Transparency of the Regulatory System
The Government of Grenada recognizes that investors value transparent rules and regulations dealing with investment.
The Investment Act and the new Investment Promotion Regime promotes transparency by authorizing key sectors to be offered investment incentives through the Grenada Investment Development Corporation. This helps to streamline processes, standardize treatment of investors, define investment rights, provide procedural guarantees, and reduce the scope for political influence in business negotiation.
The Government also promotes investments by consulting with interested parties, simplifying and codifying legislation, using plain language drafting, developing registers of existing and proposed regulation, expanding the use of electronic dissemination of regulatory material, and by publishing and reviewing administrative decisions.
The Grenada Investment Development Corporation works in conjunction with the Ministry of Finance and Ministry of Trade and Economic Development to deliver clarity to investors when consultations are not broad enough to generate public awareness of particular proposals or where draft legislation does not receive a public hearing.
Tax, labor, environment, health and safety, and other laws and policies do not distort nor impede investment, though the laws are not always applied in a consistent manner. In theory, bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent. In practice, local authorities recognize that the implementation of procedures can sometimes be inconsistent and slow.
Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. In addition, there are clear institutional arrangements established to support the implementation of transparent regimes governing investment.
International Regulatory Considerations
Grenada has been a member of the World Trade Organization since February 1996 and is a party to Agreements established under the organization. In pursuit of WTO-compliance, the Government of Grenada recently signed and is in the process of negotiating trade and investment agreements that contain provisions that are better aligned with the provisions of the WTO.
Legal System and Judicial Independence
Grenada, a constitutional monarchy with a Parliamentary System, has vested the Prime Minister and his Cabinet with the executive power for concluding and signing international agreements and conventions with other States and international organizations.
The Judicial System of the nation is based on English Common Law. The judiciary has four levels: Magistrate Court; High Court, the Eastern Caribbean Supreme Court and the Privy Council.
The Magistrates Court primarily handles minor civil and criminal cases, while the High Court adjudicates cases under the purview of the Acts of Parliament. Appeals from the Magistrates Court are heard by the High Court, while appeals from the High Court are heard by the Eastern Caribbean Supreme Court. The Eastern Caribbean Supreme Court is comprised of the Chief Justice, who serves as the Head of the Judiciary; four Justices of Appeal; nineteen High Court Judges; and three (3) Masters, who are primarily responsible for procedural and interlocutory matters. The Court of Appeal judges are based at the Court’s Headquarters in Castries, Saint Lucia where administrative and legal support is provided under the supervision of the Court Administrator and Chief Registrar respectively.
The Privy Council serves Grenada as the final Court of Appeal. However, the Caribbean Court of Justice (CCJ) has compulsory and exclusive jurisdiction under Section 211 of the Revised Treaty of Chaguaramas (which Grenada is a party to, and which delineates rights and responsibilities in CARICOM) to hear and determine disputes concerning the interpretation and application of the Treaty.
Laws and Regulations on Foreign Direct Investment
The economy of Grenada is supported by a strong legislative and regulatory framework that supports Foreign Direct Investments, and promotes investment initiatives. The Government of Grenada amplified the investment climate with a revitalization of its Citizenship by Investment Program. In 2016, several revisions were made to the following bills:
Value Added Tax Amendment Bill – This Bill seeks to amend the Value Added Tax Act CAP.333A to provide for VAT exemptions applicable to qualifying investments in priority sectors and would be read in conjunction with regulations made pursuant to the Investment Act, 2014 for the establishment of priority sectors for economic growth.
Excise Tax Amendment Bill – This Bill seeks to amend the Excise Tax Act CAP. 94 to provide for tax incentives to investors engaged in manufacturing and investors entitled to conditional duties exemptions with respect to motor vehicles.
Property Transfer Tax Amendment Bill – This Bill seeks to amend the Property Transfer Tax Act CAP.257C to provide more favourable rates of property transfer tax for investors. The Property Transfer Tax (Amendment) Act, 2015 (No. 23 of 2015) amended section 5 of the principal Act to reduce the property transfer tax payable by non-citizens with qualifying investments from 10 percent to 5 percent, such that non-citizens would be entitled to pay a reduced rate if the non-citizens commit to making a qualifying investment. This Bill seeks to expand upon this incentive and would be read in conjunction with regulations made pursuant to the Investment Act for the establishment of priority sectors for economic growth.
Customs Service Charge Amendment Bill – This Bill seeks to amend the Customs (Service Charge) Act CAP. 75D to remove the discretionary power of Cabinet to prescribe varying rates of customs service charge (‘CSC’) and to prescribe a new rate of CSC applicable to investors engaged in manufacturing.
Investment Amendment Bill – This Bill seeks to create express provision for specified circumstances under which the Minister of Finance may make regulations under the principal Act.
Bankruptcy and Insolvency Amendment Bill – This Bill provides for the modernization of the law relating to bankruptcy and insolvency of individuals and companies. The Bankruptcy Act, which applies only to individuals, would be repealed. Provisions in other Acts, such as the Companies Act, dealing with liquidation or winding up would continue to apply.
The Bill is based on the Canadian Bankruptcy and Insolvency Act, which has been used as a model in a number of Caribbean countries.
Income Tax Amendment Bill – This Bill seeks to amend the Income Tax Act CAP. 149 to provide for a waiver on withholding tax applicable on specified types of repatriated funds relating to investors engaged in tourism accommodation or health and wellness, to repeal the Sixth Schedule, and to address other matters.
The Grenada Investment Industrial Corporation together with the Inland Revenue and Customs Department of Grenada works together to ensure adherence to the rule of law and facilitate the procedures outlined in the revised investment regime.
The legal and regulatory framework governing foreign direct investment in Grenada is described here: http://grenadaidc.com/investor-centre/investors-guide/starting-up-a-business/#.WLA0BfnQe70 .
Competition and Anti-Trust Laws
There are no laws that regulate competition in Grenada. However, Government of Grenada discussed model draft bills at the CARICOM and OECS levels. These are being formulated to strengthen market regimes under the CARICOM Single Market & Economy. CARICOM established a Competition Commission and plans are underway to have a sub-regional entity, the Eastern Caribbean Competition Commission, fully functional soon.
Expropriation and Compensation
According to the Constitution, the Government of Grenada shall not compulsorily acquire or take possession of any investment enterprise, or any asset of an investor except for a purpose which (a) is in accordance with the laws of Grenada; (b) is on a non-discriminatory basis; (c) is in accordance with the procedures provided by law; (d) provides for prompt payment of adequate and effective compensation together with interest from the date of acquisition or taking possession of the investment enterprise or asset to the date of payment at the commercial bank rate on loans to the corporate sector; and (e) provides for the right of access to the High Court by any person claiming such compensation for the determination of any interest in or right over the investment enterprise or asset and the amount of compensation. There were no expropriation actions against foreign investors in over a decade. However, there is an ongoing dispute between the Government of Grenada and a British-owned resort in which the Government asserts a right to reacquire the land on which the property sits, claiming the owners of the resort failed to comply with provisions of the long term lease agreement. The outcome of this case is one to monitor going forward.
Throughout the past three years there have also been attempts by the Government of Grenada to repeal the 1994 Electricity Supply Act which granted the WRB-owned Grenada Electricity Services sole privileges to transmit, distribute, supply and generate electricity to Grenada. After 21 years, the Government is seeking to open the market to potential investors to decrease cost and improve energy efficiency. The 2016 Electricity Supply Act, which was presented to cabinet in 2016 allows for the granting of multiple licenses to energy generators both regional and international; thus removing GRENLEC as the sole electricity provider in Grenada. This continues to unfold, garnering the interest of current and potential investors to the country.
In the past, Grenadian citizens had their lands expropriated to permit foreign investments, but have been compensated for such actions. There are no sectors at greater risk of expropriation than another; and there are no laws requiring local ownership.
ICSID Convention and New York Convention
Grenada is a signatory and contracting member of the International Center for Settlement of Investment Disputes (ICSID) since May 1991, and has engaged this platform to resolve past disputes. While the domestic laws of Grenada have adapted the provisions outlined in The New York Convention, the country has not yet ratified the convention.
Investor-State Dispute Settlement
In the event of investor-State Disputes, Grenada engages the International Center for Settlement of Investment Disputes (ICSID). The country has engaged ICSID in the past and secured favorable rulings.
There were no known investment disputes involving a U.S. person over the past 10 years. Currently the Government of Grenada and the British owned Grenadian by Rex Resorts is engaged in a dispute involving the re-acquisition of land that was leased to the resort for 99 years. A ruling handed down by the High Court in December 2016 stated that the Government has the right to acquire the property, but it must be done in strict compliance with the country’s acquisition legislation. Following an appeal to the Eastern Caribbean Court of Appeal, on February 21st, the court ruled an interim conservatory order that Rex Resorts “be permitted to continue to remain in possession of, and to continue to operate the hotel known as the Grenadian by Rex Resorts.”
There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
In the event of a dispute between two foreign parties engaged in an investment; between a foreign investor(s) and Grenadian parties; between Grenadian partners; or between the investors and the Government of Grenada (GOG) with respect to an enterprise the disputants shall first seek to settle their differences through consultation or mediation to reach an amicable settlement. In the event that the disputants fail to resolve the matter, they may then: (a) submit their dispute to arbitration under the Arbitration Act No 2 of 1989; (b) invoke the jurisdiction of the courts of Grenada; (c) invoke the jurisdiction of the Caribbean Court of Justice; or (d) adopt such other procedures as provided for in the Articles of Association of the investment enterprise.
There is generally no government interference in the court system. While occasionally such government interference has been alleged, it has not been proven to date.
In addition to the above, Grenada also features a Court Connected Mediation mechanism that can be accessed through the Meditation Centre. This Centre was established by the statutory provisions of the Practice Direction Act No.1 of 2003. It extends court connected mediation to all Member States of the Organization of Eastern Caribbean States (OECS). It makes provision for the referral to mediation of civil actions filed in the Court. Through this system parties are able to utilize any form of dispute resolution including, in particular mediation, upon the consideration of the Court that this is an appropriate mechanism to be employed.
Court connected mediation, however, cannot be used in family proceedings, insolvency (including winding up of companies), non-contentious probate proceedings, proceedings when the High Court is acting as a prize court and any other proceeding in the Supreme Court instituted under any enactment, in so far as rules made under that enactment regulate those proceedings.
Grenada is ranked number 169 for ease of “resolving insolvency” in the World Bank’s Doing Business Report for both 2016 and 2017.
Chapter 27 of the Bankruptcy Act (Amended by Act No. 10 of 1990) makes provisions for all aspects of Bankruptcy. This was one of the bills recently amended under the new investment regime in an effort to modernize the law relating to bankruptcy and insolvency of individuals and companies.
Part III of this Act sets out what are acts of bankruptcy and the procedure for an application to be made by a creditor to the High Court to obtain a bankruptcy order against a debtor and appointment of a trustee in bankruptcy. There is also provisions for the Court to appoint an interim receiver (who must be a trustee) pending the outcome of the application for a bankruptcy order. (An interim receiver is to be distinguished from a receiver appointed under a security agreement or by the Court to protect the interests of secured creditors).
Part III also has provision for a process whereby an insolvent person, with leave of the Court, may make an assignment of the insolvent person’s property for the general benefit of creditors of the insolvent person. A trustee is to be appointed by the Supervisor.
The High Court exercises exclusive jurisdiction in matters related to bankruptcy.