Transparency of the Regulatory System

Afghanistan’s Law on Publication and Enforcement of Legislation requires that official declarations, laws, decrees, and other legislative documents be published in the Official Gazette.  There is no legal requirement or practice for publication and comment for domestic laws, regulations, or other measures of application that will become legally enforceable.

In general, the Afghan government shares draft legislation with interested parties for comment and some ministries publish draft legislation in national newspapers for public comment.  Foreign firms in Afghanistan follow accounting procedures consistent with international norms. The government uses ministerial orders to enforce regulatory compliance. For example, ministries have in the past taken action to freeze accounts or limit travel for companies until they comply with regulations.

International Regulatory Considerations

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

Legal System and Judicial Independence

The legal system of Afghanistan consists of Islamic, statutory, and customary (Shura) rules.  The supreme law of the land is the Constitution. The judiciary system is composed of the Supreme Court, the Courts of Appeal, and the Primary Courts.  There are trial and appellate courts that specialize on commercial disputes. Since 2002, NGOs have been working to strengthen the rule of law in Afghanistan by identifying peaceful means for dispute resolutions and developing partnerships between state and community actors in the hopes of improving access to justice.

Despite these efforts, many legal disputes are still resolved outside the formal justice system by community based tribal leaders.  Contract law in Afghanistan is set out in the Afghanistan Commercial Code 1955 and the Afghanistan Civil Code 1977. Under these codes, parties are generally free to:  a) enter into and perform a contract on any commercial subject matter provided that subject matter or performance is not contrary to law, public policy, or sharia; and b) agree to have the law of a foreign state govern their contract.

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

Because access to the formal legal system is limited in rural areas, local elders and shuras (consultative gatherings, usually of men selected by the community) are often the primary means of settling both criminal matters and civil disputes, and they are known to levy unsanctioned punishments.  According to the 2018 Asia Foundation Survey of the Afghan People, shuras were used to resolve 45 percent of all disputes and represent the predominant form of dispute resolution employed by Afghans (up from 43 percent in 2017).

Investors should be aware that the 2018 Human Rights Report noted that arbitrary arrests occur in most provinces, and that authorities frequently detain citizens without respecting essential procedural protections.  Local law enforcement officials reportedly detain persons illegally on charges not specified under local criminal law. While the law gives defendants the right to object to his or her pretrial detention and receive a court hearing on the matter, authorities generally do not observe this requirement.

Laws and Regulations on Foreign Direct Investment

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

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

Competition and Anti-Trust Laws

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

Expropriation and Compensation

The PIL allows for expropriation of investments or assets by the government on a non-discriminatory basis for the purposes of public interest.  The law stipulates that the government shall provide prompt, adequate, and effective compensation in conformity with the principles of international law.

In cases of investment in a foreign currency, the law requires compensation to be made in that currency.  The government may also confiscate private property to settle debts. According to the PIL, investors with an ownership share of more than 25 percent may challenge the expropriation.  There have been no reports of government expropriation of foreign assets.

The Ministry of Finance may freeze assets to collect taxes.

Dispute Settlement

ICSID Convention and New York Convention

In 2005, Afghanistan became a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  Under the New York Convention, Afghanistan has agreed to (a) recognize and enforce awards made in another contracted state, and (b) apply the convention to commercial disputes.

Under the PIL and the Commercial Arbitration Law of 2007, (a) parties can agree to have foreign law govern their contract and agree to have their disputes resolved through arbitration or other mechanisms inside or outside of Afghanistan, and (b) Afghan courts must enforce any resulting award or agreement.

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

Investor-State Dispute Settlement

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

Afghan awareness of the term “Responsible Business Conduct” is nascent, but the government has encouraged large companies and foreign investors to invest in corporate social responsibility (CSR).  Large mining contracts include stipulations for environmental protection and community inclusion. A new Minerals Law enacted by decree in October 2018, and published in the Official Gazette in December 2018, requires mining contract holders to consult with communities that will be affected by mining projects and to implement a community development agreement that includes details of the firm’s environmental and social impact assessment.  The law also requires extractive sector companies to safeguard and maintain any archeological and cultural relics they come across during the extraction operations until the Afghan government removes them.

Afghanistan is an Extractive Industries Transparency Initiative (EITI) candidate country.  The 2018 Minerals Law requires the Ministry of Mines and Petroleum to comply with the financial reporting requirements and standards of EITI.

A number of the competing mobile network operators have well-developed CSR outreach programs that include health, education, job creation, environmental protection, and outreach to refugees.  For example, the largest telecom operator in Afghanistan, Roshan, whose majority owner is the Aga Khan Fund for Economic Development, has received recognition for its social responsibility mission.  In addition, some Afghan entrepreneurs, such as Ihsanullah Bayat, the Barakat Group, the Ghazanfar Group, Hotak Azizi, and the Alokozay Group, have foundations that provide assistance in the fields of health, education, and the eradication of poverty.

OECD Guidelines for Multinational Enterprises

Afghanistan is not a subscriber to the OECD Declaration and Decisions on International Investment and Multinational Enterprises.

Afghan and foreign firms routinely cite corruption as an obstacle to doing business, whether in permitting and licensing, government procurement, meeting regulatory requirements, or taxation.  Various corruption watchdog reports regularly indicate corruption is endemic throughout society. For example, systemic corruption at border crossings hampers development of the licit market economy.  Afghan officials collect bribes in exchange for undervaluing, under-weighing, or not scanning shipments, which facilitates smuggling of illegal goods and the illicit trade of legal goods, while also weakening Afghan revenue collection and regulatory institutions.

The practice of criminalizing commercial complaints is commonly used to settle business disputes or to extort money from wealthy international investors.  The government does not implement criminal penalties for official corruption effectively, and officials are reported to frequently engage in corrupt practices with impunity.  There are reports of low-profile corruption cases successfully tried and of lower-level officials removed for corruption.

President Ghani has made anti-corruption efforts a high priority, and the government has seen some success in reform of procurements and customs.  In 2016, the government opened the Anti-Corruption Justice Center (ACJC) to investigate and try corruption cases. The ACJC has successfully convicted some government officials for corruption.  These high-level initiatives are positive steps though corruption remains a major issue. Disputes over land and land grabbing have risen over the last decade. Press reports indicate that government officials take land without compensation in exchange for contracts or political favors.  Occasionally, provincial governments confiscate land without due process or compensation to build public facilities.

UN Anticorruption Convention, OECD Convention on Combating Bribery

Afghanistan has signed and ratified the UN Anticorruption Convention. Afghanistan is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

The Afghan Government body responsible for combating corruption is the High Office of Oversight & Anti-Corruption. Prosecutorial authority resides with the Attorney General’s Office.

Afghan Government Point of Contact:

Dr. Yama Torabi
Head of Secretariat of High Council on Rule of Law and Anti-Corruption: (HCRoLAC)
+93 799 271 624)
Email: yama.torabi@gmail.com

Watchdog Organization Contact:

Sayed Ikram Afzali, Executive Director
Integrity Watch Afghanistan
Emal: ikram.afzali@iwaweb.org

The U.S. Department of State continues to warn Americans against travel to Afghanistan.  U.S. citizens should review the Consular Information Sheet and Travel Warning for Afghanistan for the most up-to-date information on the security situation and possible threats.

Anti-government and political violence are common and public concerns regarding security constrain economic activity.  Security is a primary concern for investors. Foreign firms operating in country report spending a significant percentage of revenues on security infrastructure and operating expenses.

Transparency of the Regulatory System

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

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

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

Regulation reviews are based on scientific or data driven assessments or baseline surveys. Evaluation is based on data.  However, evaluation if not made available for public comment.

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

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

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

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

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

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

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

International Regulatory Considerations

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

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

Angola acceded to the Kyoto Convention on February 23, 2017.

Legal System and Judicial Independence

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

The Angolan justice system is slow, arduous, and often partial.  Legal fees are high, and most businesses avoid taking commercial disputes to court in the country.  The World Bank’s Doing Business 2019 survey ranks Angola 186 out of 190 countries on contract enforcement, and estimates that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, takes an average of 1,296 days, at an average cost of 44.4 percent of the claim.

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

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

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

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

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

Laws and Regulations on Foreign Direct Investment

AIPEX — former APIEX — is the investment and export promotion center tasked with promoting Angola’s export potential, legal framework, environment, and investment opportunities in the country and abroad.  Housed within the Ministry of Commerce, AIPEX will also be responsible for ensuring the application of the 2018 NPIL on Foreign Direct investments, entered into force on June 26, 2018.

Competition and Anti-Trust Laws

On May 17, 2018 Angola’s National Assembly approved the nation’s first anti-trust law.  The law set up the creation of the Competition Regulatory Authority, which prevents and cracks down on actions of economic agents that fail to comply with the rules and principles of competition.  The Competition Regulatory Authority of Angola (Autoridade Reguladora da Concorrência – ARC) was created by Presidential Decree no. 313/18, of December, 21,2018,  and it succeeds the now defunct Instituto da Concorrência e Preços. It has administrative, financial, patrimonial and regulatory autonomy, and is endowed with broad supervisory and sanctioning powers, including the power to summon and question persons, request documents, carry out searches and seizures, and seal business premises.

The ARC is responsible, in particular, for the enforcement of the new Competition Act of Angola, approved by Law no. 5/18, of May 10, 2018 and subsequently implemented by Presidential Decree no. 240/18, of October 12. The Act has a wide scope of application, pertaining to both private and state-owned undertakings, and covers all economic activities with a nexus to Angola. The Competition Act prohibits agreements and anti-competitive practices, both between competitors (“horizontal” practices, the most serious example of which are cartels), as well as between companies and its suppliers or customers, within the context of “vertical” relations.

Equally prohibited is abusive conduct practiced by companies in a dominant position, such as the refusal to provide access to essential infrastructures, the unjustified rupture of commercial relations and the practice of predatory prices, as well as the abusive exploitation, by one or more companies, of economically-dependent suppliers or clients.

Prohibited practices are punishable by heavy fines that range from one-ten percent of the annual turnover of the companies involved. Offending companies that collaborate with the ARC, by revealing conduct until then unknown or producing evidence on a voluntary basis, may benefit from significant fine reductions, under a leniency program yet to be developed and implemented by the ARC.

Considering the ample powers and potentially heavy sanctions at the disposal of the ARC, companies present in (or planning to enter) Angola are well advised to consider carefully the impact of the new law on their activities, in order to mitigate any risk that its market conduct may be found contrary to the Competition Act.

Expropriation and Compensation

Under the Land Tenure Act of November 9, 2004 and the General Regulation on the Concession of Land (Decree no 58/07 of July 13, 2007), all land belongs to the state and the state reserves the right to expropriate land from any settlers. The state is only allowed to transfer ownership of urban real estate to Angolan nationals, and may not grant ownership over rural land to any private entity (regardless of nationality), corporate entities or foreign entities. The state may allow for land usage through a 60-year lease to either Angolan or foreign persons (individuals or corporate), after which the state reserves legal right to take over ownership.

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

The U.S. Embassy is aware of two ongoing formal investment disputes involving American companies.

International Commercial Arbitration and Foreign Courts

Although not widely implemented, the Government of Angola and public sector companies recognize the use of arbitration to settle disputes with foreign arbitration awards issued in foreign courts.  In 2016, Angola took a major step in international arbitration by signing the New York Convention on recognition of foreign arbitration Wards. On March 6, 2017 the Government of Angola deposited its instrument of accession to the Convention with the UN Secretary General. The Convention entered into force on June 4, 2017.

Bankruptcy Regulations

Angola is ranks 168 out of 190 on the World Bank’s Doing Business 2019 report on resolving insolvency. Banks are bound to comply with prudential rules aimed at ensuring that they maintain a minimum amount of funds not less than the minimal stock capital at all times to ensure adequate levels of liquidity and solvability. Insolvency is regulated by the Law on Financial Institutions No. 12/2015 of June 17, 2015. Based on this law, the BNA increased the social capital requirement for banks operating in the country by 200 percent (BNA notice 2/2015) to guard against possible damages to clients and the financial system. All monetary deposits up to 12.5 million Kwanzas (USD  40,000 equivalent) are also to be deposited into the BNA’s Deposit Guarantee Funds account (Presidential Decree 195/18 of 2018) so that clients (both local and foreign) are guaranteed a refund in case of bankruptcy by their respective bank. Article 69 of the law expressly states that it is the responsibility of the president of the Republic to create the fund, but it is silent on the rules governing its operation or the amounts guaranteed by the fund.

In early 2019, the BNA revoked the operating licenses of two private banks, Banco Mais and Banco Postal, due to their inability to recapitalize to meet new mandatory operating capital requirements set by the BNA in 2018. A third bank, Banco Angolano e Comércio de Negócios (BANC), was also put under administration due to its poor governance and a failure to also raise the mandatory operating capital to meet new minimum requirements. In 2015, following the 2014 collapse of Banco Espirito Santo Angola (BESA), the subsidiary of Portugal’s Banco Espírito Santo, the State intervened and restructured BESA which now operates as Banco Economico. While Angola’s arbitration law (Arbitration Law No. 16/03) for insolvency adopted in 2013 introduced the concept of domestic and international arbitration, the practice of arbitration law is still not widely implemented.

The law criminalizes bankruptcy under the following classification: condemnation in Angola or abroad for crimes of fraudulent bankruptcy, i.e. involvement of shareholders or managers in fraudulent activities that result in the bankruptcy, negligence bankruptcy, forgery, robbery, or involvement in other crimes of an economic nature.

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

The government has few initiatives to promote responsible business conduct.  On March 26, 2019 the UNDP launched the National Network of Corporate Social Responsibility, called “RARSE,” to promote the creation of a platform to reconcile responsible business conduct with the needs of the population.  The government, through the Ministry of Education, also held a campaign under the theme, “Countries that have a good education, that enforce laws, condemn corruption, privilege and practice citizenship, have as a consequence successful social and economic development.”

The government has enacted laws to prevent labor by children under 14 and forced labor, although resource limitations hinder adequate enforcement.  In June 2018, the government passed a National Action Plan (2018-2022) to eradicate the worst forms of child labor (the PANETI).

With limitations, the laws protect the rights to form unions, collectively bargain, and strike.  Government interference in some strikes has been reported. The Ministry of Public Administration, Employment, and Social Security, has a hotline for workers who believe their rights have been infringed.  Angola’s Chamber of Commerce and Industry established the Principles of Ethical Business in Angola.

In 2015, Angola organized an interagency technical working group to explore Angola’s possible membership in the Voluntary Principles on Security and Human Rights (VPs) and the Extractive Industries Transparency Initiative (EITI).  Angola has been a member of the Kimberley Process (KP) since 2003, and chaired the KP in 2015, until handing over the rotating chair to the United Arab Emirates

Angola is not a party to the WTO’s GPA, and does not adhere to the OECD guidelines on corporate for SOEs.

Corruption remains a strong impediment to doing business in Angola and has had a corrosive impact on international market investment opportunities and on the broader business climate.  Transparency International’s 2019 Corruption Perceptions Index ranks Angola 165 out of 175 countries in its corruption level survey, down two places from the previous year due to ongoing efforts to bring down corruption to lower levels.

Since coming into office, President Lourenco has led a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against nepotism.  President Lourenco has dismissed a number of prominent Angolan figures from government ministries and SOEs and has replaced board members charged with developing plans to improve operations and accountability in public institutions.  The president approved a set of amendments to the Public Contracts Law on November 16, 2018, which imposed further requirements for the declaration of assets and income, interests, impartiality, confidentiality, and independence in the formation and execution of public contracts.  On December 6, the Government of Angola rolled out of a national anti-corruption strategy (NACS) billed under the motto, “Corruption – A fight for All and By All.” The five-year strategy, developed in concert with the UNDP, is designed to improve government transparency, accountability, and responsiveness to citizen needs.  The NACS focuses on three pillars in the fight against corruption – prevention, prosecution, and institutional capacity building.

The government also passed the Law on the Repatriation of Financial Resources in June 2018, which established the terms and conditions for the repatriation of financial resources held abroad by resident individuals and legal entities with registered offices in Angola.  The law exempted individuals and legal entities, who voluntarily repatriated their financial resources within a period of 180 days following the date of entry into force of the Law, by transferring the funds to an Angolan bank account, from any obligation or liability of tax, foreign exchange and criminal nature.  Upon expiry of the grace period for repatriation, the Law allowed for the possibility of coercive repatriation by the government. The government estimates that USD 30 billion of Angolan assets are sheltered overseas. In early 2019, the government established the National Asset Recovery Service (SNRA), an institution linked to the Attorney General’s Office (PGR), in charge of ensuring compliance with the repatriation law.

The 2010 Law on Administrative Probity, unlike President Lourenco’s mandate for senior government officials, requires all public officials to disclose their assets and income once every two years, and it prohibits public servants from receiving money or gifts from private business deals.  The Penal Code makes it a criminal offense for private enterprises to engage in business transactions with public officials. Angola has incorporated regional anti-corruption guidelines and into their domestic legislation, including: the SADC “Protocol Against Corruption,” the African Union’s “Convention on Preventing and Combating Corruption,” and the United Nation’s “Convention against Corruption.”  Angola does not have an independent body to investigate and prosecute corruption cases, and generally, enforcement of existing laws is weak or non-existent. Three institutions – the Audit Court, the Inspector General of Finance, and the Office of the Attorney General – perform many of the anti-corruption duties in Angola. http://www.business-anti-corruption.com/country-profiles/sub-saharan-africa/angola/initiatives/public-anti-corruption-initiatives.aspx  

It is important for U.S. companies, regardless of their size, to assess the business climate in the sector in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery.  U.S. individuals and firms operating or investing in Angola, should take the time to become familiar with the relevant anticorruption laws of both Angola and the United States in order to properly comply with them, and where appropriate, they should seek legal counsel.

In 1996 the Government of Angola enacted by presidential decree the Alta Autoridade Contra Corrupção (High Authority Against Corruption) Act.  There has been no action taken to implement the law since it was enacted in 1996.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Angola is not a member state to the UN Anticorruption Convention or the OECD Convention on Combatting Bribery.  On March 26, 2018 it ratified and published in the national gazette the African Union Convention on the Prevention and Fight against Corruption and now takes legislative measures against illicit enrichment (Article 8), confiscation and seizure of proceeds and means of corruption (Article 16), and international cooperation in matters of corruption and money laundering (Article 20).

Resources to Report Corruption

Hélder Pitta Grós
Procurador Geral da Republica (Attorney General of the Republic)
Procurador Geral da Republica (Attorney General’s Office)
Travessa Antonio Marques Monteiro 22, Maianga
Telephone: 244-222-333172

Politically related violence is not a high risk in Angola, and incidents are rare.  The August 2017 election marked Angola’s first transition of power in 38 years, when former President Eduardo dos Santos, one of the longest serving presidents on the continent, opted to step down.  Since his August 2017 election, President João Lourenço has remained a popular political figure, revitalizing support for the ruling Movimento Popular de Libertacao de Angola (MPLA), instituting reforms, and slowly improving Angola’s international image. On September 8, he stood unopposed and was elected overwhelmingly as the MPLA party leader, thereby ending predecessor Jose Eduardo dos Santos’ 39-year leadership of the party. Lourenço now controls the executive, the ruling party, and the influential armed forces and intelligence services. Since his transition to office, Lourenço’s relationship with his predecessor has deteriorated. New government reforms have directly affected the former first family and their allies’ economic stronghold, and the president has publicly called out his predecessor for emptying state coffers.

A more tightly controlled MPLA under President Lourenço continues to dominate the political

landscape.  Engagement with the National Union for the Total Independence of Angola

(UNITA), Angola’s largest opposition party, has been more constructive and inclusive, as well as with the Broad Convergence for the Salvation of Angola – Electoral Coalition ( CASA-CE), a viable third party.  The president has encouraged freedom of speech, and opened up greater room for civil society participation. However, there is room for improvement, as restrictions on freedom of assembly, association, and religious freedom persist.  Unlike his predecessor, President Lourenço has demonstrated a willingness for greater international and regional engagement. He has traveled abroad more frequently, and hosted foreign leaders in a bid to rebrand Angola’s image and attract greater FDI.

Angola engages multilaterally, through the AU, SADC, and the International Conference on the Great Lakes Region, to address its security and economic equities with the DRC.  President Lourenço hosted several summits in Luanda to encourage President Kabila not to seek an illegal third term. In 2017, Angola provided troops and leadership in its first international peacekeeping force with the SADC regional stabilization mission to Lesotho.  Angola continues to struggle with its legacy of land mines and is far from reaching its goal of becoming mine impact free by 2025. Since 1995, the United States (Angola’s largest demining donor) has invested more than USD 126 million in Angola to clear and dispose of landmines and unexploded ordnance.  The United States is on course to donate an additional USD 2 million in demining assistance in 2019. The government also pledged in 2019 an unprecedented USD 60 million of its own money for humanitarian demining over the next five years, largely focused on a potential corridor for tourism and sustainable development in the southeast, linked to the Okavango Delta.

The last significant incident of political violence happened in 2010 during an attack against the Togolese national soccer team by FLEC-PM (Front for the Liberation of the Enclave of Cabinda—Military Position) in the northern province of Cabinda.  FLEC threatened Chinese workers in Cabinda in 2015 and claimed in 2016 that they would return to active armed struggle against the Angolan government forces. No attacks have since ensued and the FLEC has remained relatively inactive. President Lourenco has pledged to govern for all Angolans, and combat two of the country’s major problems: corruption and mismanagement of public funds.

Russia remains Angola’s premier security cooperation partner.  However, a May 2017 U.S.–Angola Defense Cooperation MOU has enabled more open mil-to-mil coordination.  Our security cooperation aims to build the U.S.-Angolan military relationship, address Angolan defense priorities, and develop sustainable proficiency in areas of common interest, such as maritime safety and security, civil-military operations, humanitarian assistance, medical readiness, and English language programs.

Transparency of the Regulatory System

The Macri administration has taken measures to improve government transparency. President Macri created the Ministry of Modernization, tasked with conducting quantitative and qualitative studies of government procedures and finding solutions to streamline bureaucratic processes and improve transparency. In September 2018, the Ministry of Modernization was downgraded into a Secretariat due to a budget-oriented streamlining of the Cabinet.

In September 2016, Argentina enacted a Right to Access Public Information Law (27,275) that mandates all three governmental branches (legislative, judicial, and executive), political parties, universities, and unions that receive public funding are to provide non-classified information at the request of any citizen. The law also created the Agency for the Right to Access Public Information to oversee compliance.

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

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

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

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

In April 2018, Argentina passed the Business Criminal Responsibility Law (27,041) through Decree 277. The decree establishes an Anti-Corruption Office in charge of outlining and monitoring the transparency policies with which companies must comply to be eligible for public procurement.

Under the bilateral Commercial Dialogue, Argentina and the United States discuss good regulatory practices, conducting regulatory impact analyses, and improving the incorporation of public consultations in the regulatory process. Similarly, under the bilateral Digital Economy Working Group, Argentina and the United States share best practices on promoting competition, spectrum management policy, and broadband investment and wireless infrastructure development.

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

Ministries, regulatory agencies, and Congress are not obligated to provide a list of anticipated regulatory changes or proposals, share draft regulations with the public, or establish a timeline for public comment. They are also not required to conduct impact assessments of the proposed legislation and regulations.

Since 2016, the Office of the President and various ministries has sought to increase public consultation in the rulemaking process; however, public consultation is non-binding and has been done in an ad-hoc fashion. In 2017, the Federal Government of Argentina issued a series of legal instruments that seek to promote the use of tools to improve the quality of the regulatory framework. Amongst them, Decree 891/2017 for Good Practices in Simplification establishes a series of tools to improve the rulemaking process. The decree introduces tools on ex-ante and ex-post evaluation of regulation, stakeholder engagement, and administrative simplification, amongst others. Nevertheless, no formal oversight mechanism has been established to supervise the use of these tools across the line of ministries and government agencies, which make implementation difficult and limit severely the potential to adopt a whole-of-government approach to regulatory policy, according to a 2019 OECD publication on Regulatory Policy in Argentina.

Some ministries and agencies have developed their own processes for public consultation, such as publishing the draft on their websites, directly distributing the draft to interested stakeholders for feedback, or holding public hearings. In 2016 the Ministry of Justice and Human Rights launched the digital platform Justicia2020 (https://www.justicia2020.gob.ar/ ), to foster public involvement in the Judiciary reform process projected by 2020. Once the draft of a bill is introduced into the Argentine Congress, the full text of the bill and its status can be viewed online at the Chamber of Deputies website (http://www.diputados.gov.ar/), and that of the Senate (http://www.senado.gov.ar/ ).

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

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

International Regulatory Considerations

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

Argentina has been a member of the WTO since 1995 and it ratified the Trade Facilitation Agreement in January 2018. Argentina notifies technical regulations, but not proposed drafts, to the WTO Committee on Technical Barriers to Trade. Argentina has sought to deepen its engagement with the OECD and submitted itself to an OECD regulatory policy review in March 2018, which was released in Mach 2019. Argentina participates in all 23 OECD committees and seeks an accession invitation before the end of 2019.

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

Legal System and Judicial Independence

According to the Argentine constitution, the judiciary is a separate and equal branch of government. In practice, there have been instances of political interference in the judicial process. Companies have complained that courts lack transparency and reliability, and that Argentine governments have used the judicial system to pressure the private sector. A 2017 working group review of Argentina’s application to join the OECD noted the politicization of the General Prosecutor’s Office created a lack of prosecutorial independence. The OECD working group said the executive branch, prior to the Macri government, had pressured judges through threatened or actual disciplinary proceedings. Media revelations of judicial impropriety and corruption feed public perception and undermine confidence in the judiciary.  

The Macri administration has publicly expressed its intent to improve transparency and rule of law in the judicial system, and the Justice Minister announced in March 2016 the “Justice 2020” initiative to reform the judiciary.

Argentina follows a Civil Law system. In 2014, the Argentine government passed a new Civil and Commercial Code that has been in effect since August 2015. The Civil and Commercial Code provides regulations for civil and commercial liability, including ownership of real and intangible property claims. The current judicial process is lengthy and suffers from significant backlogs. In the Argentine legal system, appeals may be brought from many rulings of the lower court, including evidentiary decisions, not just final orders, which significantly slows all aspects of the system. The Justice Ministry reported in December 2018 that the expanded use of oral processes had reduced the duration of 68 percent of all civil matters to less than two years.  

Many foreign investors prefer to rely on private or international arbitration when those options are available. Claims regarding labor practices are processed through a labor court, regulated by Law 18,345 and its subsequent amendments and implementing regulations by Decree 106/98. Contracts often include clauses designating specific judicial or arbitral recourse for dispute settlement.

Laws and Regulations on Foreign Direct Investment

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

All foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law No. 19,550) and the rules issued by the commercial regulatory agencies. Decree 27/2018 amended Law 19,550 to simplify bureaucratic procedures. Full text of the decree can be found at (http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305736/norma.htm ). All other laws and norms concerning commercial entities are established in the Argentina Civil and Commercial Code, which can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/235000-239999/235975/norma.htm 

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

• Ministry of Production and Labor (http://www.produccion.gob.ar/ )
• Treasury Ministry (https://www.argentina.gob.ar/hacienda )
• The Central Bank of the Argentine Republic (http://www.bcra.gov.ar/ )
• The National Securities Exchange Commission (http://www.cnv.gob.ar/ )
• The National Investment and Trade Promotion Agency (http://www.inversionycomercio.org.ar/ )
• Investors can download Argentina’s investor guide through this link: (https://drive.google.com/file/d/0B-086VB27JBjN0x0NmM4Y09GODA/view )

Competition and Anti-Trust Laws

The National Commission for the Defense of Competition and the Secretariat of Commerce, both within the Ministry of Production and Labor, have enforcement authority of the Competition Law (Law 25,156). The law aims to promote a culture of competition in all sectors of the national economy. In May 2018, the Argentine Congress approved a new Defense of the Competition Law (Law 27,442). The new law incorporates anti-competitive conduct regulations and a leniency program to facilitate cartel investigation. The full text of the law can be viewed at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do?id=310241 .

Expropriation and Compensation

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

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

In May 2012, the Fernandez de Kirchner administration nationalized the oil and gas company Repsol-YPF. Although most of the litigation was settled in 2016, a small percentage of stocks owned by an American hedge fund remain in litigation in U.S. courts.

Dispute Settlement

ICSID Convention and New York Convention

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

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

In March 2012, the United States suspended Argentina’s designation as a Generalized System of Preferences (GSP) beneficiary developing country because it had not acted in good faith in enforcing arbitration awards in favor of United States citizens or a corporation, partnership, or association that is 50 percent or more beneficially owned by United States citizens. Effective January 1, 2018, the United States ended Argentina’s suspension from the GSP program.  Following Congressional reauthorization of the program, as of April 22, 2018, Argentina’s access was restored for GSP duty-free treatment for over 3,000 Argentine products.

Investor-State Dispute Settlement

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

In the past ten years, Argentina has been brought before the ICSID in 54 cases involving U.S. or other foreign investors. Argentina currently has four pending arbitration cases filed against it by U.S. investors. For more information on the cases brought by U.S. claimants against Argentina, go to: https://icsid.worldbank.org/en/Pages/cases/AdvancedSearch.aspx# .

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

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

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

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

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

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

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

International Commercial Arbitration and Foreign Courts

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

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

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

Bankruptcy Regulations

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

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

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

There is an increasing awareness of corporate social responsibility (CSR) and responsible business conduct (RBC) among both producers and consumers in Argentina. RBC and CSR practices are welcomed by beneficiary communities throughout Argentina. There are many institutes that promote RBC and CSR in Argentina, the most prominent being the Argentine Institute for Business Social Responsibility (http://www.iarse.org /), which has been working in the country for more than 17 years and includes among its members many of the most important companies in Argentina.

Argentina is a member of the United Nation’s Global Compact. Established in April 2004, the Global Compact Network Argentina is a business-led network with a multi-stakeholder governing body elected for two-year terms by active participants. The network is supported by the United Nations Development Program (UNDP) Argentina in close collaboration with other UN Agencies. The Global Compact Network Argentina is the most important RBC/CSR initiative in the country with a presence in more than 20 provinces. More information on the initiative can be found at: http://pactoglobal.org.ar .

Foreign and local enterprises tend to follow generally accepted CSR/RBC principles. Argentina subscribed to the Declaration on the OECD Guidelines for Multinational Enterprises in April 1997.

Many provinces, such as Mendoza and Neuquen, have or are in the process of enacting a provincial CSR/RBC law. There have been many previously unsuccessful attempts to pass a CSR/RBC law. Distrust over the State’s role in private companies had been the main concern for legislators opposed to these bills.

In February 2019, the Argentine government joined the Extractive Industries Transparency Initiative (EITI).

Argentina’s legal system incorporates several measures to address public sector corruption. The government institutions tasked with combatting corruption include the Anti-Corruption Office (ACO), the National Auditor General, and the General Comptroller’s Office. Public officials are subject to financial disclosure laws, and the Ministry of Justice’s ACO is responsible for analyzing and investigating federal executive branch officials based on their financial disclosure forms. The ACO is also responsible for investigating corruption within the federal executive branch or in matters involving federal funds, except for funds transferred to the provinces. While the ACO does not have authority to independently prosecute cases, it can refer cases to other agencies or serve as the plaintiff and request a judge to initiate a case.

Argentina enacted a new Corporate Criminal Liability Law in November 2017 following the advice of the OECD to comply with its Anti-Bribery Convention. The full text of Law 27,401 can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/295000-299999/296846/norma.htm . The new law entered into force in early 2018. It extends anti-bribery criminal sanctions to corporations, whereas previously they only applied to individuals; expands the definition of prohibited conduct, including illegal enrichment of public officials; and allows Argentina to hold Argentines responsible for foreign bribery. Sanctions include fines and blacklisting from public contracts. Argentina also enacted an express prohibition on the tax deductibility of bribes.

Corruption has been an issue in Argentina. In its March 2017 report, the OECD expressed concern about Argentina’s enforcement of foreign bribery laws, inefficiencies in the judicial system, politicization and perceived lack of independence at the Attorney General’s Office, and lack of training and awareness for judges and prosecutors. According to the World Bank’s worldwide governance indicators, corruption remains an area of concern in Argentina. In the latest Transparency International Corruption Perceptions Index (CPI) that ranks countries and territories by their perceived levels of corruption, Argentina ranked 85 out of 180 countries in 2018, an improvement of 10 places versus 2016. Allegations of corruption in provincial as well as federal courts remained frequent. Few Argentine companies have implemented anti-foreign bribery measures beyond limited codes of ethics.

Since assuming office, President Macri made combating corruption and improving government transparency a priority objective for his administration. In September 2016, Congress passed a law on public access to information. The law explicitly applies to all three branches of the federal government, the public justice offices, and entities such as businesses, political parties, universities, and trade associations that receive public funding. It requires these institutions to respond to citizen requests for public information within 15 days, with an additional 15-day extension available for “exceptional” circumstances. Sanctions apply for noncompliance. The law also mandates the creation of the Agency for Access to Public Information, an autonomous office within the executive branch. President Macri also proposed a series of criminal justice and administrative reforms. Chief among these are measures to speed the recovery of assets acquired through corruption, plea-bargaining-type incentives to encourage judicial cooperation, and greater financial disclosure for public servants. In early 2016, the Argentine government reaffirmed its commitment to the Open Government Partnership (OGP), became a founding member of the Global Anti-Corruption Coalition, and reengaged the OECD Working Group on Bribery.

Argentina is a party to the Organization of American States’ Inter-American Convention against Corruption. It ratified in 2001 the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention). Argentina also signed and ratified the UN Convention against Corruption (UNCAC) and participates in UNCAC’s Conference of State Parties. Argentina also participates in the Mechanism for Follow-up on the Implementation of the Inter-American Convention against Corruption (MESICIC).

Since Argentina became a party to the OECD Anti-Bribery Convention, allegations of Argentine individuals or companies bribing foreign officials have surfaced. A March 2017 report by the OECD Working Group on Bribery indicated there were 13 known foreign bribery allegations involving Argentine companies and individuals as of that date.  According to the report, Argentine authorities investigated and closed some of the allegations and declined to investigate others.  The authorities determined some allegations did not involve foreign bribery but rather other offenses.  Several such allegations remained under investigation. 

Resources to Report Corruption

Laura Alonso
Director
Government of Argentina Anti-Corruption Office
Oficina Anticorrupción, Tucumán 394, C1049AAH, Ciudad Autónoma de Buenos Aires.
Phone: +54 11 5167 6400
Email: anticorrupcion@jus.gov.ar and http://denuncias.anticorrupcion.gob.ar/ 

Poder Ciudadano (Local Transparency International Affiliate)
Phone: +54 11 4331 4925 ext 225
Fax: +54 11 4331 4925
Email: comunicaciones@poderciudadano.org
Website: http://www.poderciudadano.org 

Demonstrations are common in metropolitan Buenos Aires and in other major cities and rural areas. Political violence is not widely considered a hindrance to the investment climate in Argentina.

Protesters regularly block streets, highways, and major intersections, causing traffic jams and delaying travel. Public demonstrations, strikes, and street blocking barricades increased in 2018 in response to economic and political issues. While demonstrations are usually non-violent, individuals sometimes seek confrontation with the police and vandalize private property. Groups occasionally protest in front of the U.S. Embassy or U.S.-affiliated businesses. In February 2016, the Ministry of Security approved a National Anti-Street Pickets Protocol that provides guidelines to prevent the blockage of major streets and public facilities during demonstrations. However, this protocol did not often apply to venues within the City of Buenos Aires (CABA), which fall under the city’s jurisdiction.  The CABA government often did not enforce security protocols against illegal demonstrations.

In December 2017, while Congress had called an extraordinary session to address the retirement system reforms, several demonstrations against the bill turned violent, causing structural damage to public and private property, injuries to 162 people (including 88 policemen), and arrests of 60 people. The demonstrations ultimately dissipated, and the government passed the bill.

Transparency of the Regulatory System

In 2018, the Government of Bahrain issued competition, a personal data protection, bankruptcy, and health insurance laws to enhance the country’s investment ecosystem.  The so-called Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on commercial competition.  Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors. There is no official competition authority in Bahrain and the country has yet to institute comprehensive anti-monopoly laws or an independent anti-corruption agency.

Bahrain’s industrial sector exhibits dominance by state-controlled companies such as Aluminum Bahrain (ALBA) and Gulf Petrochemical Industries Company (GPIC).  De facto monopolies also exist in some industries led by individuals or family-run businesses.

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

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

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

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

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

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

According to the World Bank, the GOB does not have the legal obligation to publish the text of proposed regulations before they are implemented and there is no period of time set by law for the text of the proposed regulations to be publicly available.  Bahrain, therefore, ranks among the countries the World Bank identifies with low rule-making transparency.

• http://rulemaking.worldbank.org/en/data/explorecountries/bahrain  

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

Commercial regulations can be proposed by the EDB, MoICT, the Cabinet, or the COR.  Draft regulations are debated within the COR’s Finance and Economic Committee. The Bahrain Chamber of Commerce board of directors may raise concerns over draft legislation at committee meetings or send written comments for review by Members of Parliament, but the bills are otherwise not available for public comment.  The Cabinet issues final approval of regulations.

The e-Government portal and the Legislation and Legal Opinion Commission website list laws by category and date of issuance.  Some laws are translated into English. The National Audit Office publishes results of its annual audits of government ministries and parastatals.

International Regulatory Considerations

Bahrain is a member of the GCC.  The GOB has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations.  In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed.  For example, the GOB mandates that imported vehicles meet either the U.S. Federal Motor Vehicle Safety Standards or the so-called “1958 Agreement” standards developed by the United Nations Economic Commission for Europe.  Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.  Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016.  Bahrain Customs and MoICT have begun working toward implementing the TFA’s requirements.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim State.  Although Article 2 of the Constitution states that Islamic Sharia (Islamic) law is the main source of legislation, general matters and private transactions are governed mainly by laws derived from modern legislation.  Three types of courts are present in Bahrain – civil, criminal, and family (Sharia) courts. The civil court system consists of lower courts, courts of appeal, and the Court of Cassation — the highest appellate court in the Kingdom, hearing a variety of civil, criminal and family cases.  Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status of non-Muslims.  Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

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

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

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

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

Bahrain issued Bankruptcy Law No. 22 in May 2018 governing corporate reorganization and insolvency.  The law is based on U.S. Chapter 11 insolvency legislation and provides companies in financial difficulty with an opportunity to restructure under court supervision.

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

Competition and Anti-Trust Laws

The GOB issued Competition Law No. 31 in July 2018 to prevent the formation of monopolies or the practice of anti-competitive behavior.  This law makes it easier for new businesses to enter existing markets and compete with significant players.

MoICT’s Consumer Protection Directorate is responsible for ensuring that the law determining price controls is implemented and that violators are punished.  There are general restrictions on FDI in some sectors, including the oil and gas and petrochemicals sectors, in which all companies are government-owned.

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

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

Jurisdiction by Law (Section 1 Cases)

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

From the establishment of the BCDR-AAA through December 2018, 231 cases were filed under Section 1, with claims totaling over USD 3.9 billion.  Of these cases, 29.4 percent were decided or settled within 6 months; 41.1 percent were decided/settled within 6–12 months; 11.3 percent were decided or settled within 12–18 months; 6.1 percent were decided or settled within 18–24 months; 3.0 percent were decided or settled after 24 months; and 9.1 percent were ongoing.

Arbitration (Section 2 Cases)

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

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

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

International Commercial Arbitration and Foreign Courts

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

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

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

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Telephone: + (973) 17278000
Email: case@gcccac.org
Website: http://www.gcccac.org/en/  

Bankruptcy Regulations

The GOB enacted its original bankruptcy and insolvency law as a Decree by Law No. 11 in 1987.  On May 30, 2018, the GOB issued and ratified Law No. 22 /2018, updating the original legislation.  Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises.

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

The Ministry of Social Development in 2011 authorized the creation of the Bahrain Corporate Social Responsibility Society (BCSRS) as a social and cultural entity.  Though there are no measures in Bahrain to compel businesses to follow codes of responsible business conduct, the BCSRS has sought to raise awareness of corporate social responsibility in the business community, and in 2018 held its second Bahrain International Corporate Responsibility Award ceremony.  The Society is a founding member of the Arab Association for Social Responsibility, which includes representatives of most Arab countries.

In 2006, Bahrain established a National Steering Committee on Corporate Governance to improve corporate governance practices.  The GOB then drafted a Corporate Governance Code to establish a set of best practices for corporate governance in the kingdom, and to provide protection for investors and other company stakeholders through compliance with those principles.  The GOB enforces the code through a combined monitoring system comprising the board, the shareholders and others including the MoICT, CBB, Bahrain Stock Exchange (BSE), Bahrain Courts and Professionals firms including auditors, lawyers and investment advisers.  The code does not create new penalties for non-complying companies, but it does state that the MoICT (working closely with the CBB and the BSE) will be able to exercise the penalty powers already granted to it under the Commercial Companies Law 2001.

The GOB, represented by the LMRA, has put in place advanced regulations and laws protecting labor rights, the most vulnerable category comprising migrant workers from Southeast Asia.  Labor courts have not been effective in settling labor disputes between employers and employees. However, there have been some reports of cases that were settled in favor of employees in Bahraini labor courts.

Law Number 35 of 2012, the Consumer Protection Law, ensures quality control, combats unfair business practices, and imposes sanctions for breaches of the law’s provisions.  MoICT is highly effective in implementing the law.

Bahrain’s amended Corporate Governance Law enhances transparency and ethical business conduct standards.  Among the changes, the GOB urged companies to submit audited ratified accounts to the MoICT.

The GOB does not maintain a National Contact Point (NCP) for the Organization for Economic Co-operation and Development (OECD) guidelines nor does it participate in the Extractive Industries Transparency Initiative (EITI).

The King and Crown Prince have advocated publicly in favor of reducing corruption and some ministries have initiated “clean-up” efforts.  Legislation regulating corruption is outlined in Bahrain’s “Economic Vision 2030” plan, and in the National Anti-Corruption Strategy. Bahrain joined the United Nations Convention Against Corruption (UNCAC) in 2003.  Accordingly, Bahrain ratified its penal code on combatting bribery in the public and private sectors in 2008, mandating criminal penalties for official corruption. Under the law, government employees at all levels are subject to prosecution and punishments of up to 10 years imprisonment if they use their positions to engage in embezzlement or bribery, either directly or indirectly.  The law does not require government officials to make financial disclosures. In 2010, Bahrain ratified the UNCAC and the Arab Convention Against Corruption, and in 2016, it joined the International Anti-Corruption Academy. In 2018, Bahrain again updated its penal code to more closely align with international standards. The General Directorate of Anti-corruption and Economic and Electronic Security dealt with 63 cases in 2018, of which 53 were referred to the Public Prosecutor.

Giving or accepting a bribe is illegal.  The government, however, has not fully implemented the law, and some officials reportedly continue to engage in corrupt practices with impunity.  Officials have at times been dismissed for what is widely believed to be blatant corruption, but the grounds for dismissal rarely have been tied to corruption.

The National Audit Office, established in 2002, is mandated to publish annual reports that highlight fiscal irregularities within government ministries and other public-sector entities.  The reports enable legislators to exercise oversight and call for investigations of fiscal discrepancies in government accounts. In 2013, the Crown Prince established an Investigation Committee to oversee cases highlighted within the National Audit Office’s annual report.

The Minister of Follow-Up Affairs at the Royal Court was designated in 2015 to execute recommendations made in that year’s National Audit Report.  At the same time, the Crown Prince urged all government entities and the Council of Representatives to work closely to implement the recommendations made in the report.  Bahrain’s National Audit Office issues annual reports that list violations committed by various Bahraini state bodies and agencies.

As a result of the 2011 National Dialogue process, the Ministry of Interior established an anti-corruption directorate.  In 2011 the Ministry of Interior signed a Memorandum of Understanding with the United Nations Development Program to enhance the anti-corruption directorate’s capabilities.

Bahrain has conflict-of-interest laws in place, however, in practice, their application in awarding contacts is not fully enforced.

Local NGOs generally do not focus their efforts on corruption-related issues, and human rights activists and members of the political opposition who have spoken out about corruption have at times been detained, prosecuted, and banned from travel for reasons related to their broader political activism.  All civil society groups are required to register with the Ministry of Labour and Social Development, which has the discretion to reject registration if it determines the organization’s services unnecessary, already provided by another society, or contrary to state security.

Few cases have been registered by U.S. companies reporting corruption as an obstacle to their investments in Bahrain.

Bahrain signed and ratified the UN Anticorruption Convention in 2005 and 2010, respectively.  Bahrain, however, is not a signatory to the OECD Convention on Combating Bribery. In 2018, Bahrain joined the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

General Directorate of Anti- Corruption & Economic & Electronic Security
Ministry of Interior
P.O. Box 26698, Manama, Bahrain
Hotline: 992

Contact at “watchdog” organization:

Sharaf AlMosawi
President
Bahrain Transparency Association
P.O. Box 26059
Adliya, Bahrain
Telephone: +973 39640929
Email: Sharaf115@gmail.com

Historically, Bahrain has been an open, politically moderate, economically liberal Gulf state that enjoys close ties to the United States.  Bahrain has experienced cyclical periods of violence often motivated by political and ideological divisions between the government and the Bahraini Shi’a majority.  Notably, since 2011, a violent minority of the opposition have occasionally targeted Bahraini security forces, including attacks using improvised explosive devices. The last such incident occurred in November 2017, when an explosion that caused a fire at the main oil pipeline in Buri was attributed to sabotage.  In 2016 and 2017, the government dissolved the country’s two largest opposition political societies and closed the only opposition-leaning independent newspaper. On May 13, 2018, the Bahraini parliament passed a law banning members of political societies dissolved by a government order from running as candidates in elections.

Neither demonstrators nor violent extremists have targeted Americans or Western expatriates.  U.S. citizens visiting Bahrain and companies interested in investing in Bahrain should visit the Embassy and State Department websites to receive the most up-to-date information about the security situation and register with the Embassy’s consular section.

• https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Bahrain.html

Transparency of the Regulatory System

Benin is a member of UNCTAD’s international network of transparent investment procedures.  Foreign and domestic investors can find detailed information on administrative procedures applicable to investment and income generating operations at http://benin.eregulations.org/  , including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.  There is no rule to prevent a monopoly over a particular business sector. The Benin Private Investment Council (CIPB) is the only business-related think-tank or body that advocates for investors, http://www.cipb.bj/  .  Generally, draft bills are not available for public comment.  However, individuals (including non-citizens) have the option to file appeals about or challenge passed or enacted bills with the country’s Constitutional Court.

International Regulatory Considerations

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies within French-speaking African member countries.  Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID). OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and the creditor may file for liquidation only.

Legal System and Judicial Independence

The preamble of the Beninese Constitution, adopted on December 11, 1990, highlights the attachment of the Beninese people “to principles of democracy and human rights as they have been defined by the Charter of the United Nations of 1945 and the Universal Declaration of Human Rights of 1948, the African Charter on Human and Peoples’ Rights adopted in 1981 by the Organization of African Unity and ratified by Benin on 20 January 1986 and whose provisions form an integral part of this present Constitution and of Beninese law and have a value superior to the internal law.”

Benin’s domestic law includes various legislative and regulatory texts covering family law, land law, labor law, criminal law, criminal procedure, and civil, commercial, social, and administrative proceedings.  The commercial court, created in 2017, enforces commercial related issues. Benin created an anti-terrorism, drugs, and economic crimes court (CRIET) in 2018. The CRIET has made several controversial decisions, including in cases of corruption charges against individuals who are among President Talon’s detractors.  In general, court cases tend to proceed slowly and there may be challenges in the enforcement of court decisions. Magistrates and judges, though appointed by the Executive, are by law independent. Benin’s courts enforce rulings of foreign courts and international arbitration.

Laws and Regulations on Foreign Direct Investment

The APIEX one-stop-shop website, http://benin.eregulations.org/  , provides information on regulations and procedures for investment in Benin.  Benin is a member of OHADA’s Common Court of Justice and Arbitration (CCJA) and the International Center for the Settlement of Investment Disputes (ICSID).  Investors may include arbitration provisions in their contracts in order to avoid prolonged entanglements in the Beninese courts. The United Nations’ investment guide for Benin (https://www.theiguides.org/public-docs/guides/benin/  ) details investment procedures in Benin.

Competition and Anti-Trust Laws

There is no existing agency that reviews transactions for competition-related concerns.  Only the local court or international arbitration courts may address these concerns filed with them.  There are no recent or existing competition cases to highlight.

Expropriation and Compensation

Based on a 1992 privatization law, the Government is forbidden from nationalizing private enterprises operating in Benin.

In conformity with World Bank structural reform commitments, the government opened the cotton sector and its related components (namely ginning and inputs) to the private sector in the 1990s, and in 2008 divested the ginning industry part of its agricultural parastatal SONAPRA (Société Nationale pour la Promotion Agricole) moving the ginning assets and regulatory control functions to SODECO (Societe de Developpement du Coton).  SODECO is a public-private joint venture: 35 percent government, 45 percent private (controlled by Societe Commune de Participation-SCP of now-President Patrice Talon), and the remainder split between stock market, local communities, cotton growers, and staff members but run by SCP. According to the founding convention, the GOB was to cede by 2013 its share to SCP.  With no publicly available on current SODECO ownership nobody would argue that SCP fully controls it.  In October 2012, prompted by concerns over performance and mismanagement, the government reassumed control of cotton production and ginning holdings under SONAPRA.  In 2014, OHADA’s CCJA judged that the Beninese government had illegally seized SODECO’s ginning assets, and similarly had illegally revoked the Port of Cotonou cargo inspection contract with the private company Benin Control.  The CCJA ordered payment of USD 267 million in compensation to the two companies owned or largely controlled by then-cotton tycoon, and current Head of State, Patrice Talon (see http://www.ohada.org/index.php/fr/ohada-au-quotidien/role-des-audiences-publiques-de-la-cour-ccja  ).  Under President Talon’s administration, in 2016 SODECO took back control of its ginning facilities and SONAPRA was dissolved.

In 2006, the government took over the management of previously privatized oil company SONACOP on the grounds that the company was in financial disarray, lacked funds for its operations, and was unable to supply gas stations throughout the country.  SONACOP is still a state-owned enterprise charged with import and distribution of petroleum products.

In February 2017, the Council of Ministers announced that the government was terminating concessions for the management of four state-owned hotels (two in Cotonou and two in northern Benin), and instructed the Minister of Justice to file reparations claims against the concessionaires on the grounds that they had not fulfilled their concession agreements.

In 2012, the government took control of the private bank Banque Internationale du Benin (BIBE) stating that poor management risked leading the bank to bankruptcy and possible systemic risk to the banking sector.  BIBE is still in government hands.

Dispute Settlement

ICSID Convention and New York Convention

Benin is a member of the International Center for the Settlement of Investment Disputes (ICSID) and New York Convention.

Investor-State Dispute Settlement

Post has no reports of government interference in judicial handling of investment disputes.

All three known past investment disputes between U.S. investors and the Beninese government were resolved in favor of the U.S. investors.  However, in 2016, the government revoked the contract of U.S.-based company SECURIPORT for the provision of civil aviation and immigration security services in the favor of Morpho-Dys, a company based in Cote d’Ivoire; this dispute remains unresolved.  The local courts recognize and enforce foreign arbitral awards issued against the government. In 2010, Benin’s civil society challenged a contract awarded by the government in the communications sector and the award decision was reversed.

There is an investment incentive agreement between the Government of the United States of America and the Government of Benin.

International Commercial Arbitration and Foreign Courts

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies.  Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID) and as such enforces foreign arbitral awards as well as foreign court rulings. Post is unaware of any investment dispute resolution made in favor of a state-owned enterprise by domestic courts.

Bankruptcy Regulations

OHADA provisions govern bankruptcy.  Debtors may file for reorganization only, and creditors may file for liquidation only.

Benin ranked 110 in the “Resolving Insolvency” category of the World Bank Group’s 2019 Doing Business report.  While this may seem a downgrade from 2018’s score of 105, it actually reflects a very modest improvement even as its relative score to other countries places it lower on the list.

In general, government policies and public tenders are made public online and in the newspapers.  Anti-corruption, human rights, environmental protection, and consumer NGOs and activists are active in Benin and report misconduct and violations of good governance practices.  There are also government-funded agencies in charge of monitoring business conduct. They include the Post and Communication Regulation Agency (ARCEP), the Anti-Money Laundering Agency, the National Commission on Systems and Freedom, and the National Anti-Corruption Authority (ANLC).

Benin does not currently have a significant extractives/ mining industry, though small-scale or artisanal mining activities do take place in some parts of the country.

Benin has laws aimed at combatting corruption.  The government has demonstrated the political will to reduce corruption and has imposed administrative sanctions and removals from office against high profile, allegedly corrupt officials.  In early- and mid-2018, the government requested, and the National Assembly approved, the lifting of parliamentary immunity of a small number of opposition parliamentarians accused of corruption or embezzlement during former government roles.  No current or former high-level government official has yet faced prosecution in Beninese courts, leaving the effectiveness of anti-corruption efforts unproven. Corruption remains a recurring problem in areas including public administration, government procurement, customs and taxation, and the judiciary.

Bribery is illegal and subject to up to ten years’ imprisonment, but enforcement of this is subject to the same capacity constraints that hamper many rule of law issues in Benin.  Private companies establish their own code of conduct to avoid conflicts of interest in line with the country’s laws. The government has identified the fight against corruption as a national priority.  Efforts reflecting government focus on fighting corruption include the 2013 creation of the National Anti-Corruption Authority (ANLC) in charge of referring corruption cases to court. By law, the ANLC has the ability to combat money laundering, electoral fraud, economic fraud, and corruption in the public and private sectors.  Benin’s State Audit Office is also responsible for identifying and acting against corruption in the public sector. A new court, the CRIET, was set up in 2018 and was conceived in part to help the administration fight corruption.

Benin is a signatory of UN Anticorruption Convention and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

Jean-Baptiste Elias
President
ANLC
01 BP 7060 Cotonou, Benin
+229 21 308 686
anlc.benin@yahoo.fr

Ms. Blanche Sonon
President
Social Watch
02 BP 937, Cotonou, Benin
+229 21042012 – 229 95961644
swbenin@socialwatch-benin.org

There were incidents of post-election protests in May and June 2019 that resulted in the destruction of public and private property and several civilian deaths.  In June 2019, clashes occurred between protesters and government security forces in central Benin after the police arrested two people suspected of violence during the April 2019 legislative elections.  In May 2019, protests in Cotonou related to the government’s placement of former President Boni Yayi under de facto house arrest turned violent and there were unconfirmed reports of gunfire exchanged between security forces and protesters.

Transparency of the Regulatory System

Bolivia has no laws or policies that directly foster competition on a non-discriminatory basis.  However, Article 66 of the Commercial Code (Law 14379, 1977) states that unfair competition, such as maintaining an import, production, or distribution monopoly, should be penalized according to criminal law.  There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

Regulatory authority regarding investment exists at the national level in Bolivia.  There are no informal regulatory procedures.

The Commercial Code requires that all companies keep adequate accounting records and legal records for transparency.  However, there is a large informal sector that does not follow these practices.  Most accounting regulations follow international principles, but the regulations do not always conform to international standards.  Large private companies and some government institutions, such as the Central Bank and the Banking Supervision Authority, have transparent and consistent accounting systems.

Formal bureaucratic procedures have been reported to be lengthy, difficult to manage and navigate, and sometimes debilitating.  Many firms complain that a lack of administrative infrastructure, corruption, and political motives impede their ability to perform. The one exception is when registering a new company in Bolivia.  Once a company submits all documents required to the FUNDEMPRESA, the process usually takes less than one week.

There is no established public comment process allowing social, political, and economic interests to provide advice and comment on new laws and decrees.  However, the government generally — but not always — discusses proposed laws with the relevant sector.  The lack of laws to implement the 2009 Constitution creates legal discrepancies between constitutional guarantees and the dated policies currently enforced, and thus an uncertain investment climate.  Draft text or summaries are usually published on the National Assembly’s website.

Online regulatory disclosures by the Bolivian Government can be found in the “Gaceta Judicial” at:  http://www.gacetaoficialdebolivia.gob.bo/ 

Supreme Decree 71 in 2009 created a Business Auditing Authority (AEMP), which is tasked with regulating the business activities of public, private, mixed, or cooperative entities across all business sectors.  AEMP’s decisions are legally reviewable through appeal.  However, should an entity wish to file a second appeal, the ultimate decision-making responsibility rests with the Bolivian Government ministry with jurisdiction over the economic sector in question.  This has led to a perception that enforcement mechanisms are neither transparent nor independent.

Environmental regulations can slow projects due to the constitutional requirement of “prior consultation” for any projects that could affect local and indigenous communities.  This has affected projects related to the exploitation of natural resources, both renewable and nonrenewable, as well as public works projects.  Issuance of environmental licenses has been slow and subject to political influence and corruption.

In 2010, the new pension fund was enacted; it increased the contributions that companies have to pay from 1.71 percent of payroll to 4.71 percent.

International Regulatory Considerations

Bolivia is a full member of the Andean Community of Nations (CAN), comprised of Bolivia, Colombia, Ecuador, and Peru.  Bolivia is also in the process of joining the Southern Common Market (MERCOSUR) as a full member.  The CAN’s norms are considered supranational in character and have automatic application in the regional economic block’s member countries.  The government does notify the WTO Committee on Technical Barriers to Trade regarding draft technical regulations.

Legal System and Judicial Independence

Property and contractual rights are enforced in Bolivian courts under a civil law system, but some have complained that the legal process is time consuming and has been subject to political influence and corruption.  Although many of its provisions have been modified and supplanted by more specific legislation, Bolivia’s Commercial Code continues to provide general guidance for commercial activities.  The constitution has precedence over international law and treaties (Article 410), and stipulates that the state will be directly involved in resolving conflicts between employers and employees (Article 50).  There have been allegations of corruption within the judiciary in high profile cases.  Regulatory and enforcement actions are appealable.

Laws and Regulations on Foreign Direct Investment

No major laws, regulations, or judicial decisions impacting foreign investment came out in the past year.  There is no primary central point-of-contact for investment that provides all the relevant information to investors.

Competition and Anti-Trust Laws

Bolivia does not have a competition law, but cases related to unfair competition can be presented to AEMP.  Article 314 of the 2009 Constitution prohibits private monopolies.  Based on this article, in 2009 the Bolivian Government created an office to supervise and control private companies (http://www.autoridadempresas.gob.bo/ ). Among its most important goals are: regulating, promoting, and protecting free competition; trade relations between traders; implementing control mechanisms and social projects, and voluntary corporate responsibility; corporate restructuring, supervising, verifying and monitoring companies with economic activities in the country in the field of commercial registration and seeking compliance with legal and financial development of its activities; and qualifying institutional management efficiency, timeliness, transparency and social commitment to contribute to the achievement of corporate goals.

Expropriation and Compensation

The Bolivian Constitution allows the central government or local governments to expropriate property for the public good or when the property does not fulfill a “social purpose” (Article 57).  In the case of land, this social purpose (FES) is understood as “sustainable land use to develop productive activities, according to its best use capacity, for the benefit of society, the collective interest and its owner.”  In all other cases where this article has been applied, the Bolivian Government has no official definition of “collective interest” and makes decisions on a case-by-case basis.  Noncompliance with the social function of land, tax evasion, or the holding of large acreage is cause for reversion, at which point the land passes to “the Bolivian people” (Article 401).  In cases where the expropriation of land is deemed a necessity of the state or for the public good, such as when building roads or laying electricity lines, payment of just indemnification is required, and the Bolivian Government has paid for the land taken in such cases.  However, in cases where there is non-compliance, or accusations of such, the Bolivian Government is not required to pay for the land and the land title reverts to the state.

The constitution also gives workers the right to reactivate and reorganize companies that are in the process of bankruptcy, insolvency, or liquidation, or those closed in an unjust manner, into employee-owned cooperatives (Article 54).  The mining code of 1997 (last updated in 2007) and hydrocarbons law of 2005 both outline procedures for expropriating land to develop underlying concessions.

Between 2006 and 2014, the Bolivian Government nationalized companies that were previously privatized in the 1990s.  The government nationalized the hydrocarbons sector, the majority of the electricity sector, some mining companies (including mines and a tin smelting plant), and a cement plant.  To take control of these companies, the government forced private entities to sell shares to the government, often at below market prices.  Some of the affected companies have cases pending with international arbitration bodies.  All outsourcing private contracts were canceled and assigned to public companies (such as airport administration and water provision).

There are still some former state companies that are under private control, including the railroad, and some electricity transport and distribution companies.  The first non-former state company was nationalized in December of 2012.  Government nationalizations have not discriminated by country; some of the countries affected were the United States, France, the United Kingdom, Spain, Argentina, and Chile.  In numerous cases the Bolivian Government has nationalized private interests in order to appease social groups protesting within Bolivia.

Dispute Settlement

ICSID Convention and New York Convention

In November 2007, Bolivia became the first country ever to withdraw from ICSID.  In August 2010, the Bolivian Minister of Legal Defense of the State said that the Bolivian Government would not accept ICSID rulings in the cases brought against them by the Chilean company Quiborax and Italian company Euro Telcom.  However, the Bolivian Government agreed to pay USD 100 million to Euro Telecom for its nationalization; this agreement was ratified by a Supreme Decree 692 on November 3, 2010.  Additionally, in 2014, a British company that owned the biggest electric generation plant in Bolivia (Guaracachi) won an arbitration case against Bolivia for USD 41 million.  In 2014, an Indian company won a USD 22.5 million international arbitration award in a dispute over the development of an iron ore project.  The Bolivian Government has appealed that award.

In another case, a Canadian mining company with significant U.S. interests failed to complete an investment required by its contract with the state-owned mining company.  The foreign company asserts it could not complete the project because the state mining company did not deliver the required property rights.  The foreign company entered into national arbitration (their contract does not allow for international arbitration) and in January 2011, the parties announced a settlement of USD 750,000, which the company says will be used to pay taxes, employee benefits, and pending debts — essentially leaving them without compensation for the USD 5 million investment they had made.  They also retained responsibility for future liabilities.

Investor-State Dispute Settlement

Conflicting Bolivian law has made international arbitration in some cases effectively impossible.  Previous investment contracts between the Bolivian Government and the international companies granted the right to pursue international arbitration in all sectors and stated that international agreements, such as the ICSID and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, must be honored.  However, the government claims these rights conflict with the 2009 Constitution, which states (Articles 320 and 366) that international arbitration is not recognized in any case and cannot proceed under any diplomatic claim, and specifically limits foreign companies’ access to international arbitration in the case of conflicts with the government.  The 2009 Constitution also states that all bilateral investment treaties must be renegotiated to incorporate relevant provisions of the new constitution.  The Investment Law of 2014 was enacted in late 2015.  Under the 2015 Arbitration Law (Law 708), international arbitration is not permitted when the dispute is against the government or a state-owned company.

A variety of companies of varying nationality were affected by the government’s nationalization policy between 2006 and 2014.  In 2014, President Morales announced there would be no more nationalizations.  The same year, one Brazilian company was nationalized, but that had been previously agreed to with the owner under the previous nationalization policy.

International Commercial Arbitration and Foreign Courts

In Bolivia, two institutions have arbitration bodies, including the National Chamber of Commerce and the Chamber of Industry and Commerce of Santa Cruz (CAINCO).  In order to utilize these domestic arbitration bodies, the private parties must include arbitration within their contracts.  Depending on the contract between the parties, UNCITRAL or Bolivia’s Arbitration Law (No. 708) may be used.  Local courts recognize and enforce foreign arbitral awards and judgments.   There are no statistics available regarding SOE involvement in investment disputes.

Bankruptcy Regulations

Bolivia ranks above regional averages for resolving insolvency according to the World Bank’s Doing Business Report.  The average time to complete bankruptcy procedures to close a business in Bolivia is 20 months.  The Bolivian Commercial Code includes (Article 1654) three different categories of bankruptcy:

1. No Fault Bankruptcy – when the owner of the company is not directly responsible for its inability to pay its obligations.
2. At- Fault Bankruptcy – when the owner is guilty or liable due to the lack of due diligence to avoid harm to the company.
3. Bankruptcy due to Fraud – when the owner intentionally tries to cause harm to the company.

In general, the application of laws related to commercial disputes and bankruptcy has been perceived as inconsistent, and charges of corruption are common.  Foreign creditors often have little redress beyond Bolivian courts, and judgments are generally more favorable to local claimants than international ones.  If a company declares bankruptcy, the company must pay employee benefits before other obligations.  Workers have broad-ranging rights to recover pay and benefits from foreign firms in bankruptcy, and criminal actions can be taken against individuals the Bolivian Government deems responsible for failure to pay in these matters.

No credit bureaus or credit monitoring authorities serve the Bolivian market.

In 2018, the Bolivian Government enacted a new law (No. 1055) called the Creation of Social Enterprises.  The law allows for employees of a company to assert ownership rights over companies under financial distress heading into bankruptcy.  Passage of the law was controversial, with numerous business chambers asserting that the law could incentivize employees and labor unions to undermine the performance of companies in order to force bankruptcy and gain control of company assets.

Bolivia has laws that regulate aspects related to corporate social responsibility (CSR) practices,  Both producers and consumers in Bolivia are generally aware of CSR, but consumer decisions are ultimately based on price and quality.  Because the Bolivian Constitution stipulates that economic activity cannot damage the collective good (Article 47), CSR activities are generally looked upon favorably by the Bolivian Government.  However, during pre-electoral periods, government officials occasionally accuse companies of using CSR practices as political tools against the government and suggest that the government pioneer tighter CSR regulations.

Though Bolivia is not part of the OECD, it has participated in several Latin American Corporate Governance Roundtables since 2000.  Neither the Bolivian Government nor its organizations use the OECD Guidelines for CSR.  Instead, Bolivian companies and organizations are focused on trying to accomplish the UN’s Millennium Development Goals, and they use the Global Reporting Initiative (GRI) methodology in order to show economic, social and environmental results.  While the Bolivian Government, private companies, and non-profits are focused on the UN’s Millennium Development Goals, only a few private companies and NGOs focus on following the UN standard ISO 26000 guidelines and methodologies.  Another methodology widely accepted in Bolivia is the one developed by the ETHOS Institute, which provides measurable indicators accepted by PLARSE (Programa Latinoamericano de Responsabilidad Social Corporativa, the Latin American Program for CSR).The Bolivian Government issued a 2013 supreme decree that requires financial entities to allocate 6 percent of profits to CSR-related projects.

The 1942 General Labor Law is the basis for employment rights in Bolivia, but this law has been modified more than 2,000 times via 60 supreme decrees since 1942.  As a result of these modifications, the General Labor Law has become a complex web of regulations that is difficult to enforce or understand.  An example of the lack of enforcement is the Comprehensive System for Protection of the Disabled (Law 25689) which stipulates that at least 4 percent of the total work force in public institutions, state owned enterprises, and private companies should be disabled.  Neither the public nor private sectors are close to fulfilling this requirement, and most buildings lack even basic access modifications to allow for disabled workers.

In support of consumer protection rights, the Vice Ministry of Defense of User and Consumer Rights was created in 2009 (Supreme Decree 29894) under the supervision of the Ministry of Justice (which became the Ministry of Justice and Transparency in 2017).  This same year the Consumer Protection Law (Supreme Decree 0065) was enacted, which gave the newly created Vice Ministry the authority to request information, verify and follow up on consumer complaints.

The Mother Earth Law (Law 071) approved in October 2012 promotes CSR elements as part of its principles (Article 2), such as collective good, harmony, respect and defense of rights.  The Ministry of Environment and Water is in charge of overseeing the implementation of this law, but the implementing regulations and new institutions needed to enforce this law are still incomplete.

Even though Bolivia promotes the development of CSR practices in its laws, the government gives no advantage to businesses that implement these practices.  Instead, businesses implement CSRs in order to gain the public support necessary to pass the prior consultation requirements or strengthen their support when mounting a legal defense against claims that they are not using land to fulfill a socially valuable purpose, as defined in the Community Land Reform laws (# 1775 and #3545).

In April 2009 the Bolivian Government reorganized the supervisory agencies of the government (formerly Superintendencias) to include social groups, thus creating the “Authorities of Supervision and Social Control” (Supreme Decree 0071).  This authority controls and supervises the following sectors: telecommunications and transportation, water and sanitation, forests and land, pensions, electricity, and enterprises.  Each sector has an Authority of Supervision and Social Control assigned to its oversight, and each Authority has the right to audit the activities in the aforementioned sectors and the right to request the public disclosure of information, ranging from financial disclosures to investigation of management decisions.

Resources to Report Corruption

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

Diego Jimenez Guachalla
Vice Minister of Justice and the Fight Against Corruption
Ministry of Justice
Calle Capitan Ravelo 2101, La Paz
+591-2-115773
http://www.transparencia.gob.bo/ 

Bolivian law stipulates criminal penalties for corruption by officials, but the laws are not often implemented properly.  Governmental lack of transparency, and police and judicial corruption, remain significant problems.  The Ministry of Justice and Transparency and the Prosecutor’s Office are both responsible for combating corruption.  In September 2014, former Transparency Minister Nardy Suxo reported that the Ministry was investigating 388 complaints against public servants.  The Ministry has obtained 100 convictions since 2006.  Cases involving allegations of corruption against the president and vice president require congressional approval before prosecutors may initiate legal proceedings, and cases against pro-government public officials are rarely allowed to proceed.  Despite the fact that the courts found that the awarding of immunity for corruption charges is unconstitutional, their rulings were ignored by the government.

Police corruption remains a significant problem.  There are also reports of widespread corruption in the country’s judiciary.

There is an Ombudsman appointed by Congress and charged with protecting human rights and guarding against government abuse.  In his 2014 annual report, the Ombudsman cited the judicial system, the attorney general’s office, and the police as the most persistent violators of human rights due to widespread inefficiencies and corruption.  Public opinion reflected the Ombudsman’s statements.  The 2017 Transparency International corruption perception index ranked Bolivia as 112 of 180 countries and found that Bolivian citizens believe the most corrupt institutions in Bolivia are the judiciary, the police, and executive branch institutions

Bolivia has laws in place which govern public sector-related contracts (Law 1178 and Supreme Decree 181), including contracts for the acquisition of goods, services, and consulting jobs.  Bribery of public officials is also a criminal offense under Articles 145 and 158 of Bolivia’s Criminal Code.  Laws also exist that provide protection for citizens filing complaints against corruption.

Bolivia signed the UN Anticorruption Convention in December 2003 and ratified it in December 2005.  Bolivia is also party to the OAS Inter-American Convention against Corruption.  Bolivia is not a signatory of the OECD Convention on Combating Bribery of Foreign Public Officials.

Bolivia is prone to social unrest, which can include violence.  Given the country’s reliance on a few key thoroughfares, conflict often disrupts transportation and distribution networks.  The majority of civil disturbances are related to domestic issues, usually workers pressuring the government for concessions by marching or closing major transportation arteries.  Over the past year, there has been no political violence that targeted foreigners.  While protests and blockades are frequent, they only periodically affect commerce.  Several conflicts in La Paz directly affected distribution of essential services or travel in and out of the city for periods greater than 24 hours during 2018.  However, numerous others caused businesses to close for short periods or impeded business operations.  To date, the situation remains as such.  The environment is becoming increasingly politicized in the run up to general elections in October 2019.