is concerned about lack of foreign bribery enforcement. For more see Finland’s 4th evaluation report: http://www.oecd.org/corruption/Finland-phase-4-follow-up-report-ENG.pdf .

In October 2020, the Council of Europe’s anticorruption body GRECO (Group of States against Corruption) addressed 14 recommendations to Finland on preventing corruption and promoting integrity in central governments (top executive functions) and compliance with these recommendations. For more see GRECO’s 5th evaluation round, Finland compliance report: https://rm.coe.int/fifth-evaluation-round-preventing-corruption-and-promoting-integrity-i/1680a0b0ca . The National Bureau of Investigation is responsible for the investigation of organized and international crimes, including economic crime and corruption, and operates an anti-corruption unit to detect economic offences. Finland adopted the first national anti-corruption strategy in May 2021. The Strategy is in line with the UN Sustainable Development Goals (2030 Agenda) and the recommendations issued by the UN, the OECD, the Council of Europe and the European Union to Finland to reinforce its anti-corruption work.

At the beginning of 2017, the Public Procurement Act based on the new EU directives on public procurement entered into force. Under the law, a foreign bribery conviction remains mandatory grounds for exclusion from public contracts (section 80: mandatory exclusion criteria).

Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

Markku Ranta-Aho
Head of Financial Crime Division
National Board of Investigation
P.O. Box 285, 01310 Vantaa, Finland
markku.ranta-aho@poliisi.fi

Contact at a “watchdog” organization:

Mari Laakso
Chairperson
Transparency Finland
Mari.Laakso@transparency.fi

While instances of political violence in Finland are rare, extremism exists, and anti-immigration and anti-Semitic incidents do occur. Stickers and posters with anti-Semitic images and messages were on the synagogue of Helsinki’s Jewish congregation in neighborhoods with significant Jewish populations and on public property throughout 2021. The vandalism ranged from targeted to apparently random, and similar incidents had occurred numerous times over the previous three years. Some of the anti-Semitic graffiti and stickers claimed to be from the banned neo-Nazi Nordic Resistance Movement (NRM). Stickers specifically targeted Jewish community members at lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI+) pride events.

In 2019, 15 anti-Semitic acts of vandalism against the Israeli Embassy over an 18-month period prompted an official demarche. The NRM is banned in Finland, as is its Facebook page. However, in January 2021 the daily newspaper Helsingin Sanomat reported that the NRM continued to operate out of public sight and without a clear name. In June 2021 prosecutors charged nine members of the NRM with engaging in illegal association for continuing NRM activities under the organization of the group Toward Freedom! (Kohti Vapautta! in Finnish) and leading a demonstration at Tampere Central Market in October 2020. There were a few anti-Semitic incidents on International Holocaust Remembrance Day at the beginning of 2020, but the banning of NRM and COVID-19 have led to a marked decline in anti-Semitic incidents over the past two years.

It is illegal in Finland to share violent content such as footage of Christchurch massacre, but it is still being disseminated and no one has been prosecuted. In August 2017, a stabbing attack took place in central Turku, in southwest Finland in which two pedestrians were killed and eight injured. Finnish authorities considered the attack a terrorist act and its perpetrator was convicted on terrorism charges, making it the first incident of its kind in Finland since the end of World War II.

In December 2021, the Finnish Intelligence Service (SUPO) announced that the first terrorism investigation on the extreme right in Finland has started. Although the investigation is exceptional, it does not affect SUPO’s terrorist threat assessment, according to which the most significant threat is posed by lone operators or small groups inspired by far-right or radical Islamist ideology. According to SUPO’s most recent 2020 yearbook, released in March 2021, the danger of extreme right-wing terrorism has grown in Finland, and SUPO has identified far-right operators with the capacity and motivation to mount a terrorist attack. Some indications of concrete preparation have also emerged. The threat of radical Islamist terrorism has remained at the previous level.

The Fund for Peace (FFP) ranked Finland as the most stable country in the world again in 2021 in the Fragile States Index based on political, social, and economic indicators including public services, income distribution, human rights, and the rule of law. Marsh’s Political Risk Map 2021, based on Marsh Specialty’s World Risk Review platform, provides risk ratings for 197 countries on a 0.1 to 10 scale, with 10 representing the highest risk and 0.1 the lowest. Finland was rated low risk, with ratings ranging from 1.2 to 3.9.

Finland has a long tradition of trade unions. The country has a unionization rate of 59 percent, and approximately 90 percent of employees in Finland participate in the collective bargaining system. Extensive tripartite cooperation between the government, employer’s groups, and trade unions characterize the country’s labor market system. Any trade union and employers’ association may make collective agreements, and the Ministry decides on the validity of the agreement. The Act on Employment Contracts regulates employment relationships regarding working hours, annual leave, and safety conditions, although minimum wages, actual working hours, and working conditions are determined to a large extent through collective agreements instead of parliamentary legislation. Collective bargaining and collective labor agreements are generally binding. In recent years, local labor market partners have been given more flexibility to enforce the collective agreements. In Fall 2020, the government decided to commission a report on measures to strengthen the trust and negotiating competence required for local collective bargaining within both generally binding collective agreements and normally binding collective agreements. The aim is to develop and advance local collective bargaining through the system of collective agreements. The report, launched March 2021, concluded that local bargaining continues to have a great potential in the field of so-called normally binding collective agreements.

Finland adheres to most ILO conventions; enforcement of worker rights is effective. Freedom of association and collective bargaining are guaranteed by law, which provides for the right to form and join independent unions, conduct legal strikes, and bargain collectively. The law prohibits anti-union discrimination and any obstruction of these rights. The National Conciliator under the Ministry of Employment and the Economy assists negotiating partners with labor disputes. The arbitration system is based on the Act on Mediation in Labor Disputes and the Labor Court is the highest body for settlement. The ILO’s Finland Country profile can be found here: http://www.ilo.org/dyn/normlex/en/f?p=1000:11110:0::NO:11110:P11110_COUNTRY_ID:102625 .

The Ministry of Employment and the Economy is responsible for drafting labor legislation and the Ministry of Social Affairs and Health is responsible for enforcing labor laws and regulations via the Occupational Safety and Health (OSH) authorities of the OSH Divisions at the Regional State Administrative Agencies, which operate under the Ministry of Social Affairs and Health. Finnish authorities adequately enforce contract, wage, and overtime laws. New legislation concerning the hiring of foreign workers in Finland entered into force on June 18, 2016. Its objective is to intensify monitoring and to ensure improved compliance with the terms of employment in Finland. Finland allows the free movement of EU citizen workers.

During 2020, there were 108 strikes in Finland, compared to 107 in 2019. Though most labor disputes are resolved relatively quickly, some recent labor disputes have been protracted and have led to supply chain disruptions affecting business operations in the United States and other markets.

In September 2021, Statistics Finland reported that between 2010 and 2020, the number of working-age people has fallen by 136,000 persons, and during the next two decades the working age population is expected to decrease more slowly or by 76,000 persons by 2040. While the number of people belonging to the younger age groups declined over the period 2015 – 2020 period in Finland, the age group of 60 years and older continued to increase. By the end of 2020, the number of people aged 60 or older was over 1.6 million of Finland’s total population of roughly 5.53 million people.

The government reformed social protection and unemployment security to encourage people to accept job offers, shorten unemployment periods, reduce structural unemployment, and save public resources. The unemployed are granted a labor market subsidy, which, if linked to earnings as is the case for about 60 percent of the unemployed, guarantees moderate income for a period up to 400 working days. Those without jobs after the 400-day period need to demonstrate that they are actively pursuing employment to continue receiving benefits. The period of eligibility was shortened from 500 days to 400 days starting on January 1, 2017, except for those with a work history shorter than three years (reduced to 300 days), and for those aged over 58 with an employment history of at least five years (remains 500 days).

On January 1, 2017, Finnish authorities introduced a two-year, nationwide, statutory and randomized universal basic income trial. The goal was to determine whether a basic income, received without conditions, incentivizes recipients to seek paid work. The government concluded that the basic income experiment did not increase the employment of participants, but it did improve mental wellbeing, confidence, and life satisfaction. The study found a mild positive effect on employment, particularly in certain categories, such as families with children.

In 2017, the center-right government of Juha Sipila introduced the “Activation Model” (AM), which mimicked the Danish unemployment insurance system. The AM became effective on January 1, 2018 and was applied to basic (flat-rate) unemployment benefits (paid by the Social Insurance Institution, Kela) and income-related schemes (paid by unemployment funds). The aim of the AM was to tighten the conditions for benefit eligibility, in order to encourage activation of the unemployed, reduce the duration of periods in unemployment and increase the employment rate. AM experiences were mixed, and union opposed the action vigorously. In a December 2019 press release, the Minister of Social Affairs and Health called the activation model unfair and announced that the model is abolished starting January 1, 2020.

Transparency International estimate the size of Finland’s informal economy to be 13 percent, representing approximately USD 39 billion at GDP PPP levels. According to Finland’s Ministry of Interior, the share of the grey economy of GDP range from USD 1.2 to 16.6 billion. In June 2020, a Strategy and Action Plan for tackling the Grey Economy and Economic Crime (2020-2023) was adopted. For more see Grey Economy and Economic Crime website: https://www.vero.fi/en/grey-economy-crime/ 

HelsinkiPolEconAll@state.gov 

France welcomes foreign investment. In the current economic climate, the French government sees foreign investment as a means to create additional jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors. Surveys of U.S. investors in 2021 showed the greatest optimism about the business operating environment in France since 2008. U.S. companies find France’s good infrastructure, advanced technology, and central location in Europe attractive. France’s membership in the European Union (EU) and the Eurozone facilitates the efficient movement of people, services, capital, and goods. However, notwithstanding recent French efforts at structural reform, including a reduction in corporate and production tax, and advocacy for a global minimum tax within the European Union, perceived disincentives to investing in France include the persistently high tax environment, ongoing labor law rigidity, and a shortage of skilled labor.

France is among the least restrictive countries for foreign investment. With a few exceptions in certain specified sectors, there are no statutory limits on foreign ownership of companies. Foreign entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.

France maintains a national security review mechanism to screen high-risk investments. French law stipulates that control by acquisition of a domiciled company or subsidiary operating in certain sectors deemed crucial to France’s national interests relating to public order, public security and national defense are subject to prior notification, review, and approval by the Economy and Finance Minister. Other sectors requiring approval include energy infrastructure; transportation networks; public water supplies; electronic communication networks; public health protection; and installations vital to national security. In 2018, four additional categories – semiconductors, data storage, artificial intelligence and robotics – were added to the list requiring a national security review. For all listed sectors, France can block foreign takeovers of French companies according to the provisions of the 2014 Montebourg Decree.

On December 31, 2019 the government issued a decree to lower the threshold for vetting of foreign investment from outside Europe from 33 to 25 percent and then lowered it again to 10 percent on July 22, 2020, a temporary provision to prevent predatory investment during the COVID-19 crisis. This lower threshold is set to expire at the end of 2022. The decree also enhanced government-imposed conditions and penalties in cases of non-compliance and introduced a mechanism to coordinate the national security review of foreign direct investments with the European Union (EU Regulation 2019/452). The new European rules entered into force on October 11, 2020. The list of strategic sectors was also expanded to include the following activities listed in the EU Regulation 2019/452: agricultural products, when such products contribute to national food supply security; the editing, printing, or distribution of press publications related to politics or general matters; and R&D activities relating to quantum technologies and energy storage technologies. Separately, France expanded the scope of sensitive sectors on April 30, 2020, to include biotechnology companies.

Procedurally, the Minister of Economy, Finance, and Recovery has 30 business days following the receipt of a request for authorization to either: 1) declare that the investor is not required to obtain such authorization; 2) grant its authorization without conditions; or 3) declare that an additional review is required to determine whether a conditional authorization is sufficient to protect national interests. If an additional review is required, the Minister has an additional 45 business days to either clear the transaction (possibly subject to conditions) or prohibit it. The Minister is further allowed to deny clearance based on the investor’s ties with a foreign government or public authority. The absence of a decision within the applicable timeframe is a de facto rejection of the authorization.

The government also expanded the breadth of information required in the approval request. For example, a foreign investor must now disclose any financial relationship with or significant financial support from a State or public entity; a list of French and foreign competitors of the investor and of the target; or a signed statement that the investor has not, over the past five years, been subject to any sanctions for non-compliance with French FDI regulations.

In 2020, the government blocked at least one transaction—the attempted acquisition of a French firm by a U.S. company in the defense sector. In early 2021, the French government blocked the acquisition of French supermarket chain Carrefour by Canada’s Alimentation Couche-Tard on the basis that it was a threat to France’s food security and national sovereignty.

France has not recently been the subject of international organizations’ investment policy reviews. The OECD Economic Survey for France (November 2021) can be found here:  https://www.oecd.org/economy/france-economic-snapshot/ .

Business France is a government agency established with the purpose of promoting new foreign investment, expansion, technology partnerships, and financial investment. Business France provides services to help investors understand regulatory, tax, and employment policies as well as state and local investment incentives and government support programs. Business France also helps companies find project financing and equity capital. The agency unveiled a website in English to help prospective businesses that are considering investments in the French market ( https://www.businessfrance.fr/en/invest-in-France ). The U.S. Embassy in Paris also collaborated with Business France to create a map of U.S. investment in each region of France ( https://investinfrance.fr/wp-content/uploads/2017/08/Entreprises-americaines.pdf ).

In addition, France’s public investment bank, Bpifrance, assists foreign businesses to find local investors when setting up a subsidiary in France. It also supports foreign startups in France through the government’s French Tech Ticket program, which provides them with funding, a resident’s permit, and incubation facilities. Both business facilitation mechanisms provide for equitable treatment of women and minorities.

President Macron prioritized innovation early in his five-year mandate. In 2017, he launched a €10 billion ($11 billion) fund to back disruptive innovation in energy, the digital sector, and the climate transition by privatizing state-owned enterprises and introduced a four-year tech visa for entrepreneurs to come to France. He also introduced tax reforms that would tax capital gains, interest and dividends at a flat 30 percent, instead of the existing top rate of 45 percent.

In June 2020, the French government introduced a new €1.2 billion ($1.3 billion) plan to support French startups, concentrating on the health, quantum, artificial intelligence, and cybersecurity sectors. The plan included the creation of a €500 million ($550 million) investment fund to help startups overcome the COVID-19 crisis and continue to innovate. It also comprised a “French Tech Sovereignty Fund” launched in December 2020 by France’s public investment bank Bpifrance, with an initial commitment of €150 million ($165 million).

In October 2021, President Macron unveiled a €34 billion ($37.4billion) innovation investment strategy between 2022 and 2027, which mirrors the priorities of the European Commission’s investments in digital innovation and decarbonisation. France will invest by 2030 in breakthrough innovation in a wide variety of areas, including small nuclear fission reactors, green hydrogen production facilities, the production of two million electric and hybrid vehicles every year, research on developing France’s first low-carbon airplane, healthy and sustainable foods, and 20 drugs for cancer and chronic diseases as well as the development of new medical devices. Major industrial groups are encouraged to work with startups, which will also benefit from funding under this new plan. This plan comes on top of the €20 billion ($22 billion) from the 2021 Fourth Future Investment Program. A new Secretary General for Investment was appointed in January 2022 to ensure the coordination of these two innovation programs.

France’s sectors that traditionally attracted the most investment include aeronautics, agro-foods, digital, nuclear, rail, auto, chemicals and materials, forestry, eco-industries, shipbuilding, health, luxury, and extractive industries. However, Business France and Bpifrance are particularly interested in attracting foreign investment in the tech sector. The French government has developed the “French Tech” initiative to promote France as a location for start-ups and high-growth digital companies. French Tech offices have been established in 17 French cities and over 100 cities globally, including New York, San Francisco, Los Angeles, Shanghai, Hong Kong, Vietnam, Moscow, and Berlin. French Tech has special programs to provide support to startups at various stages of their development. The latest effort has been the creation of the French Tech 120 Program, which provides financial and administrative support to some 123 most promising tech companies. In 2019, €5 billion ($5.9 billion) in venture funding was raised by French startups, an increase of nearly threefold since 2015. Venture capital investment in French startups has doubled from €5.1 billion ($5.6 billion) in 2020 to over €10 billion ($11 billion) in 2021.

In March 2021, France launched, with the support of the European Commission and other member states, the Scale-Up Europe initiative bringing together over 300 start-up and scale-up founders, investors, researchers, and corporations, with the goal of creating 10 tech giants each valued at more than €100 billion ($110 billion) by 2030. French authorities supported the Scale-up Europe initiative designed to promote businesses across Europe to expand beyond their local and European markets. As part of that initiative, on February 8, 2022, France inaugurated a new European Investment Fund designed to increase European venture capital funds’ capacity to provide late-stage funding to EU-based start-ups and scale-ups. France and Germany have each committed €1 billion ($1.1 billion), along with €500 million ($565 million) from the European Investment Bank.

The website Guichet Enterprises ( https://www.guichet-entreprises.fr/fr/ ) is designed to be a one-stop website for registering a business. The site, managed by the National Institute of Industrial Property (INPI), is available in both French and English although some fact sheets on regulated industries are only available in French on the website.

French firms invest more in the United States than in any other country and support approximately 765,100 American jobs. Total French investment in the United States reached $314.9 billion in 2020. France was still our tenth largest trading partner with approximately $115.7 billion in bilateral trade in 2021. The business promotion agency Business France also assists French firms with outward investment, which it does not restrict.

The French government has made considerable progress in the last decade on the transparency and accessibility of its regulatory system. The government generally engages in industry and public consultation before drafting legislation or rulemaking through a regular but variable process directed by the relevant ministry. However, the text of draft legislation is not always publicly available before parliamentary approval. U.S. firms may also find it useful to become members of industry associations, which can play an influential role in developing government policies. Even “observer” status can offer insight into new investment opportunities and greater access to government-sponsored projects.

To increase transparency in the legislative process, all ministries are required to attach an impact assessment to their draft bills. The Prime Minister’s Secretariat General (SGG for Secretariat General du Gouvernement) is responsible for ensuring that impact studies are undertaken in the early stages of the drafting process. The State Council (Conseil d’Etat), which must be consulted on all draft laws and regulations, may reject a draft bill if the impact assessment is inadequate.

After experimenting with new online consultations, the Macron Administration is regularly using this means to achieve consensus on its major reform bills. These consultations are often open to professionals as well as citizens at large. Another innovation is to impose regular impact assessments after a bill has been implemented to ensure its maximum efficiency, revising, as necessary, provisions that do not work in favor of those that do.

Over past decades, major reforms have extended the investigative and decision-making powers of France’s Competition Authority. On April 11, 2019, France implemented the European Competition Network (ECN) Directive, which widens the powers of all European national competition authorities to impose larger fines and temporary measures. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position. It issues specific guidance on competition law compliance, and government ministers, companies, consumer organizations, and trade associations now have the right to petition the authority to investigate anti-competitive practices. While the Authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness, or saving jobs.  The Competition Authority continues to simplify takeover and merger notifications with online procedures via a dedicated platform in 2020 and updated guidelines in English released on January 11, 2021. Since January 2021, the Competition Authority has a new President, Benoît Cœuré, who intends to focus on the impact of the Cloud on all sectors of the French economy.

France’s budget documents are comprehensive and cover all expenditures of the central government. An annex to the budget also provides estimates of cost sharing contributions, though these are not included in the budget estimates. Last September, the French government published its first “Green Budget,” as an annex to the 2021 Finance Bill. This event attests to France’s strong commitment, notably under the OECD-led “Paris Collaborative on Green Budgeting” (which France joined in December 2017), to integrate “green” tools into the budget process. In its spring report each year, the National Economic Commission outlines the deficits for the two previous years, the current year, and the year ahead, including consolidated figures on taxes, debt, and expenditures. Since 1999, the budget accounts have also included contingent liabilities from government guarantees and pension liabilities.  The government publishes its debt data promptly on the French Treasury’s website and in other documents. Data on nonnegotiable debt is available 15 days after the end of the month, and data on negotiable debt is available 35 days after the end of the month.  Annual data on debt guaranteed by the state is published in summary in the CGAF Report and in detail in the Compte de la dette publique. More information can be found at:  https://www.imf.org/external/np/rosc/fra/fiscal.htm 

France was the first country to include extra-financial reporting in its 2001 New Economic Regulations Law. To encourage companies to develop a social responsibility strategy and limit the negative externalities of globalized trade, the law requires French companies with more than 500 employees and annual revenues above €100 million ($106 million) to report on the social and environmental consequences of their activities and include them in their annual management report. A 2012 decree on corporate social and environmental transparency obligations requires portfolio management companies to incorporate environmental, social, and governance (ESG) criteria in their investment process.

France’s 2015 Law on Energy Transition for Green Growth strengthened mandatory carbon disclosure requirements for listed companies and introduced carbon reporting for institutional investors. It requires investors (defined as asset owners and investment managers) to disclose in their annual investor’s report and on their website how they factor ESG criteria and carbon-related considerations into their investment policies. The regulation concerns all asset classes: listed assets, venture capital, bonds, physical assets, etc.

France is a founding member of the European Union, created in 1957. As such, France incorporates EU laws and regulatory norms into its domestic law. France has been a World Trade Organization (WTO) member since 1995 and a member of GATT since 1948. While developing new draft regulations, the French government submits a copy to the WTO for review to ensure the prospective legislation is consistent with its WTO obligations. France ratified the Trade Facilitation Agreement in October 2015 and has implemented all of its TFA commitments.

French law is codified into what is sometimes referred to as the Napoleonic Code, but is officially the Code Civil des Français, or French Civil Code. Private law governs interactions between individuals (e.g., civil, commercial, and employment law) and public law governs the relationship between the government and the people (e.g., criminal, administrative, and constitutional law).

France has an administrative court system to challenge a decision by local governments and the national government; the State Council (Conseil d’Etat) is the appellate court. France enforces foreign legal decisions such as judgments, rulings, and arbitral awards through the procedure of exequatur introduced before the Tribunal de Grande Instance (TGI), which is the court of original jurisdiction in the French legal system.

France’s Commercial Tribunal (Tribunal de Commerce or TDC) specializes in commercial litigation.  Magistrates of the commercial tribunals are lay judges, who are well known in the business community and have experience in the sectors they represent. Decisions by the commercial courts can be appealed before the Court of Appeals. France’s judicial system is procedurally competent, fair, and reliable and is independent of the government.

The judiciary – although its members are state employees – is independent of the executive branch. The judicial process in France is known to be competent, fair, thorough, and time-consuming. There is a right of appeal. The Appellate Court (cour d’appel) re-examines judgments rendered in civil, commercial, employment or criminal law cases. It re-examines the legal basis of judgments, checking for errors in due process and reexamines case facts. It may either confirm or set aside the judgment of the lower court, in whole or in part. Decisions of the Appellate Court may be appealed to the Highest Court in France (cour de cassation).

The French Financial Prosecution Office (Parquet National Financier, or PNF), specialized in serious economic and financial crimes, was set up by a December 6, 2013 law and began its activities on February 1, 2014.

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all sorts of remunerative activities. U.S. investment in France is subject to the provisions of the Convention of Establishment between the United States of America and France, which was signed in 1959 and remains in force. The rights it provides U.S. nationals and companies include:  rights equivalent to those of French nationals in all commercial activities (excluding communications, air transportation, water transportation, banking, the exploitation of natural resources, the production of electricity, and professions of a scientific, literary, artistic, and educational nature, as well as certain regulated professions like doctors and lawyers). Treatment equivalent to that of French or third-country nationals is provided with respect to transfer of funds between France and the United States. Property is protected from expropriation except for public purposes; in that case it is accompanied by payment that is just, realizable and prompt.

Potential investors can find relevant investment information and links to laws and investment regulations at  http://www.businessfrance.fr/ .

Major reforms have extended the investigative and decision-making powers of France’s Competition Authority. France implemented the European Competition Network, or ECN Directive, on April 11, 2019, allowing the French Competition Authority to impose heftier fines (above €3 million / $3.3 million) and temporary measures to prevent an infringement that may cause harm. The Authority issues decisions and opinions mostly on antitrust issues, but its influence on competition issues is growing. For example, following a complaint in November 2019 by several French, European, and international associations of press publishers against Google over the use of their content online without compensation, the Authority ordered the U.S. company to start negotiating in good faith with news publishers over the use of their content online. On December 20, 2019, Google was fined €150 million ($177 million) for abuse of dominant position. Following an in-depth review of the online ad sector, the Competition Authority found Google Ads to be “opaque and difficult to understand” and applied in “an unfair and random manner.” On November 17, 2021, the Competition Authority brokered a “pioneering” five-year deal between the CEOs of Google and French news agency Agence France-Presse for the search giant to pay for the French news agency’s content. The deal covers the entirety of the EU and follows 18 months of negotiations. It is the first such deal by a news agency under Article 15 of the 2019 European directive creating a neighboring right for the benefit of press agencies and press publishers when online services reproduce press publications in search engine results. France was the first EU member state to implement Article 15 through its July 24, 2019 law, which came into force on October 24, 2019.

Additional U.S. firms also continue to fall under review of the Competition Authority. For example, it fined Apple $1.3 billion on March 16, 2020, for antitrust infringements involving the restriction of intra-brand competition and the rarely used French law concept of “abuse of economic dependency.”

The Competition Authority launches regular in-depth investigations into various sectors of the economy, which may lead to formal investigations and fines. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position. It issues specific guidance on competition law compliance. Government ministers, companies, consumer organizations and trade associations have the right to petition the authority to investigate anti-competitive practices. While the Authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness, or saving jobs.

A new law on Economic Growth, Activity and Equal Opportunities (known as the “Macron Law”), adopted in August 2016, vested the Competition Authority with the power to review mergers and alliances between retailers ex-ante (beforehand). The law provides that all contracts binding a retail business to a distribution network shall expire at the same time. This enables the retailer to switch to another distribution network more easily. Furthermore, distributors are prohibited from restricting a retailer’s commercial activity via post-contract terms. The civil fine incurred for restrictive practices can now amount to up to five percent of the business’s revenue earned in France.

In accordance with international law, the national or local governments cannot legally expropriate property to build public infrastructure without fair market compensation. There have been no expropriations of note during the reporting period.

France has extensive and detailed bankruptcy laws and regulations. Any creditor, regardless of the amount owed, may file suit in bankruptcy court against a debtor. Foreign creditors, equity shareholders and foreign contract holders have the same rights as their French counterparts. Monetary judgments by French courts on firms established in France are generally made in euros.  Not bankruptcy itself, but bankruptcy fraud – the misstatement by a debtor of his financial position in the context of a bankruptcy – is criminalized. Under France’s bankruptcy code managers and other entities responsible for the bankruptcy of a French company are prevented from escaping liability by shielding their assets (Law 2012-346).  France has adopted a law that enables debtors to implement a restructuring plan with financial creditors only, without affecting trade creditors.  France’s Commercial Code incorporates European Directive 2014/59/EU establishing a framework for the recovery and resolution of claims on insolvent credit institutions and investment firms.  In the World Bank’s 2020 Doing Business Index, France ranked 32nd of 190 countries on ease of resolving insolvency.

The Bank of France, the country’s only credit monitor, maintains files on persons having written unfunded checks, having declared bankruptcy, or having participated in fraudulent activities. Commercial credit reporting agencies do not exist in France.

Following the election of President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms. By relaxing the rules on companies to hire and fire employees and by offering investment incentives, Macron improved the operating environment in France, based on surveys of U.S. investors.

However, with the onset of the pandemic, Macron put an end to his planned pension reforms and introduced his overhaul of France’s unemployment insurance in stages throughout 2021. Under his new plan, employees must work longer to qualify for unemployment benefits: they are required to work at least six of the last 25 months, instead of four of the last 28 months under previous rules. Furthermore, employees under 57 years of age, earning €4,500 ($4,952) in pre-tax monthly wages, will see their benefits decrease by 30 percent after the seventh month of unemployment. The other major aspect of this reform mandates that the rules for calculating unemployment benefits are based on an average monthly income from work rather than the number of days worked, as was the case previously. The purpose is to ensure unemployment benefits never exceed the amount of the average monthly net salary (which is currently the case for some beneficiaries).

In 2021, the government’s focus shifted to mitigating France’s most severe economic crisis in the post-war era. The economy shrank 8.3 percent in 2020 compared to the year prior as a result of the COVID-19 pandemic. In response, the government implemented extensive direct fiscal support to households and businesses in 2020 and 2021. The “France Relaunch” recovery program was mainly comprised of loan guarantees, unemployment schemes that support workers’ wages, subsidies to vulnerable sectors, investment in green and developing technologies, production tax cuts and other tax benefits, and funding for research and development. The cost of the emergency measures was around €70 billion ($76.9 billion) in 2020 (2.9 percent of 2019 GDP), according to the national accounts. In 2021, the measures reached €64 billion ($70.3 billion), or 2.6 percent of 2019 GDP. The government’s agenda aims to bolster competitiveness, increase productivity, and accelerate the ecological transition.

In addition, the authorities announced a new investment plan to 2030 in October 2021. The plan, called “France 2030,” allocates €30 billion ($33 billion) over five years and aims to complement France Relance recovery plan. “France 2030” targets further investment in the energy sector (€8 billion/$8.8 billion), as well as the health (€7 billion/$7 billion) and transport sectors (€4 billion/$4.4 billion). The permanent production tax cuts (€10 billion annually), included in France Relance, bring the estimated level of support to around 7.1 percent of 2019 GDP for the period 2020-27.

Both “France Relaunch” and “France 2030” fiscal packages support France’s green transition, the “decarbonization of the French economy,” and the “French green hydrogen plan.” Measures include the energy renovation of public buildings, private housing, social housing, and the operating premises of VSEs (Very Small Enterprises) and SMEs (Small and Medium Enterprises); support for the rail sector in order to renovate the national network and develop freight; development of green hydrogen; support for public transport and the use of bicycles; aid for industrial companies to invest in equipment that emits less CO2; and support for the green transition of agricultural.

“France 2030” supports the transformation of France’s automotive, aerospace, digital, green industry, biotechnology, culture, and healthcare sectors. Its objectives include the development of small-scale nuclear reactors, becoming a leader in green hydrogen (hydrogen made using renewable energy sources), producing two million electric and hybrid vehicles, and decarbonizing France’s industry by reducing greenhouse gas emissions by 35 percent relative to 2015. Of the plan’s €30 billion ($33.8 billion) to be invested over the five years, €3-4 billion ($3.4-4.5 billion) will be spent beginning in 2022. Additionally, one-third of France’s €100 billion ($106 billion) “France Relance” pandemic recovery package is allocated to the ecological transition, including energy sector related investments. The plan also targets green technology, including the development of a hydrogen economy. With approximately two thirds of its electricity coming from nuclear power, France supports the use of nuclear energy to meet near-term emissions reductions targets. Of the developed economies, France has one of the lowest rates of greenhouse gas emissions per capita and per unit of GDP due to its reliance on nuclear power. France aims to phase out fossil fuels over the next decade, shut down the last of its coal plants by 2022, and end public financial support for fossil fuels and natural gas by 2025 and 2035, respectively. In October 2020, France announced it would phase out export guarantees for foreign projects involving fossil fuels by 2035.

France’s “Ma Prime Renov” scheme allocates €1.4 billion to homeowners to finance insulation, heating, ventilation, or energy audit works for single-family house or apartments in collective housing. Such investment will finance the thermal renovation of 400,000 households. To guarantee quality standards, the renovation projects must be carried out by companies with a label classified as “recognized as guarantor of the environment.”

Former PM Jean Castex presented in March 2022 France’s “Resilience Plan” to support households and businesses affected by sanctions associated with the Russia-Ukraine conflict. The first portion of the plan provides support for specific sectors impacted directly by the conflict: fisheries, agriculture and livestock, transportation and trucking, and construction. There are also non-sectoral support targeting exporting firms and energy-intensive companies, plus continued state-guaranteed loans and delayed tax collection for companies facing higher energy costs and exports difficulties. The additional measures in the “Resilience Plan” will cost the government an additional €5-6 billion ($5.5-6.6 billion), on top of previously-implemented measures that include a gas price cap (€10 billion/ $11 billion), electricity price cap (€8 billion/ $8.8 billion), and energy cheques and inflation offsets (€2 billion/ $2.2 billion).

France is subject to all EU free trade zone regulations. These allow member countries to designate portions of their customs’ territory as duty-free, where value-added activity is limited. France has several duty-free zones, which benefit from exemptions on customs for storage of goods coming from outside of the European Union. The French Customs Service administers them and provides details on its website ( http://www.douane.gouv.fr ). French legal texts are published online at http://legifrance.gouv.fr .

In September 2018, President Macron announced the extension of 44 Urban Free Zones (ZFU) in low-income neighborhoods and municipalities with at least 10,000 residents.  The program provides incentives for employers, who have created 600 new jobs since 2016. Incentives include exemption from payment of payroll taxes and certain social contributions for five years, financed by €15 million ($17.7 million) a year in State funds.

While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives. Incentives like PAT regional planning grants (Prime d’Amenagement du Territoire pour l’Industrie et les Services) and related R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.

The French government imposes the same conditions on domestic and foreign investors in cultural industries:  all purveyors of movies and television programs (i.e., television broadcasters, telecoms operators, internet service providers and video services) must contribute a percentage of their revenues toward French film and television productions. They must also abide by broadcasting cultural content quotas (minimum 40 percent French, 20 percent EU).

The 2018 Directive on audio-visual media services, implemented in France by a December 21, 2020 government decree, requires streaming services exceeding a certain revenue threshold to contribute 20 or 25 percent of their revenues in France to the development of French and European production, depending on how quickly they show movies after their theatrical release. For example, Netflix has signed the agreement under the new windowing rules and will benefit from having access to movies 15 months after their theatrical release. Other streaming services such as Disney Plus will have a 17-month window for new films. Netflix, Amazon, Disney Plus, and Apple TV Plus signed in December 2021 an agreement with France’s broadcasting authority CSA to start investing 20 percent of their annual revenues in French content.

Real property rights are regulated by the French civil code and are uniformly enforced. The World Bank’s Doing Business Index ranks France 32nd of 190 on registering property. French civil-law notaries (notaires) – highly specialized lawyers in private practice appointed as public officers by the Justice Ministry – handle residential and commercial conveyance and registration, contract drafting, company formation, successions, and estate planning. The official system of land registration (cadastre) is maintained by the French public land registry under the auspices of the French tax authority (Direction Generale des Finances Publiques or DGFiP), available online at  http://www.cadastre.gouv.fr . Mortgages are widely available, usually for a 15-year period.

France is a strong defender of intellectual property rights (IPR). Under the French system, patents and trademarks protect industrial property, while copyrights protect literary/artistic property. By virtue of the Paris Convention , U.S. nationals have a priority period following filing of an application for a U.S. patent or trademark in which to file a corresponding application in France:  twelve months for patents and six months for trademarks.

Counterfeiting is a costly problem for French companies, and the government of France maintains strong legal protections and a robust enforcement mechanism to combat trafficking in counterfeit goods — from copies of luxury goods to fake medications — as well as the theft and illegal use of IPR. The French Intellectual Property Code has been updated repeatedly over the years to address this challenge, most recently in 2019 with the implementation of the so-called Action Plan for Business Growth and Transformation or PACTE Law (Plan d’Action pour la Croissance et la Transformation des Entreprises).  This law reinforced France’s anti-counterfeiting legislation and implemented EU Directive 2015/2436 of the Trademark Reform Package. It increased the Euro amount for damages to companies that are victims of counterfeiting and extends trademark protection to smartcard technology, certain geographic indications, plants, and agricultural seeds. The legislation also increased the statute of limitations for civil suits from three to ten years and strengthened the powers of customs officials to seize fake goods sent by mail or express freight.  France also adopted legislation in 2019 to implement EU Directive 2019/790 on Copyright and Related Rights in the Digital Single Market.

The government also reports on seizures of counterfeit goods. On February 22, 2021, the government launched a new French customs action plan to combat counterfeiting for the 2021-2022 calendar year. Customs seizures in France have increased from 200,000 in 1994 to 5.64 million in 2020, and a record 9.1 million in 2021 (+ 62.5 percent compared to 2020). This new action plan focuses on improved intelligence gathering, investigation, litigation, and cooperation between all the stakeholders involved, including the Customs Office, which investigates fraud cases; the National Institute of Industrial Property, which oversees patents, trademarks, and industrial design rights; and France’s top private sector anti-counterfeiting organization, UNIFAB.

France has robust laws against online piracy. A law on the regulation and protection of public access to cultural works in the digital era approved by Parliament on September 29, 2021 established the Regulatory Authority for Audiovisual and Digital Communication (ARCOM) from the merger of the French Audiovisual Authority (CSA) and the French digital piracy agency HADOPI (High Authority for the Dissemination of Artistic Works and the Protection of Rights on Internet or Haute Autorite pour la Diffusion des Œuvres et la Protection des droits sur Internet). The HADOPI element of ARCOM administers a “graduated response” system of warnings and fines and has taken enforcement action against several online pirate sites. HADOPI traditionally cooperates closely with the U.S. Patent and Trademark Office (USPTO) including pursuing voluntary arrangements to single out awareness about intermediaries that facilitate or fund pirate sites. The new law grants ARCOM wider investigative powers to close down mirror sites, as well as blacklist and block access to websites that repeatedly infringe on copyrights. The bill also introduces a fast-track remedy to prevent the illegal broadcast of sporting events. The establishment of this new authority was delayed by the COVID-19 pandemic, and the new authority was finally established in January 2022. The government also issued an order on May 12, 2021, enforcing in France the EU Directive on Copyright and Related Rights in the Digital Single Market (CDSM), which holds content-sharing platforms liable for the unauthorized communication of copyrighted content. The United States will continue to monitor ways this legislation may impact U.S. stakeholders.

France does not appear on USTR’s 2020 Special 301 Report.  USTR’s 2020 Notorious Market report continues to list France as host to illicit streaming and copyright infringement websites.  For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

There are no administrative restrictions on portfolio investment in France, and there is an effective regulatory system in place to facilitate portfolio investment. France’s open financial market allows foreign firms easy access to a variety of financial products, both in France and internationally. France continues to modernize its marketplace; as markets expand, foreign and domestic portfolio investment has become increasingly important. As in most EU countries, France’s listed companies are required to meet international accounting standards. Some aspects of French legal, regulatory, and accounting regimes are less transparent than U.S. systems, but they are consistent with international norms. Foreign banks are allowed to establish branches and operations in France and are subject to international prudential measures. Under IMF Article VIII, France may not impose restrictions on the making of payments and transfers for current international transactions without the (prior) approval of the Fund.

Foreign investors have access to all classic financing instruments, including short-, medium-, and long-term loans, short- and medium-term credit facilities, and secured and non-secured overdrafts offered by commercial banks. These assist in public offerings of shares and corporate debt, as well as mergers, acquisitions and takeovers, and offer hedging services against interest rate and currency fluctuations. Foreign companies have access to all banking services. Most loans are provided at market rates, although subsidies are available for home mortgages and small business financing.

Euronext Paris (also known as Paris Bourse) is part of a regulated cross-border stock exchange located in six European countries. Euronext Growth is an alternative exchange for medium-sized companies to list on a less regulated market (based on the legal definition of the European investment services directive), with more consumer protection than the Marché Libre still used by a couple hundred small businesses for their first stock listing. A company seeking a listing on Euronext Growth must have a sponsor with status granted by Euronext and prepare a French language prospectus for a permit from the Financial Markets Authority (Autorité des Marchés Financiers or AMF), the French equivalent of the U.S. Securities and Exchange Commission. Small and medium-size enterprises (SMEs) may also list on Enternext, a subsidiary of the Euronext Group created in 2013. The bourse in Paris also offers Euronext Access, an unregulated exchange for start-ups.

France’s banking system recovered gradually from the 2008-2009 global financial crises and passed the 2018 stress tests conducted by the European Banking Authority. In the context of the COVID-19 outbreak, the European Banking Authority (EBA) launched an EU-wide stress test exercise in January 2021 and published its results in July 2021. The results of the stress tests confirmed the resilience of the French banking system over the entire time horizon of the exercise (2021-2023), despite using a particularly severe macroeconomic and financial scenario, which envisages a prolongation of the crisis between 2021 and 2023. A new EBA EU-wide stress test will be carried out in 2023.

Four French banks were ranked among the world’s 20 largest as of the end of 2020 (BNP Paribas SA; Crédit Agricole Group, Société Générale SA, Groupe BPCE). The assets of France’s top five banks totaled $7.7 trillion in 2020. Acting on a proposal from France’s central bank, Banque de France, in March 2020, the High Council for Financial Stability (HCSF) instructed the country’s largest banks to decrease the “countercyclical capital buffer” from 0.25 percent to zero percent of their bank’s risk-weighted assets, thereby increasing liquidity to help mitigate the impact of the pandemic-induced recession. As of January 2022, HCSF maintained the zero percent countercyclical capital buffer but with the intention of normalizing it to its pre-crisis level at its next meeting.

Banque de France is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro. Banque de France is a public entity governed by the French Monetary and Financial Code. The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract. The three main missions are monetary strategy; financial stability, together with the High Council of Financial Stability (HCSF) which implements macroprudential policy; and the provision of economic services to the community. In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.

Foreign banks can operate in France either as subsidiaries or branches but need to obtain a license. Credit institutions’ licenses are generally issued by France’s Prudential Authority (Autorité de Contrôle Prudentiel et de Résolution or ACPR) which reviews whether certain conditions are met (e.g. minimum capital requirement, sound and prudent management of the bank, compliance with balance sheet requirements, etc.). Both EU law and French legislation apply to foreign banks. Foreign banks or branches are additionally subject to prudential measures and must provide periodic reports to the ACPR regarding operations in France, including detailed reports on their financial situation. At the EU level, the ‘passporting right’ allows a foreign bank settled in any EU country to provide their services across the EU, including France. There are about 944 credit institutions authorized to carry on banking activities in France; the list of foreign banks is available on this website:  https://www.regafi.fr/spip.php?page=results&type=advanced&id_secteur=3&lang=en&denomination=&siren=&cib=&bic=&nom=&siren_agent=&num=&cat=01-TBR07&retrait=0 

France has no sovereign wealth fund per se (none that use that nomenclature) but does operate funds with similar intents. The Public Investment Bank (Bpifrance) supports small and medium enterprises (SMEs), larger enterprises (Entreprises de Taille Intermedaire), and innovating businesses with over €36 billion ($39.6 billion) assets under management. The government strategy is defined at the national level and aims to fit with local strategies.  Bpifrance may hold direct stakes in companies, hold indirect stakes via generalist or sectorial funds, venture capital, development or transfer capital.  In November 2020, Bpifrance became a member of the One Planet Sovereign Wealth Funds (OPSWF) international initiative, which federates international sovereign wealth funds mobilized to contribute to the transition towards a more sustainable economy. Bpifrance stepped up its support for the ecological and energy transition, aiming to reach nearly €6 billion ($6.6 billion) per year by 2023.

The 11 listed entities in which the French State maintains stakes at the federal level are Aeroports de Paris (50.63 percent); Airbus Group (10.92 percent); Air France-KLM (28.6 percent); EDF (83.88 percent), ENGIE (23.64 percent), Eramet (27.13 percent), La Française des Jeux (FDJ) (20.46 percent), Orange (a direct 13.39 percent stake and a 9.60 percent stake through Bpifrance), Renault (15.01 percent), Safran (11.23 percent), and Thales (25.67 percent). Unlisted companies owned by the State include SNCF (rail), RATP (public transport), CDC (Caisse des depots et consignations) and La Banque Postale (bank). In all, the government maintains majority and minority stakes in 88 firms in a variety of sectors.

Private enterprises have the same access to financing as SOEs, including from state-owned banks or other state-owned investment vehicles. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. SOEs may get subsidies and other financial resources from the government.

France, as a member of the European Union, is party to the Agreement on Government Procurement (GPA) within the framework of the World Trade Organization. Companies owned or controlled by the state behave largely like other companies in France and are subject to the same laws and tax code. The Boards of SOEs operate according to accepted French corporate governance principles as set out in the (private sector) AFEP-MEDEF Code of Corporate Governance. SOEs are required by law to publish an annual report, and the French Court of Audit conducts financial audits on all entities in which the state holds a majority interest. The French government appoints representatives to the Boards of Directors of all companies in which it holds significant numbers of shares, and manages its portfolio through a special unit attached to the Ministry for the Economy and Finance Ministry, the shareholding agency APE (Agence de Participations de l’Etat). The State as a shareholder must set an example in terms of respect for the environment, gender equality and social responsibility. The report also highlighted that the State must protect its strategic assets and remain a shareholder in areas where the general interest is at stake.

In 2021, the French Government increased to 29.9 percent its existing 14.3 percent stake in the Air France-KLM group in a deal that injected €4 billion ($4.5 billion) into Air France and its Holding Company under the European State aid Temporary Framework. This recapitalization, through a mix of new shares and hybrid debt, constrains the group from taking more than a 10 percent stake in any competitor until three-quarters of that aid is repaid. It follows a €7 billion ($7.7 billion) bailout the government provided earlier in 2020. The French Government has pledged to reduce its stake to the pre-crisis level of 14.3 percent by the end of 2026.

The government was due to privatize many large companies in 2019, including ADP and ENGIE in order to create a €10 billion ($11 billion) fund for innovation and research. However, the program was delayed because of political opposition to the privatization of airport manager ADP, regarded as a strategic asset to be protected from foreign shareholders. The government succeeded in selling in November 2019 a 52 percent stake in gambling firm FDJ. The government continues to maintain a strong presence in some sectors, particularly power, public transport, and defense industries.

The business community has general awareness of standards for responsible business conduct (RBC) in France. The country has established a National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, coordinated and chaired by the Directorate General of the Treasury in the Ministry for the Economy and Finance. Its members represent State Administrations (Ministries in charge of Economy and Finance, Labor and Employment, Foreign Affairs, Ecology, Sustainable Development and Energy), six French Trade Unions (CFDT, CGT, FO, CFE-CGC, CFTC, UNSA) and one employers’ organization, MEDEF.

The NCP promotes the OECD Guidelines in a manner that is relevant to specific sectors. When specific instances are raised, the NCP offers its good offices to the parties (discussion, exchange of information) and may act as a mediator in disputes, if appropriate.  This can involve conducting fact-finding to assist parties in resolving disputes, and posting final statements on any recommendations for future action with regard to the Guidelines. The NCP may also monitor how its recommendations are implemented by the business in question. In April 2017, the French NCP signed a two-year partnership with Global Compact France to increase sharing of information and activity between the two organizations.

In France, corporate governance standards for publicly traded companies are the product of a combination of legislative provisions and the recommendations of the AFEP-MEDEF code (two employers’ organizations). The code, which defines principles of corporate governance by outlining rules for corporate officers, controls and transparency, meets the expectations of shareholders and various stakeholders, as well as of the European Commission. First introduced in September 2002, it is regularly updated, adding new principles for the determination of remuneration and independence of directors, and now includes corporate social and environmental responsibility standards. The latest amendments in February 2019 tackle the remuneration and post-employment benefits of Chief Executive Officers and Executive Officers: 60 percent variable remuneration based on quantitative objectives and 40 percent on quality objectives, including efforts in the corporate social responsibility.

Also relating to transparency, the EU passed a new regulation in May 2017 to stem the trade in conflict minerals and, in particular, to stop conflict minerals and metals from being exported to the EU; to prevent global and EU smelters and refiners from using conflict minerals; and to protect mine workers from being abused. The regulation goes into effect January 1, 2021, and will then apply directly to French law.

France has played an active role in negotiating the ISO 26000 standards, the International Finance Corporation Performance Standards, the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights. France has signed on to the Extractive Industries Transparency Initiative (EITI), although, it has not yet been fully implemented. Since 2017, large companies based in France and having at least 5,000 employees are now required to establish and implement a corporate plan to identify and assess any risks to human rights, fundamental freedoms, workers’ health, safety, and risk to the environment from activities of their company and its affiliates.

The February 2017 “Corporate Duty of Vigilance Law” requires large companies to set up, implement, and publish a “vigilance plan” to identify risks and prevent “serious violations” of human rights, fundamental freedoms, and serious environmental damage.

In 2021, France enacted a Climate and Resilience Law covering consumption and food, economy and industry, transportation, housing, and strengthening sanctions against environmental violations. The production and work chapter aligns France’s national research strategy with its national low carbon and national biodiversity strategies. All public procurement must consider environmental criteria. To protect ecosystems, the law amends several mining code provisions, including the requirement to develop a responsible extractive model. The law translates France’s multi-year energy program into regional renewable energy development objectives, creates the development of citizen renewable energy communities, and requires installation of solar panels or green roofs on commercial surfaces, offices, and parking lots. The consumption chapter requires an environmental sticker and inscription to better inform consumers of a product or service’s impact on climate. The law bans advertising of fossil fuels by 2022 and advertising of the most carbon-emitting cars (i.e., those that emit more than 123 grams of carbon dioxide per kilometer) by 2028. The law also empowered local authorities with mechanisms to reduce paper advertisements and regulate electronic advertising screens in shop windows. Large- and medium-sized stores (i.e., those with over 400 square meters of sales area) must devote 20 percent of their sales area to bulk sales by 2030. In the agriculture sector, the law sets annual emissions reduction levels concerning nitrogen fertilizers; failure to meet these objectives will trigger a tax beginning in 2024. The law’s transportation chapter extends France’s 2019 Mobility law by creating 33 low-emission zones in urban areas that have more than 150,000 inhabitants by the end of 2024, and bans cars manufactured before 1996 in these large cities. In the top 10 cities that regularly exceed air quality limits on particulates, the law will ban vehicles that have air quality certification stickers of above a certain level. The law requires regions to offer attractive fares on regional trains, bans domestic flights when there is train transportation of less than 2.5 hours, requires airlines to conduct carbon offsetting for domestic flights beginning in 2022, and creates carpool lanes. The law creates a road ecotax starting in 2024, prohibits the sale of new cars that emit more than 95 gram of carbon dioxide per kilometer by 2030 and of new trucks, buses, and coaches with 95 gCO2/km emissions by 2040, and provides incentives to develop bicycle paths, parking areas, and rail and waterway transport.

The Climate and Resilience Law’s housing chapter seeks to accelerate the environmental renovation of buildings. Starting in 2023, owners of poorly insulated housing must undertake energy renovation work if they want to increase rent rates. The law forbids leasing non-insulated housing beginning in 2025 and bans leasing any type of poorly insulated housing beginning in 2028. It also provides information, incentives, and control mechanisms empowering tenants to demand landlords conduct energy renovation work. Beginning in 2022, the law requires an energy audit, including proposals, when selling poorly insulated housing. All households will have access to a financing mechanism to pay the remaining costs of their renovation work via government-guaranteed loans. The law regulates the laying of concrete, mandates a 50 percent reduction in the rate of land use by 2030, requires net zero land reclamation by 2050, and prohibits the construction of new shopping centers that lead to modifying natural environment. The law aims to protect 30 percent of France’s sensitive natural areas and supports local authorities in adapting their coastal territories against receding coastlines. The law’s final chapter focuses on environmental violations and reinforces sanctions for environmental damage, such as long-term degradation to fauna and flora (up to three years in prison and a €250,000 ($273,000) fine), as well as for the general offense of environmental pollution and “ecocide” (up to 10 years in prison and a €4.5 million ($4.9 million) fine or up to 10 times the profit obtained by the individual committing the environmental damage). The chapter uses the term “ecocide” to refer to the most serious cases of environmental damage, although the term is not defined in the law. Even if pollution has not occurred, these penalties apply as long as the individual’s behavior is considered to have put the environment in “danger.”

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

In line with President Macron’s campaign promise to clean up French politics, the French parliament adopted in September 2017 the law on “Restoring Confidence in Public Life.” The new law bans elected officials from employing family members, or working as a lobbyist or consultant while in office. It also bans lobbyists from paying parliamentary, ministerial, or presidential staff and requires parliamentarians to submit receipts for expenses.

France’s “Transparency, Anti-corruption, and Economic Modernization Law,” also known as the “Loi Sapin II,” came into effect on June 1, 2017. It brought France’s legislation in line with European and international standards. Key aspects of the law include: creating a new anti-corruption agency; establishing “deferred prosecution” for defendants in corruption cases and prosecuting companies (French or foreign) suspected of bribing foreign public officials abroad; requiring lobbyists to register with national institutions; and expanding legal protections for whistleblowers. The Sapin II law also established a High Authority for Transparency in Public Life (HATVP). The HATVP promotes transparency in public life by publishing the declarations of assets and interests it is legally authorized to share publicly. After review, declarations of assets and statements of interests of members of the government are published on the High Authority’s website under open license. The declarations of interests of members of Parliament and mayors of big cities and towns, but also of regions are also available on the website. In addition, the declarations of assets of parliamentarians can be accessed in certain governmental buildings, though not published on the internet.

France is a signatory to the OECD Anti-Bribery Convention. The U.S. Embassy in Paris has received no specific complaints from U.S. firms of unfair competition in France in recent years. France ranked 22rd of 180 countries on Transparency International’s (TI) 2021 corruption perceptions index. See  https://www.transparency.org/country/FRA .

The Central Office for the Prevention of Corruption (Service Central de Prevention de la Corruption or SCPC) was replaced in 2017 by the new national anti-corruption agency – the Agence Francaise Anticorruption (AFA). The AFA is charged with preventing corruption by establishing anti-corruption programs, making recommendations, and centralizing and disseminating information to prevent and detect corrupt officials and company executives. The French anti-corruption agency guidelines can be found here: https://www.agence-francaise-anticorruption.gouv.fr/files/2021-03/French%20AC%20Agency%20Guidelines%20.pdf . The AFA will also administrative authority to review the anticorruption compliance mechanisms in the private sector, in local authorities and in other government agencies.

Contact information for Agence Française Anti-corruption (AFA):

Director: Charles Duchaine
23 avenue d’Italie
75013 Paris
Tel : (+33) 1 44 87 21 14
Email: charles.duchaine@afa.gouv.fr

Contact information for Transparency International’s French affiliate:

Transparency International France
14, passage Dubail
75010 Paris
Tel: (+33) 1 84 16 95 65;
Email:  contact@transparency-france.org

France is a politically stable country. Large demonstrations and protests occur regularly (sometimes organized to occur simultaneously in multiple French cities); these can result in violence. When faced with imminent business closures, on rare occasions French trade unions have resorted to confrontational techniques such as setting plants on fire, planting bombs, or kidnapping executives or managers.

From mid-November 2018 through 2019, Paris and other cities in France faced regular protests and disruptions, including “Gilets Jaunes” (Yellow Vest) demonstrations that turned violent, initiated by discontent over high cost of living, gas, taxes, and social exclusion. In the second half of 2019, most demonstrations were in response to President Macron’s proposed unemployment and pension reform. Authorities permitted peaceful protests. During some demonstrations, damage to property, including looting and arson, in popular tourist areas occurred with reckless disregard for public safety.  Police response included water cannons, rubber bullets and tear gas.

Between 2012 and 2021, 271 people have been killed in terrorist attacks in France, including the January 2015 assault on the satirical magazine Charlie Hebdo, the November 2015 coordinated attacks at the Bataclan concert hall, national stadium, and streets of Paris, and the 2016 Bastille Day truck attack in Nice. While the terrorist threat remains high, the threat is lower than its peak in 2015. Terrorist attacks have since been smaller in scale. Security services remained concerned with lone-wolf attacks, carried out by individuals already in France, inspired by or affiliated with ISIS.  French security agencies continue to disrupt plots and cells effectively. Despite the spate of recent small-scale attacks, France remains a strong, stable, democratic country with a vibrant economy and culture. Americans and investors from all over the world continue to invest heavily in France.

France’s has one of the lowest unionized work forces in the developed world (between 8-11 percent of the total work force). However, unions have strong statutory protections under French law that give them the power to engage in sector- and industry-wide negotiations on behalf of all workers. As a result, an estimated 98 percent of French workers are covered by union-negotiated collective bargaining agreements. Any organizational change in the workplace must usually be presented to the unions for a formal consultation as part of the collective bargaining process.

The number of apprenticeships in France peaked in 2021, at 718,000 (+37 percent compared with 2020), including 698,000 in the private sector, according to February 2, 2022 Labor Ministry figures. Apprenticeships, like vocational training, have been placed under the direct management of the government via a newly created agency called France Compétences. The government claims growth of apprenticeship and reform of vocational training help to explain the drop to from eight percent in 2020 to 7.4 percent in 2021.

During the COVID-19 crisis, France’s partial unemployment scheme, which allows firms to retain their employees while the government continues to pay a portion of their wages, expanded dramatically in scope and size and kept unemployment at pre-crisis levels (between eight and nine percent). The reform of unemployment insurance was launched in stages in November 2017 and twice postponed because of the COVID-19 pandemic. Labor Minister Elizabeth Borne presented on March 2, 2021, the last measures of the government’s final decree on unemployment insurance. These final measures include a new method for calculating the daily reference wage and the introduction of a tax on short-term contracts. In spite of strong labor union opposition, the government was able to enforce its reform in November 2021. Earlier measures of the reform, in place since January 1, 2021, cover a 30 percent cut in benefits of higher wage earners and an increase from one to four months of the threshold for recharging rights to unemployment benefits once they have ended. This reform is designed to tackle two issues: 1) ensuring that the jobless do not make more money from unemployment benefits than by working; and 2) reducing the deficit of France’s unemployment insurance system UNEDIC. The deficit is expected to turn to surplus by the end of 2022, according to an October 22, 2021 report by UNEDIC, due to the end of the government COVID-19 partial unemployment scheme and as a consequence of the unemployment insurance reform. Pension reform has been delayed until after the April 2022 presidential elections.

* French Source : INSEE database for GDP figures and French Central Bank (Banque de France) for FDI figures. Accessed on March 21, 2022.

Source: Bank of France.

Note: These figures represent the stock of foreign direct investment (FDI), not the annual flow of FDI. The United States was the second top investor by number of projects recorded in 2021 but remained in first place for jobs generated (10,118).

Dustin Salveson (from July 2022, Craig Pike)
Economic Officer
U.S. Embassy
2 Avenue Gabriel
75008 Paris, France
Tel: +33.1.43.12.2000
FranceICSeditor@state.gov

The German government and industry actively encourage foreign investment. U.S. investment continues to account for the largest share of Germany’s FDI. The 1956 U.S.-Federal Republic of Germany Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. As an OECD member, Germany adheres to the OECD National Treatment Instrument and the OECD Codes of Liberalization of Capital Movements and of Invisible Operations.  The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for the Federal Ministry for Economic Affairs and Climate Action (MEC) to review acquisitions of domestic companies by foreign buyers and to assess whether these transactions pose a risk to the public order or national security (for example, when the investment pertains to critical infrastructure).  For many decades Germany has experienced significant inbound investment, which is widely recognized as a considerable contributor to Germany’s growth and prosperity. The investment-related challenges facing foreign companies are broadly the same as those that face domestic firms, e.g., relatively high tax rates and energy costs, stringent environmental regulations, and labor laws that complicate hiring and dismissals. Germany Trade and Invest (GTAI), the country’s economic development agency, provides extensive information for investors: https://www.gtai.de/gtai-en/invest 

Under German law, a foreign-owned company registered in the Federal Republic of Germany as a GmbH (limited liability company) or an AG (joint stock company) is treated the same as a German-owned company. There are no special nationality requirements for directors or shareholders.

Companies seeking to open a branch office in Germany without establishing a new legal entity, (e.g., for the provision of employee placement services, such as providing temporary office support, domestic help, or executive search services), must register and have at least one representative located in Germany.

While there are no economy-wide limits on foreign ownership or control, Germany maintains an elaborate mechanism to screen foreign investments based on national security grounds. The legislative basis for the mechanism (the Foreign Trade and Payments Act and Foreign Trade and Payments Ordinance) has been amended several times in recent years to tighten parameters of the screening as technological threats evolve, particularly to address growing interest by foreign investors in both Mittelstand (mid-sized) and blue-chip German companies. Germany amended its investment screening mechanism May 1, 2021 and has now fully implemented the EU Screening Directive. With the amendment, firms must notify MEC of foreign investments and MEC can then screen investments in sensitive sectors and technologies if the buyer plans to acquire 10 percent or more of the company’s voting rights and may be required, regardless, for a non-EU company acquiring more than 25 percent of voting rights ( https://www.bmwi.de/Redaktion/EN/Artikel/Foreign-Trade/investment-screening.html ).

In the screening process, MEC considers “stockpile acquisitions” by the same investor in a German company or “atypical control investments” where an investor secures additional influence in company operations via side contractual agreements. MEC can also factor in combined acquisitions by multiple investors if all are controlled by one foreign government. The total time for the screening process, depending on the sensitivities of the investment, may take up 10 to 12 months. BMWK – Investment screening (bmwi.de) 

The World Bank Group’s “Doing Business 2020” Index provides additional information on Germany’s investment climate. [Note: this report is no longer updated]. The American Chamber of Commerce in Germany publishes results of an annual survey of U.S. investors in Germany (“AmCham Germany Transatlantic Business Barometer.” https://www.amcham.de/publications ).

Before engaging in commercial activities, companies and business operators must register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister).

Applications for registration at the commercial register ( www.handelsregister.de ) are electronically filed in publicly certified form through a notary.  The commercial register provides information about all relevant relationships between merchants and commercial companies, including names of partners and managing directors, capital stock, liability limitations, and insolvency proceedings.  Registration costs vary depending on the size of the company. According to the World Bank’s Doing Business Report 2020, the median duration to register a business in Germany is eight days, though some firms have experienced longer processing times.

Germany Trade and Invest (GTAI), the country’s economic development agency, can assist in the registration processes ( https://www.gtai.de/gtai-en/invest/investment-guide/establishing-a-company/business-registration-65532 ) and advises investors, including micro-, small-, and medium-sized enterprises (MSMEs), on how to obtain incentives.

In the EU, MSMEs are defined as follows:

• Micro-enterprises:  fewer than 10 employees and less than €2 million annual turnover or less than €2 million in balance sheet total.
• Small enterprises:  fewer than 50 employees and less than €10 million annual turnover or less than €10 million in balance sheet total.
• Medium-sized enterprises:  fewer than 250 employees and less than €50 million annual turnover or less than €43 million in balance sheet total.

U.S.-based exporters seeking to sell in Germany (e.g., via commercial platforms) are required to register with one specific tax authority in Bonn, which can lead to significant delays due to capacity issues.

Germany’s federal government provides guarantees for investments by Germany-based companies in developing and emerging economies and countries in transition in order to insure them against political risks. In order to receive guarantees, the investment must have adequate legal protection in the host country. The Federal Government does not insure against commercial risks. In 2020, the government issued investment guarantees amounting to €900 million for investment projects in 13 countries, with the majority of those in China and India.

Germany has transparent and effective laws and policies to promote competition, including antitrust laws. The legal, regulatory, and accounting systems are complex but transparent and consistent with international norms.

Public consultation by federal authorities is regulated by the Joint Rules of Procedure, which specify that ministries must consult early and extensively with a range of stakeholders on all new legislative proposals. In practice, laws and regulations in Germany are routinely published in draft form for public comment. According to the Joint Rules of Procedure, ministries should consult the concerned industries’ associations, consumer organizations, environmental, and other NGOs. The consultation period generally takes two to eight weeks.

The German Institute for Standardization (DIN), Germany’s independent and sole national standards body representing Germany in non-governmental international standards organizations, is open to German subsidiaries of foreign companies.

As a member of the European Union, Germany must observe and implement directives and regulations adopted by the EU. EU regulations are binding and enter into force as immediately applicable law. Directives, on the other hand, constitute a type of framework law that Member States transpose via their respective legislative processes. Germany regularly adheres to this process.

EU Member States must transpose directives within a specified time period. Should a deadline not be met, the Member State may suffer the initiation of an “infringement procedure,” which could result in steep fines. Germany has a set of rules that prescribe how to break down any payment of fines devolving to the Federal Government and the federal states (Länder). Both bear part of the costs. Payment requirements by the individual states depend on the size of their population and the respective part they played in non-compliance. In 2020, the Commission opened 28 new infringement cases against Germany; at year-end, 79 total infringement cases remained open against Germany.

In accordance with WTO membership requirements, the Federal Government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT) through the Federal Ministry of Economic Affairs and Energy.

German law is stable and predictable.  Companies can effectively enforce property and contractual rights.  Germany’s well-established enforcement laws and official enforcement services ensure investors can assert their rights.  German courts are fully available to foreign investors in an investment dispute.

The judicial system is independent, and the government does not interfere in the court system.  The legislature sets the systemic and structural parameters, while lawyers and civil law notaries use the law to shape and organize specific situations.  Judges are highly competent and impartial. International studies and empirical data have attested that Germany offers an effective court system committed to due process and the rule of law.

In Germany, most important legal issues and matters are governed by comprehensive legislation in the form of statutes, codes, and regulations.  Primary legislation in the area of business law includes:

• the Civil Code (Bürgerliches Gesetzbuch, abbreviated as BGB), which contains general rules on the formation, performance, and enforcement of contracts and on the basic types of contractual agreements for legal transactions between private entities;
• the Commercial Code (Handelsgesetzbuch, abbreviated as HGB), which contains special rules concerning transactions among businesses and commercial partnerships;
• the Private Limited Companies Act (GmbH-Gesetz) and the Public Limited Companies Act (Aktiengesetz), covering the two most common corporate structures in Germany – the ‘GmbH’ and the ‘Aktiengesellschaft’; and
• the Act on Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, abbreviated as UWG), which prohibits misleading advertising and unfair business practices.

Apart from the regular courts, which hear civil and criminal cases, Germany has specialized courts for administrative law, labor law, social law, and finance and tax law.  Many civil regional courts have specialized chambers for commercial matters. In 2018, the first German regional courts for civil matters (in Frankfurt and Hamburg) established Chambers for International Commercial Disputes, introducing the possibility to hear international trade disputes in English.  Other federal states are currently discussing plans to introduce these specialized chambers as well. In November 2020, Baden-Wuerttemberg opened the first commercial court in Germany with locations in Stuttgart and Mannheim, with the option to choose English– language proceedings.

The Federal Patent Court hears cases on patents, trademarks, and utility rights related to decisions by the German Patent and Trademarks Office.  Both the German Patent Office (Deutsches Patentamt) and the European Patent Office are headquartered in Munich.

In the case of acquisitions of critical infrastructure and companies in sensitive sectors, the threshold for triggering an investment review by the government is 10 percent. The Federal Ministry for Economic Affairs and Climate Action may review acquisitions of domestic companies by foreign buyers, regardless of national security concerns, where investors seek to acquire at least 25 percent of the voting rights to assess whether these transactions pose a risk to the public order or national security of the Federal Republic of Germany.

In 2021, the Federal Ministry for Economic Affairs and Climate Action screened 306 foreign acquisitions and prohibited none. MEC officials told Post the mere prospect of rejection has caused foreign investors to pull out of prospective deals in sensitive sectors in the past. All national security decisions by the Ministry can be appealed in administrative courts.

There is no general requirement for investors to obtain approval for any acquisition unless the target company poses a potential national security risk, such as operating or providing services relating to critical infrastructure, is a media company, or operates in the health sector. The Federal Ministry for Economic Affairs and Climate Action may launch a review within three months after obtaining knowledge of the acquisition; the review must be concluded within four months after receipt of the full set of relevant documents. An investor may also request a binding certificate of non-objection from the Federal Ministry for Economic Affairs and Climate Action in advance of the planned acquisition to obtain legal certainty at an early stage.

If the Federal Ministry for Economic Affairs and Climate Action does not open an in-depth review within two months from the receipt of the request the certificate is deemed as granted. During the review, MEC may ask to submit further documents. The acquisition may be restricted or prohibited within three months after the full set of documents has been submitted.

The German government has continuously amended domestic investment screening provisions in recent years to transpose the relevant EU framework and address evolving security risks. An amendment in June 2017 clarified the scope for review and gave the government more time to conduct reviews, in reaction to an increasing number of acquisitions of German companies by foreign investors with apparent ties to national governments. The amended provisions provide a clearer definition of sectors in which foreign investment can pose a threat to public order and security, including operators of critical infrastructure, developers of software to run critical infrastructure, telecommunications operators or companies involved in telecom surveillance, cloud computing network operators and service providers, and telematics companies, and which are subject to notification requirements. The new rules also extended the time to assess a cross-sector foreign investment from two to four months, and for investments in sensitive sectors, from one to three months, and introduced the possibility of retroactively initiating assessments for a period of five years after the conclusion of an acquisition. Indirect acquisitions such as those through a Germany- or EU-based affiliate company are now also explicitly subject to the new rules.

With further amendments in 2020, Germany implemented the 2019 EU Screening Regulation.

The amendments a) introduced a more pro-active screening based on “prospective impairment” of public order or security by an acquisition, rather than a de facto threat, b) consider the impact on other EU member states, and c) formally suspend transactions during the screening process.

Furthermore, acquisitions by foreign government-owned or -funded entities now trigger a review, and the healthcare industry is now considered a sensitive sector to which the stricter 10% threshold applies. In May 2021, a further amendment entered into force, which introduced a list of sensitive sectors and technologies (like the current list of critical infrastructures), including artificial intelligence, autonomous vehicles, specialized robots, semiconductors, additive manufacturing, and quantum technology. Foreign investors who seek to acquire at least 10% of ownership rights of a German company in one those fields must notify the government and potentially become subject to an investment review. The screening can now also consider “stockpiling acquisitions” by the same investor, “atypical control investments” where an investor seeks additional influence in company operations via side contractual agreements, or combined acquisitions by multiple investors, if all are controlled by one foreign government.

The Ministry for Economic Affairs and Climate Action provides comprehensive information on Germany’s investment screening regime on its website in English:

https://www.bmwi.de/Redaktion/EN/Artikel/Foreign-Trade/investment-screening.html 

The German Economic Development Agency (GTAI) provides extensive information for investors, including about the legal framework, labor-related issues and incentive programs, on their website: http://www.gtai.de/GTAI/Navigation/EN/Invest/investment-guide.html .

The German government ensures competition on a level playing field based on two main legal codes:

The Law against Limiting Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) is the legal basis for limiting cartels, merger control, and monitoring abuse. State and Federal cartel authorities are in charge of enforcing anti-trust law. In exceptional cases, the Minister for Economic Affairs and Climate Action can provide a permit under specific conditions.

A June 2017 amendment to the GWB expanded the reach of the Federal Cartel Office (FCO) to include internet and data-based business models; the FCO has shown an interest in investigating large internet firms. A February 2019 FCO investigation found that Facebook had abused its dominant position in social media to harvest user data. Facebook challenged the FCO’s decision in court, but in June 2020, Germany’s highest court upheld the FCO’s action. In March 2021, the Higher Regional Court in Düsseldorf referred the case to the European Court of Justice for guidance. The FCO has continued to challenge the conduct of large tech platforms, particularly with regard to the use of user data. Another FCO case against Facebook, initiated in December 2020, regards the integration of the company’s Oculus virtual reality platform into its broader platform, creating mandatory registration of Facebook accounts for all Oculus users.

In 2021, a further amendment to the GWB, known as the Digitalization Act, entered into force codifying tools that allow greater scrutiny of digital platforms by the FCO, in order to “better counteract abusive behavior by companies with paramount cross-market significance for competition.” The law aims to prohibit large platforms from taking certain actions that put competitors at a disadvantage, including in markets for related services or up and down the supply chain – even before the large platform becomes dominant in those secondary markets. To achieve this goal, the amendments expand the powers of the FCO to act earlier and more broadly. Due to the relatively modest number of German platforms, the amendments will primarily affect U.S. companies. The Cartel Office commenced investigations against four U.S. platforms – Alphabet/Google, Amazon, Meta/Facebook and Apple – in 2021 to assess whether they fall under the scope of the new legislation. In January 2022, the competition authority determined Alphabet/Google will be subject to abuse control measures under the scope of the new law but has not yet announced remedies. The three other investigations are still ongoing.

While the focus of the GWB is to preserve market access, the Law against Unfair Competition seeks to protect competitors, consumers, and other market participants against unfair competitive behavior by companies. This law is primarily invoked in regional courts by private claimants rather than by the FCO.

German law provides that private property can be expropriated for public purposes only in a non-discriminatory manner and in accordance with established principles of constitutional and international law. There is due process and transparency of purpose, and investors in and lenders to expropriated entities are entitled to receive prompt, adequate, and effective compensation.

The Berlin state government is currently reviewing a petition for a referendum submitted by a citizens’ initiative calling for the expropriation of residential apartments owned by large corporations. At least one party in the governing coalition officially supports the proposal. Certain long-running expropriation cases date back to the Nazi and communist regimes.

German insolvency law, as enshrined in the Insolvency Code, supports and promotes restructuring. If a business or the owner of a business becomes insolvent, or a business is over-indebted, insolvency proceedings can be initiated by filing for insolvency; legal persons are obliged to do so. Insolvency itself is not a crime, but deliberately filing late for insolvency is.

Under a regular insolvency procedure, the insolvent business is generally broken up in order to recover assets through the sale of individual items or rights or parts of the company. Proceeds can then be paid out to creditors in the insolvency proceedings. The distribution of monies to creditors follows detailed instructions in the Insolvency Code.

Equal treatment of creditors is enshrined in the Insolvency Code. Some creditors have the right to claim property back. Post-adjudication preferred creditors are served out of insolvency assets during the insolvency procedure. Ordinary creditors are served on the basis of quotas from the remaining insolvency assets. Secondary creditors, including shareholder loans, are only served if insolvency assets remain after all others have been served. Germany ranks fourth in the global ranking of “Resolving Insolvency” in the World Bank’s Doing Business Index, with a recovery rate of 79.8 cents on the dollar.

In December 2020, the Bundestag passed legislation implementing the EU Restructuring Directive to modernize and make German restructuring and insolvency law more effective.

The Bundestag also passed legislation granting temporary relief to companies facing insolvency due to the COVID-19 pandemic, including temporary suspensions from the obligation to file for insolvency under strict requirements. This suspension expired in May 2021.

Federal and state investment incentives – including investment grants, labor-related and R&D incentives, public loans, and public guarantees – are available to domestic and foreign investors alike. Different incentives can be combined. In general, foreign and German investors must meet the same criteria for eligibility.

Germany’s Climate Action Program provides targeted support for research and development into climate-friendly technologies, through which it aims to build on Germany’s position as a leading provider and a lead market for such technology. The Energy and Climate Fund, which is scheduled to reach a volume of $220 billion (200 billion euros) by 2026, is the main instrument for financing Germany’s energy transition and climate action measures. It facilitates investments in climate protection and security of supply.

The federal government also funds a program offering subsidized loans or nonrepayable cash grants to support the purchase of equipment leading to energy savings. Up to 45 percent of energy efficiency expenditures by large enterprises and 55 percent of expenditures by SMEs are eligible for coverage under the program.

Germany Trade & Invest (GTAI), Germany’s federal economic development agency, provides comprehensive information on incentives in English at: https://www.gtai.de/gtai-en/invest/investment-guide/incentive-programs .

There are currently two free ports in Germany operating under EU law: Bremerhaven and Cuxhaven. The duty-free zones within the ports also permit value-added processing and manufacturing for EU-external markets, albeit with certain requirements. All are open to both domestic and foreign entities. In recent years, falling tariffs and the progressive enlargement of the EU have eroded much of the utility and attractiveness of duty-free zones.

In general, there are no discriminatory export policies or import policies affecting foreign investors: no requirements for local sourcing, export percentage, or local or national ownership. In some cases, however, there may be performance requirements tied to an incentive, such as creation of jobs or maintaining a certain level of employment for a prescribed length of time.

Visa, residence, and work permit procedures for foreign investors are non-discriminatory and, for U.S. citizens (as investors or employees), generally liberal. No restrictions exist on the numbers of foreign managers brought in to supervise foreign investment projects. Work permits for managers can be granted for a maximum of three years and permits can only be renewed after a six-month “cooling off period.”

U.S. companies can generally obtain the visas and work permits required to do business in Germany. U.S. citizens may apply for work and residential permits from within Germany. Germany Trade & Invest offers detailed information online at https://www.gtai.de/gtai-en/invest/investment-guide/coming-to-germany .

There are no general localization requirements for data storage in Germany. However, the invalidation of the Privacy Shield by the European Court of Justice in July 2020 in the Schrems II case has led not only to increased calls for localized data storage in Germany but also to greater scrutiny by the German data protection commissioners of U.S. service providers handling German user data. In recent years, German and European cloud providers have also sought to market the domestic location of their servers as a competitive advantage.

The German Government adheres to a policy of national treatment, which considers property owned by foreigners as fully protected under German law. In Germany, mortgage approvals are based on recognized and reliable collateral. Secured interests in property, both chattel and real, are recognized and enforced. According to the World Bank’s Doing Business Report, it takes an average of 52 days to register property in Germany.

The German Land Register Act dates to 1897. The land register mirrors private real property rights and provides information on the legal relationship of the estate. It documents the owner, rights of third persons, as well as liabilities and restrictions. Any change in property of real estate must be registered in the land registry to make the contract effective. Land titles are now maintained in an electronic database and can be consulted by persons with a legitimate interest.

Germany has a robust regime to protect intellectual property rights (IPR). Legal structures are strong and enforcement is good. Nonetheless, internet piracy and counterfeit goods remain issues, and specific infringing websites are occasionally included in USTR’s Notorious Markets List. Germany has been a member of the World Intellectual Property Organization (WIPO) since 1970. The German Central Customs Authority annually publishes statistics on customs seizures of counterfeit and pirated goods. The statistics for 2020 are available at

https://www.zoll.de/SharedDocs/Broschueren/DE/Die-Zollverwaltung/jahresstatistik_2020.html 

Germany is party to the major international IPR agreements: the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, the Patent Cooperation Treaty (PCT), the Brussels Satellite Convention, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, and the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Many of the latest developments in German IPR law are derived from European legislation with the objective to make applications less burdensome and allow for European IPR protection.

The following types of protection are available:

Copyrights: National treatment is granted to foreign copyright holders, including remuneration for private recordings. Under the TRIPS Agreement, Germany grants legal protection for U.S. performing artists against the commercial distribution of unauthorized live recordings in Germany. Germany is party to the World Intellectual Property Organization (WIPO) Copyright Treaty and WIPO Performances and Phonograms Treaty, which came into force in 2010. Most rights holder organizations regard German authorities’ enforcement of IP rights as effective. In 2008, Germany implemented the EU Directive (2004/48/EC) on IPR enforcement with a national bill, thereby strengthening the privileges of rights holders and allowing for improved enforcement action. Germany implemented the Digital Single Market Directive with the “Act to Adapt Copyright Law to the Requirements of the Digital Single Market,” which entered into force on June 7, 2021. This new law implemented necessary changes to the German Copyright Act. As part of the implementing legislation parliament passed the new Copyright Service Provider Act, which entered into force on August 1, 2021.

Trademarks: National treatment is granted to foreigners seeking to register trademarks at the German Patent and Trade Mark Office. Protection is valid for a period of ten years and can be extended in ten-year periods. It is possible to register for trademark and design protection nationally in Germany or for an EU Trade Mark and/or Registered Community Design at the EU Intellectual Property Office (EUIPO). These provide protection for industrial design or trademarks in the entire EU market. Both national trademarks and European Union Trade Marks (EUTMs) can be applied for from the U.S. Patent and Trademark Office (USPTO) as part of an international trademark registration system, or the applicant may apply directly for those trademarks from EUIPO at https://euipo.europa.eu/ohimportal/en/home .

Patents: National treatment is granted to foreigners seeking to register patents at the German Patent and Trade Mark Office. Patents are granted for technical inventions that are new, involve an inventive step, and are industrially applicable. However, applicants having neither a domicile nor an establishment in Germany must appoint a patent attorney in Germany as a representative filing the patent application. The documents must be submitted in German or with a translation into German. The duration of a patent is 20 years from the patent application filing date. Patent applicants can request accelerated examination under the Global Patent Prosecution Highway (GPPH) when filing the application, provided that the patent application was previously filed at the USPTO and that at least one claim had been determined to be patentable. There are a number of differences between U.S. and German patent law, including the filing systems (“first-inventor-to-file” versus “first-to-file”, respectively), which a qualified patent attorney can explain to U.S. patent applicants. German law also offers the possibility to register designs and utility models.

A U.S. applicant may file a patent in multiple European countries through the European Patent Office (EPO), which grants European patents for the contracting states to the European Patent Convention (EPC). The 38 contracting states include the entire EU membership and several additional European countries; Germany joined the EPC in 1977. It should be noted that some EPC members require a translation of the granted European patent in their language for validation purposes. The EPO provides a convenient single point to file a patent in as many of these countries as an applicant would like: https://www.epo.org/applying/basics.html . U.S. applicants seeking patent rights in multiple countries can alternatively file an international Patent Coordination Treaty (PCT) application with the USPTO.

Trade Secrets: Trade secrets are protected in Germany by the Law for the Protection of Trade Secrets, which has been in force since April 2019 and implements the 2016 EU Directive (2016/943). According to the law, the illegal accessing, appropriation, and copying of trade secrets, including through social engineering, is prohibited. Explicitly exempt from the law is “reverse engineering” of a publicly available item, and appropriation, usage, or publication of a trade secret to protect a “legitimate interest,”, including journalistic research and whistleblowing. The law requires companies implement “adequate confidentiality measures” for information to be protected as a trade secret under the law. Owners of trade secrets are entitled to omission, compensation, and information about the culprit, as well as the destruction, return, recall, and ultimately the removal of the infringing products from the market.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

For additional information about how to protect IPR in Germany, please see Germany Trade & Invest website at https://www.gtai.de/en/invest/investment-guide/company-set-up 

Statistics on the seizure of counterfeit goods are available through the German Customs Authority (Zoll):

https://www.zoll.de/SharedDocs/Broschueren/DE/Die-Zollverwaltung/statistik_gew_rechtsschutz_2019.html;jsessionid=F8B0524DFF4F1ADF99DEBB858E4CAD31.internet412?nn=305648  https://www.zoll.de/SharedDocs/Broschueren/DE/Die-Zollverwaltung/statistik_gew_rechtsschutz_2019.html;jsessionid=F8B0524DFF4F1ADF99DEBB858E4CAD31.internet412?nn=305648 

Businesses can also join the Anti-counterfeiting Association (APM):

http://www.markenpiraterie-apm.de/index.php?article_id=1&clang=1 

As an EU member state with a well-developed financial sector, Germany welcomes foreign portfolio investment and has an effective regulatory system. Capital markets and portfolio investments operate freely with no discrimination between German and foreign firms. Germany has a very open economy, routinely ranking among the top countries in the world for exports and inward and outward foreign direct investment. As a member of the Eurozone, Germany does not have sole national authority over international payments, which are a shared task of the European Central Bank and the national central banks of the 19 member states, including the German Central Bank (Bundesbank). A European framework for national security screening of foreign investments, which entered into force in April 2019, provides a basis under European law to restrict capital movements into Germany because of threats to national security. Global investors see Germany as a safe place to invest. German sovereign bonds continue to retain their “safe haven” status.

Listed companies and market participants in Germany must comply with the Securities Trading Act, which bans insider trading and market manipulation. Compliance is monitored by the Federal Financial Supervisory Authority (BaFin) while oversight of stock exchanges is the responsibility of the state governments in Germany (with BaFin taking on any international responsibility). Investment fund management in Germany is regulated by the Capital Investment Code (KAGB), which entered into force on July 22, 2013. The KAGB represents the implementation of additional financial market regulatory reforms, committed to in the aftermath of the global financial crisis. The law went beyond the minimum requirements of the relevant EU directives and represents a comprehensive overhaul of all existing investment-related regulations in Germany with the aim of creating a system of rules to protect investors while also maintaining systemic financial stability.

Although corporate financing via capital markets is on the rise, Germany’s financial system remains mostly bank-based. Bank loans are still the predominant form of funding for firms, particularly the small- and medium-sized enterprises that comprise Germany’s “Mittelstand,” or mid-sized industrial market leaders. Credit is available at market-determined rates to both domestic and foreign investors, and a variety of credit instruments are available. Legal, regulatory, and accounting systems are generally transparent and consistent with international banking norms. Germany has a universal banking system regulated by federal authorities; there have been no reports of a shortage of credit in the German economy. After 2010, Germany banned some forms of speculative trading, most importantly “naked short selling.” In 2013, Germany passed a law requiring banks to separate riskier activities such as proprietary trading into a legally separate, fully- capitalized unit that has no guarantee or access to financing from the deposit-taking part of the bank. Since the creation of the European single supervisory mechanism (SSM) in November 2014, the European Central Bank directly supervises 21 banks located in Germany (as of January 2022), among them four subsidiaries of foreign banks.

Germany has a modern and open banking sector characterized by a highly diversified and decentralized, small-scale structure. As a result, it is extremely competitive, profit margins notably in the retail sector are low, and the banking sector is considered “over-banked” and in need of consolidation. The country’s “three-pillar” banking system consists of private commercial banks, cooperative banks, and public banks (savings banks/Sparkassen and the regional state-owned banks/Landesbanken). This structure has remained unchanged despite marked consolidation within each “pillar” since the financial crisis in 2009. By the end of 2020 the number of state banks (Landesbanken) had dropped from 12 to 6, savings banks from 446 in 2007 to 377, and cooperative banks from 1,234 to 818. Two of the five large private-sector banks have exited the market (Dresdner, Postbank). The balance sheet total of German banks dropped from 304 percent of GDP in 2007 to 192 percent of year-end 2020 GDP with banking sector assets worth €9.1 trillion. Market shares in corporate finance of the banking groups remained largely unchanged (all figures for end of 2021): commercial banks 25.5 percent (domestic 16.2 percent, foreign banks 9.3 percent), savings banks 31.2 percent, credit cooperative banks 22 percent, regional Landesbanken 9.3 percent, and development banks/building and loan associations/mortgage banks 12 percent.

Germany’s retail banking sector is healthy and well capitalized in line with ECB rules on bank capitalizations. The sector is dominated by globally active banks, Deutsche Bank (Germany’s largest bank by balance sheet total) and Commerzbank (fourth largest bank), with balance sheets of €1.32 trillion and €507 billion respectively (2020 figures). Commerzbank received €18 billion in financial assistance from the federal government in 2009, for which the government took a 25 percent stake in the bank (now reduced to 15.6 percent). Merger talks between Deutsche Bank and Commerzbank failed in 2019. The second largest of the top ten German banks with €595 billion of assets per year-end 2020 is DZ Bank, the central institution of the Cooperative Finance Group (after its merger with WGZ Bank in July 2016), followed by German branches of large international banks (UniCredit Bank, ING-Diba), development banks (KfW Group, NRW Bank), and state banks (LBBW, Bayern LB, Helaba, NordLB).

German credit institutions’ operating business proved robust in 2020 despite the prolonged low interest rate environment and the coronavirus pandemic. Operating income rose by €1.8 billion (+1.5 percent) on the year to €120.5 billion. In 2020 German credit institutions reported however a pre-tax profit of only €14.3 billion, coming in below the long-term average of €17.6 billion and significantly lower than the average of the post-financial crisis years (2010 to 2018) of €25.4 billion. Their 2020 net interest income of €81.1 billion remained below the long-term average of €87.2 billion. Credit risk provisioning rose significantly due to the impact of the coronavirus pandemic on economic activity, reaching €5.3 billion or 0.8 percent of big banks’ annual average lending portfolio. The banking sector’s average return on equity before tax in 2020 slipped to 2.71 percent (after tax: 1.12 percent) (with savings banks and credit cooperatives generating a higher return, and big banks a negative return).

The German government does not currently have a sovereign wealth fund or an asset management bureau.

The formal term for state-owned enterprises (SOEs) in Germany translates as “public funds, institutions, or companies,” and refers to entities whose budget and administration are separate from those of the government, but in which the government has more than 50 percent of the capital shares or voting rights. Appropriations for SOEs are included in public budgets, and SOEs can take two forms, either public or private law entities. Public law entities are recognized as legal personalities whose goal, tasks, and organization are established and defined via specific acts of legislation, with the best-known example being the publicly-owned promotional bank KfW (Kreditanstalt für Wiederaufbau). KfW’s mandate is to promote global development. The government can also resort to ownership or participation in an entity governed by private law if the following conditions are met: doing so fulfills an important state interest, there is no better or more economical alternative, the financial responsibility of the federal government is limited, the government has appropriate supervisory influence, and yearly reports are published.

Government oversight of SOEs is decentralized and handled by the ministry with the appropriate technical area of expertise. The primary goal of such involvement is promoting public interests rather than generating profits. The government is required to close its ownership stake in a private entity if tasks change or technological progress provides more effective alternatives, though certain areas, particularly science and culture, remain permanent core government obligations. German SOEs are subject to the same taxes and the same value added tax rebate policies as their private- sector competitors. There are no laws or rules that seek to ensure a primary or leading role for SOEs in certain sectors or industries. Private enterprises have the same access to financing as SOEs, including access to state-owned banks such as KfW.

The Federal Statistics Office maintains a database of SOEs from all three levels of government (federal, state, and municipal) listing a total of 19,009 entities for 2019, or 0.58 percent of the total 3.35 million companies in Germany. SOEs in 2019 had €646 billion in revenue and €632 billion in expenditures. Forty-one percent of SOEs’ revenue was generated by water and energy suppliers, 12 percent by health and social services, and 11 percent by transportation-related entities. Measured by number of companies rather than size, 88 percent of SOEs are owned by municipalities, 10 percent are owned by Germany’s 16 states, and two percent are owned by the federal government.

The Federal Ministry of Finance is required to publish a detailed annual report on public funds, institutions, and companies in which the federal government has direct participation (including a minority share) or an indirect participation greater than 25 percent and with a nominal capital share worth more than €50,000. The federal government held a direct participation in 106 companies and an indirect participation in 401 companies at the end of 2019 (per the Ministry’s April 2021 publication of full-year 2019 figures), most prominently Deutsche Bahn (100 percent share), Deutsche Telekom (32 percent share), and Deutsche Post (21 percent share). Federal government ownership is concentrated in the areas of infrastructure, economic development, science, administration/increasing efficiency, defense, development policy, and culture. As the result of federal financial assistance packages from the federally-controlled Financial Market Stability Fund during the global financial crisis of 2008/9, the federal government still has a partial stake in several commercial banks, including a 15.6 percent share in Commerzbank, Germany’s second largest commercial bank. In 2020, in the wake of the COVID-19 pandemic, the German government acquired shares of several large German companies, including CureVac, TUI, and Lufthansa in an attempt to prevent companies from filing for insolvency or, in the case of CureVac, to support vaccine research in Germany.

The 2021 annual report (with 2019 data) can be found here:

https://www.bundesregierung.de/breg-de/service/publikationen/beteiligungsbericht-des-bundes-2021-2016812 

Publicly-owned banks constitute one of the three pillars of Germany’s banking system (cooperative and commercial banks are the other two). Germany’s savings banks are mainly owned by the municipalities, while the so-called Landesbanken are typically owned by regional savings bank associations and the state governments. Given their joint market share, about 40 percent of the German banking sector is thus publicly owned. There are also many state-owned promotional/development banks which have taken on larger governmental roles in financing infrastructure. This increased role removes expenditures from public budgets, particularly helpful considering Germany’s balanced budget rules, which took effect for the states in 2020.

Germany does not have any privatization programs currently. German authorities treat foreigners equally in privatizations of state-owned enterprises.

In December 2016, the Federal Government passed the National Action Plan for Business and Human Rights (NAP), applying the UN Guiding Principles for Business and Human Rights to the activities of German companies though largely voluntary measures. A 2020 review found most companies did not sufficiently fulfill due diligence measures and in 2021 Germany passed the legally binding Human Rights Due Diligence in Supply Chains Act. From 2023, the act will apply to companies with at least 3,000 employees with their central administration, principal place of business, administrative headquarters, a statutory seat, or a branch office in Germany. From 2024 it will apply to companies with at least 1000 employees. The 2021 coalition agreement between the SPD, the Greens party, and the Free Democrats Party (FDP) committed to revising the NAP in line with the Supply Chains Act. Germany promoted EU-level legislation during its 2020 Council of the European Union presidency and the EU Commission published a legislative proposal in 2022.

Germany adheres to the OECD Guidelines for Multinational Enterprises; the National Contact Point (NCP) is housed in the Federal Ministry of Economic Affairs and Climate Action. The NCP is supported by an advisory board composed of several ministries, business organizations, trade unions, and NGOs. This working group usually meets once a year to discuss all Guidelines-related issues. The German NCP can be contacted through the Ministry’s website: https://www.bmwi.de/Redaktion/EN/Textsammlungen/Foreign-Trade/national-contact-point-ncp.html .

There is general awareness of environmental, social, and governance issues among both producers and consumers in Germany, and surveys suggest that consumers increasingly care about the ecological and social impacts of the products they purchase. In order to encourage businesses to factor environmental, social, and governance impacts into their decision-making, the government provides information online and in hard copy. The federal government encourages corporate social responsibility (CSR) through awards and prizes, business fairs, and reports and newsletters. The government also organizes so-called “sector dialogues” to connect companies and facilitate the exchange of best practices and offers practice days to help nationally as well as internationally operating small- and medium-sized companies discern and implement their entrepreneurial due diligence under the NAP. To this end it has created a website on CSR in Germany ( http://www.csr-in-deutschland.de/EN/Home/home.html  in English). The German government maintains and enforces domestic laws with respect to labor and employment rights, consumer protections, and environmental protections. The German government does not waive labor and environmental laws to attract investment.

Social reporting is currently voluntary, but publicly listed companies frequently include information on their CSR policies in annual shareholder reports and on their websites.

Civil society groups that work on CSR include Amnesty International Germany, Bund für Umwelt und Naturschutz Deutschland e. V. (BUND), CorA Corporate Accountability – Netzwerk Unternehmensverantwortung, Forest Stewardship Council (FSC), Germanwatch, Greenpeace Germany, Naturschutzbund Deutschland (NABU), Sneep (Studentisches Netzwerk zu Wirtschafts- und Unternehmensethik), Stiftung Warentest, Südwind – Institut für Ökonomie und Ökumene, TransFair – Verein zur Förderung des Fairen Handels mit der „Dritten Welt“ e. V., Transparency International, Verbraucherzentrale Bundesverband e.V., Bundesverband Die Verbraucher Initiative e.V., and the World Wide Fund for Nature (WWF, known as the “World Wildlife Fund” in the United States).

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

The government has an ambitious national climate strategy which, by law, requires the reduction of greenhouse gas emissions 65 percent by 2030, 88 percent by 2040, and the achievement of complete carbon neutrality by 2045. It also aims to source 100 percent of its electricity from renewables by 2035. To achieve this objective it is investing heavily in renewables and implementing a combination of carrots and sticks for private companies to spur investment and deter continued use of climate-polluting energy sources. The country earmarked $220 billion (€200 billion) to fund industrial transformation through 2026, including climate protection, hydrogen technology, and expansion of its electric vehicle charging network. It is also removing bureaucratic hurdles for renewable projects. States must designate two percent of their land for onshore wind energy, and solar energy panels will be mandatory on new commercial buildings. Germany also intends to phase out coal “ideally” by 2030, although Russia’s February 2022 further invasion of Ukraine could lead to a delay as the government seeks alternatives to Russian oil and gas. The government aims to increase domestic rail freight transport by 25 percent, as moving freight by rail instead of trucks emits far fewer greenhouse gases, and it will advocate for EU legislation to encourage rail travel and greener forms of transport throughout the bloc. Germany is part of the EU’s greenhouse gas Emissions Trading System, which sets a price on carbon emissions from power stations, energy-intensive industries (e.g., oil refineries, steelworks, and producers of iron, aluminum, cement, paper and glass), and intra-European commercial aviation. It also instituted a national emissions trading system to cover the transport and building heating sectors in 2021.

The Global Green Growth Institute ranked Germany fourth globally in its 2020 Green Growth Index. Germany ranked fifth in the category “Natural capital protection,” which takes factors such as environmental quality and biodiversity protection into consideration, and second in “Green economic opportunities,” which measures green investment, green trade, green employment, and green innovation. In 2021, Germany launched a $1 billion fund aimed at halting global biodiversity loss and providing long-term financial support for protected areas across Africa, Asia, and South America. The new government plans to significantly increase Germany’s financial commitment to global biodiversity and promote “an ambitious new global framework” at the April 2022 UN Biodiversity Conference.

Public procurement policies include environmental and green growth considerations such as resource efficiency, pollution abatement, and climate resilience. The German Environment Agency has formulated clear requirements and recommendations for climate change mitigation at public agencies, including their procurement policies, and it has an environmental management system in place certified according to the EU Eco-Management and Audit System. The federal government and 11 of Germany’s federal states have committed to achieving greenhouse gas-neutral administration.

Among industrialized countries, Germany ranks 10th out of 180, according to Transparency International’s 2021 Corruption Perceptions Index. Some sectors including the automotive industry, construction sector, and public contracting, exert political influence and political party finance remains only partially transparent. Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.

Over the last two decades, Germany has increased penalties for the bribery of German officials, corrupt practices between companies, and price-fixing by companies competing for public contracts. It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs. Most state governments and local authorities have contact points for whistleblowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.

To prevent corruption, Germany relies on the existing legal and regulatory framework consisting of various provisions under criminal law, public service law, and other rules for the administration at both federal and state levels. The framework covers internal corruption prevention, accounting standards, capital market disclosure requirements, and transparency rules, among other measures.

According to the Federal Criminal Office, in 2020, 50.6 percent of all corruption cases were directed towards the public administration (down from 73 percent in 2018), 33.2 percent towards the business sector (down from 39 percent in 2019), 13.4 percent towards law enforcement and judicial authorities (up from 9 percent in 2019), and 2 percent to political officials (unchanged compared to 2018).

Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment. Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary. In early 2021, several parliamentarians stepped down due to inappropriate financial gains made through personal relationships to businesses involved in the procurement of face masks during the initial stages of the pandemic.

Donations by private persons or entities to political parties are legally permitted. However, if they exceed €50,000, they must be reported to the President of the Bundestag, who is required to immediately publish the name of the party, the amount of the donation, the name of the donor, the date of the donation, and the date the recipient reported the donation. Donations of €10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.

State prosecutors are generally responsible for investigating corruption cases, but not all state governments have prosecutors specializing in corruption. Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large– scale cases against major companies.

Media reports in past years about bribery investigations against Siemens, Daimler, Deutsche Telekom, Deutsche Bank, and Ferrostaal have increased awareness of the problem of corruption. As a result, listed companies and multinationals have expanded compliance departments, tightened internal codes of conduct, and offered more training to employees.

Germany was a signatory to the UN Anti-Corruption Convention in 2003. The Bundestag ratified the Convention in November 2014.

Germany adheres to and actively enforces the OECD Anti-Bribery Convention which criminalizes bribery of foreign public officials by German citizens and firms. The necessary tax reform legislation ending the tax write-off for bribes in Germany and abroad became law in 1999.

Germany participates in the relevant EU anti-corruption measures and signed two EU conventions against corruption. However, while Germany ratified the Council of Europe Criminal Law Convention on Corruption in 2017, it has not yet ratified the Civil Law Convention on Corruption.

There is no central government anti-corruption agency in Germany. Federal states are responsible for fighting corruption.

Due to Germany’s federal state structure, original responsibility in the area of anti-corruption lies with the individual federal states. Further information, in particular contact persons for corruption prevention, can be found on the websites of state level law enforcement (police) or the ombudsmen of the cities, districts and municipalities.

These offices, special telephone numbers or web-based contact options also offer whistleblowers or interested citizens the opportunity to contact them anonymously in individual federal states.

(The Federal Ministry of the Interior’s website provides further information on corruption prevention regulations and integrity regulations at the federal level.)

Claimants can contact “watchdog” organizations such as Transparency International for more information:

Hartmut Bäumer, Chair
Transparency International Germany
Alte Schönhauser Str. 44, 10119 Berlin
+49 30 549 898 0
office@transparency.de
https://www.transparency.de/en/ 

The Federal Criminal Office publishes an annual report on corruption: “Bundeslagebild Korruption” – the latest one covers 2020.

https://www.bka.de/DE/AktuelleInformationen/StatistikenLagebilder/Lagebilder/Korruption/korruption_node.html;jsessionid=95B370E07C3C5702B4A4AAEE8EAC8B3F.live0601 

Overall, political acts of violence against either foreign or domestic business enterprises are extremely rare. Most protests and demonstrations, whether political acts of violence against either foreign or domestic business enterprises or any other cause or focus, remain peaceful. However, minor attacks by left-wing extremists on commercial enterprises occur. These extremists justify their attacks as a means to combat the “capitalist system” as the “source of all evil.” In the foreground, however, concrete connections such as “anti-militarism” (in the case of armament companies), “anti-repression” (in the case of companies for prison logistics or surveillance technology), or the supposed commitment to climate protection (companies from the raw materials and energy sector) are usually cited. In several key instances in larger cities with a strained housing market (low availability of affordable housing options), left-wing extremists target real estate companies in connection with the defense of autonomous “free spaces” and the fight against “anti-social urban structures.” Isolated cases of violence directed at certain minorities and asylum seekers have not targeted U.S. investments or investors.

The German labor force is generally highly skilled, well-educated, and productive. Before the economic downturn caused by COVID-19, employment in Germany had risen for 13 consecutive years and reached an all-time high of 45.3 million workers in 2019. As a result of the COVID-19 pandemic, employment fell to 44.8 million in 2020 and remained stagnant in 2021 at 44.79 million workers. The pandemic had a disproportionate impact on female workers, who comprise most employees in the tourism, restaurant, retail, and beauty industries.

Unemployment has fallen by more than half since 2005, and, in 2019, reached the lowest average annual value since German reunification. In 2019, around 2.34 million people were registered as unemployed, corresponding to an unemployment rate of 5.2 percent, according to German Federal Employment Agency calculations. Using internationally comparable data from the European Union’s statistical office Eurostat, Germany had an average annual unemployment rate of 3.2 percent in 2019, the second lowest rate in the European Union. For the pandemic year 2020, the Federal Employment Agency reported an average unemployment rate of 5.9 percent and an average 2.7 million unemployed. In 2021, employment recovered despite the persistent pandemic, with the unemployment rate falling to 5.7 percent and the total number of unemployed dropping by 82,000. However, long-term effects on the labor market and the overall economy due to COVID-19 are not yet fully observable. All employees are by law covered by federal unemployment insurance that compensates for lack of income for up to 24 months. A government-funded temporary furlough program (“Kurzarbeit”) allows companies to decrease their workforce and labor costs with layoffs and has helped mitigate a negative labor market impact in the short term. At its peak in April 2020, the program covered more than six million employees. By December 2021 the number had decreased considerably to 790,000 but remained a key government tool to cope with the impact of COVID-19 on the labor market. The government, through the national employment agency, has spent more than €22 billion on this program, which it considers the main tool to keep unemployment low during the COVID-19 economic crisis. The government extended the program for all companies already meeting its conditions in March 2022 until the end of June 2022.

Germany’s average national youth unemployment rate was 6.9 percent in 2020, the lowest in the EU. The German vocational training system has garnered international interest as a key contributor to Germany’s highly skilled workforce and its sustainably low youth unemployment rate. Germany’s so-called “dual vocational training,” a combination of theoretical courses taught at schools and practical application in the workplace, teaches and develops many of the skills employers need. Each year there are more than 500,000 apprenticeship positions available in more than 340 recognized training professions, in all sectors of the economy and public administration. Approximately 50 percent of students choose to start an apprenticeship. The government promotes apprenticeship opportunities, in partnership with industry, through the “National Pact to Promote Training and Young Skilled Workers.”

An element of growing concern for German business is the country’s decreasing population, which (absent large-scale immigration) will likely shrink considerably over the next few decades. Official forecasts at the behest of the Federal Ministry of Labor and Social Affairs predict the current working-age population will shrink by almost three million between 2010 and 2030, resulting in an overall shortage of workforce and skilled labor. Labor bottlenecks already constrain activity in many industries, occupations, and regions. The government has begun to enhance its efforts to ensure an adequate labor supply by improving programs to integrate women, elderly, young people, and foreign nationals into the labor market. The government has also facilitated the immigration of qualified workers.

Germans consider the cooperation between labor unions and employer associations to be a fundamental principle of their social market economy and believe this collaboration has contributed to the country’s resilience during economic and financial crises. Insofar as job security for members is a core objective for German labor unions, unions often show restraint in collective bargaining in weak economic times and often can negotiate higher wages in strong economic conditions. In an international comparison, Germany is in the lower midrange with regards to strike numbers and intensity. All workers have the right to strike, except for civil servants (including teachers and police) and staff in sensitive or essential positions, such as members of the armed forces.

Germany’s constitution, federal legislation, and government regulations contain provisions designed to protect the right of employees to form and join independent unions of their choice. The overwhelming majority of unionized workers are members of one of the eight largest unions — largely grouped by industry or service sector — which are affiliates of the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB). Several smaller unions exist outside the DGB. Overall trade union membership has, however, been in decline over the last several years. In 2021, total DGB union membership amounted to 5.9 million. IG Metall is the largest German labor union with 2.2 million members, followed by the influential service sector union Ver.di (1.9 million members).

The constitution and enabling legislation protect the right to collective bargaining, and agreements are legally binding to the parties. In 2020, 52 percent of non-self-employed workers were covered by a collective wage agreement.

By law, workers can elect a works council in any private company employing at least five people. The rights of the works council include the right to be informed, to be consulted, and to participate in company decisions. Works councils often help labor and management settle problems before they become disputes and disrupt work. In addition, “co-determination” laws give the workforce in medium-sized or large companies (corporations, limited liability companies, partnerships limited by shares, co-operatives, and mutual insurance companies) significant voting representation on the firms’ supervisory boards. This co-determination in the supervisory board extends to all company activities.

From 2010 to 2020, real wages grew yearly by 1.4 percent on average. As a result of the COVID-19 pandemic, real wages fell in 2020 by 1.1 percent over the previous year, ending a six-year period of real wage increases. Job losses and enrollment in the government’s temporary furlough program (at 70 percent of previous wage levels) were the drivers of this reduction. In 2021 employment picked up again and nominal wages increased by 3.1 percent. Inflation in 2021 of 3.1 percent resulted in another year of real wage reduction of 0.1 percent.

* Source for Host Country Data: Federal Statistical Office, www.destatis.de ; Bundesbank, www.bundesbank.de 

U.S. Commercial Service
Pariser Platz 2, 14191 Berlin, Germany
Email: office.berlin@trade.gov

The Greek government continues to take steps to increase foreign investment, implementing economic reforms and taking steps to mitigate the impact of the pandemic.  Greece completed its EU bailout program in 2018, allowing it to borrow once again at market rates, reflected in a rising economic sentiment since 2017.  Heavy bureaucracy and a slow judicial system continue to create challenges for both foreign and domestic investors.

There are no laws or practices known to Post that discriminate against foreign investors.  The country has investment promotion agencies to facilitate foreign investments, with “Enterprise Greece” as the official agency of the Greek state.  Under the supervision of the Ministry of Foreign Affairs, Enterprise Greece is responsible for promoting investment in Greece and exports from Greece, and with making Greece more attractive as an international business partner.  Enterprise Greece provides the full spectrum of services related to international business relationships and domestic business development for the international market, including an Investor Ombudsman program for investment projects exceeding €2 million.  The Ombudsman is available to assist with specific bureaucratic obstacles, delays, disputes, or other difficulties that impede an investment project.  However, Enterprise Greece, even with its ombudsman service, is not very effective at moving investment projects forward.

The General Secretariat for Strategic and Private Investments streamlines the licensing procedure for strategic investments, aiming to make the process easier and more attractive to investors.

Greece has adopted the following EU definitions regarding micro, small, and medium size enterprises:

Micro Enterprises:  Fewer than 10 employees and an annual turnover or balance sheet below €2 million.

Small Enterprises:  Fewer than 50 employees and an annual turnover or balance sheet below €10 million.

Medium-Sized Enterprises:  Fewer than 250 employees and annual turnover below €50 million or balance sheet below €43 million.

Numerous structural reforms, undertaken as part of the country’s 2015-2018 international bailout program as well as a part of the current New Democracy administration’s efforts to lower taxes and reduce bureaucracy, aim to welcome and facilitate foreign investment, and the government has publicly messaged its dedication to attracting foreign investment.The 2019 investment law simplified licensing procedures in order to facilitate investment.  In December 2020, parliament passed a new law allowing non-residents who relocate their jobs to Greece to benefit from half their salary being free of income tax for up to seven years.  The scheme is open to any type of job, any income level and complements other tax incentive schemes put in place, including a non-dom program for wealthy investors and a low flat tax rate for pensioners.  The Trans Adriatic Pipeline (TAP) is another example of the government’s commitment in this area.  In November 2015, the Greek government and TAP investors agreed on measures and began construction on the largest investment project since the start of the financial crisis.  The pipeline began operations in December 2020 and in March 2021, TAP announced that a total of 1 billion cubic meters (bcm) of natural gas from Azerbaijan entered Europe via the Greek interconnection point of Kipoi.  Law 4710/2020 gave a strong push for electro-mobility, with several incentives and subsidies to those interested in acquiring an electric vehicle. The law has paved the way for greater U.S. investment.  For example, Tesla has installed the first pop-up stand along with three electric vehicle (EV) charges at a major Greek shopping mall, while Blink expanded its EV network in Greece.  Additionally, there are directives that have eased the bureaucracy surrounding renewable energy source (RES) projects, including establishing a deadline for the issuance of Environmental Terms Approvals (ETAs) of 120 days and limiting the environmental licensing stages to three stages instead of the previous six or seven stages required for companies to abide by.

In the past decade, the country underwent one of the most significant fiscal consolidations in modern history, with broad and deep cuts to public expenditures and significant increases in labor and social security tax rates, which have offset improved labor market competitiveness achieved through significant wage devaluation.  While there has been notable progress, corruption and burdensome bureaucracy continue to create barriers to market entry for new firms, permitting incumbents to maintain oligopolies in different sectors, and creating scope for arbitrary decisions and rent seeking by public servants.

As a member of the EU and the European Monetary Union (the “Eurozone”), Greece is required to meet EU and eurozone investment regulations.  Foreign and domestic private entities have the legal right to establish and own businesses in Greece; however, the country places restrictions on foreign equity ownership higher than those imposed on average in the other 17 high-income OECD economies, such as equity restrictions on airport operations and limits on foreign ownership in electricity and media.  The government has undertaken EU-mandated reforms in its energy sector, opening much of it to foreign equity ownership.  Restrictions exist on land purchases in border regions and on certain islands because of national security considerations.  Foreign investors can buy or sell shares on the Athens Stock Exchange on the same basis as local investors.  Greece does not maintain an investment screening mechanism.  However, the Greek Government is currently working on the legislation for the development of an FDI screening mechanism. The plan is to finalize the text in mid-2022 and then present it to the European Commission.

The government has not undergone an investment policy review by the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or United Nations Committee on Trade and Development (UNCTAD) or worked with any other international institution to produce a public report on the general investment climate in the past three years.  However, in July 2020, the OECD published a periodic economic survey describing the state of the economy and addressing foreign direct investment concerns, especially regarding needed reforms in the public sector and judicial system.In particular, the OECD report lauds the Ministry of Digital Governance’s progress in instituting digital and public administration reforms and recommends continued effort in this area.  To date, the OECD has not published an economic survey for 2021, however, the economic forecast summary for Greece was published in December 2021.

Although Greece has many civil society organizations (CSOs), no CSO has raised concerns related to investment policies introduced by the government of Greece.

In 2020, Greece eased processes for starting a business by reducing the time to register a company and removing the requirement to obtain a tax clearance.  Accessing industrial land in Greece is relatively quick, with only three weeks required to lease land from the government.  Private land can be leased within 15 days.  Arbitrating commercial disputes, however, can take almost a year.  Establishing a limited liability company takes approximately four days with three procedures involved, including registering the business, making a company seal, and registering with the Unified Social Security Institution.  Greece’s Ease of Doing Business score in 2020 is 96, for a rank of 11 for starting a business and rank of 79 overall.  Greece is now one of the 37 countries listed on www.businessfacilitation.org.

Greece’s business registration entity GEMI (General Commercial Register) has the basic responsibility for digitizing and automating the registration and monitoring procedures of commercial enterprises. The online business registration process is relatively clear, and although foreign companies can use it, the registration steps are currently available only in Greek.  In general, a company must register with the business chamber, tax registry, social security, and local municipality.  Business creation without a notary can be done for specific cases (small/personal businesses, etc.).  For the establishment of larger companies, a notary is mandatory.

The Greek government does not have any known outward investment incentive programs.  Capital controls were eliminated in September 2019.

Enterprise Greece supports the international expansion of Greek companies.  While no incentives are offered, Enterprise Greece has been supportive of Greek companies attending the U.S. Government’s Annual SelectUSA Investment Summit, which promotes inbound investment to the United States, and similar industry trade events internationally.

As an EU member, Greece is required to have transparent policies and laws for fostering competition.  Foreign companies consider the complexity of government regulations and procedures and their inconsistent implementation to be a significant impediment to investing and operating in Greece.  Occasionally, foreign companies report cases where there are multiple laws governing the same issue, resulting in confusion over which law is applicable.  Under its bailout programs, the Greek government committed to widespread reforms to simplify the legal framework for investment, including eliminating bureaucratic obstacles, redundancies, and undue regulations.  The fast-track law, passed in December 2010, aimed to simplify the licensing and approval process for “strategic” investments, i.e. large-scale investments that will have a significant impact on the national economy.  In 2013, Greece’s parliament passed Investment Law 4146/2013 to simplify the regulatory system and stimulate investment.  This law provides additional incentives, beyond those in the fast-track law, available to domestic and foreign investors, dependent on the sector and the location of the investment.

In February 2021, the EU introduced new trade enforcement regulations which apply to all member-states, including new policy countermeasures to services and trade-related aspects of intellectual property rights (IPR).  Former trade enforcement regulations only permitted countermeasures in goods.  The following enforcement mechanisms have been enacted at the EU-level:

• the appointment of a Chief Trade Enforcement Officer;
• the creation of a new Directorate in DG Trade for enforcement, market access and SMEs; and
• the establishment under Access2Markets of a single-entry point for complaints from EU stakeholders and businesses on trade barriers on foreign markets and violations of sustainable trade commitments in EU trade agreements.

Additionally, the European Commission has also committed to developing the EU’s anti-coercion mechanism, with the goal to deter countries from restricting or threatening to restrict trade or investment.

Greece’s tax regime lacked stability during the economic crisis, presenting additional obstacles to investment, both foreign and domestic.  Foreign firms are not subject to discrimination in taxation.  Numerous changes to tax laws and regulations since the beginning of the economic crisis injected uncertainty into Greece’s tax regime.  As part of Greece’s August 2015 bailout agreement, the government converted the Ministry of Finance’s Directorate-General for Public Revenue into a fully independent tax agency effective January 2017, with a broad mandate to increase collection and develop further reforms to the tax code aimed at reducing evasion and increasing the coverage of the Greek tax regime.  The government makes continued efforts to combat tax evasion by increasing inspections and crosschecks among various authorities and by using more sophisticated methods to find undeclared income.  Authorities held monthly lotteries offering taxpayers rewards of €1,000 ($1,200) for using credit or debit cards, which are considered more financially transparent, in their daily transactions.

Foreign investment is not legally prohibited or otherwise restricted.  Proposed laws and regulations are published in draft form for public comment before Parliament takes up consideration of the legislation.  The laws in force are accessible on a unified website managed by the government and printed in an official gazette.  Greece introduced International Financial Reporting Standards for listed companies in 2005 in accordance with EU directives.  These rules improved the transparency and accountability of publicly traded companies.

Citizens of other EU member state countries may work freely in Greece.  Citizens of non-EU countries may work in Greece after receiving residence and work permits.  There are no discriminatory or preferential export/import policies affecting foreign investors, as EU regulations govern import and export policy, and increasingly, many other aspects of investment policy in Greece.

Greece has been a World Trade Organization (WTO) member since January 1, 1995, and a member of the General Agreement on Tariffs and Trade (GATT) since March 1, 1950.  Greece complies with WTO Trade-Related Investment Measures (TRIMs) requirements.  There are no performance requirements for establishing, maintaining, or expanding an investment.  Performance requirements may come into play, however, when an investor wants to take advantage of certain investment incentives offered by the government.  Greece has not enacted measures that are inconsistent with TRIMs requirements, and the Embassy is not aware of any measures alleged to violate Greece’s WTO TRIMs obligations.  Trade policy falls within the competence and jurisdiction of the European Commission Directorate General for Trade and is generally not subject to regulation by member state national authorities.

Although Greece has an independent judiciary, the court system is an extremely time-consuming and unwieldy means for enforcing property and contractual rights.  According to the “Enforcing Contracts Indicator” of the World Bank’s ‘Doing Business 2020” survey, Greece ranks 146 among 190 countries in terms of the speed of delivery of justice, requiring 1,711 days (more than four years) on average to resolve a dispute, compared to the OECD high-income countries’ average of 589.6 days.  The government committed, as part of its three bailout packages, to reforms intended to expedite the processing of commercial cases through the court system.  In July 2015, the government adopted significant reforms to the Code of Civil Procedure (Law 4335/2015).  These reforms aimed to accelerate judicial proceedings in support of contract enforcement and investment climate stability and entered into force in January 2016.  Foreign companies report, however, that Greek courts do not consistently provide fast and effective recourse.  Problems with judicial corruption reportedly still exist.  Commercial and contractual laws accord with international norms, and the judicial system remains independent of the executive branch.

In 2019 and 2020, Parliament passed several investment-related laws.

In December 2020, Parliament passed Law 4758/2020, which introduced amendments in the current tax legislation regarding special taxation of employment services and business activity income arising in Greece, earned by individuals who transfer their tax residence in Greece.

In October 2019, Parliament passed an economic development bill, Law 4635/2019, aimed at boosting economic recovery in the post-bailout era which entered into force in January 2020.  The bill, called “Invest in Greece and other provisions,” simplifies processes for investors regarding environmental and urban planning regulations, speeding up bureaucratic processes.  The bill also introduces changes to labor union alterations to encourage job creation and reforms the functioning of the General Commercial Registry.

Law 4605/2019 expands the types of investments that qualify an individual for a residence permit, allowing investments in intangible assets.  In particular, capital contribution of at least €400,000 in a real estate investment company, in a company registered in Greece, in a purchase of state bonds, corporate bonds, or shares, in a venture capital investment company, or in mutual funds, allows the investor and his or her family members a five-year residency permit in Greece.

Law 4608/2019 for strategic investments was approved in April 2019, creating a favorable investment climate by providing various privileges to investors such as tax exemptions and fast track licensing.

Investments in Greece operate under two main laws:  the new Investment Law (4399/2016) that addresses small-scale investments and Law 4146/2013 that addresses strategic investments.  In particular:

Law 4399/2016, entitled “Statutory framework to the establishment of Private Investments Aid Schemes for the regional and economic development of the country” was passed in June 2016.  Its key objectives include the creation of new jobs, the increase of extroversion, the reindustrialization of the country, and the attraction of FDI.  The law provides aids (as incentives) for companies that invest from €50,000 (Social Cooperative Companies) up to €500,000 (large sized companies) as well as tax breaks.  The Greek government provides funds to cover part of the eligible expenses of the investment plan; the amount of the subsidy is determined based on the region and the business size.  Qualified companies are exempt from paying income tax on their pre-tax profits for all their activities.  There is a fixed corporate income tax rate and fast licensing procedures.  Eligible economic activities are manufacturing, shipbuilding, transportation/infrastructure, tourism, and energy.  More about this law can be found here: https://www.enterprisegreece.gov.gr/files/pdf/madrid2019/2-Investment-Incentives-Law.pdf.

– Law 4146/2013, entitled the “Creation of a Business-Friendly Environment for Strategic and Private Investments” is the other primary investment incentive law currently in force.  The law aims to modernize and improve the institutional framework for private investments, raise liquidity, accelerate investment procedures, and increase transparency.  It seeks to provide an efficient institutional framework for all investors and speed the approval processes for pending and approved investment projects.  The law created a general directorate for private investments within the Ministry of Development and Investment and reduced the value of investments needed to be considered strategic.  The law also provides tax exemptions and incentives to investors and allows foreign nationals from non-EU countries who buy property in Greece worth over €250,000 ($285,000) to obtain five-year renewable residence permits for themselves and their families.  In March 2019, the Greek government brought a bill to parliament to expand eligibility criteria of the existing program.

Other investment laws include:

– Law 3908/2011, which provides incentives in the form of tax relief, grants, and allowances on investments, is gradually being phased out by Law 4146 (above).

– Law 3919/2011 aims to liberalize more than 150 currently regulated or closed-shop professions.

– Law 3982/2011 reduced the complexity of the licensing system for manufacturing activities and technical professions and modernized certain qualification and certification requirements to lower barriers to entry.

– Law 4014/2011 simplified the environmental licensing process.

– Law 3894/2010 (also known as fast track) allows Enterprise Greece to expedite licensing procedures for qualifying investments in the following sectors: industry, energy, tourism, transportation, telecommunications, health services, waste management, or high-end technology/innovation. To qualify, investments must meet one of the following conditions:

• exceed €100 million;
• exceed €15 million in the industrial sector, operating in industrial zones;
• exceed €40 million and concurrently create at least 120 new jobs; or
• create 150 new jobs, regardless of the monetary value of the investment.

More about fast-track licensing of strategic investments can be found online at https://www.enterprisegreece.gov.gr/en/invest-in-greece/strategic-investments

– Law 3389/2005 introduced the use of public-private partnerships (PPP).  This law aimed to facilitate PPPs in the service and construction sectors by creating a market-friendly regulatory environment.

–  Law 3426/2005 completed Greece’s harmonization with EU Directive 2003/54/EC and provided for the gradual deregulation of the electricity market.  Law 3175/2003 harmonized Greek legislation with the requirements of EU Directive 2003/54/EC on common rules for the internal electricity market.  Law 2773/99 initially opened 34 percent of the Greek energy market, in compliance with EU Directive 96/92 concerning regulation of the internal electricity market.

– Law 3427/2005, which amended Law 89/67, provides special tax treatment for offshore operations of foreign companies established in Greece.  Special tax treatment is offered only to operations in countries that comply with OECD tax standards.

– Law 2364/95 and supporting amendments govern investment in the natural gas market in Greece.

– Law 2289/95, which amended Law 468/76, allows private (both foreign and domestic) participation in oil exploration and development.

– Law 2246/94 and supporting amendments opened Greece’s telecommunications market to foreign investment.

– Legislative Decree 2687 of 1953, in conjunction with Article 112 of the Constitution, gives approved foreign “productive investments” (primarily manufacturing and tourism enterprises) property rights, preferential tax treatment, and work permits for foreign managerial and technical staff.  The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor’s agreement with the government, but the guarantee does not cover changes in the tax regime.

Under Articles 101-109 of the Treaty on the Functioning of the EU, the European Commission (EC), together with member state national competition authorities, directly enforces EU competition rules.  The EC Directorate-General for Competition carries out this mandate in member states, including Greece.  Greece’s competition policy authority rests with the Hellenic Competition Commission, in consultation with the Ministry of Economy.  The Hellenic Competition Commission protects the proper functioning of the market and ensures the enforcement of the rules on competition.  It acts as an independent authority and has administrative and financial autonomy.

Private property may be expropriated for public purposes, but the law requires this be done in a nondiscriminatory manner and with prompt, adequate, and effective compensation.  Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms.  There have been no expropriation actions involving the real property of foreign investors in recent history, although legal proceedings over expropriation claims initiated, in one instance, over a decade ago, continue to work through the judicial system.

Bankruptcy laws in Greece meet international norms.  Under Greek bankruptcy law 3588/2007, private creditors receive compensation after claims from the government and insurance funds have been satisfied.  Monetary judgments are usually made in euros unless explicitly stipulated otherwise.  Greece has a reliable system of recording security interests in property.  According to the World Bank’s 2020 Doing Business report, resolving insolvency in Greece takes 3.5 years on average and costs nine percent of the debtor’s estate, with the most likely outcome that the company will be sold piecemeal.  Recovery rate is 32 cents on the dollar.  Greece ranks 72 of 190 economies surveyed for ease of resolving insolvency in the Doing Business report (from 62 in 2019).

Investment incentives are available on an equal basis for both foreign and domestic investors in productive enterprises.  The investment laws in Greece aim to increase liquidity, accelerate investment processes, and ensure transparency.  They provide an efficient institutional framework for all investors and speed the approval process for pending investment projects.  The basic investment incentives Law 4146/2013, “Creation of a Development Friendly Environment for Strategic and Private Investments,” aims to improve the institutional and legal framework to attract private investment.  Separately, Law 3908/2011 (which replaced Law 3299/2004) provides incentives in the form of tax relief, cash grants, leasing subsidies, and soft loans on qualifying investments in all economic sectors with some exceptions.

In evaluating applications for tax and other financial incentives for investment, Greek authorities consider several criteria, including the viability of the planned investment; the expected impact on the economy and regional development (job creation, export orientation, local content use, energy conservation, environmental protection); the use of innovative technology; and the creditworthiness and capacity of the investor.  Progress assessments are conducted on projects receiving incentives, and companies that fail to implement projects as planned may be forced to give up incentives initially granted to them.  All information transmitted to the government for the approval process is to be treated confidentially by law.

Investment categories are:

• General Entrepreneurship
• Regional Cohesion
• Technological development
• Youth Entrepreneurship (18-40 years old)
• Large Investment Plans (above €50 million)
• Integrated, Multi-Annual Business Plans

The entire application and evaluation process shall not exceed six months (more information can be found at https://www.ependyseis.gr).

Greece offers incentive packages for green investments and expects to offer more as it receives its European Recovery and Resilience Facility allocations.  In 2021, the European Commission approved a €2.27 billion Greek program to award aid for renewable energy production, including a joint competitive tendering procedure for onshore wind and solar installations and two-way contract-for-difference premiums for electricity production from renewable energy sources.  The incentives have spurred increased investment in the renewable energy sector; auctions to secure long-term electricity production contracts for onshore wind and solar projects have been oversubscribed.  Law 4710/2020 offers incentives to promote e-mobility, including subsidies for purchases of electric vehicles and associate charging equipment, as well as tax incentives for green investments.  Law 4710/2020 offers incentives to promote e-mobility, including subsidies for purchases of electric vehicles and associate charging equipment, as well as tax incentives for green investments.  In 2021, the European Commission also approved Greek plans to establish an incentive scheme to help drive renewables deployment across 47 Greek islands, for example premium payments to generators to bridge the gap between generation costs and wholesale electricity prices.

Greece has four free-trade zones, located at the Piraeus, Thessaloniki, Heraklion, and Platigiali Astakos Etoloakarnias port areas.  Greek and foreign-owned firms enjoy the same advantages in these zones.  Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and may remain free of all duties and taxes if subsequently transshipped or re-exported.  Similarly, documents pertaining to the receipt, storage, or transfer of goods within the zones are free from stamp taxes.  Handling operations are carried out according to EU regulations 2504/1988 and 2562/1990.  Transit goods may be held in the zones free of bond.  These zones also may be used for repackaging, sorting, and re-labeling operations.  Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki Free Zone.  Storage time is unlimited, as long as warehouse rents are paid every six months.

The Greek government does not follow a policy of forced localization or mandate local employment designed to require foreign investors to use domestic content in goods or technology, with the exception of economic development requirements in many defense contracts (see Research and Development, below).  Some foreign investors partner with local companies or hire local staff/experts, however, as a way to facilitate their entry into the market.  In 2019, the government enacted a new amendment to the Greek tourism legislation, which obligates tour operators from third countries who do not own a travel agency in Greece to collaborate with a local travel agency established in the country to be able to conduct its business locally.  The government is not taking steps to force foreign investors to keep a specific amount of the data they collect and store within Greek national borders.

Offset agreements, co-production, and technology transfers are commonplace in Greece’s procurement of defense items.  Although the most recent Greek defense procurement law eliminated offset requirements, there are some remaining ongoing active offset contracts, as well as expired offset contracts with U.S. firms that are potentially subject to non-performance penalties.  Defense procurements are still subject to economic development requirements, which are, in effect, similar to offsets.  In 2014, the government committed to resolving offset contract disputes in a way that would satisfy both parties and avoid the imposition of penalties or fines.

In general, U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs.  Foreign investors do not face discriminatory or other formal inhibiting requirements.  However, many potential and actual foreign investors assert the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of multiple government agencies all discourage investment.

Greek laws extend the protection of property rights to both foreign and Greek nationals, and the legal system protects and facilitates acquisition and disposition of all property rights.

Multiple layers of authority in Greece are involved in the issuance or approval of land use and zoning permits, creating disincentives to real property investment.  Secured interests in property are movable and real, recognized and enforced.  The concept of mortgage does exist in the market and can be recorded through the banks.  The government is working to create a comprehensive electronic land registry which is expected to increase the transparency of real estate management.  However, the land registry is behind schedule and is not expected to be completed until 2022, two years after its initial estimate of completion.  Greece ranks 156 out of 190 countries for Ease of Registering Property in the World Bank’s Doing Business 2020 Report, down from 153 last year.

Foreign nationals can acquire real estate property in Greece, though they first need to be issued a tax authentication number.  However, for the border areas, foreign nationals first require a license from the Greek state (Law 3978/2011).  In another effort to boost investment, the government passed Law 4146/2013, which allows foreign nationals who buy property in Greece worth over €250,000 ($285,000) to obtain a five-year residence permit for themselves and their families.  The “Golden Visa” program has been extended to buyers of various types of Greek securities, including stocks, bonds, and bank accounts, with a value of at least €400,000.  The permit can be extended for an additional five years and allows travel to other EU and Schengen countries without a visa.

On April 29, 2020, the U.S. Trade Representative (USTR) delisted Greece from the USTR Special 301 Watch List due to progress in addressing concerns regarding IP protection and enforcement.  The widespread use of unlicensed software in the public sector in Greece had been of long-standing concern to right holders.  In December 2019, Greece took clear steps to address this matter by allocating over €39 million for the purchase of software licenses.  In December 2020, the agreement to purchase software licenses for government workers was finalized, and the rollout is proceeding well according to government and private sector contacts.  In addition, the Committee for Notification of Copyright and Related Rights Infringement on the Internet has been taking steps to address enforcement in the online environment, and Greece introduced a new law imposing fines for possessing counterfeit products.  In 2019, the Ministry of Culture developed legislation which would allow for blocking of dynamic domains, in order to improve even further the protection of IP rights.  Parliament passed the bill in 2020.

Greece tracks seizures of counterfeit goods; however, the Ministry of Finance, Coast Guard, and Customs Service all track their data separately.  In 2019, the Hellenic Coast Guard arrested 143 people during 110 cases, seizing over 9 million counterfeit cigarettes, 10 vehicles, and over 1,300 pounds of tobacco, all representing €1.8 million in attempted tax evasion.  The Ministry of Finance’s Economic and Financial Crimes Unit (SDOE) conducts investigations and seizures of counterfeit goods and products.  In 2019, the SDOE seized almost 600,000 counterfeit and pirated products, down from 1.1 million in 2018.  The Hellenic Customs Service also conducts inspections at exit and entry points into the EU, with over 20 million counterfeit products seized in 2019, the majority of which were cigarettes.  Violators can be fined for their actions, and Law 3982/2022 provides police ex officio authority to confiscate and destroy counterfeit goods.

Greece is a member of the World Intellectual Property Organization (WIPO), the Paris Convention for the Protection of Industrial Property, the European Patent Convention, the Washington Patent Cooperation Treaty, and the Bern Copyright Convention.  As a member of the EU, Greece has harmonized its IP legislation with EU rules and regulations.  The WTO-TRIPS agreement was incorporated into Greek legislation on February 28, 1995 (Law 2290/1995).  The Greek government also signed and ratified the WIPO internet treaties and incorporated them into Greek legislation (Laws 3183 and 3184/2003) in 2003.  Greece’s legal framework for copyright protection is found in Law 2121 of 1993 on copyrights and Law 2328 of 1995 on the media.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

Embassy Point of Contact:

U.S. Embassy Athens
Economic Section
91 Vas. Sofias Avenue, Athens, Greece 10160
Phone:  +30-210-721-2951
Athens-ECON@state.gov

A list of local attorneys is available at gr.usembassy.gov/u-s-citizen-services/attorneys/

American-Hellenic Chamber of Commerce
109-111 Messoghion Avenue, Politia Business Center
Athens, Greece 11526
Phone: +30-210-699-3559, Fax: +30-210-698-5686
Email: info@amcham.gr

Following EU regulations, Greece is open to foreign portfolio investment.  Law 3371/2005 sets an effective legal framework to encourage and facilitate portfolio investment.  Law 3283/2004 incorporates the European Council’s Directive 2001/107, setting the legal framework for the operation of mutual funds.  The Bank of Greece complies with its IMF Article VIII obligations and does not generally impose restrictions on payments.  Transfers for current international transactions are allowed but are subject to specific conditions for approval.  The lack of liquidity in the Athens Stock Exchange along with the challenging economic environment have hindered the allocation of credit but is accessible to foreign investors on the local market, who also have access to a variety of credit instruments.

Greece’s banking system is recovering from a decade-long economic crisis that created a large stock of nonperforming loans (NPLs).  In previous years, Greek banks cleared their balance sheets though the sale of their NPLs to several international funds.  The strong economic recovery in Greece in 2021, coupled with accommodative monetary and fiscal policies to mitigate the impact of the COVID-19 pandemic, contributed to improved liquidity conditions.  Banks successfully continued their efforts to clean up their loan portfolios.  This laid the groundwork for banks to resume their financial intermediation role and thus contribute to sustainable economic growth.  However, banks continue to face challenges including the legacy stock of non-performing loans still on bank balance sheets; the low quality of Greek banks’ prudential own funds, given the large share of deferred tax assets; and low operating profitability.  Currently, banks enjoy adequate liquidity and capital buffers that allow them to provide lending to the economy.

In November 2015, following an Asset Quality Review and Stress Test conducted by the ECB as a requirement of the 2015 ESM agreement, a third recapitalization of Greece’s four systemic banks (National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank) took place.  The recapitalization concluded with the banks remaining in private hands, after raising €6.5 billion from foreign investors, mostly hedge funds.  In September 2020, the ratio of NPLs decreased to 35.8 percent, down from 40.6 percent in December 2019.  Banks estimate that about 20 percent of non-performing exposures (NPEs) are owned by so-called “strategic defaulters” – borrowers who refrain from paying their debts to lenders to take advantage of the laws enacted during the financial crisis to protect borrowers from foreclosure or creditors’ collection even though they are able to pay their obligations.

Developing an effective NPL reduction strategy has been among the most difficult challenges for the Greek economy.  According to the Bank of Greece, Greek banks’ NPL ratio, at 15 percent in June 2021, remains the highest in the eurozone, well over the European average of around three percent.  Under the terms of the ESM agreement, Greece remains obliged to create an NPL market through which the loans could, over time, be sold or transferred for servicing purposes to foreign investors.  The Bank of Greece has licensed more than ten servicers, and the sale and securitization environment for non-performing loans continues to mature, with all of Greece’s systemic banks having conducted portfolio sales of secured and unsecured loan tranches since mid-2017.  The potential sale and/or transfer of Greek NPLs continues to receive interest by many Greek and foreign companies and funds, signaling a viable market.  The Greek state operates an auction platform for collateral and foreclosed assets, although the bulk of auctions still conclude with the selling bank as the purchaser of the assets.  The government introduced its “Hercules” asset protection scheme in late 2019, providing guarantees to banks as an incentive to securitize €30 billion more in NPLs.  The plan offloads bad debt by wrapping it into asset backed securities via special purpose vehicles that will purchase the NPLs.  The sales are financed by notes issued by the special purpose vehicles with a government guarantee for senior tranches, thereby limiting the risk to the Greek state.  Since all four systemic banks have availed themselves of the plan, the Greek government submitted an official request for an extension of the Hercules scheme on March 16, 2021, that will permit banks to further reduce non-performing loans (NPLs) in 2021 and 2022.

Poor asset quality inhibits banks’ ability to provide systemic financing, although the situation is slowly improving.  The annual growth rate of total deposits increased to 8.5 percent in 2020.Deposits increased by roughly €9 billion over 2019, up from around €200 billion in early 2019, a significant improvement from the crisis years, when deposits shrunk from their highest level of €237 billion in September 2009 to around €123 billion in September 2017.  Greece’s systemic banks held the following assets at the end of 2020:  Piraeus Bank, €71.6 billion; National Bank of Greece, €64.3 billion; Alpha Bank, €70 billion; and Eurobank, €67.7 billion.

Few U.S. financial institutions have a retail presence in Greece.  In September 2014, Alpha Bank acquired the retail operations of Citibank, including Diners Club.  Bank of America serves only companies and some special classes of pensioners.

There are a limited number of cross-shareholding arrangements among Greek businesses.  To date, the objective of such arrangements has not been to restrict foreign investment.  The same applies to hostile takeovers, a practice which has been recently introduced in the Greek market.  The government actively encourages foreign portfolio investment.

Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments.  Credit is allocated on market terms prevailing in the eurozone and credit is equally accessible by Greek and foreign investors.  An independent regulatory body, the Hellenic Capital Market Commission, supervises brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g. the Athens Stock Exchange), and investor indemnity and transaction security schemes (e.g. the Common Guarantee Fund and the Supplementary Fund), and also encourages and facilitates portfolio investments.

Owner-registered bonds and shares are traded on the Athens Stock Exchange (ASE).  It is mandatory in Greece for the shares of banking, insurance, and public utility companies to be registered.  Greek corporations listed on the ASE that are also state contractors are required to have all their shares registered.

Greece has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions.

There are no sovereign wealth funds in Greece. Public pension funds may invest up to 20 percent of their reserves in state or corporate bonds.

Greek state-owned enterprises (SOEs) are active in utilities, transportation, energy, media, health, and the defense industry.  There is no official website with a list of SOEs.

Bank of Greece: partially owned (Greek state shares cannot exceed 35 percent); over 1,800 employees; governed by a Governor appointed by the government.

Public Gas Corporation of Greece (DEPA): majority-owned by Greek state (65 percent); Net income €131 million in 2016; Total assets €3.1 billion in 2016; governed by Ministry of Development; Government is in the process of splitting the company and privatizing its infrastructure and commercial operations.

Hellenic Aerospace Industry: wholly owned; Total assets €932.5 million in 2014; Net income €13.7 million in 2014; over 1,300 employees.

Hellenic Financial Stability Fund: governed by General Council and Executive Board

Hellenic Post: majority-owned (90 percent by Greek state); Net income €15.5 million in 2017.

Hellenic Vehicle Organization: majority-owned (51 percent owned by Greek state); around 400 employees; Total assets around €69 million; governed by Board of Directors.

Water Supply and Sewerage Company (EYDAP): majority-owned (34 percent by Greek state); governed by Board of Directors.

Public Power Corporation: majority-owned (51 percent by Greek state); Total assets €14.1 billion in 2018; over 16,700 employees.

Most Greek SOEs are structured under the auspices of the Hellenic Corporation for Assets and Participations (HCAP), an independent holding company for state assets mandated by Greece’s 2015 bailout and formally launched in 2016.  HCAP’s supervisory board is independent from the Greek state and is appointed in part by Greece’s creditor institutions.  Some SOEs are still supervised by the Finance Ministry’s Special Secretariat for Public Enterprises and Organizations, established by Law 3429/2005.  Private companies previously were not allowed to enter the market in sectors where the SOE functioned as a monopoly, such as water, sewage, or urban transportation.  However, several of these SOEs are planned for privatization as a requirement of the country’s bailout programs, intended to liberalize markets and raise revenues for the state.

Official government statements on privatization since 2015 have sometimes led to confusion among investors.  Some senior officials have declared their opposition to previously approved privatization projects, while other officials have maintained the stance that the government remains committed to the sale of SOEs.  The current government has expressed its commitment and is moving forward with privatizations, including DEPA and some of the port assets.  Under the bailout agreement, Greece has moved forward with the deregulation of the electricity market, adopting the Target Model in November 2020.  In sectors opened to private investment, such as the telecommunications market, private enterprises compete with public enterprises under the same nominal terms and conditions with respect to access to markets, credit, and other business operations, such as licenses and supplies.  Some private sector competitors to SOEs report the government has provided preferential treatment to SOEs in obtaining licenses and leases.  The government actively seeks to end many of these state monopolies and introduce private competition as part of its overall reform of the Greek economy.  Greece – as a member of the EU – participates in the Government Procurement Agreement within the framework of the WTO.  SOEs purchase goods and services from private sector and foreign firms through public tenders.  SOEs are subject to budget constraints, with salary cuts imposed in the past few years on public sector jobs.

The Hellenic Republic Asset Development Fund (HRADF, or TAIPED in Greek), an independent non-governmental privatization fund, was established in 2011 under Greece’s bailout program to manage the sale or concession of major government assets, to raise substantial state revenue, and to bring in new technology and expertise for the commercial development of these assets.  These include listed and unlisted state-owned companies, infrastructure, and commercially valuable buildings and land.  Foreign and domestic investor participation in the privatization program has generally not been subject to restrictions, although the economic environment during the crisis and subsequent pandemic has challenged the domestic private sector’s ability to raise funds to purchase firms slated for privatization.

The August 2015 ESM bailout agreement required Greece to consolidate the HRADF, the Hellenic Financial Stability Fund (HFSF), the Public Properties Company (ETAD), and a new entity that will manage other state-owned enterprises (SOEs) into the Hellenic Corporation of Assets and Participations (or HCAP), formed by Law 4389/2016.  In March 2017, HCAP received short- and long-term guidelines from the Minister of Finance, and in September 2017, it received strategic guidelines from the Greek state (HCAP’s sole shareholder).

Privatizations are subject to a public bidding process, which is easy to understand, non-discriminatory, and transparent.  Notable privatizations recently completed include the transfer of the 66 percent of Greece’s gas transmission system operator DESFA to Senfluga Energy Infrastructure Holdings, the sale of 67 percent of the shares of Thessaloniki Port Authority, the sale of the remaining 5 percent of the largest telecommunications provider shares to Deutsche Telecom and rolling stock maintenance and railroad availability services company Rosco.

In February 2019, the government concluded the 20-year extension of the concession agreement of the Athens International Airport, worth €1.4 billion euros, and received nine expressions of interest in January 2020 for a 30 percent stake.  The extension allowed for launch of the tender for the sale of the 30 percent stake in the airport. In January 2020, the Hellenic Republic Asset Development Fund (HRADF) shortlisted nine parties (from 10 that have originally expressed interest) that were qualified for the next phase of the tender; the binding offers. However, with the arrival of the pandemic in Greece (February-March 2020), and the dramatic drop in the airport operations/revenues, the HRADF has decided to freeze the whole process indefinitely.  In January 2020, the government of Greece launched the legal procedures necessary for privatization of ten regional ports, including Heraklion, Elefsina, and Alexandroupolis, which will be privatized through either partial concession deals or full management schemes.  In January 2021, the European Commission gave the Ministry of Infrastructure and Transportation the approval to proceed with the construction of a road network linking the town of Trikala with the main Egnatia Motorway.  In July 2020, the HRDF proceeded with two tenders for the privatization of the ports of Alexandroupoli and Kavala, that were deemed as more mature projects. In October of the same year six parties (in total) have expressed interest for both ports. In March 2021, the HRADF announced that four parties have been qualified for the binding offers phase of the tenders including two US companies (Quintana Infrastructure & Development, and Black Summit Financial Group).  The project is budgeted at €442 million and is expected to promote the energy, economic and tourism development of Central Greece, Thessaly, and Western Macedonia. In March 2020, the commercial operations of DEPA received nine non-binding bids for its sale of a 65 percent stake.  Hellenic Petroleum maintains the other 35 percent.  The Public Power Corporation continues to consider the partial privatization of its power distribution operator.

Awareness of corporate social responsibility (CSR) including environmental, social, and governance issues, has been growing over the last decade among both producers and consumers in Greece.  Several enterprises, particularly large ones, in many fields of production and services, have accepted and now promote CSR principles.  Several non-profit business associations have emerged in the last few years (Hellenic Network for Corporate Social Responsibility, Global Sustain, etc.) to disseminate CSR values and to promote them in the business world and society more broadly.  These groups’ members have incorporated programs that contribute to the sustainable economic development of the communities in which they operate; minimize the impacts of their activities on the environment and natural resources; create healthy and safe working conditions for their employees; provide equal opportunities for employment and professional development; and provide shareholders with satisfactory returns through responsible social and environmental management.  Firms that pursue CSR in Greece enhance the public acceptance and respect that they enjoy.  In 2014, the government drafted a National Action Plan for Corporate Social Responsibility for the 2014-2021 period.  The main goal of the plan is to increase the number of companies that recognize and use CSR to formulate their strategies.  Greece has encouraged adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.  There are no alleged/reported human or labor rights concerns relating to CSR that foreign businesses should be aware of.  Greece is not a member of the Extractive Industries Transparency Initiative.  Greece signed the Montreux Document on Private Military and Security Companies in 2009.  It has also been a supporter of the International Code of Conduct for Private Security Service Providers and is a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Greece saw a slight increase in perceptions of corruption, as it went up one place to 59 on Transparency International’s 2019 Corruption Perception Index, from 60 in 2019 and 67 in 2018.  By contrast, the country had improved since 2012, partly due to mandatory structural reforms.  Despite these structural improvements, bureaucracy is reportedly slowing the progress.  Transparency International issued a report in 2018 criticizing the government for improper public procurement actions involving Greek government ministers and the recent appointment of the close advisor to the country’s prime minister to be the head of the Hellenic Competition Commission, which oversees the enforcement of anti-trust legislation.  Transparency International released another report in October 2018, warning of the corruption risks posed by golden visa programs, mentioning Greece as a top issuer of golden visas.  In Transparency International’s 2020 report, the organization outlined the costs directly stemming from the COVID-19 pandemic, including cases of foreign bribery occurring in the health care sector.

On March 19, 2015, the government passed Law 4320, which provides for the establishment of a General Secretariat for Combatting Corruption under the authority of a new Minister of State.  Under Article 12 of the Law, this entity drafts a national anti-corruption strategy, with an emphasis on coordination between anti-corruption bodies within various ministries and agencies, including the Economic Police, the Financial and Economic Crime Unit (SDOE), the Ministries’ Internal Control Units, and the Health and Welfare Services Inspection Body.  Based on Law 4320, two major anti-corruption bodies, the Inspectors-Controllers Body for Public Administration (SEEDD) and the Inspectors-Controllers Body for Public Works (SEDE), were moved under the jurisdiction of the General Secretariat for Combatting Corruption.  A Minister of State for combatting corruption was appointed to the cabinet following the January 2015 elections and given oversight of government efforts to combat corruption and economic crimes.  The minister drafted coordinated plans of action, monitored their implementation, and was given operational control of the Economic Crime division of the Hellenic Police, the SDOE, ministries’ internal control units, and the Health and Welfare Services’ inspection body.  Following the September 2015 national elections, the government abolished the cabinet post of Minister of State for combatting corruption and assigned those duties to a new alternate minister for combatting corruption in the Ministry of Justice, Transparency, and Human Rights.

Legislation passed on May 11, 2015, provides a wider range of disciplinary sanctions against state employees accused of misconduct or breach of duty, while eliminating the immediate suspension of an accused employee prior to the completion of legal proceedings.  If found guilty, offenders could be deprived of wages for up to 12 months and forced to relinquish their right to regain a senior post for a period of one to five years.  Certain offenders could also be fined from €3,000 to €100,000.  The law requires income and asset disclosure by appointed and elected officials, including nonpublic sector employees, such as journalists and heads of state-funded NGOs.  Several different agencies are mandated to monitor and verify disclosures, including the General Inspectorate for Public Administration, the police internal affairs bureau, the Piraeus appeals prosecutor, and an independent permanent parliamentary committee.  Declarations are made publicly available.  The law provides for administrative and criminal sanctions for noncompliance. Penalties range from two to ten years’ imprisonment and fines from €10,000 to €1 million.  On August 7, 2019, Parliament passed legislation establishing a unified transparency authority by transferring the powers and responsibilities of public administration inspection services to an independent authority.  In November 2019, laws addressing the bribery of officials were amended to include a specific definition of “public official” and to make active bribery of a public official a felony instead of a misdemeanor, punishable by a prison sentence of five to eight years (as opposed to three years).  On November 17, 2020, the government established the Financial Prosecutor’s Office to deal with financial crime in the wake of public complaints about an investigation by the Corruption Prosecutor’s Office into a case involving the pharmaceutical company Novartis.  The new office, headed by a senior prosecutor selected by the Supreme Judicial Council of the Supreme Court, included 16 prosecutors, and became operational in November 2020.

Bribery is a criminal act, and the law provides severe penalties for infractions, although diligent implementation and haphazard or uneven enforcement of the law remains an issue.  Historically, the problem has been most acute in government procurement, as political influence and other considerations are widely believed to play a significant role in the evaluation of bids.  Corruption related to the health care system and political party funding are areas of concern, as is the “fragmented” anti-corruption apparatus.  NGOs and other observers have expressed concern over perceived high levels of official corruption.  Permanent and ad hoc government entities charged with combating corruption are understaffed and underfinanced. There is a widespread perception that there are high levels of corruption in the public sector and tax evasion in the private sector, and many Greeks view corruption as the main obstacle to economic recovery.

The Ministry of Justice prosecutes cases of bribery and corruption.  In cases where politicians are involved, the Greek parliament can conduct investigations and/or lift parliamentary immunity to allow a special court action to proceed against the politician.  A December 2014 law does not allow high ranking officials, including the prime minister, ministers, alternate, and deputy ministers, parliament deputies, European Parliament deputies, general and special secretaries, regional governors and vice governors, and mayors and deputy mayors to benefit from more lenient sentences in cases involving official bribes.  In 2019, Parliament passed an amendment to Article 62 of the constitution, which limits parliamentary immunity to acts carried out in the course of parliamentary duties.  In addition, Parliament amended Article 86 of the constitution, abolishing the statute of limitations for crimes committed by ministers and to disallow postponements for trials of ministers.

Greece is a signatory to the UN Anticorruption Convention, which it signed on December 10, 2003, and ratified September 17, 2008.  As a signatory of the OECD Convention on Combating Bribery of Foreign Government Officials and all relevant EU-mandated anti-corruption agreements, the Greek government is committed in principle to penalizing those who commit bribery in Greece or abroad.  The OECD Convention has been in effect since 1999.  Greek accession to other relevant conventions or treaties:

Council of Europe Civil Law Convention on Corruption: Signed June 8, 2000.  Ratified February 21, 2002.  Entry into force: November 1, 2003.

Council of Europe Criminal Law Convention on Corruption: Signed January 27, 1999.  Ratified July 10, 2007.  Entry into force: November 1, 2007.

United Nations Convention against Transnational Organized Crime: Signed on December 13, 2000.  Ratified January 11, 2011.

Government Agency

Organization: The Inspectors-Controllers Body for Public Administration
Address: 60 Sygrou Avenue, 11742, Athens
Telephone number: +30-213-215-8800
Email address: seedd@seedd.gr

Watchdog Organization

Organization: Transparency International Greece
Address:  Solomou 54, 4^th floor, 10682 Athens
Telephone number: +30-210-722-4940
Email address: tihellas@otenet.gr

There have been no major terrorist incidents in Greece in recent years; however, domestic groups conduct intermittent small-scale attacks such as targeted package bombs, improvised explosive devices, and unsophisticated incendiary devices (Molotov cocktails) typically targeting properties of political figures, party offices, privately owned vehicles, ministries, police stations, and businesses. In addition, domestic anarchist groups often carry out small-scale attacks targeting government buildings and foreign missions.  Bilateral counterterrorism cooperation with the Greek government remains strong, and support from the Greek security services with respect to the protection of American interests is excellent.  Demonstrations and protests are commonplace in large cities in Greece. While most of these demonstrations and strikes are peaceful and small-scale, they often cause temporary disruption to essential services and traffic, and anarchist groups are known in some cases to attach themselves to other demonstrations to create mayhem.

The masterminds of Greece’s most notorious terrorist groups are currently behind bars, including leaders of November 17 and Revolutionary Popular Struggle, active between the 1970s and 1990s and responsible for hundreds of attacks and murders.  Greek authorities largely eliminated these groups in advance of the 2004 Olympic Games.  Following the Olympics, a new wave of organizations emerged, including Revolutionary Struggle, Conspiracy of Fire Nuclei, and Sect of Revolutionaries, though authorities rounded up these groups in a wave of arrests between 2009 and 2011, and again in 2014.

Domestic terrorist groups include “OLA,” also known as the Group of Popular Fighters or Popular Fighters Group, which claimed responsibility for the December 2018 bomb outside a private television station and the December 2017 bomb outside an Athens courthouse.  OLA also claimed responsibility for the November 2015 bomb attack at the offices of the Hellenic Federation of Enterprises, which caused extensive damage to the offices and surrounding buildings, the December 2014 attack on the Israeli embassy in Athens, which resulted in no injuries and minor damage to the building, and the attack on the German Ambassador’s residence in Athens in December 2013.  OLA also claimed responsibility for an indirect fire attack on a Mercedes-Benz building on January 12, 2014, and an attack in January 2013 against the headquarters of the then-governing New Democracy party in Athens.

There is an adequate supply of skilled, semi-skilled, and unskilled labor in Greece, although some highly technical skills may be lacking.  Illegal immigrants predominate in the unskilled labor sector in many urban areas, and in rural areas predominately in agriculture.  Greece provides residency permits to migrants for a variety of reasons, including work.  In July 2015, Parliament adopted a law regulating the status of non-EU foreign nationals recruited to work in the country as seasonal workers.  The law also reduces the minimum consecutive residency period in the country required for undocumented migrants to be eligible to apply for a residency permit from ten to seven years, such applications being judged on the applicant’s strong ties to the country.  The same law outlines the requirements for setting work contracts, requires proof of adequate shelter for workers and imposes a €1,500 ($1,620) fine for employers who do not do so, requires prepayment of at least one month’s worth of social security for each employee, provides basic labor rights to each worker, and prohibits employers from recruiting workers if found to have previously recruited workers through fraudulent means.  The law also stipulates that daily wages for non-EU foreign seasonal workers cannot be less than that of an unqualified worker.  The law grants seasonal non-EU foreign workers the same rights as citizens with respect to minimum age of employment, labor conditions, the right to association, unionism, collective bargaining, education and vocational training, employment consultation services, and the right to certain goods, services and benefits under conditions.  The same law also provides that non-EU nationals who are victims of abusive conditions or labor accidents could be eligible to apply for a residency permit on humanitarian grounds.

The labor force today is overwhelmingly comprised of employees who have secondary or higher-level education. Relatedly, beginning in 2012, women in the labor force now possess more higher education degrees than men.

In December 2021, the unemployment rate in Greece was 12.8 percent, a decrease from the 15.5 percent unemployment rate in December 2020 and from the 13.4 percent rate in November 2021.  In 2021, the unemployment rate among men was 10 percent, while among women it was 16.2 percent.  The unemployment rate among Greek citizens age 15-24 years remains high at 27 percent.  The unemployment rate for those citizens age 25 – 74 is currently 12.1 percent.

According to a report conducted by the International Monetary Fund in 2019, Greece’s informal economy is among the highest in the EU.  An informal economy, or shadow economy, is the part of any economy that is neither taxed nor monitored by any form of government.  The informal economy in Greece followed an upward trend until 2009, when it accounted for €56.9 billion at the current inflation rate.

An OECD report published in 2021 highlights a significant increase in the shadow economy during the COVID-19 pandemic and in all of OECD’s 36 member states.  In 2020, rising unemployment and a slump in GDP drove more citizens into the shadow economy to make up for lost income.

In Greece, OECD estimates the shadow economy rose to 20.9 percent of GDP from 19.2 percent in 2019.From preliminary estimates, the shadow economy fell in 2021 to 20.3 percent.  However, the shadow economy in Greece in 2021 increased by €1.6 billion from 2020.

Asylum-seekers are eligible to apply for a work permit once they complete their first asylum interview; however, the procedures for obtaining this permit were not widely understood by asylum-seekers, non-governmental organizations (NGOs), or government officials.  As of February 2021, the Greek Asylum Service had 74,934 cases pending, with the backlog expected to be cleared before the end of 2021.  Asylum services and receipt of applications were suspended from March 13-April 10, 2020, due to the COVID-19 pandemic.  Recognized refugees are entitled to the same labor rights as Greek nationals.  NGOs and government officials working in migrant sites reported that some asylum-seekers perform undeclared seasonal agricultural labor in rural areas.

In April 2019, Greece announced a wage subsidy scheme called “Rebrain Greece,” which provides 500 talented Greeks that moved abroad during the financial crisis with a €3,000 monthly salary if they return to Greece.  The program hopes to reinvigorate high-skilled sectors of the economy.  In December 2020, the Greek Parliament passed Law 4758 that involved a tax break for those foreign nationals who would transfer their tax residence to Greece.  Digital nomads who choose to work in Greece can take advantage of a 50 percent tax break for their first seven years of residency.

Greece has ratified International Labor Organization (ILO) Core Conventions.  Specific legislation provides for the right of association and the rights to strike, organize, and bargain collectively.  Greek labor laws set a minimum age (15) and wage for employment, determine acceptable work conditions and minimum occupational health and safety standards, define working hours, limit overtime, and apply certain rules for the dismissal of personnel.  There is a difference between national minimum wage in the private sector for unspecialized workers aged 25 or older and workers below 25 years of age.  The latter receive 84 percent of the salary of those over 25.  A May 2015 law amended the laws prohibiting strikes during national emergencies.  The 2015 law explicitly prohibits the issuance of civil mobilization orders as a means of countering strike actions before or after their proclamation.

In 2017 parliament passed legislation providing for the temporary closure of businesses in cases where employers repeatedly violate the law concerning undeclared work or safety.  Under the same law, employers are obliged to declare in advance their employees’ overtime or changes in their work schedules.  The legislation also provided for social and