Andorra

3. Legal Regime

Transparency of the Regulatory System

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

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

International Regulatory Considerations

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

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

Although the Government took some steps in the past to become a member of the World Trade Organization (WTO); Andorra currently holds observer status in the WTO. Andorra has applied for membership in the International Monetary Fund (IMF). Its process of adhesion is ongoing.

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

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

Competition and Anti-Trust Laws

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

Expropriation and Compensation

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

Dispute Settlement

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

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

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

Bankruptcy Regulations

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

9. Corruption

Andorra’s laws penalize corruption, money laundering, drug trafficking, hostage taking, sale of illegal arms, prostitution, terrorism, as well as the financing of terrorism. Additional amendments were added in 2008, 2014, 2015, and 2016 to the Criminal Code and the Criminal Procedure Code that modify and introduce money laundering and terrorism financing provisions.

In 1994, Andorra joined the Council of Europe, an institution that oversees the defense of democracy, the rule of law, and human rights. That same year, the Justice Ministers of the Member States decided to fight corruption at the European level after considering that the phenomenon posed a serious threat to the stability of democratic institutions.

In early 2005, Andorra joined the Council of Europe’s Group of States against Corruption (GRECO) and, consequently, the fight against corruption. The Government has gradually built its internal regulations and relevant legal instruments and has undertaken numerous initiatives to improve the State’s response to reprehensible acts and conduct committed internally and internationally.

The Government created the Unit for the Prevention and the Fight against Corruption (UPLC) in 2008 to centralize and coordinate actions that might concern local administrations, national bodies, and entities with an international scope. UPLC is in charge of implementing the recommendations made by GRECO in the framework of periodic evaluation reports.

Andorra has not signed the UN Anticorruption Convention or the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

There are explicitly defined rules for the ethical behavior of all participating bodies within the Andorran financial system. The Andorran Financial Authority (AFAINAF) has also established rules regarding ethical behavior in the financial system.

The Andorran government modified and implemented new laws in order to comply with international corruption standards. The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent body charged with mitigating money laundering and terrorist funding (www.uifand.ad ).

Resources to Report Corruption:

Unitat de Prevencio i Lluita contra la Corrupcio
Ministeri d’Afers Socials, Justicia i Interior
Govern d’Andorra
Ctra.de l’Obac s/n
AD700 Escaldes-Engordany
Phone: +376 875 700
Email: uplc_govern@govern.ad

Marshall Islands

3. Legal Regime

Transparency of the Regulatory System

Regulatory and accounting systems are generally transparent and consistent with international norms. Bureaucratic procedures are generally transparent, although nepotism and customary hierarchal relationships can play a role in government actions. Proposed laws and regulations are available in draft form for public comment pursuant to the Administrative Procedures Act, Title 6 of the Marshall Islands Revised Code. Generally, tax, labor, environment, health and safety, and other laws and policies do not impede investment. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

International Regulatory Considerations

The Marshall Islands is a member of the Pacific Islands Forum (PIF) which has a model regulatory and policy framework focused on competition, access and pricing, fair trading, and consumer protections.  The RMI seeks to implement PIF-agreed standards domestically; however, the capacity for enforcement remains weak.

Legal System and Judicial Independence

The Republic of the Marshall Islands has a responsive judiciary that consistently upholds the sanctity of contracts. The legal system in the Marshall Islands is patterned on common law proceedings as they exist in the United States. The country has a judicial branch composed of a Supreme Court, a High Court, a Traditional Rights Court, District Courts, and Community Courts. The Supreme Court is made up of one Chief Justice and two Associate Justices.  The High Court consists of the Chief Justice and one Associate Justice. The Chief Justices are both U.S. Citizens serving 10-year terms.  There are also three Traditional Rights Court judges, two District Court judges, and several Community Court judges serving the Marshall Islands. On certain occasions, as necessary, the Marshall Islands Judicial Service Commission recruits qualified judges on contract from the United States to serve with the Chief Justice on the Supreme Court and to temporarily fill vacancies on the High Court as there are few qualified and independent Marshallese who can fill these positions.  The Traditional Rights Court deals with customary law and land disputes.

The Marshall Islands Courts are generally considered fair, without undue influence or interference.  Marshall Islands Court rulings, legal codes, and public law can be found on their website: http://www.rmicourts.org/ .

Laws and Regulations on Foreign Direct Investment

All non-citizens wishing to invest in the Marshall Islands must obtain a Foreign Investment Business License (FIBL). The FIBL is obtained from the Registrar of Foreign Investment in the office of the Attorney General. In coordination with the Investment Promotion Unit at the Ministry of Natural Resources and Commerce, the Ministry of Finance reviews the application and ensures that the business does not fall under the categories of the National Reserved List listed above. The application process usually takes 7-10 working days. The FIBL grants non-citizens the right to invest in the Marshall Islands, provided the investment remains within the scope of business activity for which the FIBL was granted.

The 2015 amendment to the Foreign Investment Business License Act requires all holders of FIBLs to maintain reliable and complete accounting records and records of ownership, and that all business records must be kept in such a way that they can be converted into written form at the request of an authorized inspector.  These records must be retained for a period of five years.

Competition and Anti-Trust Laws

The Marshall Islands does not currently have any anti-trust legislation or agency which reviews transactions for competition-related concerns.

Expropriation and Compensation

All land is privately owned by Marshallese citizens through complex family lineages. Although the Government of the Marshall Islands may legally expropriate property under the country’s constitution, the government has only exercised this right on one occasion and only for a temporary period of time. Given the importance of private land ownership in customary law and practice, it is very unlikely that the government will exercise this right in the foreseeable future.

If a business activity is subsequently added to the reserved List, the Registrar of Foreign Investment may not cancel or revoke an existing Foreign Investment Business License if the investment has already commenced.

Dispute Settlement

ICSID Convention and New York Convention

The Marshall Islands has been a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the 1958 New York Convention) since 2006, but is not a member of the International Center for Settlement of Investment Disputes (ICSID), nor does it have plans to become a member at this time.

Investor-State Dispute Settlement

There are no ongoing investment disputes involving the Government of the Republic of the Marshall Islands and foreign investors.   There is a very limited record of foreign investment disputes in the Marshall Islands due to the small size of foreign investment in the country. The most common type of business disputes are with landowners over land use, and land rights issues, and as there is currently no official dispute resolution procedure, these are frequently resolved informally or only after protracted court disputes. Domestic civil society has traditionally not been actively engaged in dispute resolution.  The Marshall Islands Courts are generally considered fair, without undue influence or interference.  There is no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The Republic of the Marshall Islands does not have any alternative dispute resolution (ADR) mechanisms or domestic arbitration bodies available as a means for setting disputes between two private parties.  There is no known history of the RMI enforcing foreign commercial arbitral decisions.

Bankruptcy Regulations

There is no legal provision for bankruptcy in the Marshall Islands.  It ranks 153 out of 190 for resolving insolvency in World Bank’s 2020 Doing Business Report.

9. Corruption

There are credible allegations and periodic prosecutions for misuse of government funds and abuse of public office for private gain. Government procurement and transfers appear most vulnerable to corruption, and personal relationships sometimes play a role in government decisions. Government officials at all levels are permitted to invest in and own private businesses without regard for conflict-of-interest considerations. Foreign aid has been abused and past audits report a number of financial irregularities connected to donor-funded activities. Bribery is a second-degree felony, whether to a domestic or foreign official.  The Marshall Islands acceded to the UN Convention against Corruption in September 2011.

Domestic and international firms as well as NGOs have repeatedly identified corruption as a problem in the business environment and a major detractor for international firms exploring investment or business activities in the local market.

Resources to Report Corruption

Richard Hickson
Attorney General
RMI Attorney General Office
PO Box 890
Majuro, Republic of the Marshall Islands 96960
RichardHicksonLawyer@gmail.com
Tel: +692 625 3244
Fax: +692 625 5218

No international, regional, or local watchdog organizations operate in the country.

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