Policies Towards Foreign Direct Investment

Canada and the United States have one of the largest and most comprehensive investment relationships in the world. U.S. investors are attracted to Canada’s strong economic fundamentals, its proximity to the U.S. market, its highly skilled work force, and abundant resources. As of 2018, the United States had a stock of US$401 billion of foreign direct investment (FDI) in Canada. U.S. FDI stock in Canada represents 46 percent of Canada’s total investment. Canada’s FDI stock in the United States totaled US$511 billion.

Canada, the United States, and Mexico signed a modernized and rebalanced NAFTA agreement – the United States-Mexico-Canada Agreement (USMCA) – on November 30, 2018 and a protocol of amendment to the USMCA on December 10, 2019. President Trump signed legislation implementing the USMCA on January 29, 2020. The agreement will come into force after the completion of the domestic ratification processes by each individual member of the agreement, likely in 2020. The agreement updates NAFTA’s provisions with respect to investment protection rules and investor-state dispute settlement procedures to better reflect U.S. priorities related to foreign investment. All Parties to the agreement have agreed to treat investors and investments of the other Parties in accordance with the highest international standards, and consistent with U.S. law and practice, while safeguarding each Party’s sovereignty and promoting domestic investment.

Invest in Canada is Canada’s investment attraction and promotion agency. It provides information and advice on doing business in Canada, strategic market intelligence on specific industries, site visits, as well as introductions to provincial, territorial, and local investment promotion agencies who can help companies access local opportunities, networks, and programs.

Limits on Foreign Control and Right to Private Ownership and Establishment

U.S. FDI in Canada is subject to the provisions of the Investment Canada Act (ICA), the World Trade Organization (WTO), and the 1994 North American Free Trade Agreement (NAFTA). Chapter 11 of NAFTA contains provisions such as “national treatment” designed to protect cross-border investors and facilitate the settlement of investment disputes. NAFTA does not exempt U.S. investors from review under the ICA, which has guided foreign investment policy in Canada since its implementation in 1985. The ICA provides for review of large acquisitions by non-Canadian investors and includes the requirement that these investments be of “net benefit” to Canada. The ICA also has provisions for the review of investments on national security grounds. The Canadian government has blocked investments on a few occasions.

The Canadian government announced April 18 enhanced scrutiny of certain foreign investments under the ICA, which will apply until the economy recovers from the effects of the COVID-19 pandemic. While all investments will continue to be examined on their own merits, the Government will scrutinize with particular attention foreign direct investments of any value in Canadian businesses that are related to public health or involved in the supply of critical goods and services to Canadians. The Government will also subject all foreign investments by state-owned investors, or investors with close ties to foreign governments, to enhanced scrutiny under the Investment Canada Act.

Although foreign investment is a key component of Canada’s economic growth contributing 1.9 percent to GDP, restrictions remain in key sectors. Under the Telecommunications Act, Canada maintains a 46.7 percent limit on foreign ownership of voting shares for a Canadian telecom services provider. However, a 2012 amendment exempts foreign telecom carriers with less than 10 percent market share from ownership restrictions in an attempt to increase competition in the sector. In May 2018, Canada eased its foreign ownership restrictions in the aviation sector, which increased foreign ownership limits of Canadian commercial airlines to 49 percent from 25 percent. Investment in cultural industries also carries restrictions, including a provision under the ICA that foreign investment in book publishing and distribution must be compatible with Canada’s national cultural policies and be of “net benefit” to Canada. Canada is open to investment in the financial sector, but barriers remain in retail banking.

Other Investment Policy Reviews

The World Trade Organization conducted a trade policy review of Canada in 2019. The report is available at: https://www.wto.org/english/tratop_e/tpr_e/tp489_e.htm .

Business Facilitation

Canada ranks third out of 190 countries in the World Bank’s Doing Business survey on starting a business. The Canadian government has a business registration page available at: https://www.canada.ca/en/services/business/start/register-with-gov.html?it=government/registering-your-business/&it=eng/page/2730/ . Corporations must incorporate either through the federal or provincial government, apply for a federal business number and corporation income tax account from the Canada Revenue Agency, register as an extra-provincial or extra-territorial corporation in all other Canadian jurisdictions where you plan to do business, and apply for any permits and licenses the business may need. In some cases, registration for these accounts is streamlined (a business can receive its business number, tax accounts, and provincial registrations as part of the incorporation process); however, this is not true for all provinces and territories.

Outward Investment

Canada’s trade diversification strategy promotes trade and investment opportunities, primarily through export promotion and negotiation of free trade agreements, which generally have investment chapters.

Transparency of the Regulatory System

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

Canada and the United States announced the creation of the Canada-U.S. Regulatory Cooperation Council (RCC) on February 4, 2011. This regulatory cooperation does not encompass all regulatory activities within all agencies. Rather, the RCC focuses on areas where benefits can be realized by regulated parties, consumers, and/or regulators without sacrificing outcomes such as protecting public health, safety, and the environment. The initial RCC Joint Action Plan set out 29 initiatives where Canada and the United States sought greater regulatory alignment. A Memorandum of Understanding between the Treasury Board of Canada and the U.S. Office of Information and Regulatory Affairs, signed on June 4, 2018, reaffirmed the RCC as a vehicle for regulatory cooperation.

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

International Regulatory Considerations

Canada is not part of a regional economic block and does not incorporate regional standards into its economic system. Through the new United States-Mexico-Canada Agreement (USMCA) the three countries agreed to a new chapter on Good Regulatory Practices that will promote transparency and accountability when developing and implementing regulations. Canada and the United States also work together through the RCC to reduce differences between their regulatory frameworks, making it easier for bilateral trade. Canada, with the United States and Mexico, is a member of the NAFTA. The Canada-EU Comprehensive and Economic Trade Agreement (CETA) also contains a chapter on regulatory cooperation that commits both sides to strengthen regulatory cooperation and facilitate discussions between regulatory authorities in the EU and Canada. The Comprehensive and Progressive Partnership for Trans-Pacific Partnership contains a chapter on regulatory coherence that aims to encourage members of the agreement to adopt widely accepted good regulatory practices, such as reviewing the effectiveness of existing regulatory practices and providing public notice of future regulatory measures.

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

Legal System and Judicial Independence

Canada’s legal system is based on English common law, except for Quebec, which follows civil law. Canada has both a federal parliament which makes laws for all of Canada and a legislature in each of the provinces and territories that deals with laws in their areas. When Parliament or a provincial or territorial legislature passes a statute, it takes the place of common law or precedents dealing with the same subject. The judicial branch of government is independent of the executive branch and the current judicial process is considered procedurally competent, fair, and reliable. The provinces administer justice in their jurisdictions. This includes organizing and maintaining the civil and criminal provincial courts and civil procedures in those courts.

Canada has both written commercial law and contractual law, and specialized commercial and civil courts. Canada’s Commercial Law Directorate provides advisory and litigation services to federal departments and agencies whose mandate includes a commercial component and has legal counsel in Montréal and Ottawa.

Parliament and provincial and territorial legislatures give government organizations the authority to make specific regulations. As of June 1, 2009, all consolidated Acts and regulations on the Justice Laws Website (http://laws-lois.justice.gc.ca/eng/) are “official,” meaning they can be used for evidentiary purposes.

Laws and Regulations on Foreign Direct Investment

Foreign investment policy in Canada has been guided by the Investment Canada Act (ICA) since 1985. The ICA liberalized policy on foreign investment by recognizing that investment is central to economic growth and key to technological advancement. The ICA provides for review of large acquisitions by non-Canadians and imposes a requirement that these investments be of “net benefit” to Canada. The ICA also contains provisions that permit the government to conduct a national security review of virtually any investment or acquisition. For the vast majority of small acquisitions and the establishment of new businesses, foreign investors need only to notify the Canadian government of their investments.

U.S. FDI in Canada is subject to provisions of the ICA, the WTO, and the NAFTA. Chapter 11 of the NAFTA ensures that regulation of U.S. investors in Canada and Canadian investors in the United States results in treatment no different than that extended to domestic investors within each country, i.e., “national treatment.” The concept of national treatment is also a feature of the USMCA. Both governments are free to regulate the ongoing operation of business enterprises in their respective jurisdictions provided that the governments accord national treatment to both U.S. and Canadian investors.

Competition and Anti-Trust Laws

Competition Bureau Canada is a law-enforcement agency that administers and enforces Canadian legislation that regulates competition, including the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. The Competition Tribunal is a specialized tribunal that adjudicates antitrust cases related to competition.

Expropriation and Compensation

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

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

Dispute Settlement

ICSID Convention and New York Convention

Canada ratified the International Centre for Settlement of Investment Disputes (ICSID) Convention on December 1, 2013 and is a signatory to the 1958 New York Convention, ratified on May 12, 1986. Canada signed the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (known as the Mauritius Convention on Transparency) in March 2015.

Investor-State Dispute Settlement

Canada accepts binding arbitration of investment disputes to which it is a party only when it has specifically agreed to do so through a bilateral or multilateral agreement, such as a Foreign Investment Protection Agreement. The provisions of Chapter 11 of the NAFTA guide the resolution of investment disputes between NAFTA persons and NAFTA member governments. The NAFTA encourages parties to settle disputes through consultation or negotiation. It also establishes special arbitration procedures for investment disputes separate from the NAFTA’s general dispute settlement provisions. Under the NAFTA, a narrow range of disputes dealing with government monopolies and expropriation between an investor from a NAFTA country and a NAFTA government may be settled, at the investor’s option, by binding international arbitration. An investor who seeks binding arbitration in a dispute with a NAFTA party gives up his right to seek redress through the court system of the NAFTA party, except for proceedings seeking nonmonetary damages. Canada does not have a history of extrajudicial action against foreign investors.

Over the history of the NAFTA, more than 25 disputes have been filed against the Government of Canada. For more information about cases filed under NAFTA Chapter 11, please visit https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/gov.aspx?lang=eng 

Upon entry into force of the USMCA, Investor State Dispute Settlement procedures that existed under NAFTA for the United States and Canada will be eliminated over a three-year period. Canadian and U.S. investors that believe their host country has violated USMCA will rely on the domestic courts and other dispute resolution mechanisms.

International Commercial Arbitration and Foreign Courts

Provinces primarily regulate arbitration within Canada. With the exception of Quebec, each province has legislation adopting the UNCITRAL Model Law. The Quebec Civil Code and Code of Civil Procedure are consistent with the UNCITRAL Model Law. The Canadian Supreme Court has ruled that arbitration agreements must be broadly interpreted and enforced. Canadian courts respect arbitral proceedings and have been willing to lend their enforcement powers to facilitate the effective conduct of arbitration proceedings, requiring witnesses to attend and give evidence and produce documents and other evidence to the arbitral tribunal.

Bankruptcy Regulations

Bankruptcy in Canada is governed by the Bankruptcy and Insolvency Act (BIA) and is not criminalized. Creditors must deliver claims to the trustee and the trustee must examine every proof of claim. The trustee may disallow, in whole or in part, any claim of right to a priority under the BIA. Generally, the test of proving the claim before the trustee in bankruptcy is very low and a claim is proved unless it is too “remote and speculative.” Provision is also made for dealing with cross-border insolvencies and the recognition of foreign proceedings. Canada was ranked number 13 for ease of “resolving insolvency” by the World Bank in 2020. Credit bureaus in Canada include Equifax Canada and TransUnion Canada.

Investment Incentives

Federal and provincial governments in Canada offer a wide array of investment incentives that municipalities are generally prohibited from offering. The incentives are designed to advance broader policy goals, such as boosting research and development or promoting regional economies. The funds are available to any qualified Canadian or foreign investor who agrees to use the monies for the stated purpose. For example, Export Development Canada can support inbound investment under certain specific conditions (e.g., investment must be export-focused; export contracts must be in hand or companies have a track record; there is a world or regional product mandate for the product to be produced). The government also announced the US$940 million Strategic Innovation Fund in 2017, which provides repayable or non-repayable contributions to firms of all sizes across Canada’s industrial and technology sectors in an effort to grow and expand those industries. One of the explicit goals of the program is to attract new investments to Canada.

The Liberal government invested US$730 million over five years, beginning in 2018, to support five business-led supercluster projects that have the potential to accelerate economic and investment growth in Canada. The superclusters are now operational, and feature projects in digital technologies, food production, advanced manufacturing, artificial intelligence in supply chain management, and ocean industries. There are 450 businesses, 60 post-secondary institutions, and 180 other partners involved in the supercluster projects. Several U.S. firms are participants.

Several provinces offer an array of incentive programs and services aimed at attracting foreign investment that lower corporate taxes and incentivize research and development. The Province of Quebec officially re-launched its “Plan Nord” (Northern Plan) in April 2015, a 20-year sustainable development investment initiative that is intended to harness the economic, mineral, energy, and tourism potential of Quebec’s northern territory. Quebec’s government created the “Société du Plan Nord” (Northern Plan Company) to attract investors and work with local communities to implement the plan. Thus far, Plan Nord has helped finance mining projects in northern Quebec and began building the necessary infrastructure to link remote mines with ports. The provincial government is actively seeking other foreign investors who desire to take advantage of these opportunities.

Provincial incentives tend to be more investor-specific and are conditioned on applying the funds to an investment in the granting province. For example, Ontario’s Jobs and Prosperity Fund provides US$2.5 billion from 2013 to 2023 to enhance productivity, bolster innovation, and grow Ontario’s exports. To qualify, companies must have substantive operations (generally three years) and at least US$7.5 million in eligible project costs. Alberta offers companies a 10 percent refundable provincial tax credit worth up to US$300,000 annually for scientific research and experimental development encouraging research and development in Alberta, as well as Alberta Innovation Vouchers worth US$11,000 to US$37,000 to help small early-stage technology and knowledge-driven businesses in Alberta get their ideas and products to market faster. Newfoundland and Labrador provide vouchers worth 75 percent of eligible project costs up to US$11,000 for R&D, performance testing, field trials, and other projects.

Provincial incentives may also be restricted to firms established in the province or that agree to establish a facility in the province. Government officials at both the federal and provincial levels expect investors who receive investment incentives to use them for the agreed purpose, but no enforcement mechanism exists.

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

Data localization is an evolving issue in Canada. Privacy rules in two Canadian provinces, British Columbia and Nova Scotia, mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using non-Canadian hosting services. The United States–Mexico–Canada Agreement (USMCA) will help ensure cross-border data flows between Canada and the United States remain open by prohibiting any member of the agreement from requiring the use or location of computing facilities in a particular jurisdiction as a condition of business.

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

Real Property

Foreign investors have full and fair access to Canada’s legal system, with private property rights limited only by the rights of governments to establish monopolies and to expropriate for public purposes. Investors under NAFTA (and USMCA) have mechanisms available for dispute resolution regarding property expropriation by the Government of Canada. The recording system for mortgages and liens is reliable. Canada is ranked 18 out of 190 countries in 2020 in the World Bank’s “Ease of Registering Property” rankings. About 89 percent of Canada’s land area is Crown Land owned by federal (41 percent) or provincial (48 percent) governments; the remaining 11 percent is privately owned.

British Columbia began a 15 percent tax on foreign buyers of residential real estate in the Metro Vancouver area in August 2016. In early 2017, the province announced that foreign buyers with work permits would be exempt from the tax. In 2018, British Columbia increased this tax to 20 percent and expanded its geographical coverage to include several other metro areas, including that of the provincial capital Victoria. In 2018, British Columbia broadened taxation on foreign ownership in Metro Vancouver and enacted a 0.5 percent Speculation and Vacancy Tax, targeting foreign-owned homes left empty. In 2019, the Ministry of Finance increased the tax to 2.0 percent. The tax includes foreign owners and satellite families defined as those who earn a majority of their income outside of Canada. A group of homeowners is challenging the tax in the British Columbia Supreme Court. Canadian citizens and permanent residents pay 0.5 percent per year.

In April 2017, a 15 percent tax was instituted for non-resident buyers of residential property in the Greater Golden Horseshoe Area of Ontario, which includes most of southern Ontario including, but not limited to, such cities such as Toronto, Mississauga, and Hamilton.

A 2014 Supreme Court decision recognized the existence of aboriginal title on land in British Columbia, which has ramifications for aboriginal land claims across Canada. While stopping short of giving aboriginals a veto on projects, the decision gives them increased influence on the economic development of any land with a colorable (potentially valid) aboriginal title claim.

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

Intellectual Property Rights

Canada took significant steps to improve its intellectual property (IP) provisions by ratifying implementing legislation for the United States-Mexico-Canada Agreement (USMCA) in 2020. It is expected to issue accompanying regulations and Ministerial Statements that further fulfill its commitments under the agreement. Canada’s commitments under the USMCA will address areas where there have been longstanding concerns, including enforcement against counterfeits, inspection of goods in transit, transparency with respect to new geographical indicators, national treatment, copyright term, and patent term extensions for unreasonable patent office delay. Rights holders report that Canadian courts have established meaningful penalties against circumvention devices and services. Canada has also made positive progress in reforming proceedings before the Copyright Board related to tariff-setting procedures for the use of copyrighted works.

Commercial-scale online piracy is a significant issue in Canada where some notorious copyright-infringing websites are hosted or operated. Stream-ripping, the unauthorized converting of a file from a licensed streaming site into an unauthorized copy, is now a dominant method of music piracy, including in Canada, causing substantial economic harm to music creators and undermining legitimate online services. Industry stakeholders are also concerned with uneven application of new notice and notice regulations requiring Internet Service Providers (ISPs) to notify (and address) sites of trademark or copyright infringements. Canada’s ambiguous education-related exemption added to the 2012 copyright law has significantly damaged the market for educational publishers and authors. While Canadian courts have helped clarify this exception, confusion remains and the educational publishing sector reports lost revenue from licensing.

Canada is on the Watch List in USTR’s Special 301 Report to congress.

Capital Markets and Portfolio Investment

Canada’s capital markets are open, accessible, and without onerous regulatory requirements. Foreign investors are able to get credit in the local market. Canada has several securities markets, the largest of which is the Toronto Stock Exchange, and there is sufficient liquidity in the markets to enter and exit sizeable positions. The World Economic Forum ranked Canada’s banking system as the second “most sound” in the world in 2018. Among other factors, Canadian banking stability is linked to high capitalization rates that are well above the norms set by the Bank for International Settlements. The Canadian government and Bank of Canada do not place restrictions on payments and transfers for current international transactions.

Money and Banking System

The Canadian banking industry is dominated by six major domestic banks, but includes a total of 36 domestic banks, 18 foreign bank subsidiaries, 28 full-service foreign bank branches and four foreign bank lending branches operating in Canada. The six largest banks manage close to US$4 trillion in assets. Many large international banks have a presence in Canada through a subsidiary, representative office, or branch of the parent bank. Ninety-nine percent of Canadians have an account with a financial institution.

Foreign financial firms interested in investing submit their applications to the Office of the Superintendent of Financial Institutions (OSFI) for approval by the Finance Minister. U.S. firms are present in all three sectors, but play secondary roles. U.S. and other foreign banks have long been able to establish banking subsidiaries in Canada, but no U.S. banks have retail banking operations in Canada. Several U.S. financial institutions have established branches in Canada, chiefly targeting commercial lending, investment banking, and niche markets such as credit card issuance. Foreigners may be able to open bank accounts in Canada with proper identification and would need to visit the financial institution in person.

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

Foreign Exchange and Remittances

Foreign Exchange

The Canadian dollar is a free floating currency with no restrictions on its transfer or conversion.

Remittance Policies

The Canadian dollar is fully convertible and the central bank does not place time restrictions on remittances.

Sovereign Wealth Funds

Canada does not have a sovereign wealth fund, but the province of Alberta has the Heritage Savings Trust Fund established to manage the province’s share of petroleum royalties. The fund’s net financial assets were US$13.5 billion on December 31, 2019. It is invested in a globally diversified portfolio of public and private equity, fixed income, and real assets. The fund follows the voluntary code of good practices known as the “Santiago Principles” and participates in the IMF-hosted International Working Group of SWFs. Forty-eight percent of the Heritage Fund is currently held in equity investments, eight percent of which are Canadian equities.

Canada has more than 30 state-owned enterprises (SOEs) at the federal level, with the majority of assets held by three federal crown corporations: Export Development Canada, Farm Credit Canada, and Business Development Bank of Canada. Canada also has more than 90 SOEs at the provincial level that contribute to a variety of sectors including finance; power, electricity and utilities; and transportation. The Treasury Board Secretariat provides an annual report to Parliament regarding the governance and performance of Canada’s federal crown corporations and other corporate interests.

The Canadian government lists SOEs as “Government Business Enterprises” (GBE). A list is available at http://www.osfi-bsif.gc.ca/Eng/fi-if/rtn-rlv/fr-rf/dti-id/Pages/GBE.aspx and includes both federal and provincial enterprises.

There are no restrictions on the ability of private enterprises to compete with SOEs. The functions of most Canadian crown corporations have limited appeal to the private sector. The activities of some SOEs such as VIA Rail and Canada Post do overlap with private enterprise. As such, they are subject to the rules of the Competition Act to prevent abuse of dominance and other anti-competitive practices. Foreign investors are also able to challenge SOEs under the NAFTA and WTO.

Privatization Program

Federal and provincial privatizations are considered on a case-by-case basis, and there are no overall limitations with regard to foreign ownership. As an example, the federal Ministry of Transport did not impose any limitations in the 1995 privatization of Canadian National Railway, whose majority shareholders are now U.S. persons.

Canada encourages Canadian companies to observe the OECD Guidelines for Multinational Enterprises in their operations abroad and provides a National Contact Point for dealing with issues that arise in relation to Canadian companies. Canada defines responsible business conduct as Canadian companies doing business abroad responsibly in an economically, socially, and environmentally sustainable manner. On April 8, 2019, Canada announced the appointment of Sheri Meyerhoffer as Canadian Ombudsperson for Responsible Enterprise. She is mandated to review allegations of human rights abuses arising from the operations of Canadian companies abroad. Canada’s Corporate Social Responsibility strategy, “Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad” is available on the Global Affairs Canada website: http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-strat-rse.aspx?lang=eng.

Despite the increased level of official attention paid to Responsible Business Conduct, the activities of Canadian mining companies abroad remain the subject of some critical attention and have prompted calls for the government to move beyond voluntary measures. Canada is a supporter of the Extractive Industries Transparency Initiative (EITI).

On an international scale, corruption in Canada is low and similar to that found in the United States. In general, the type of due diligence that would be required in the United States to avoid corrupt practices would be appropriate in Canada. Canada is a party to the UN Convention Against Corruption. Canada is a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as well as the Inter-American Convention Against Corruption.

Canada’s Criminal Code prohibits corruption, bribery, influence peddling, extortion, and abuse of office. The 1998 Corruption of Foreign Public Officials Act prohibits individuals and businesses from bribing foreign government officials to obtain influence and prohibits destruction or falsification of books and records to conceal corrupt payments. The law has extended jurisdiction that permits Canadian courts to prosecute corruption committed by companies and individuals abroad. Canada’s anti-corruption legislation is vigorously enforced, and companies and officials guilty of violating Canadian law are being effectively investigated, prosecuted, and convicted of corruption-related crimes. In March 2014, Public Works and Government Services Canada (now Public Services and Procurement Canada, or PSPC) revised its Integrity Framework for government procurement to ban companies or their foreign affiliates for 10 years from winning government contracts if they have been convicted of corruption. In August 2015, the Canadian government revised the framework to allow suppliers to apply to have their ineligibility reduced to five years where the causes of conduct are addressed and no longer penalizes a supplier for the actions of an affiliate in which it had no involvement. PSPC has a Code of Conduct for Procurement, which counters conflict-of-interest in awarding contracts. Canadian firms operating abroad must declare whether they or an affiliate are under charge or have been convicted under Canada’s anti-corruption laws during the past five years in order to receive help from the Trade Commissioner Service. U.S. firms have not identified corruption as an obstacle to FDI in Canada.

Resources to Report Corruption

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

Mario Dion
Conflict of Interest and Ethics Commissioner (for appointed and elected officials, House of Commons)
Office of the Conflict of Interest and Ethics Commissioner
Parliament of Canada
66 Slater Street, 22nd Floor
Ottawa, Ontario (Mailing address)

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

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

Political violence occurs in Canada to about the same extent as it does in the United States.

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

Analysts note that Canada’s labor story varies significantly by province, with resource-dependent provinces affected more adversely than non-resource dependent provinces as a result of lower oil and other commodity prices. The impact of COVID-19 on the labor force is yet to be fully seen, but analysts have predicted unemployment rates around 10 percent or higher as a result of the pandemic. More than one million Canadians lost their jobs in March 2020 due largely to the outbreak, increasing Canada’s unemployment rate to 7.8 percent from 5.6 percent in February. The Canadian government created an emergency response benefit for workers who lost employment due to COVID-19 as well as wage subsidies and other support for employers.

Canada faces a labor shortage in skilled trades’ professions, such as carpenters, engineers, and electricians. Canada launched several initiatives including the Global Skills Visa, announced in November 2016, to address its skilled labor shortage, including through immigration reform, the inclusion of labor mobility provisions in free trade agreements, including the Canada-EU CETA agreement, and the Temporary Foreign Worker Program (TFWP).

The TFWP is jointly managed by Employment and Social Development Canada (ESDC) and Immigration, Refugees, and Citizenship Canada (IRCC). The International Mobility Program (IMP) primarily includes high skill/high wage professions and is not subject to a labor market impact assessment. The number of temporary foreign workers a business can employ is limited. For more information, see the TFWP website: http://www.cic.gc.ca/english/resources/publications/employers/temp-foreign-worker-program.asp 

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

In 2019, workers for Montreal-based CN rail walked off the job on November 19 over concerns about long hours, fatigue, and “dangerous working conditions.” The strike lasted for seven days from November 19 through November 26, during which the railroad operated at approximately 10 percent capacity. CN Rail carries about $189 billion worth of goods annually. Economists at Toronto-Dominion Bank predicted Canada’s gross domestic product would have lost as much as $1.65 billion if the strike had lasted four more days, until November 30. In the end, the one-week long strike clipped GDP by about 0.1 percent that month according to the Bank of Montreal. The Canadian government focused on finding a negotiated end to the strike amid calls to legislate the workers back to work.

The DFC does not operate in Canada.

* Source for Host Country Data:

• Host Country Source: Office of the Chief Economist, State of Trade 2019, Global Affairs Canada.
• Host Country Source: Statistics Canada
• Note: Data converted to U.S. dollars using yearly average currency conversions from IRS

Economic Section
490 Sussex Drive, Ottawa, Ontario
613-688-5335
OttawaEconCounselor@state.gov

Policies Towards Foreign Direct Investment

In pursuit of its National Vision 2030, the government of Qatar has enacted reforms to incentivize foreign investment in the economy.  As Qatar finalizes major infrastructure developments in preparation for hosting the 2022 FIFA World Cup, the government has allocated USD 3.2 billion for new, non-oil sector projects in its 2020 budget.  The government also plans to increase LNG production by 64 percent by 2027.  Significant investment in the upstream and downstream sectors is expected.  In February 2019, national oil company Qatar Petroleum announced a localization initiative, Tawteen, which will provide incentives to local and foreign investors willing to establish domestic manufacturing facilities for oil and gas sector inputs.  Moreover, in July 2019, the Investment Promotion Agency was established to further attract inward foreign direct investment to Qatar.  These economic spending and promotion plans create significant opportunities for foreign investors.

In 2019, the government enacted a new foreign investment law (Law 1/2019) to ease restrictions on foreign investment.  The law, once executive regulations are issued, will permit full foreign ownership of businesses in most sectors with full repatriation of profits, protection from expropriation, and several other benefits.  Excepted sectors include banking, insurance, and commercial agencies, where foreign capital investment remains limited at 49 percent, barring special dispensation from the Cabinet.  The government is currently in the process of publishing regulations for the implementation of the new law.  Until its issuance, the old law requiring 51% Qatari partnership still applies (Law 13/2000).  Qatar’s primary foreign investment promotion and evaluation body is the Invest in Qatar Center within the Ministry of Commerce and Industry.  Qatar is also home to the Qatar Financial Centre, Qatar Science and Technology Park, Manateq (Qatar’s Economic Zones Company), and the Qatar Free Zones Authority, all of which offer full foreign ownership and repatriation of profits, tax incentives, and investment funds for small- and medium-sized enterprises.

When competing for government contracts, preferential treatment is given to suppliers who use local content in their bids.  To further boost local production amid an economic and political rift with neighboring Gulf countries, the government announced in October 2017 that it will favor bids that use Qatari products that meet necessary specifications and adhere to tender rules.  Participation in tenders with a value of QAR 5 million or less (USD 1.37 million) is limited to local contractors, suppliers, and merchants registered by the Qatar Chamber of Commerce and Industry.  Higher-value tenders sometimes do not require any local commercial registration to participate, but in practice certain exceptions exist.

Qatar maintains ongoing dialogue with the United States through both official and private sector tracks, including through the annual U.S.-Qatar Strategic Dialogue and official trade missions undertaken in cooperation with both nations’ chambers of commerce.  Qatari officials have repeatedly emphasized their desire to increase both American investments in Qatar and Qatari investments in the United States.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government has recently reformed its foreign investment legal framework.  As noted above, full foreign ownership is now permitted in all sectors with the exception of banking, insurance and commercial agencies.  Law 1/2019 on Regulating the Investment of Non-Qatari Capital in Economic Activity (replacing Law 13/2000) stipulates that foreigners can invest in Qatar either through partnership with a Qatari investor owning 51 percent or more of the enterprise, or by applying to the Ministry of Commerce and Industry for up to 100 percent foreign ownership.  The Invest in Qatar Center within the Ministry of Commerce and Industry is the entity responsible for vetting full foreign ownership applications.  The law includes provisions on the protection of foreign investment from expropriation, the exemption of some foreign investment projects from income tax and customs duties, and the right to transfer profits and ownership without delay.

Another recent foreign investment reform is Law 16/2018 on Regulating Non-Qatari Ownership and Use of Properties, which allows foreign individuals, companies, and real estate developers freehold ownership of real estate in 10 designated zones and ‎usufructuary rights up to 99 years in 16 other zones.  Foreigners may also own villas within residential complexes, as well as retail outlets in certain commercial complexes.  Foreign real estate investors and owners will be granted residency in Qatar for as long as they own their property.  The Committee on Non-Qatari Ownership and Use of Real Estate, formed in December 2018 under the Ministry of Justice, is the regulator of non-Qatari real estate ownership and use.

There are also other FDI incentives in the country provided by the Qatar Financial Centre, the Qatar Free Zones, and the Qatar Science and Technology Park.  A draft Public-Private Partnership law to facilitate direct foreign investment in national infrastructure development (currently focused on schools, hospitals, and drainage networks) was approved by the Cabinet in April, 2019 and is pending the Amir’s final review.

U.S. investors and companies are not any more disadvantaged by ownership or control mechanisms, sector restrictions, or investment screening mechanisms relative to other foreign investors.

Other Investment Policy Reviews

N/A

Business Facilitation

Recent reforms have further streamlined the commercial registration process.  Local and foreign investors may apply for a commercial license through the Ministry of Commerce and Industry’s (MOCI) physical “one-stop shop” or online through the Invest in Qatar Center’s portal.  Per Law 1/2019, upon submission of a complete application, the Ministry will issue its decision within 15 days.  Rejected applications can be resubmitted or appealed.  In January 2020, MOCI announced it was studying the possibility of reducing the fees required to register companies, in addition to lowering tariffs and port fees to provide more incentives to the private sector.  For more information on the application and required documentation, visit:  https://invest.gov.qa 

The World Bank’s 2020 Doing Business Report estimates that registering a small-size limited liability company in Qatar takes eight to nine days.  For detailed information on business registration procedures, as evaluated by the World Bank, visit:   http://www.doingbusiness.org/data/exploreeconomies/qatar/ 

For more information on business registration in Qatar, visit:

• Ministry of Commerce and Industry’s Invest in Qatar Center:  https://invest.gov.qa 
• Qatar Financial Centre:  http://www.qfc.qa/ 
• Qatar Free Zones Authority:  https://fza.gov.qa/ 
• Qatar Science and Technology Park:  https://qstp.org.qa/ 
• Qatar Petroleum Tawteen Program:  https://www.tawteen.com.qa/ 
• Manateq: https://www.manateq.qa/ 

Outward Investment

Qatar does not restrict domestic investors from investing abroad.  According to the latest foreign investment survey from the Planning and Statistics Authority, Qatar’s outward foreign investment stock reached USD 109.9 billion in the second quarter of 2019.  In 2018, sectors that accounted for most of Qatar’s outward FDI were finance and insurance (40 percent of total), transportation, storage, information and communication (33 percent), and mining and quarrying (18 percent).  As of 2018, Qatari investment firms held investments in about 80 countries; the top destinations were the European Union (34 percent of total), the Gulf Cooperation Council (GCC, 24 percent), and other Arab countries (14 percent).

Qatar has 59 bilateral investment treaties (BITs), according to the United Nations Conference on Trade and Development (UNCTAD).  Twenty-five BITs are in force, namely with Armenia, Belarus, Belgium-Luxembourg Economic Union, Bosnia and Herzegovina, China, Costa Rica, Cyprus, Egypt, Finland, France, Gambia, Germany, Indonesia, Iran, Italy, Jordan, Montenegro, Morocco, Portugal, Romania, Russia, Singapore, South Korea, Switzerland, and Turkey.  The most recent BIT was signed with Rwanda in November 2018 but has not yet come into force.  A full list of current BITs with the State of Qatar can be found at:  http://investmentpolicyhub.unctad.org/IIA/CountryBits/171 

While Qatar has not entered into a bilateral investment or trade treaty with the United States, the two nations established a Trade and Investment Framework Agreement (TIFA) in 2004.  Additionally, as part of the GCC, Qatar has signed 12 treaties with investment provisions (TIPs), including one between the GCC and the United States in 2012, but this treaty has not yet entered into force.

Qatar does not have a double taxation treaty with the United States.  In January 2015, Qatar became the first GCC country to sign a Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement with the United States.  In total, Qatar has over 80 agreements for the Avoidance of Double Taxation, including, most recently, with Ghana (November 2018) and Paraguay (March 2018).

Qatar has recently advanced its taxation regime.  In January 2019, the government established the General Tax Authority as the central tax collection and compliance function of the government.  In the same month, the government implemented the GCC 2016 Excise Tax Framework Agreement, imposing consumption-based excise taxes on select goods deemed harmful to human health, including tobacco (100% excise tax), sweetened carbonated drinks (50%), energy drinks (100%), as well as special-category goods such as alcoholic drinks (100%), and pork (100%).  The decision was promulgated in Law No. 25 of 2018 and it applies to both locally produced and imported goods.  As a GCC Member State, Qatar has agreed to introduce a common value-added tax (VAT) of five percent.  In 2017, Qatar approved a draft law on the proposed VAT, but has not committed to an implementation timeline.  To date, no VAT exists in Qatar.

Transparency of the Regulatory System

The World Trade Organization recognizes Qatar’s legal framework as conducive to private investment and entrepreneurship and enabling of the development of an independent judiciary system.  Qatar has taken measures to protect competition and ensure a free and efficient economy.  In addition to the National Competition Protection and Anti-Monopoly Committee, regulatory authorities exist for most sectors in the economy and are mandated with monitoring economic activity and ensuring fair practices.

Nonetheless, according to the World Bank’s Global Indicators of Regulatory Governance, Qatar lacks a transparent rulemaking system, as government ministries and regulatory agencies do not share regulatory plans or publish draft laws for public consideration.  An official public consultation process does not exist in Qatar.  The 45-member Shura Council (which is statutorily obligated to have 30 publicly-elected officials, but is in practice comprised solely of direct appointees by the Amir) must reach consensus to pass draft legislation, which is then returned to the Cabinet for further review and to the Amir for final approval.  Laws and regulations are developed by relevant ministries and entities.  The text of all legislation is published online and in local newspapers upon approval by the Amir.  All Qatari laws are issued in Arabic and eventually translated into English.  Qatar-based legal firms provide translations of Qatari legislation to their clients.  Each approved law explicitly mandates one or more government entities with the responsibility to implement and enforce legislation.  These entities are clearly defined in the text of each law.  In some cases, the law also sets up regulatory and oversight committees made of representatives of concerned government entities to safeguard enforcement.  Qatar’s official legal portal is http://www.almeezan.qa .

Qatar’s primary commercial regulator is the Ministry of Commerce and Industry.  Commercial Companies’ Law 11/2015 requires that publicly traded companies submit financial statements to the Ministry in compliance with the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS).  Publicly listed companies must also publish financial statements at least 15 days before annual general meetings in two local newspapers (in Arabic and English) and on their websites.  All companies are required to keep accounting records, prepared according to standards promulgated by the IAS Board.

The Qatar Central Bank (QCB) is the main financial regulator that oversees all financial institutions in Qatar, per Law 13/2012.  To promote financial stability and enhance regulatory coordination, the law established the Financial Stability and Risk Control Committee, which is headed by the QCB Governor.  According to the Law 7/2005, the Qatar Financial Centre (QFC) Regulatory Authority is the independent regulator of the QFC firms and individuals conducting financial services in or from the QFC, but the QCB also oversees financial markets housed within QFC.  QFC regulations are available at http://www.qfcra.com/en-us/legislation/ .

The government of Qatar is transparent about its public finances and debt obligations.  QCB publishes quarterly banking data, including on government external debt, government bonds, treasury bills, and sukuk (Islamic bonds).

International Regulatory Considerations

Qatar is part of the GCC, a political and economic regional union, notwithstanding an ongoing diplomatic rift with three GCC member states, Bahrain, Saudi Arabia, and the UAE since June 2017.  Laws based on GCC regulations must be approved through Qatar’s domestic legislative process and are reviewed by the Qatari Cabinet and the Shura Council prior to implementation.  Qatar has been a member of the World Trade Organization (WTO) since 1996 and usually notifies its draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Qatar’s legal system is based on a combination of civil and Sharia Islamic law.  The Constitution takes precedence over all laws, followed by legislation and decrees, and finally ministerial resolutions.  All judges are appointed by the Supreme Judicial Council, under Law 10/2003.  The Supreme Judicial Council oversees Qatari courts and functions independently from the executive branch of the government, per the Constitution.

Qatari courts adjudicate civil and commercial disputes in accordance with civil and Sharia laws.  International agreements have equal status with Qatari laws; the Constitution ensures that international pacts, treaties, and agreements to which Qatar is a party are respected and taken into account.  Qatar does not currently have a specialized commercial court, but in June 2019 , the Cabinet approved a decision to set up a court for investment and trade disputes.  Pending the establishment of the new court, domestic commercial disputes continue to be settled in civil courts.  Contract enforcement is governed by the Civil Code Law 22/2004.  Decisions made in civil courts can be appealed before the Court of Appeals, or later the Court of Cassation.

Companies registered with the Ministry of Commerce and Industry are subject to Qatari courts and laws—primarily the Commercial Companies’ Law 11/2015—while companies set up through QFC are regulated by commercial laws based on English Common Law and the courts of the QFC Regulatory Authority, per Law 7/2005.  The QFC legal regime is separate from the Qatari legal system—with the exception of criminal law—and is only applicable to companies licensed by the QFC.  Similarly, companies registered within the Qatar Free Zones Authority have specialized regulations.

Laws and Regulations on Foreign Direct Investment

Over the past few years, the Amir enacted Law 1/2019 on Regulating the Investment of Non-Qatari Capital in Economic Activity and Law 16/2018 on Regulating Non-Qatari Ownership and Use of Properties.  These laws are aimed at encouraging greater foreign investment in the economy by authorizing, incentivizing and protecting foreign ownership.

The Ministry of Commerce and Industry’s Invest in Qatar Center is the main investment promotion body.  It has a physical “one-stop-shop” and an online portal.  Preference is given to investments that add value to the local economy and align with the country’s national development plans.  For more information on investment opportunities, commercial registration application and required documentation, visit:  https://invest.gov.qa 

Separate laws and regulations govern foreign direct investment at the Qatar Financial Centre (http://www.qfc.qa/ ), the Qatar Free Zones Authority (https://fza.gov.qa/ ), the Qatar Science and Technology Park (https://qstp.org.qa/ ), and Manateq (https://www.manateq.qa/ ).

Competition and Anti-Trust Laws

Certain sectors are not open for domestic or foreign competition, such as public transportation and fuel distribution and marketing.  Instead, semi-public companies have complete or predominant control of these sectors.  Law 19/2006 for the Protection of Competition and Prevention of Monopolistic Practice established the Competition Protection and Anti-Monopoly Committee in charge of receiving complaints about anti-competition violations.  The law, however, exempts state institutions and government-owned companies.

International law firms with 15 years of continuous experience in their countries of origin are allowed to set up operations in Qatar, but can only become licensed if Qatari authorities deem their fields of specialization useful to Qatar (the Cabinet may grant exemptions).  Cabinet Decision Number 57/2010 states that the Doha office of an international law firm is allowed to practice in Qatar only if its main office in the country of origin remains open for business.

Expropriation and Compensation

Under current legislation (Law 1/2019 and Law 16/2018), the government protects foreign investment and property from direct or indirect expropriation, unless for public benefit, in a non-discriminatory manner, and after providing adequate compensation.  The same procedures are applied to expropriated property of Qatari citizens.  Law 13/1988 covers the rules of expropriation for public benefit.

In 2019, there was one expropriation-related Cabinet decision.  Expropriation is unlikely to occur in the investment zones in which foreigners may purchase or obtain rights to property, although the law does not restrict the power to expropriate in these areas.

Dispute Settlement

ICSID Convention and New York Convention

Qatar has been party to the 1958 New York Convention since 2011 and a member of the International Center for the Settlement of Investment Disputes (ICSID) since 2002.  Qatar enforces foreign arbitral decisions concluded in states that are party to the New York Convention.

Investor-State Dispute Settlement

If investment disputes occur, Qatar accepts binding international arbitration.  Nevertheless, Qatari courts will not enforce judgments or awards from other courts in disputes emanating from investment agreements made under the jurisdiction of other nations.

International Commercial Arbitration and Foreign Courts

The Qatar Financial Centre (QFC) features an Alternative Dispute Resolution (ADR) center.  Although primarily concerned with hearing commercial matters arising from within the QFC itself, the QFC has expanded the court’s jurisdiction to enable it to accept other disputes at its discretion.  The Qatar International Court and Dispute Resolution Center adjudicates disputes brought by firms associated with the QFC in accordance with English common law.

Qatar’s arbitration law (Law 2/2017) based on the United Nations Commission on International Trade Law (UNCITRAL) gives Qatar’s International Court and Dispute Resolution Centre the jurisdiction to oversee arbitration cases in Qatar in line with recent local and international developments.  The purpose of this law is to stimulate and strengthen Qatar’s investment and business environment.

There is no set duration for dispute resolution and the time to obtain a resolution depends on the case.  The Qatar International Court and Dispute Resolution Centre publishes past judgments on its website (https://www.qicdrc.com.qa/the-courts/judgments ).

In order to protect their interests, U.S. firms are advised to consult with a Qatari or foreign-based law firm when executing contracts with local parties.

Bankruptcy Regulations

Two concurrent bankruptcy regimes exist in Qatar.  The first is the local regime, the provisions of which are set out in Commercial Law 27/2006 (Articles 606-846).  The bankruptcy of a Qatari citizen or a Qatari-owned company is rarely announced, and the government sometimes plays the role of guarantor to prop up domestic businesses and safeguard creditors’ rights.  The law aims to protect creditors from a bankrupted debtor whose assets are not sufficient to meet the amount of the debts.  Bankruptcy is punishable by imprisonment, but the prison sentence depends on violations of other penal codes, such as concealment or destruction of company records, embezzlement, or knowingly contributing to insolvency.

The Qatar Central Bank (QCB) established the Qatar Credit Bureau in 2010 to promote credit growth in Qatar.  The Credit Bureau provides QCB and the banking sector with a centralized credit database to inform economic and financial policies and support the implementation of risk management techniques as outlined in the Basel II Accord.

The second bankruptcy regime is found in the Qatar Financial Centre (QFC) Insolvency Regulations of 2005 and applies to corporate bodies and branches registered within the QFC.  There are firms that offer full dissolution bankruptcy services to QFC-registered companies.

The World Bank’s Doing Business Report for 2020 gave Qatar’s resolving insolvency indicator a score of 38 out 100 because of the high cost associated with the process and 2.8 years average required to complete foreclosure proceedings.

Investment Incentives

Qatar does not impose a personal income tax and the new foreign investment law (Law 1/2019) offers a variety of other incentives to foreign investors, which may include the following:

• Exemption from 10 percent corporate tax for a period of up to 10 years.
• Allocation of land by way of a renewable rent for a period of up to 50 years.
• Exemption from customs duties on the imports of necessary machinery and equipment.
• Exemption from customs duties on imports of raw materials or half-manufactured goods necessary for production and not available in the local market, for industrial projects.

Some industrial projects can be established in designated industrial zones governed by the Qatar Free Zones Authority, and are offered the following incentives:

• Exemption from 10 percent corporate tax for a period of up to 20 years.
• Zero custom duties on imports.
• Potential access to a USD 3 billion government-backed fund.

The Ministry of Energy Affairs determines the amount of foreign equity and the extent of incentives for industrial projects, as stipulated by Law 8/2018.  In February 2020, and in line with the government’s efforts to improve the ease of doing business and  enhance the investment environment for owners of small and medium-size enterprises (SMEs), the Ministry of Commerce and Industry in co-operation with Qatar Development Bank, launched the ‘Land and Industrial Loan’ initiative, offering loans and industrial land to SMEs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Qatar has several free zones and business facilitation options:

Qatar Financial Centre (QFC) is an onshore business platform that allows international financial institutions and professional service companies to establish offices in Qatar with 100 percent foreign ownership and full repatriation of profits.  Locally sourced profits are subject to a 10 percent corporate tax.  The QFC has its own independent regulatory regime based on English common law.  The QFC Regulatory Authority acts as the regulator for financial firms operating in the QFC.  The QFC Regulatory Tribunal and Qatar International Court hear and adjudicate cases, though these bodies’ judgments are only of value if enforced by Qatari courts against persons and assets in Qatar.  Goldman Sachs International, Mastercard Gulf, Uber, and Oracle are among the companies registered with QFC.

The Qatar Science and Technology Park (QSTP) is a hub designed to undertake research and development and facilitate the transfer of expertise and technology.  The hub offers grants and incubators to foreign and local innovators.  Licensed foreign companies are permitted 100 percent ownership and full capital and income repatriation benefits.  Companies operating at the QSTP can import goods and services duty free and export goods produced in the park are tax-free.  Firms at the park are also exempt from all taxes, including the 10 percent income tax.  The property of these businesses cannot be seized under any circumstance, but capital and other cash may be seized on the orders of a local court.  Microsoft, ExxonMobil, GE, Cisco, and ConocoPhillips are among QSTP member companies.

In 2018, the government created an independent Free Trade Zone Authority to oversee free zones in Qatar and offer opportunities and benefits to investors.  The Authority currently administers two such free trade zones:  Ras Bufontas near the country’s international airport and Um Alhoul adjacent to the country’s largest commercial seaport.  Additionally, in 2011, Qatar established Manateq, a state-owned company affiliated with the Ministry of Commerce and Industry, to manage and develop economic zones.  Manateq has oversight of one special economic zone (Al Karaana), four logistics parks (​Jery Al Samur, Al Wakra, Birkat Al Awamer and Aba Saleel​), four warehousing parks ​(Bu Fesseela, Bu Sulba, Umm Shaharaine 1, and Umm Shaharaine 2) and one industrial zone (Mesaieed).

In the last two years, the Ministry of Commerce and Industry has also aimed to introduce a public-private partnership (PPP) law to further attract foreign investors.  The draft law is currently under judicial review.

Performance and Data Localization Requirements

There are no laws that obligate the private sector to hire Qatari nationals, but the public sector and institutions working closely with the government on projects and joint ventures are required to hire Qatari nationals—these notably include energy companies operating in Qatar.  Workforce localization policy (known as “Qatarization”) in the public sector is a main focus of the country’s National Vision 2030 and foreign investors wishing to operate fully owned companies will be required to submit a “Qatarization” plan.  Employers are allocated visa slots for the hiring of specific nationalities and such positions are non-transferable without approval of the Ministry of Administrative Development, Labor, and Social Affairs.

While Qatar does not follow a forced localization policy, when competing for government contracts, preferential treatment is given to suppliers that use local content in bids.  Goods produced with Qatari content are also given a 10 percent price preference.  As a rule, participation in government tenders with a value of QAR 5,000,000 or less (equivalent to approximately USD 1.37 million) are limited to local contractors, suppliers, and merchants registered by the Qatar Chamber of Commerce, while tenders with a value of more than this amount do not require any local commercial registration to participate, but in practice certain exceptions exist.

In February 2019, national oil company Qatar Petroleum announced a localization initiative, Tawteen, which, among other things, will require all suppliers for Qatar Petroleum and its subsidiaries, as well as bidders for select contracts, to be assessed by a third-party auditor to determine their In-Country Value (ICV) score.  Qatar Petroleum and its subsidiary companies will assess the ICV score in addition to technical and commercial criteria when evaluating bidders.  The formula for calculating a company’s ICV score may be found here:  https://www.tawteen.com.qa/In-Country-Value-Policy/ICV-Formula-Calculation 

Performance requirements for foreign investment in Qatar do not exist.  Disclosure of financial and employment data is required, but proprietary information is not.

There are no known formalized requirements for foreign IT providers to turn over source code or provide access to surveillance.  The information and communications technology (ICT) sector is regulated by Qatar’s Communications Regulatory Authority, established as an independent body by Amiri Decree 42/2014, under the Ministry of Transport and Communications.  Qatar is the first Gulf nation to enact a Data Protection Law 13/2016, which requires companies to comply with restrictions relating to the collection, disclosure, and safekeeping of personal data.  The regulator responsible for enforcing the Data Protection Law is the Ministry of Transport and Communications.

Real Property

A set of laws, ministerial decrees, and resolutions make up the country’s jurisprudence on property rights and ownership.  Law 16/2018 designates 10 zones in which foreign investors, companies, and real estate developers are permitted full property ownership.  The law also allows foreign investors a right of real estate of up to 99 years in 16 other zones.  Additionally, foreigners may own villas within residential complexes, as well as retail outlets in certain commercial complexes.  In December 2018, a committee was formed under the Ministry of Justice to regulate foreign real estate ownership and use.  According to subsequent regulations announced in March 2019, non-Qatari real estate owners will be granted residency in Qatar for as long as they own their property.

Law 6/2014 regulates real estate development and promulgates that non-Qatari companies should have at least 10 years of experience and headquarters in Qatar to carry out real estate development activities within selected locations.

Property leasehold rights are enforced.  Qatar’s Rent Law 4/2008 protects the lessee and regulates the lessor.  There are a number of enforceable rights granted to the lessee including protection from rent hikes during the lease period and enforcement of the terms of the lease contract should the lessor transfer ownership.  The lessor is also protected from tenants who violate their lease agreements.  Qatar’s Leasing Dispute Settlement Committee enforces these regulations.  The committee hears and issues binding decisions and all lessors are required by law to register their lease agreements with this committee.  The Ministry of Municipality and Environment oversees the preparation of all records related to the selling, leasing, waiver, and bequeathing of real estate.  A reliable electronic database exists to check for encumbrances, including liens, mortgages, and restrictions.  In addition, all titles and deed records are kept in digital format.

Qatar was ranked  first globally for ease of registering property by the World Bank’s 2020 Doing Business Report:  http://www.doingbusiness.org/data/exploreeconomies/qatar#registering-property 

Intellectual Property Rights

Qatar’s intellectual property (IP) legal regime, albeit still developing in capacity, is robust and wide-ranging in terms of the number of laws protecting different types of IP rights.  Qatar has signed many international IP treaties, which are implemented through Qatari laws and regulations.  Qatar’s IP legislation includes the Trademark and Copyright Law (enacted in 2002), the Protection of Trade Secrets and Protection of Layout Design law (2005), and the Patent Law (2006).  These laws grant foreign applicants the same rights as Qataris, provided they are nationals of a state that grants Qatar reciprocal treatment.

Intellectual property owners can apply for IP rights at the Ministry of Commerce and Industry, which is mandated (by Law 20/2014) to enforce IP laws and regulations.  Within the ministry, an IP Protection Department has been set up with offices focusing on trademarks, copyrights, neighboring rights, patents, industrial designs, and innovations.  The following are the periods of validity for the different types of registered iIP:

• Patents:  Valid for 20 years from filing.
  • With regard to pharmaceutical products, the Ministry of Public Health requires registration of all products imported into the country and will not register unauthorized copies of products patented in other countries.  Qatar also recognizes GCC patents on pharmaceutical products.  To obtain patent protection in the GCC, pharmaceutical companies must apply for a GCC patent at the GCC Patent Office.  Once granted, protection should extend to all the GCC countries.

• Copyrights:  Protected for 50 years after the author’s death.
  • Per Qatari law, failure to register at the Ministry of Commerce and Industry will not affect protection of the copyright.  While the law does not protect unpublished works and does not criminalize end-user piracy, Qatar is party to the Berne and Paris Conventions and abides by their mandates concerning unpublished works.  The IP Protection Department works with law enforcement authorities to prosecute resellers of unlicensed video and software.

• Trademarks:  Valid for 10 years but can be renewed indefinitely, while trademarks unused for five consecutive years are subject to cancellation.
  • As part of the GCC Customs Union, inaugurated in 2015, the GCC approved a common trademark law and Qatar is taking steps to enact it.

The law on Intellectual Property Border Protection (Law 17/2011) forbids the import of any products that infringe on any intellectual property rights protected in Qatar and obligates the General Authority of Customs to take measures to prevent the entrance of infringing products.  The law also permits IP rights holders to block the release of imported products that infringe on their rights, given sufficient evidence.  In 2017, the General Authority of Customs launched an electronic system to detect counterfeit goods coming into the country.  The system is accredited by the World Customs Organization and has been introduced to limit  importation of counterfeit goods.  The General Authority of Customs, the Consumer Protection and IP Protection Departments at the Ministry of Commerce and Industry, and the Ministry of Interior conduct surveys, search shops, and seize and destroy counterfeit products.

In 2017, the Cabinet approved a draft law on the protection of industrial designs in an attempt to modernize existing Law 9/2002 on trademarks, trade indications, trade names, geographical indications, and industrial designs and templates.  The new law has not come into force yet.

The existing Penal Code imposes hefty fines on individuals dealing in counterfeit products and imprisonment for offenders convicted of counterfeiting, imitating, fraudulently affixing, or selling products, or offering services of a registered trademark, or other IP violations.  However, the level of awareness about intellectual property rights and enforcement is low among the public.  The IP Protection Department in the Ministry of Commerce and Industry has taken the lead in promoting awareness through workshops and seminars.

The United States Trade Representative Office (USTR) does not consider Qatar a market that engages in, turns a blind eye to, or benefits from piracy and counterfeit products, nor is Qatar listed in USTR’s Special 301 Report.

Qatar is a member of the World Trade Organization and the World Intellectual Property Organization (WIPO), and is a signatory of several WIPO treaties.  For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/wipolex/en/profile.jsp?code=QA .

Resources for Rights Holders

U.S. Patent & Trademark Office
Regional IP Attaché
Peter C. Mehravari, Intellectual Property Attaché for the Middle East & North Africa
U.S. Department of Commerce Foreign Commercial Service, U.S. Patent & Trademark Office
U.S. Embassy Kuwait City, Kuwait
+965 2259 1455
Peter.mehravari@trade.gov
Web:  https://www.uspto.gov/learning-and-resources/ip-policy/intellectual-property-rights-ipr-attach-program/intellectual 

United States Trade Representative
IPR Director for the GCC
Jacob Ewerdt
+1-202-395-3866
Jacob.p.ewerdt@ustr.eop.gov 
Web:  http://www.ustr.gov 

A list of local attorneys that may be able to provide assistance in pursuing IP protections and enforcement claims in Qatar can be found on the U.S. Embassy Doha website:  https://qa.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Capital Markets and Portfolio Investment

Foreign portfolio investment has been permitted since 2005.  There is no restriction on the flow of capital in Qatar.  The Qatar Central Bank (QCB) adheres to conservative policies aimed at maintaining steady economic growth and a stable banking sector.  Loans are allocated on market terms, and foreign companies are essentially treated the same as local companies.

Currently, foreign ownership is limited to 49 percent of Qatari companies listed on the Qatar Stock Exchange.  Foreign capital investment up to 100 percent is permitted in most sectors upon approval of an application submitted to the Invest in Qatar Center under the Ministry of Commerce and Industry.  Foreign portfolio investment in national oil and gas companies or companies with the right of exploration of national resources cannot exceed 49 percent.

Almost all import transactions are controlled by standard letters of credit processed by local banks and their correspondent banks in the exporting countries.  Credit facilities are provided to local and foreign investors within the framework of standard international banking practices.  Foreign investors are usually required to have a guarantee from their local sponsor or equity partner.  In accordance with QCB guidelines, banks operating in Qatar give priority to Qataris and to public development projects in their financing operations.  Additionally, single customers may not be extended credit facilities by a bank exceeding 20 percent of the bank’s capital and reserves.  QCB does not allow cross-sharing arrangements among banks.  QCB requires banks to maintain a maximum credit ratio of 90 percent.  QCB respects IMF Article VIII and does not restrict payments or transfers for international transactions.

Qatar has become an important banking and financial services center in the Gulf region.  Qatar’s monetary freedom score is 72.6 out of 100 (“mostly-free”) and it ranks 28th out of 180 countries in the 2019 Index of Economic Freedom, according to the Heritage Foundation.  Qatar is ranked third in the Middle East/North Africa region in terms of economic freedom and its overall score is above the world average.

Money and Banking System

There are 17 licensed banks in Qatar, seven of which are foreign institutions.  Qatar also has 20 exchange houses, six investment and finance companies, 16 insurance companies, and 17 investment funds.  Other foreign banks and financial institutions operate under the Qatar Financial Center’s platform, but they are not licensed by the Qatar Central Bank (QCB) and are regulated by the Qatar Financial Center Regulatory Authority.  The country is home to the Qatar National Bank, the largest financial institution in the Middle East and Africa, with total assets exceeding USD 229.1 billion.

The QCB, as the financial regulator, continues to introduce incentives for local banks to ensure a strong financial sector that is resilient during economic volatility.  The QCB manages liquidity by mandating a reserve ratio of 4.5 percent and utilizing treasury bonds, bills, and other macroprudential measures.  Banks that do not abide by the required reserve ratio are penalized.  QCB uses repurchase agreements, backed by government securities, to inject liquidity into the banks.  According to QCB data, total domestic liquidity reached USD 158.8 billion in December of 2019.  The IMF estimated that 1.7 percent of Qatar’s bank loans in 2019 were nonperforming.  International ratings agencies have expressed confidence in the financial stability of the country’s banks, given liquidity levels and strong earnings.

Cryptocurrency trading is illegal in Qatar, per a 2018 Qatar Central Bank circular.  In January 2020, the Qatar Financial Centre Regulatory Authority (QFCRA) announced that firms operating under the Qatar Finance Center are not permitted to provide or facilitate the provision or exchange of crypto assets and related services.

To open a bank account in Qatar, foreigners must present proof of residency.

Foreign Exchange and Remittances

Foreign Exchange

Due to minimal demand for the Qatari riyal outside Qatar and the national economy’s dependence on oil and gas revenues, which are priced in dollars, the government has pegged the riyal to the U.S. dollar.  The official peg is QAR 1.00 per USD 0.27 or USD 1.00 per QAR 3.64, as set by the government in June 1980 and reaffirmed by Amiri decree 31/2001.

In implementing the provisions of Law No. 20/2019 on Combating Money Laundering and Terrorism Financing and following the issuance of Cabinet Resolution No. 41/2019, starting February 27, 2020, travelers to or from Qatar are required to complete a declaration form upon entry or departure, if carrying cash, precious metals, financial instruments, or jewelry, valued at fifty thousand Qatari Riyals or more ($13,7000).

Remittance Policies

Qatar neither delays remittance of foreign investment returns nor restricts transfer of funds associated with an investment, such as return on dividends, return of capital, interest and principal payments on private foreign debt, lease payments, royalties, management fees, amounts generated from sale or liquidation, amounts garnered from settlements and disputes, and compensation from expropriation to financial institutions outside Qatar.

In accordance with Law 20/2019 on Combating Money Laundering and Terrorism Financing, the Qatar Central Bank requires financial institutions to apply due diligence prior to establishing business relationships, carrying out financial transactions, and performing wire transfers.  Executive regulations for this law were published in December 2019 and they promulgate that originator information should be secured when a wire transfer exceeds QAR 3,500 (USD 962).  Similarly, due diligence is required when a customer is completing occasional transactions in a single operation or several linked operations of an amount exceeding QAR 50,000 (USD 13,736).

Qatar is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body.  Qatar will undergo its next MENAFATF mutual evaluation in 2021.  In July 2017, Qatar signed a counterterrorism MOU with the United States, which includes information sharing, training, enhanced cooperation, and other deliverables related to combating money laundering and terrorism financing.

Sovereign Wealth Funds

The Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, was established by Amiri Decree 22/2005.  QIA is overseen by the Supreme Council for Economic Affairs and Investment, chaired by the Amir, and does not disclose its assets (independent analysts estimate QIA’s holdings at around USD 330 billion).  QIA pursues direct investments and favors luxury brands, prime real estate, infrastructure development, and banks.  Various QIA subsidiaries invest in other sectors, as well.

In September 2015, QIA opened an office in New York City to facilitate over USD 45 billion allocated for investments in the United States over the course of five years.  QIA’s real estate subsidiary, Qatari Diar, has operated an office in Washington, D.C. since 2014.

QIA was one of the early supporters of the Santiago Principles and among the few members who drafted the initial and final versions of the principles, and continues to be a proactive supporter of its implementation.  QIA was also a founding member of the IMF-hosted International Working Group of Sovereign Wealth Funds.  QIA fully supported the establishment of the International Forum of Sovereign Wealth Funds (IFSWF) and helped create the Forum’s constitution.

The State Audit Bureau oversees state-owned enterprises (SOEs), several of which operate as monopolies or with exclusive rights in most economic sectors.  Despite the dominant role of SOEs in Qatar’s economy, the government has affirmed support for the local private sector and encourages small and medium-sized enterprise development as part of its National Vision 2030.  The Qatari private sector is favored in bids for local contracts and generally receives favorable terms for financing at local banks.  The following are Qatar’s major SOEs:

Energy and Power:

• Qatar Petroleum (QP), its subsidiaries, and its partners operate all oil and gas activities in the country.  QP is wholly owned by the government.  Non-Qataris are permitted to invest in stock exchange listed subsidiaries, but shareholder ownership is limited to two percent and total non-Qatari ownership to 49 percent.
• Qatar General Electricity and Water Corporation (Kahramaa) oversees all water and electricity activities and is majority-owned by Qatari government entities.  Government officials signaled intentions to  privatize segments of the water and electricity sectors.  A first step in this direction occurred when the Ras Laffan Power Company, which is 55 percent owned by a U.S. company, was established in 2001.  As part of its National Vision 2030 to diversify the economy, Qatar will boost investments in renewable energy, led by Kahramaa, with a view to generate 10 GW of solar capacity annually, or the equivalent of 20 percent of Qatar’s electricity needs.

Aerospace:

• Qatar Airways is the country’s national carrier, wholly owned by the state.

Services:

• Qatar General Postal Corporation is the state-owned postal company.  Several other delivery companies are allowed to compete in the courier market:  Aramex, DHL Express, and FedEx Express.

Information and Communication:

• Ooredoo Group is a telecommunications company founded in 2013.  It is the dominant player in the Qatari telecommunications market and is 68 percent owned by Qatari government entities.  Ooredoo (previously known as Q-Tel) dominates both the mobile and fixed line telecommunications markets in Qatar.
• Vodafone Qatar, the only other telecommunications operator in Qatar at present, is owned by the semi-governmental Qatar Foundation, Qatari government entities, and Qatar-based investors.  In 2017, Vodafone Qatar announced that it achieved 21 percent market share in Qatar.

Qatari SOEs may adhere to their own corporate governance codes and are not required to follow the OECD Guidelines on Corporate Governance.  Some SOEs publish online corporate governance reports to encourage transparency, but there is no general framework for corporate governance across all Qatari SOEs.  When an SOE is involved in an investment dispute, the case is reviewed by the appropriate sector regulator.

Privatization Program

There is no ongoing official privatization program for major SOEs.  Qatar Airways executives state the government plans to take the company public within the next decade.

There is a general awareness in Qatar of responsible business conduct.  In 2007, Qatar created the Corporate Social Responsibility (CSR) Network, a research and reporting entity that publishes annual reports highlighting best practices and honoring CSR leaders in the country.  Many companies in Qatar publicize their CSR initiatives.

Sustainability is the focus of the National Development Strategy 2018-2022, released in March 2018; it is also an important goal of the National Vision 2030.  Law 30/2002 is the main legislation protecting the environment.  It prohibits the use of polluting equipment, machineries, and vehicles, and restricts the dumping and treatment of liquid or solid wastes to certain designated areas.  The law also limits emissions of harmful vapors, gases, and smoke by the energy sector.  This applies to all companies working in exploration and production of crude oil and natural gas.

The Ministry of Commerce and Industry has a dedicated Consumer Protection and Combating Commercial Fraud Department which has intensified its efforts in recent years by increasing the monitoring of records and inspection of stores and factories that sell or manufacture counterfeit goods.  The Ministry prosecutes violators when business misconduct is detected or reported and announces these violations publicly.  The Government of Qatar maintains a reporting regime for suspicious transactions and requirements for consumer due diligence and record keeping.

As an economy dependent on extractive industries, Qatar participates in the Extractive Industries Transparency Initiative (EITI).  Nonetheless, the Qatari government has not improved transparency regarding its management of the petroleum industry, as no regulatory body oversees resources extraction or revenue management.  Moreover, Qatar has no freedom of information law.

With regard to labor and human rights, Qatari law prohibits all forms of forced or compulsory labor and reserves two percent of jobs in government agencies and public institutions for persons with disabilities.  The law also prohibits employment of children under 16 years old.  The Ministry of Administrative Development, Labor, and Social Affairs (MADLSA); the Ministry of Interior; and the National Human Rights Committee (NHRC) conduct training sessions for migrant laborers to educate them on their rights in the country.  International media and human rights organizations continue to allege numerous abuses against foreign workers, including forced or compulsory labor, withheld wages, unsafe working conditions, and poor living accommodations.  In January 2018, the United States and Qatar signed a government-level memorandum of understanding to exchange expertise and foster capacity building in combating human trafficking.  In March 2019, the Department of Labor and MADLSA signed an MOU on labor, which focuses on two pillars:  labor inspections and protecting domestic workers’ rights in Qatar.

Some non-governmental organizations (NGOs) in Qatar focus on labor rights and often work in conjunction with the government.  Researchers from international NGOs such as Amnesty International and Human Rights Watch continue to visit and report on the country with limited interference from authorities.  International labor NGOs have been able to send researchers to Qatar under the sponsorship of academic institutions and quasi-governmental organizations such as the NHRC.

Corruption in Qatar does not generally affect business although the power of personal connections plays a major role in business culture.  Qatar is one of the least corrupt countries in the Middle East and North Africa, according to Transparency International’s 2019 Corruption Perceptions Index, and ranked 30 out of 180 nations globally with a score of 62 out of 100, with 100 indicating full transparency.

Qatari law imposes criminal penalties to combat corruption by public officials and the government practices these laws.  In recent years, corruption and misuse of public money has been a focus of the executive office.  Decree 6/2015 restructured the Administrative Control and Transparency Authority, granting it juridical responsibility, its own budget, and direct affiliation with the Amir’s office.  The objectives of the authority are to prevent corruption and ensure that ministries and public employees operate with transparency.  It is also responsible for investigating alleged crimes against public property or finances perpetrated by public officials.  Law 22/2015 imposes hefty penalties for corrupt officials and Law 11/2016 grants the State Audit Bureau more financial authority and independence, allowing it to publish parts of its findings (provided that confidential information is removed),which it was not previously empowered to do.

In 2007, Qatar ratified the UN Convention for Combating Corruption (through Amiri Decree 17/2007) and established a National Committee for Integrity and Transparency, (through Amiri Decree 84/2007).  The permanent committee is headed by the Chairman of the State Audit Bureau.  Qatar also opened the Anti-Corruption and Rule of Law Center in 2013 in Doha in partnership with the United Nations.  The purpose of the center is to support, promote, and disseminate legal principles to fight against corruption.

Those convicted of embezzlement and damage to the public treasury are subject to terms of imprisonment of no less than five and up to ten years.  The penalty is extended to a minimum term of seven and a maximum term of fifteen years if the perpetrator is a public official in charge of collecting taxes or exercising fiduciary responsibilities over public funds.  Investigations into allegations of corruption are handled by the Qatar State Security Bureau and Public Prosecution.  Final judgments are made by the Criminal Court.

Bribery is also a crime in Qatar and the law imposes penalties on public officials convicted of taking action in return for monetary or personal gain, or for other parties who take actions to influence or attempt to influence a public official through monetary or other means.  The current Penal Code (Law 11/2004) governs corruption law and stipulates that individuals convicted of bribery may be sentenced up to ten years imprisonment and a fine equal to the amount of the bribe but no less than USD 1,374.

The Procurement Law 24/2015 is designed to promote a fair, transparent, simple, and expeditious tendering process.  It abolishes the Central Tendering Committee and establishes a Procurement Department within the Ministry of Finance that has oversight over the majority of government tenders.  The new department has an online portal that consolidates all government tenders and provides relevant information to interested bidders, facilitating the process for foreign investors (https://monaqasat.mof.gov.qa ).

Despite these efforts, some American businesses continue to cite lack of transparency in government procurement and customs as recurring issues encountered in the Qatari market.  U.S. investors and Qatari nationals who happen to be agents of U.S. firms are subject to the provisions of the U.S. Foreign Corrupt Practices Act.

Qatar is not a party to the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials.

Resources to Report Corruption

In 2015, the Public Prosecution’s Anti-Corruption Office launched a campaign encouraging the public to report corruption and bribery cases, establishing hotlines and a tip reporting inbox and vowing to protect the confidentiality of submitted information:

Public Prosecution
Anti-Corruption Office
Hotlines:  +974-3353-1999 and +974-3343-1999
aco@pp.gov.qa

Qatar is a politically stable country with low crime rates.  There are no political parties, labor unions, or organized domestic political opposition.  The U.S government rates Qatar as medium for terrorism, which includes threats from transnational groups.

In June 2017,  Saudi Arabia, United Arab Emirates, Bahrain, and Egypt severed diplomatic and economic ties with Qatar.  This geopolitical rift did not alter the political and security environment for U.S. investors in Qatar.

U.S. citizens in Qatar are encouraged to stay in close contact with the State Department and the U.S. Embassy in Doha for up-to-date threat information.  U.S. visitors to Qatar are invited to enroll in the State Department’s Smart Traveler Enrollment Program to receive further information regarding safety conditions in Qatar:  https://step.state.gov/step/.

According to the World Bank’s Migration & Remittances Fact Book 2016, Qatar has the world’s highest migrant workers to population ratio, with foreigners making up around 90 percent of the country’s population.  Qatar’s labor force consists primarily of expatriate workers.  In the private sector, foreigners make up nearly 95 percent of the labor force per statistics published by Qatar’s  Planning and Statistics Authority.  Qatar’s resident population is estimated at 2.8 million as of February 2020, doubling in the last decade.  Qatari citizens are estimated to number approximately 300,000 – around 11 percent of the total population.  The largest group of foreign workers comes from the Indian sub-continent.  Men make up around 75 percent of the population.

Unemployment rates in Qatar are among the lowest in the world, with 0.1 percent unemployment rate for men and 0.4 percent unemployment rate for women as of the third quarter of 2019.  The Ministry of Administrative Development, Labor, and Social Affairs (MADLSA) regulates recruitment of expatriate labor.  Article 18 of Labor Law 14/2004, gives priority to hiring Qataris in the private sector, unless hiring non-Qataris is necessary.  Amiri Decree 44 for 2008, mandates that around 80 private companies  have no less than 20% Qataris in their workforce. The public sector and institutions working closely with the government on projects and joint ventures are  required to hire Qatari nationals, examples include energy companies operating in Qatar.

Labor Law 14/2004 largely governs employment in Qatar and provides for terminating  employment  without  requiring the terminating party to give reasons.  The law requires employers to pay employees due wages and other benefits in full, provided that employees performed expected work duties  during the notice period, which varies based on years of employment.  Companies registered with Qatar Financial Centre (QFC) are governed by the English common law, and labor issues are administered by QFC’s Regulation 10/2006.  The rules that govern recruitment and immigration of QFC employees differ from those that govern other expatriate employees in the country.

Law 12/2004 of Private Associations and Foundations and subsequent regulations grant Qatari citizens the right to form workers’ committees in private enterprises with more than 100 Qatari citizen workers.  Qatari citizens employed in the private sector also have the right to participate in approved strikes, but the restrictive conditions imposed by the law make the likelihood of an approved strike remote.  There are no labor unions in the country.  Non-citizens are not eligible to form worker committees or go on strike, though according to an agreement between the MADLSA and the International Labor Organization (ILO), joint worker committees including 50-50 representation of workers and employers exist in a small number of cases for all medium to large-sized companies.  Individuals working in the government sector, regardless of nationality, are prohibited from joining unions.  Over three-quarters of Qatari citizens are employed by the government.  Workers at labor camps occasionally go on strike over non-payment or delayed payment of wages, however, this practice is technically illegal.

Local courts handle disputes between workers and employers though the process is widely regarded as inefficient.  In an effort to speed up the process of resolving labor disputes, the government established  Labor Disputes Settlement Committees headed by a judge and representatives from the MADLSA.  As of March 2018, there are three such committees, all of which operate outside of the traditional Supreme Judicial Committee structure and are required to address any complaints within three weeks, though anecdotally we hear that a resolution can still take much longer than the three week window.

A new law that would increase the minimum wage to approximately USD 300 per month is currently being debated by the Shura Council.  At present, a recommended minimum wage of USD 195 per month exists, but is not enforced.  In addition, many embassies via bilateral work agreements set minimum wages for their citizens.  To combat the problem of late and unpaid wages, the government issued Law 1/2015 amending certain provisions of Labor Law 14/2004 on wage protection and mandating electronic payment to all employees subject to the local labor law.  The law does not apply to domestic workers.  The government requires all employers to open bank accounts for their employees and pay wages electronically through a system subject to audits by an inspection division at the MADLSA.  Employers who fail to pay their workers face penalties of USD 550 – USD 1,650 per case and possible prison sentences.  Those penalties are, however, rarely  implemented.  The system currently applies to over 1.4 million workers.

In an effort to eliminate forced labor, the government issued reforms to the sponsorship system (Law 21/2015), which  enables employees to switch employers at the end of their contract, without requiring employer’s  permission.  In September 2018, Qatar issued Law 13/2018, which allows workers  covered by the Labor Law  to leave the country without requiring exit permits from their employers.  A new law in 2020 will extend this mandate to domestic employees and government workers, who  now comprise  the majority of the workforce.  The Qatari Cabinet proposed in 2020 a new law to facilitate switching employers by abolishing the previous requirement for a no-objection certificate from the previous employer.  The law will not go into effect until the draft is  approved by the Shura Council and the Amiri Diwan.  The Labor Law prohibits the withholding of workers’ passports by employers and stiffens penalties for transgressors.

To protect workers from fraudulent employment contracts, the Ministry of Interior signed an agreement with a Singaporean company in November 2017 to establish Qatar Visa Centers (QVCs) with the goal of simplifying residency procedures for expat workers from India, Nepal, Sri Lanka, Pakistan, Bangladesh, Indonesia, the Philippines, and Tunisia, which together comprise 80 percent of Qatar’s workforce.  In partnership with both MOI and MADLSA,  contracted companies established QVCs in these countries to facilitate biometric enrollment, medical records verification, and  signing  work contracts before contracted workers enter Qatar.  To date, QVCs have been established in Sri Lanka, Pakistan, Bangladesh, Kenya, Philippines, Tunisia, and India.

Qatar is a member of the ILO and maintains that its labor law meets ILO minimum requirements.  In November 2017, Qatar made commitments to address some ILO complaints by launching a comprehensive three-year ILO technical cooperation program.  In 2018, the ILO opened a Doha office.

In January 2018, the Qatari Minister of Foreign Affairs signed an MOU with the U.S. Department of State during the U.S.-Qatar Strategic Dialogue.  The MOU laid out plans for cooperation in combating trafficking-in-persons, including strengthening the labor sector to reduce instances of forced labor.  In March 2019, the MADLSA signed a new MOU with the US Department of Labor to enhance cooperation in the fields of labor inspection and protecting domestic workers rights.

U.S. International Development Finance Corporation (DFC) has not maintained a presence in Qatar since 1995.  Qatar is a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

* Source for Host Country Data: Qatar’s Planning and Statistics Authority
https://www.psa.gov.qa/en/ 

* Source: 2018 Data form Qatar’s Planning and Statistics Authority https://www.psa.gov.qa/en/ 

Table 4: Sources of Portfolio Investment 
Data not available.

Economic Specialist
U.S. Embassy
22nd February Street, Al Luqta District, P.O. Box 2399, Doha, Qatar
+974-4496-6000
EskandarGA@state.gov

Policies Towards Foreign Direct Investment

The UK encourages foreign direct investment.  With a few exceptions, the government does not discriminate between nationals and foreign individuals in the formation and operation of private companies.  The Department for International Trade actively promotes direct foreign investment, and prepares market information for a variety of industries.  U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders. Once established in the UK, foreign-owned companies are treated no differently from UK firms.  The British Government is a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership, reflected in the fact that the UK has never had to defend an investment dispute at the level of international arbitration.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is limited in only a few strategic private sector companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense).  No individual foreign shareholder may own more than 15 percent of these companies.  Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act of 1975, but it has never done so.  Investments in energy and power generation require environmental approvals. Certain service activities (like radio and land-based television broadcasting) are subject to licensing.  The Enterprise Act of 2002 extends powers to the UK government to intervene in mergers which might give rise to national security implications and into which they would not otherwise be able to intervene.

The UK requires that at least one director of any company registered in the UK be ordinarily resident in the UK.  The UK, as a member of the Organization for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalization and is committed to minimizing limits on foreign investment.

While the UK does not have a formalized investment review body to assess the suitability of foreign investments in national security sensitive areas, an ad hoc investment review process does exist and is led by the relevant government ministry with regulatory responsibility for the sector in question (e.g., the Department for Business, Energy, and Industrial Strategy would have responsibility for review of investments in the energy sector).  U.S. companies have not been the target of these ad hoc reviews.  The UK is currently considering ways to revise its rules related to foreign direct investment that may implicate UK national security interests. (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690623/Government_Response_final.pdf ).  The Government has proposed to amend the turnover threshold and share-of-supply tests within the Enterprise Act 2002, in orderto give the Government more leeway to examine and potentially intervene in high-risk mergers that currently fall outside the thresholds in two areas: (i) the dual use and military use sector and, (ii) parts of the advanced technology sector.  For these areas only, the Government proposes to lower the turnover threshold from £70 million ($92 million) to £1 million ($1.3 million) and remove the current requirement for the merger to increase the share of supply to or over 25 percent.

Other Investment Policy Reviews

The Economist’s “Intelligence Unit”, World Bank Group’s “Doing Business 2018”, and the OECD’s “Economic Forecast Summary (May 2019) have current investment policy reports for the United Kingdom:

http://country.eiu.com/united-kingdom 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/ 
http://www.oecd.org/economy/united-kingdom-economic-forecast-summary.htm 

Business Facilitation

The UK government has promoted administrative efficiency  to facilitate business creation and operation.  The online business registration process is clearly defined, though some types of company cannot register as an overseas firm in the UK, including partnerships and unincorporated bodies.  Registration as an overseas company is only required when the company has some degree of physical presence in the UK.  After registering their business with the UK governmental body Companies House, overseas firms must separately register to pay corporation tax within three months.  On average, the process of setting up a business in the UK requires thirteen days, compared to the European average of 32 days, putting the UK in first place in Europe and sixth in the world.  As of April 2016, companies have to declare all “persons of significant control.”  This policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.  More information is available at this link: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships .  Companies House maintains a free, publicly searchable directory, available at this link: https://www.gov.uk/get-information-about-a-company .  

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the World Bank’s Investing Across Sectors indicators.  As in all other EU member countries, foreign equity ownership in the air transportation sector is limited to 49 percent for investors from outside of the European Economic Area (EEA).  It remains to be determined how this will change after the UK leaves the transition period with the EU on December 31, 2020.  https://invest.great.gov.uk/int/ 

https://www.gov.uk/government/organisations/department-for-international-trade 
https://www.gov.uk/set-up-business 
https://www.gov.uk/topic/company-registration-filing/starting-company 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business 

Special Section on the British Overseas Territories and Crown Dependencies

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus.  The BOTs retain a substantial measure of responsibility for their own affairs.  Local self-government is usually provided by an Executive Council and elected legislature.  Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security.  However, the UK imposed direct rule on the Turks and Caicos Islands in August 2009 after an inquiry found evidence of corruption and incompetence.  Its Premier was removed and its constitution was suspended.  The UK restored Home Rule following elections in November 2012.

Many of the territories are now broadly self-sufficient.  However, the UK’s Department for International Development (DFID) maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.  This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development in order to promote economic self-sustainability.  In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS and child protection.

Seven of the BOTs have financial centers:  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands.  These Territories have committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.  They are already exchanging information with the UK, and began exchanging information with other jurisdictions under the CRS from September 2017.

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has rated Anguilla as “partially compliant” with the internationally agreed tax standard.  Although Anguilla sought to upgrade its rating in 2017, it still remains at “partially compliant” as of May 2020.  The Global Forum has rated the other six territories as “largely compliant.”  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar and the Turks and Caicos Islands have also committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.  These arrangements came into effect in June 2017.

Anguilla:  Anguilla is a neutral tax jurisdiction.  There are no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction.  The territory has no exchange rate controls.  Non-Anguillan nationals may purchase property, but the transfer of land to an alien includes an additional 12.5 percent surcharge.

British Virgin Islands:  The government of the British Virgin Islands welcomes foreign direct investment and offers a series of incentive packages aimed at reducing the cost of doing business on the islands.  This includes relief from corporation tax payments over specific periods but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission.  Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License.  Stamp duty is imposed on transfer of real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate of 4 percent for belongers (i.e., residents who have proven they meet a legal standard of close ties to the territory) and 12 percent for non-belongers.  There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act.  Payroll tax is imposed on every employer and self-employed person who conducts business in BVI.  The tax is paid at a graduated rate depending upon the size of the employer.  The current rates are 10 percent for small employers (those which have a payroll of less than $150,000, a turnover of less than $300,000 and fewer than 7 employees) and 14 percent for larger employers.  Eight percent of the total remuneration is deducted from the employee, the remainder of the liability is met by the employer.  The first $10,000 of remuneration is free from payroll tax.

Cayman Islands:  There are no direct taxes in the Cayman Islands.  In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale; however, certain districts, including Seven Mile Beach, are subject to a rate of nine percent.  There is a one percent fee payable on mortgages of less than KYD 300,000, and one and a half percent on mortgages of KYD 300,000 or higher.  There are no controls on the foreign ownership of property and land.  Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands:  Companies located in the Falkland Islands are charged corporation tax at 21 percent on the first GBP one million and 26 percent for all amounts in excess of GBP one million.  The individual income tax rate is 21 percent for earnings below $15,694 (GBP 12,000) and 26 percent above this level.

Gibraltar:  The government of Gibraltar encourages foreign investment.  Gibraltar has a stable currency and few restrictions on moving capital or repatriating dividends.  The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 10 percent for all other companies.  There are no capital or sales taxes.  Gibraltar is unique among British Overseas Territories in having been a part of the European Union’s single market,    Gibraltar left the EU with the rest of the UK and its final status is currently subject to negotiations between the UK and Spain.

Montserrat:  The government of Montserrat welcomes new private foreign investment.  Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license which carries a fee of five percent of the purchase price.  The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions.  Foreign investment in Montserrat is subject to the same taxation rules as local investment, and is eligible for tax holidays and other incentives.  Montserrat has preferential trade agreements with the United States, Canada, and Australia.  The government allows 100 percent foreign ownership of businesses but the administration of public utilities remains wholly in the public sector.

St. Helena:  The island of St. Helena is open to foreign investment and welcomes expressions of interest from companies wanting to invest.  Its government is able to offer tax based incentives which will be considered on the merits of each project – particularly tourism projects.  All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands:  The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles.  The territory does not have an airstrip or safe harbor.  Residents exist on fishing, subsistence farming, and handcrafts.

The Turks and Caicos Islands:  The islands operate an “open arms” investment policy.  Through the policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors.  The islands have a “no tax” status, but property purchasers must pay a stamp duty on purchases over $25,000.  Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to $250,000, eight percent for purchases $250,001 to $500,000, and 10 percent for purchases over $500,000.

The Crown Dependencies:

The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey and the Isle of Man.  The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown.  This means they have their own directly elected legislative assemblies, administrative, fiscal and legal systems and their own courts of law.  The Crown Dependencies are not represented in the UK Parliament.

Jersey has a  zero percent standard rate of corporate tax .  The exceptions to this standard rate are financial service companies, which are taxed at 10 percent, utility companies, which are taxed at 20 percent, and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent.  VAT is not applicable in Jersey as it is not part of the EU VAT tax area.

Guernsey has a zero percent rate of corporate tax.  Exceptions include some specific banking activities, taxed at 10 percent, utility companies, which are taxed at 20 percent, Guernsey residents’ assessable income is taxed at 20 percent, and income derived from land and buildings is taxed at 20 percent.

The Isle of Man’s corporate standard tax is zero percent.  The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent and income received from land and property in the Isle of Man which is taxed at 20 percent.  In addition, a 10 percent tax rate also applies to companies who carry on a retail business in the Isle of Man and have taxable income in excess of £500,000 from that business.  VAT is applicable in the Isle of Man as it is part of the EU customs territory.

The tax data above are current as of April 2020.

Outward Investment

The UK remains one of the world’s largest foreign direct investors, currently ranked fourth.  The UK’s international investment position abroad (outward investment) increased from GBP 1,713.3 billion in 2018 to GBP 1,857.7 in 2019, dropping to .   GBP 1,805 billion by the end of 2019.  The main destination for UK outward FDI is the United States, which accounted for approximately 21 percent of UK outward FDI  at the end of 2018.  Other key destinations include the Netherlands, Luxembourg, France, and Spain which, together with the United States, account for a little under half of the UK’s outward FDI stock.

The UK’s international investment position within the Americas was GBP 419.7 billion in 2018.  This is the largest recorded value in the time series since 2009 for the Americas.

Transparency of the Regulatory System

U.S. exporters and investors generally will find little difference between the United States and UK in the conduct of business.  The regulatory system provides clear and transparent guidelines for commercial engagement.  Common law prevails in the UK as the basis for commercial transactions, and the International Commercial Terms (INCOTERMS) of the International Chambers of Commerce are accepted definitions of trading terms.  In terms of accounting standards and audit provisions firms in the UK must use the International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) and approved by the European Commission, at least currently.  The UK’s Accounting Standards Board provides guidance to firms on accounting standards and works with the IASB on international standards.

Statutory authority over prices and competition in various industries is given to independent regulators, for example the Competition and Markets Authority (CMA), Office of Communications (Ofcom), the Water Services Regulation Authority (Ofwat), the Office of Gas and Electricity Markets (Ofgem), the Rail Regulator, and the Prudential Regulatory Authority (PRA).  The PRA was created out of the dissolution of the Financial Services Authority (FSA) in 2013.  The PRA reports to the Financial Policy Committee (FPC) in the Bank of England.  The PRA is responsible for supervising the safety and soundness of individual financial firms, while the FPC takes a systemic view of the financial system and provides macro-prudential regulation and policy actions.  The CMA acts as a single integrated regulator focused on enforcement of the UK’s competition laws.  The Financial Conduct Authority (FCA) is a regulator that addresses financial and market misconduct through legally reviewable processes.  These regulators work to protect the interests of consumers while ensuring that the markets they regulate are functioning efficiently.  Most laws and regulations are published in draft for public comment prior to implementation.  The FCA maintains a free, publicly searchable register of their filings on regulated corporations and individuals here: https://register.fca.org.uk/ . 

The UK government publishes regulatory actions, including draft text and executive summaries, on the Department for Business, Energy & Industrial Strategy webpage listed below.  The current policy requires the repeal of two regulations for any new one in order to make the business environment more efficient.

Unlike the United States, the UK currently lacks independent authority in setting its regulatory regime.  As long as the UK remains in the transition period with the European Union, it must comply with and enforce EU regulations and directives.  Any U.S. government concerns about the degree of transparency and accountability in the EU regulatory process therefore also apply to the UK as an EU member state.  The extent to which the UK will maintain the EU regulatory regime after the UK withdraws from the EU is unknown at this time.  The UK is expected to leave the EU’s economic relationships on December 31, 2020.

https://www.gov.uk/government/policies/business-regulation 
https://www.gov.uk/government/organisations/regulatory-delivery 

International Regulatory Considerations

The UK’s withdrawal from the EU may result in a period in which the future regulatory direction of the UK is uncertain as the UK determines the extent to which it will either maintain and enforce the current EU regulatory regime or deviate towards new regulations in any particular sector.  The UK is an independent member of the WTO, and actively seeks to comply with all WTO obligations.

Legal System and Judicial Independence

The UK is a common-law country.  UK business contracts are legally enforceable in the UK, but not in the United States or other foreign jurisdictions.  International disputes are resolved through litigation in the UK Courts or by arbitration, mediation, or some other alternative dispute resolution (ADR) method.  The UK has a long history of applying the rule of law to business disputes; judicial proceedings have a reputation for being competent, fair, and reliable, which helps position London as an international hub for dispute resolution with over 10,000 cases filed per annum.

Laws and Regulations on Foreign Direct Investment

There are few statutes governing or restricting foreign investment in the UK.  The procedure for establishing a company in the UK is identical for British and foreign investors.  No approval mechanisms exist for foreign investment, apart from the ad hoc process outlined in Section 1.  Foreigners may freely establish or purchase enterprises in the UK, with a few limited exceptions, and acquire land or buildings.  As noted above, the UK is currently reviewing its procedures and has proposed new rules for restricting foreign investment in those sectors of the economy with higher risk for affecting national security.

Alleged tax avoidance by multinational companies, including several major U.S. firms, has been a controversial political issue and subject of investigations by the UK Parliament and EU authorities.  Foreign and UK firms are subject to the same tax laws, however, and several UK firms have also been criticized for tax avoidance.  Foreign investors may have access to certain EU and UK regional grants and incentives designed to attract industry to areas of high unemployment, but these do not include tax concessions.  Access to EU grants will end after December 31, 2020.

In 2015, the UK flattened its structure of corporate tax rates.  The UK currently taxes corporations at a flat rate of 19 percent, with certain exceptions,, with marginal tax relief granted for companies with profits falling between $391,000 (GBP 300,000) and $1.96 million (GBP 1.5 million).  Tax deductions are allowed for expenditure and depreciation of assets used for trade purposes.  These include machinery, plant, industrial buildings, and assets used for research and development.  A special rate of 20 percent is given to unit trusts and open-ended investment companies.  Companies that make profits from oil extraction or oil rights in the UK, including its continental shelf, are known as “ring fence” companies.  Small ”ring fence” companies are taxed at a rate of 19 percent for profits up to $391,000 (GBP 300,000), and 30 percent for profits over $391,000 (GBP 300,000).

The UK has a simple system of personal income tax.  The marginal tax rates for 2019-2020 are as follows: up to GBP 12,500, zero percent; GBP 12,501 to GBP 50,000, 20 percent; GBP 50,001 to GBP 150,000, 40 percent; and over GBP 150,000, 45 percent.

UK citizens also make mandatory payments of about 12 percent of income into the National Insurance system, which funds social security and retirement benefits.  The UK requires non-domiciled residents of the UK to either pay tax on their worldwide income or the tax on the relevant part of their remitted foreign income being brought into the UK.  If they have been resident in the UK for seven tax years of the previous nine, and they choose to pay tax only on their remitted earnings, they may be subject to an additional charge of $39,141 (GBP 30,000).  If they have been resident in the UK for 12 of the last 14 tax years, they may be subject to an additional charge of $78,282 (GBP 60,000).

The Scottish Parliament has the legal power to increase or decrease the basic income tax rate in Scotland, currently 20 percent, by a maximum of three percentage points.

For guidance on laws and procedures relevant to foreign investment in the UK, follow the link below:

https://www.gov.uk/government/collections/investment-in-the-uk-guidance-for-overseas-businesses 

Competition and Anti-Trust Laws

UK competition law prohibits anti-competitive behavior within the UK through Chapters I and II of the Competition Act of 1998 and the Enterprise Act of 2002.  The UK’s Competition and Markets Authority (CMA) is responsible for implementing these laws by investigating potentially anti-competitive behaviors, including cases involving state aid, cartel activity, or mergers that threaten to reduce the competitive market environment.  While merger notification in the UK is voluntary, the CMA may impose substantial fines or suspense orders on potentially non-compliant transactions.  The CMA prosecutes cartel activity both as a civil and criminal offense.  The criminal offense carries a penalty of up to five years imprisonment; CMA shares concurrent jurisdiction with the Serious Fraud Office over criminal cartel matters.  The CMA is also responsible for ensuring consumer protection, conducting market research, and overseeing sectoral regulators, such as those involved in the regulation of the UK’s energy, water, and communications markets.

Until December 31, 2020, EU competition policy will continue to apply in the UK.  The UK will continue to refer cross-border cases with an EU-nexus to the European Commission, pursuant to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).  After December 31, 2020, the UK will begin reviewing cross-border activities with a UK-EU nexus in parallel to the European Commission.  The UK government has indicated there are no plans for any immediate, fundamental changes to its competition law regime following its withdrawal from the EU.

UK competition law requires:

1) the prohibition of agreements or practices that restrict free trading and competition between business entities (this includes in particular the repression of cartels);

2) the banning of abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position (practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others); and,

3) the supervision of mergers and acquisitions of large corporations, including some joint ventures.

Any transactions which could threaten competition also fall into scope of the UK’s regulators.  UK law provides for remedies to problematic transactions,  such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.

Expropriation and Compensation

The UK is a member of the OECD and adheres to the OECD principle that when a government expropriates property, compensation should be timely, adequate, and effective.  In the UK, the right to fair compensation and due process is uncontested and is reflected in the fact that there are no public instances of the government needing to defend an international arbitration dispute with an investor.  Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament.  A number of key UK banks became subject to full or partial nationalization as a response to the 2007-2009 financial crisis.  However, these were privatized once the banks returned to financial viability.

Dispute Settlement

As a member of the World Bank-based International Center for Settlement of Investment Disputes (ICSID), the UK accepts binding international arbitration between foreign investors and the State.  As a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the UK provides local enforcement of arbitration judgments decided in other signatory countries.

London is a thriving center for the resolution of international disputes through arbitration under a variety of procedural rules such as those of the London Court of International Arbitration, the International Chamber of Commerce, the Stockholm Chamber of Commerce, the American Arbitration Association International Centre for Dispute Resolution, and others.  Many of these arbitrations involve parties with no connection to the jurisdiction, but who are drawn to the jurisdiction because they perceive it to be a fair, neutral venue with an arbitration law and experienced courts that support efficient resolution of disputes.  They also choose London-based arbitration because of the general prevalence of the English language and Common Law in international commerce.  A wide range of contractual and non-contractual claims can be referred to arbitration in this jurisdiction including disputes involving intellectual property rights, competition, and statutory claims.  There are no restrictions on foreign nationals acting as arbitration counsel or arbitrators in this jurisdiction.  There are few restrictions on foreign lawyers practicing in the jurisdiction as evidenced by the fact that over 200 foreign law firms have offices in London.

ICSID Convention and New York Convention

In addition to its membership in ICSID, the UK is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  The latter convention has territorial application to Gibraltar (September 24, 1975), Hong Kong (January 21, 1977), Isle of Man (February 22, 1979), Bermuda (November 14, 1979), Belize and Cayman Islands (November 26, 1980), Guernsey (April 19, 1985), Bailiwick of Jersey (May 28, 2002), and British Virgin Islands (February 24, 2014).

The United Kingdom has consciously elected not to follow the UNCITRAL Model Law on International Commercial Arbitration.  Enforcement of an arbitral award in the UK is dependent upon where the award was granted.  The process for enforcement in any particular case is dependent upon the seat of arbitration and applicable arbitration rules .  Arbitral awards in the UK can be enforced under a number of different regimes, namely:  The Arbitration Act 1996, The New York Convention, The Geneva Convention 1927, The Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933, and Common Law.

The Arbitration Act 1996 governs all arbitrations seated in England, Wales and Northern Ireland, both domestic and international.  The full text of the Arbitration Act can be found here: http://www.legislation.gov.uk/ukpga/1996/23/data.pdf .

The Arbitration Act is heavily influenced by the UNCITRAL Model Law, but it has some important differences.  For example, the Arbitration Act covers both domestic and international arbitration; the document containing the parties’ arbitration agreement need not be signed; an English court is only able to stay its own proceedings and cannot refer a matter to arbitration; the default provisions in the Arbitration Act require the appointment of a sole arbitrator as opposed to three arbitrators; a party retains the power to treat its party-nominated arbitrator as the sole arbitrator in the event that the other party fails to make an appointment (where the parties’ agreement provides that each party is required to appoint an arbitrator); there is no time limit on a party’s opposition to the appointment of an arbitrator; parties must expressly opt out of most of the provisions of the Arbitration Act which confer default procedural powers on the arbitrators; and there are no strict rules governing the exchange of pleadings.  Section 66 of the Arbitration Act applies to all domestic and foreign arbitral awards.  Sections 100 to 103 of the Arbitration Act provide for enforcement of arbitral awards under the New York Convention 1958.  Section 99 of the Arbitration Act provides for the enforcement of arbitral awards made in certain countries under the Geneva Convention 1927.

Under Section 66 of the Arbitration Act, the court’s permission is required for an international arbitral award to be enforced in the UK.  Once the court has given permission, judgment may be entered in terms of the arbitral award and enforced in the same manner as a court judgment or order.  Permission will not be granted by the court if the party against whom enforcement is sought can show that (a) the tribunal lacked substantive jurisdiction and (b) the right to raise such an objection has not been lost.

The length of arbitral proceedings can vary greatly.  If the parties have a relatively straightforward dispute, cooperate, and adopt a fast track procedure, arbitration can be concluded within months or even weeks.  In a substantial international arbitration involving complex facts, many witnesses and experts and post-hearing briefs, the arbitration could take many years.  A reasonably substantial international arbitration will likely take between one and two years.

There are two alternative procedures that can be followed in order to enforce an award.  The first is to seek leave of the court for permission to enforce.  The second is to begin an action on the award, seeking the same relief from the court as set out in the tribunal’s award.  Enforcement of an award made in the jurisdiction may be opposed by challenging the award.  However, the court also may refuse to enforce an award that is unclear, does not specify an amount, or offends public policy.  Enforcement of a foreign award may be opposed on any of the limited grounds set out in the New York Convention.  A stay may be granted for a limited time pending a challenge to the order for enforcement.  The court will consider the likelihood of success and whether enforcement of the award will be made more or less difficult as a result of the stay.  Conditions that might be imposed on granting the stay include such matters as paying a sum into court.  Where multiple awards are to be rendered, the court may give permission for the tribunal to continue hearing other matters, especially where there may be a long delay between awards.  UK courts have a good record of enforcing arbitral awards.  The courts will enforce an arbitral award in the same way that they will enforce an order or judgment of a court.  At the time of writing, there are no examples of the English courts enforcing awards which were set aside by the courts at the place of arbitration.

Most awards are complied with voluntarily.  If the party against whom the award was made fails to comply, the party seeking enforcement can apply to the court.  The length of time it takes to enforce an award which complies with the requirements of the New York Convention will depend on whether there are complex objections to enforcement which require the court to investigate the facts of the case.  If a case raises complex issues of public importance the case could be appealed to the Court of Appeal and then to the Supreme Court.  This process could take around two years.  If no complex objections are raised, the party seeking enforcement can apply to the court using a summary procedure that is fast and efficient.  There are time limits relating to the enforcement of the award.  Failure to comply with an award is treated as a breach of the arbitration agreement.  An action on the award must be brought within six years of the failure to comply with the award or 12 years if the arbitration agreement was made under seal.  If the award does not specify a time for compliance, a court will imply a term of reasonableness.

Bankruptcy Regulations

The UK has strong bankruptcy protections going back to the Bankruptcy Act of 1542.  Today, both individual bankruptcy and corporate insolvency are regulated in the UK primarily by the Insolvency Act 1986 and the Insolvency Rules 1986, regulated through determinations in UK courts.  The World Bank’s Doing Business IndexRanks the UK 14/190 for ease of resolving insolvency.

Regarding individual bankruptcy law, the court will oblige a bankrupt individual to sell assets to pay dividends to creditors.  A bankrupt person must inform future creditors about the bankrupt status and may not act as the director of a company during the period of bankruptcy.  Bankruptcy is not criminalized in the UK, and the Enterprise Act of 2002 dictates that for England and Wales, bankruptcy will not normally last longer than 12 months.  At the end of the bankrupt period, the individual is normally no longer held liable for bankruptcy debts unless the individual is determined to be culpable for his or her own insolvency, in which case the bankruptcy period can last up to fifteen years.

For corporations declaring insolvency, UK insolvency law seeks to distribute losses equitably between creditors, employees, the community, and other stakeholders in an effort to rescue the company.  Liability is limited to the amount of the investment.  If a company cannot be rescued, it is liquidated and assets are sold to pay debts to creditors, including foreign investors.  In March 2020, the UK government announced it would introduce legislation to change existing insolvency laws in response to COVID-19.  The new measures seek to enable companies undergoing a rescue or restructuring process to continue trading and help them avoid insolvency.

Investment Incentives

The UK offers a range of incentives for companies of any nationality locating in economically depressed regions of the country, as long as the investment generates employment.  DIT works with its partner organizations in the devolved administrations – Scottish Development International, the Welsh Government and Invest Northern Ireland – and with London and Partners and Local Enterprise Partnerships (LEPs) throughout England, to promote each region’s particular strengths and expertise to overseas investors.

Local authorities in England and Wales also have power under the Local Government and Housing Act of 1989 to promote the economic development of their areas through a variety of assistance schemes, including the provision of grants, loan capital, property, or other financial benefit.  Separate legislation, granting similar powers to local authorities, applies to Scotland and Northern Ireland.  Where available, both domestic and overseas investors may also be eligible for loans from the European Investment Bank.

Foreign Trade Zones/Free Ports/Trade Facilitation

The cargo ports and freight transportation ports at Liverpool, Prestwick, Sheerness, Southampton, and Tilbury used for cargo storage and consolidation are designated as Free Trade Zones.  No activities that add value to commodities are permitted within the Free Trade Zones, which are reserved for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  The Free Trade Zones offer little benefit to U.S. exporters or investors, or any other non-EU exporters or investors.  Questions remain as to whether the UK will continue to employ Free Trade Zones and Free Ports in a post-Brexit environment.

Performance and Data Localization Requirements

The UK does not mandate “forced localization” of data and does not require foreign IT firms to turn over source code.  The Investigatory Powers Act became law in November 2016 addressing encryption and government surveillance.  It permitted the broadening of capabilities for data retention and the investigatory powers of the state related to data.

As of May 2018, companies operating in the UK comply with the EU General Data Protection Regulation.  The UK presently intends to transpose the requirements of the GDPR into UK domestic law after the UK withdraws from the EU.  The impact of the UK leaving the EU on the free flow of data between the EU and the UK, and the UK and United States, is unknown at this time.  The UK Government does not mandate local employment, though at least one director of any company registered in the UK must be ordinarily resident in the UK.

Immigration rules (HC1888) that came into effect on April 6, 2012 have wide-ranging implications for foreign employees, primarily affecting businesses looking to sponsor migrants under Tier 2 as well as migrants looking to apply for settlement in the UK.  In particular, the UK Government has introduced a 12-month cooling off period for Tier 2 (General) applications similar to the one that is currently in place for Tier 2 (Intra-company transfer).  The effect of this is that, while those who enter the UK under Tier 2 (General) to work for one company will be able to apply in-country under Tier 2 (General) to work for another company, if they leave the UK, they will not be able to apply to re-enter the UK under a fresh Tier 2 (General) permission until twelve months after their previous Tier 2 (General) permission has expired.

In addition, those who enter the UK under Tier 2 (Intra-company transfer)  will not be able to change their status in-country to Tier 2 (General) under any circumstances.  If they leave the UK, they will also not be able to apply to enter the UK under Tier 2 (General) until 12 months after their previous Tier 2 (Intra-company transfer) permission has expired.

Where an individual is sent to the UK on assignment under Tier 2 (Intracompany transfer), and the sponsoring company subsequently wishes to hire them permanently in the UK, they will not be able to apply either to remain in the UK under Tier 2 (General) or leave the UK and submit a Tier 2 (General) application overseas.

This  means that employers must carefully consider the long-term plans for all assignees that they send to the UK and whether Tier 2 (Intracompany transfer) is the most appropriate category.  This is because, if the assignee is subsequently required in the UK on a long-term basis, it will not be possible for them to make a new application under Tier 2 (General) until at least twelve months after their Tier 2 (Intra-company transfer) permission has expired.

In 2016, the British government updated requirements for Tier 2 visas by increasing the Tier 2 minimum salary threshold to GBP 30,000 for experienced workers.  This change was phased in, with the minimum threshold increased to GBP 25,000 in fall 2016 and to GBP 30,000 in April 2017.  Employers will continue to be able to recruit non-EEA graduates of UK universities without first testing the resident labor market and without being subject to the annual limit on Tier 2 (General) places, which will remain at 20,700 places per year.  From April 2017, extra weighting was added within the Tier 2 (General) limit where the allocation of places is associated with the relocation of a high-value business to the UK or, potentially, supports an inward investment.  It also waived the resident labor market test for these applications.

Real Property

The UK has robust real property laws stemming from legislation including the Law of Property Act 1925, the Settled Land Act 1925, the Land Charges Act 1972, the Trusts of Land and Appointment of Trustees Act 1996, and the Land Registration Act 2002.

Interests in property are well enforced, and mortgages and liens have been recorded reliably since the Land Registry Act of 1862.  The Land Registry is the government database where all land ownership and transaction data are held for England and Wales, and it is reliably accessible online, here: https://www.gov.uk/search-property-information-land-registry .  Scotland has its own Registers of Scotland, while Northern Ireland operates land registration through the Land and Property Services.

Long-term physical presence on non-residential property without permission is not typically considered a crime in the UK.  Police take action if squatters commit other crimes when entering or staying in a property.

Intellectual Property Rights

The UK legal system provides a high level of intellectual property rights (IPR) protection, and enforcement mechanisms are comparable to those available in the United States.  The UK is a member of the World Intellectual Property Organization (WIPO).  The UK is also a member of the major IP agreements: the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, and the Patent Cooperation Treaty.  By implementing various EU directives,  UK law encompasses the WIPO Copyright Treaty and WIPO Performance and Phonograms Treaty, known together as the internet treaties.  Since its departure from the EU, it should be noted that the UK will not be implementing the 2019 Directive (2019/790) on Copyright in the Digital Single Market and has formally withdrawn from the Unified Patent Court.

The Intellectual Property Office (IPO) is the official UK government body responsible for intellectual property rights including patents, designs, trademarks and copyright.  The IPO web site contains comprehensive information on UK law and practice in these areas:  https://www.gov.uk/government/organisations/intellectual-property-office  

The British government tracks and reports seizures of counterfeit goods and regards the production and subsequent sale as a criminal act.  The Intellectual Property Crime Report for 2018/19 highlights the incidence of IPR infringement and the harm caused to the UK economy, showing that almost 4 percent of all UK imports in 2018 were counterfeit, worth £9.3 billion ($12 billion).  This translates to around 60,000 jobs lost and almost £4 billion ($5.2 billion) in lost tax revenue.

The UK is not included in USTR’s 2020 Special 301 Report.  USTR’s 2019 Notorious Markets report includes amazon.co.uk, based in the UK, due to high levels of counterfeit goods on the platform, but the report also notes the UK has blocking orders in place for a number of torrent and infringing websites.  The 2019 report further details the “innovative approaches to disrupting ad-backed funding of pirate sites” taken by the London Police Intellectual Property Crime Unit (PIPCU) and IPO.

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

Capital Markets and Portfolio Investment

The City of London houses one of the largest and most comprehensive financial centers globally.  London offers all forms of financial services:  commercial banking, investment banking, insurance, venture capital, private equity, stock and currency brokers, fund managers, commodity dealers, accounting and legal services, as well as electronic clearing and settlement systems and bank payments systems.  London is highly regarded by investors because of its solid regulatory, legal, and tax environments, a supportive market infrastructure, and a dynamic, highly skilled workforce.

The UK government is generally hospitable to foreign portfolio investment.  Government policies are intended to facilitate the free flow of capital and to support the flow of resources in product and services markets.  Foreign investors are able to obtain credit in local markets at normal market terms, and a wide range of credit instruments are available.  The principles underlying legal, regulatory, and accounting systems are transparent, and they are consistent with international standards.  In all cases, regulations have been published and are applied on a non-discriminatory basis by the Bank of England’s Prudential Regulation Authority (PRA).

The London Stock Exchange is one of the most active equity markets in the world.  London’s markets have the advantage of bridging the gap between the day’s trading in the Asian markets and the opening of the U.S. market.  This bridge effect is also evidenced by the fact that many Russian and Central European companies have used London stock exchanges to tap global capital markets.  The Alternative Investment Market (AIM), established in 1995 as a sub-market of the London Stock Exchange, is specifically designed for smaller, rapidly expanding companies.  The AIM has a more flexible regulatory system than the main market and has no minimum market capitalization requirements.  Since its launch, the AIM has raised more than $85 billion (GBP 68 billion) for more than 3,000 companies.

Money and Banking System

The UK banking sector is the largest in Europe and represents the continent’s deepest capital pool.  More than 150 financial services firms from the EU are based in the UK.  The financial and related professional services industry contributed approximately 10 percent of UK Economic Output in 2019, employed approximately 2.3 million people, and contributed the most to UK tax receipts of any sector.  The long-term impact of Brexit on the financial services industry is uncertain at this time.  Some firms have already moved limited numbers of jobs outside the UK in order to service EU-based clients, but anticipate the UK will remain a top financial hub.

The Bank of England (BoE) serves as the central bank of the UK.  According to BoE guidelines, foreign banking institutions are legally permitted to establish operations in the UK as subsidiaries or branches.  Responsibilities for the prudential supervision of a non-European Economic Area (EEA) branch are split between the parent’s home state supervisors and the PRA.  However, the Prudential Regulation Authority (PRA) expects the whole firm to meet the PRA’s threshold conditions.  The PRA expects new non-EEA branches to focus on wholesale and corporate banking and to do so at a level that is not critical to the UK economy.  The FCA is the conduct regulator for all banks operating in the United Kingdom.  For non-EEA branches the FCA’s Threshold Conditions and conduct of business rules apply, including areas such as anti-money laundering.  Eligible deposits placed in non-EEA branches may be covered by the UK deposit guarantee program and therefore non-EEA branches may be subject to regulations concerning UK depositor protection.

There are no legal restrictions that prohibit non-UK residents from opening a business bank account; setting up a business bank account as a non-resident is in principle straightforward.   However, in practice most banks will not accept applications from overseas due to fraud concerns and the additional administration costs.  To open a personal bank account, an individual must at minimum present an internationally recognized proof of identification and prove residency in the UK.  This is a problem for incoming FDI and American expatriates.  Unless the business or the individual can prove UK residency, they will have limited banking options.

Foreign Exchange and Remittances

Foreign Exchange

The British pound sterling is a free-floating currency with no restrictions on its transfer or conversion.  Exchange controls restricting the transfer of funds associated with an investment into or out of the UK are not exercised.

Remittance Policies

Not applicable.

Sovereign Wealth Funds

The United Kingdom does not maintain a national wealth fund.  Although there have at time been calls to turn The Crown Estate – created in 1760 by Parliament as a means of funding the British monarchy – into a wealth fund, there are no current plans in motion.  Moreover, with assets of just under $12 billion, The Crown Estate would be small in relation to other national funds.

There are 20 partially or fully state-owned enterprises in the UK.  These enterprises range from large, well-known companies to small trading funds.  Since privatizing the oil and gas industry, the UK has not established any new energy-related state-owned enterprises or resource funds.

Privatization Program

The privatization of state-owned utilities in the UK is now essentially complete.  With regard to future investment opportunities, the few remaining government-owned enterprises or government shares in other utilities are likely to be sold off to the private sector when market conditions improve.

Businesses in the UK are accountable for a due-diligence approach to responsible business conduct (RBC), or corporate social responsibility (CSR), in areas such as human resources, environment, sustainable development, and health and safety practices – through a wide variety of existing guidelines at national, EU and global levels.  There is a strong awareness of  CSR principles among UK businesses, promoted by UK business associations such as the Confederation of British Industry and the UK government.

The British government fairly and uniformly enforces laws related to human rights, labor rights, consumer protection, environmental protection, and other statutes intended to protect individuals from adverse business impacts.  HMG adheres to the OECD Guidelines for Multinational Enterprises.  It is committed to the promotion and implementation of these Guidelines and encourages UK multinational enterprises to adopt high corporate standards involving all aspects of the Guidelines.  The UK has established a National Contact Point (NCP) to promote the Guidelines and to facilitate the resolution of disputes that may arise within that context.  The UK NCP is housed in BEIS and is partially funded by DFID.  A Steering Board monitors the work of the UK NCP and provides strategic guidance.  It is composed of representatives of relevant government departments and four external members nominated by the Trades Union Congress, the Confederation of British Industry, the All Party Parliamentary Group on the Great Lakes Region of Africa, and the NGO community.

The results of a UK government consultation on CSR can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300265/bis-14-651-good-for-business-and-society-government-response-to-call-for-views-on-corporate-responsibility.pdf .

Information on UK and EU regulations and policies relating to the procurement of supplies, services and works for the public sector, and the relevance of promoting RBC, are found here: https://www.gov.uk/guidance/public-sector-procurement-policy . 

Although isolated instances of bribery and corruption have occurred in the UK, U.S. investors have not identified corruption of public officials as a factor in doing business in the UK.

The Bribery Act 2010 came into force on July 1, 2011.  It amends and reforms the UK criminal law and provides a modern legal framework to combat bribery in the UK and internationally.  The scope of the law is extra-territorial.  Under the Bribery Act, a relevant person or company can be prosecuted for bribery if the crime is committed abroad.  The Act applies to UK citizens, residents and companies established under UK law.  In addition, non-UK companies can be held liable for a failure to prevent bribery if they do business in the UK.

Section 9 of the Act requires the UK Government to publish guidance on procedures that commercial organizations can put in place to prevent bribery on their behalf.  It creates the following offenses: active bribery, described as promising or giving a financial or other advantage, passive bribery, described as agreeing to receive or accepting a financial or other advantage; bribery of foreign public officials; and the failure of commercial organizations to prevent bribery by an associated person (corporate offense).  This corporate criminal offense places a burden of proof on companies to show they have adequate procedures  in place to prevent bribery (http://www.transparency.org.uk/our-work/business-integrity/bribery-act/adequate-procedures-guidance/ ).  To avoid corporate liability for bribery, companies must make sure that they have strong, up-to-date and effective anti-bribery policies and systems.  The Bribery Act creates a corporate criminal offense making illegal the failure to prevent bribery by an associated person.  The briber must be “associated” with the commercial organization, a term which will apply to, amongst others, the organization’s agents, employees, and subsidiaries.  A foreign corporation which “carries on a business, or part of a business” in the UK may therefore be guilty of the UK offense even if, for example, the relevant acts were performed by the corporation’s agent outside the UK.  The Act does not extend to political parties and it is unclear whether it extends to family members of public officials.

UN Anticorruption Convention, OECD Convention on Combatting Bribery 

The UK formally ratified the OECD Convention on Combating Bribery in December 1998.  The UK also signed the UN Convention Against Corruption in December 2003 and ratified it in 2006.  The UK has launched a number of initiatives to reduce corruption overseas.  The OECD Working Group on Bribery (WGB) criticized the UK’s implementation of the Anti-Bribery convention.  The OECD and other international organizations promoting global anti-corruption initiatives pressured the UK to update its anti-bribery legislation which was last amended in 1916.  In 2007, the UK Law Commission began a consultation process to draft a Bribery Bill that met OECD standards.  A report was published in October 2008 and consultations with experts from the OECD were held in early 2009.  The new Bill was published in draft in March 2009 and adopted by Parliament with cross-party support as the 2010 Bribery Act in April 2010.

Resources to Report Corruption 

UK law provides criminal penalties for corruption by officials, and the government routinely implements these laws effectively.  The Serious Fraud Office (SFO) is an independent government department, operating under the superintendence of the Attorney General with jurisdiction in England, Wales, and Northern Ireland.  It investigates and prosecutes those who commit serious or complex fraud, bribery, and corruption, and pursues them and others for the proceeds of their crime.

All allegations of bribery of foreign public officials by British nationals or companies incorporated in the United Kingdom—even in relation to conduct that occurred overseas—should be reported to the SFO for possible investigation.  When the SFO receives a report of possible corruption, its intelligence team makes an assessment and decides if the matter is best dealt with by the SFO itself or passed to a law enforcement partner organization, such as the Overseas Anti-Corruption Unit of the City of London Police (OACU) or the International Corruption Unit of the National Crime Agency.  Allegations can be reported in confidence using the SFO’s secure online reporting form: https://www.sfo.gov.uk/contact-us/reporting-serious-fraud-bribery-corruption/ . 

Details can also be sent to the SFO in writing:

SFO Confidential
Serious Fraud Office
2-4 Cockspur Street
London, SW1Y 5BS
United Kingdom

The UK is politically stable but continues to be a target for both domestic and global terrorist groups.  Terrorist incidents in the UK have significantly decreased in frequency and severity since 2017, which saw five terrorist attacks that caused 36 deaths.  In 2019, the UK suffered one terrorist attack resulting in three deaths (including the attacker), and another two attacks in early 2020 caused serious injuries and resulted in the death of one attacker.  In November 2019, the UK lowered the terrorism threat level to substantial, meaning the risk of an attack was reduced from “highly likely” to “likely.”  UK officials categorize Islamist terrorism as the greatest threat to national security, though officials identify a rising threat from racially or ethnically motivated extremists, which they refer to as “extreme right-wing” terrorism.  Since March 2017, police and security services have disrupted 15 Islamist and seven extreme right-wing plots.

Environmental advocacy groups in the UK have been involved with numerous protests against a variety of business activities, including: airport expansion, bypass roads, offshore structures, wind farms, civilian nuclear power plants, and petrochemical facilities.  These protests tend not to be violent but can be disruptive, with the aim of obtaining maximum media exposure.

Brexit has waned as a source of political instability.  Nonetheless, the June 2016 EU referendum campaign was characterized by significant polarization and widely varying perspectives across the country.  Differing views about what should be the terms of the future UK-EU relationship continue to polarize political opinion across the UK.  The people of Scotland voted to remain in the EU and Scottish political leaders have indicated that the UK leaving the EU may provide justification to pursue another Referendum on Scotland leaving the UK.  A failure to fully implement the Withdrawal Agreement could contribute to political and sectarian tensions in Northern Ireland.

The process of Brexit itself has been politically fraught.  The UK was originally due to leave the EU on March 29, 2019, but then-Prime Minister (PM) Theresa May and her successor Boris Johnson had to ask for four delays in total as they both were unable to bring together a majority in the House of Commons to ratify the Withdrawal Agreement setting out the terms of the UK’s departure from the bloc.  The prolonged political paralysis resulted in an early General Election on December 12, 2019, which gave PM Johnson a solid 80-seat majority in the House of Commons and a clear mandate to press ahead with the UK’s withdrawal from the EU.  The UK formally departed the bloc on January 31, 2020, following the ratification of the Withdrawal Agreement, and entered a transition period during which the country is effectively still a member of the EU without voting rights, while continuing talks on its long-term future economic and security arrangements with the bloc.  The transition is currently scheduled to end on December 31, 2020, and HMG has categorically ruled out any extension.  The challenging timeline for negotiating an agreement of such breadth and complexity makes the prospect of no deal at the end of the transition period a real possibility at the time of writing.

Both main political parties have recently tacked in a less business-friendly direction.  The Conservative Party, traditionally the UK’s pro-business party, was, until the COVID-19 pandemic, focused on implementing Brexit, a process many international businesses oppose because they expect it to make trade in goods, services, workers, and capital with the UK’s largest trading partners more problematic and costly, at least in the short term.  In addition, the Conservative Party has implemented a Digital Services Tax (DST), a 2% tax on the revenues of predominantly American search engines, social media services and online marketplaces which derive value from UK users.  The DST has delayed a reduction in the Corporation Tax rate from 19 percent to 17 percent.  The Conservative Party also intends to limit and reduce international immigration, an issue that was a main driver of the UK’s vote to leave the EU.  The opposition Labour Party, until a resounding electoral loss in December 2019, was led by Jeremy Corbyn MP and Chancellor John McDonnell MP, who promoted policies opposed by business groups including laws that would give employees and shareholders the right to a binding vote on executive remuneration, make trade union rights stronger and more expansive, increase corporation tax, and nationalize utility companies.  The Labour Party’s new leader, former Brexit Shadow Secretary, Sir Keir Starmer MP, although widely acknowledged to be more economically centrist, has proposed few policies as the UK’s political system contends with the COVID-19 crisis.

The UK’s labor force is just over 41 million people. For the period between December 2019 and February 2020, the employment rate was 76.6 percent, with 33 million workers employed – the highest employment rate since 1971. Unemployment also hit a 43-year low with 1.36 million unemployed workers, or just 4 percent (no change from a year earlier).

The most serious issue facing British employers is a skills gap derived from a high-skill, high-tech economy outpacing the educational system’s ability to deliver work-ready graduates.  The government has improved the British educational system in terms of greater emphasis on science, research and development, and entrepreneurial skills, but any positive reforms will necessarily deliver benefits with a lag.

As of 2018, approximately 23.5 percent of UK employees belonged to a union.  Public-sector workers have a much higher share of union members, at 52.5 percent, while the private sector is 13.2 percent.  Manufacturing, transport, and distribution trades are highly unionized. Unionization of the workforce in the UK is prohibited only in the armed forces, public-sector security services, and police forces.  Union membership has been relatively stable in the past few years, although the trend has been downward over the past decade.

Once-common militant unionism is less frequent, but occasional bouts of industrial action, or threatened industrial action, can still be expected.  Recent strike action was motivated in part by the Coalition Government’s deficit reduction program impacts on highly unionized sectors.  In the 2018, there were 273,000 working days lost from 81 official labor disputes.  The Trades Union Congress (TUC), the British nation-wide labor federation, encourages union-management cooperation as do most of the unions likely to be encountered by a U.S. investor.

On April 1, 2020, the UK raised the minimum wage to GBP 8.72 ($10.86) an hour for workers ages 25 and over.  The increased wage impacts about 2 million workers across Britain.

The UK decision to leave the EU has also introduced uncertainty into the labor market, with questions surrounding the rights of workers from other EU countries currently in the UK, the future rights of employers to hire workers from EU countries, and the extent to which the UK will maintain EU rules on workers’ rights.

The 2006 Employment Equality (Age) Regulations make it unlawful to discriminate against workers, employees, job seekers, and trainees because of age, whether young or old.  The regulations cover recruitment, terms and conditions, promotions, transfers, dismissals, and training.  They do not cover the provision of goods and services.  The regulations also removed the upper age limits on unfair dismissal and redundancy.  It sets a national default retirement age of 65, making compulsory retirement below that age unlawful unless objectively justified.  Employees have the right to request to work beyond retirement age and the employer has a duty to consider such requests.

DFC does not operate in the UK.  Export-Import Bank (Ex-Im Bank) financing is available to support major investment projects in the UK.  A Memorandum of Understanding (MOU) signed by Ex-Im Bank and its UK equivalent, the Export Credits Guarantee Department (ECGD), enables bilateral U.S.-UK consortia intending to invest in third countries to seek investment funding support from the country of the larger partner.  This removes the need for each of the two parties to seek financing from their respective credit guarantee organizations.

U.S. Embassy London
Economic Section
33 Nine Elms Ln
London SW11 7US
United Kingdom
+44 (0)20-7499-9000
LondonEconomic@state.gov