Transparency of the Regulatory System
The laws and regulations that affect direct investment, including environmental, health, and safety rules and regulations, apply equally to foreign and domestic firms. STP tax laws reward citizens who return to the home country to invest, while also containing provisions for attracting foreigners to invest in STP. The STP legal code is based on Portuguese law, and laws and regulations are applied at the national level. Rule-making and regulatory authority exists at the national level and regulations are developed at the ministerial level, approved by the National Assembly and promulgated by the president. The ministry concerned is responsible for any regulatory enforcement mechanisms. Drafted bills or regulations are rarely made available for public comment. Copies of most regulations can be purchased online at https://www.legis-palop.org/ or directly at the Ministry of Justice, Public Administration and Human Rights in the format of the Official Gazette.
International Regulatory Considerations
STP is a member of the Economic Community of Central African States (ECCAS). ECCAS’s fundamental goal is to promote exchange and collaboration among the member countries and give an institutional and legal framework to their cooperation. ECCAS is the largest economic community in Central Africa, including Central African Economic and Monetary Community (CEMAC) member states (Gabon, Cameroon, the Central African Republic, Chad, Republic of Congo, and Equatorial Guinea), as well as Burundi, the Democratic Republic of Congo, Angola, Rwanda, and Sao Tome and Principe. Covering an area of 6,640,600 square kilometers, ECCAS has a total population of approximately 130 million. STP is not a member of the WTO, but has observer status. STP is among the forty-four African Nations that signed the agreement of the African Continental Free Trade Area (AfCFTA) in March 2018 in Kigali, Rwanda.
Legal System and Judicial Independence
Disputes are generally resolved through negotiations between parties without litigation, and there are few known instances of disagreements involving foreign investors reaching international courts. One notable exception is a 10-year dispute between a local businessman and Angolan investors over a brewery, which led to the Parliament’s dismissal of Supreme Court justices in 2018. The country has a written commercial law but does not have specialized courts. Overall, the legal system is perceived to act independently. The judicial process is procedurally fair but is subject to manipulation on occasion. All regulations or enforcement actions are appealable to the Supreme Court.
Laws and Regulations on Foreign Direct Investment
In April 2018, the country’s first Public Private Partnership (PPP) Law (Law 06/2018) entered into force. In addition, both the new Commercial Registry Code (Law no. 13/2018 of July 3) and the Code of Notaries (Law 14/2018 of July 4) were approved in 2018, entering into force on January 4, 2019, revoking the old codes (Law no. 47619, March 31, 1967), and the Decrees 42644 and 42645, both of November 14, 1959.
Now, a new business can obtain expedited registration within 24 hours for approximately USD 470 or between three to five days for around USD 240. STP ranks 148 out of 190 in terms of starting a new business according to the 2019 Doing Business Report, the same rank as in 2018.
Although no online business registration process exists, companies can easily register their businesses at the counter. The following is a general description of how a foreign company can establish a local office:
- Provide full company documentation, translated into Portuguese.
- Check the uniqueness of the proposed company name and reserve a name.
- Notarize the company statutes with the registration office at the Ministry of Justice.
- File a company declaration with the Tax Administration Office at the Ministry of Finance, Commerce, and Blue Economy.
- Register with the Social Security Office at the Ministry of Labor and Social Affairs.
- Publish an incorporation notice in the official government gazette (Diario da Republica).
- Publish the incorporation notice in a national newspaper.
- Register the company with the Commercial Registry Office at the Ministry of Finance, Commerce, and Blue Economy.
- Apply for a commercial operations permit (also known as an “alvara”).
- Apply for a taxpayer identification number with the Office of Tax Administration at the Ministry of Finance, Commerce, and Blue Economy.
- Register employees with the Social Security Office.
Other required documents include: 1) copies of the by-laws of the parent company and of the minutes of the meeting of the board of directors in which the opening of the STP branch is approved; 2) a certificate of appointment of the general manager for the STP office; 3) a copy of any agreement signed with a Sao Tomean company or with the STP government; 4) two copies of permits from the Court authorization to operate; and 5) two photographs and a copy of the passport of the General Manager.
In addition, the Single Window website (http://www.gue-stp.net/spip.php?article24 ; Portuguese language only) provides information on creating and registering companies in STP.
There are no agencies or brokers that provide services to simplify the procedures for establishing an office in STP. Some companies hire a legal office for assistance.
Competition and Anti-Trust Laws
AGER (General Regulation Authority of the Democratic Republic of Sao Tome and Principe) was created to promote competition, as well as to prevent operator abuses in the water, electricity, telecommunications sectors as well as in the postal service. AGER was established in 2005 and is housed under the Ministry of Public Works, Infrastructures, Natural Resources, and Environment. AGER supervision does not go beyond its mandate. For other economic sectors, STP does not have specific agencies that review transactions for competition-related concerns.
Expropriation and Compensation
The law permits the government to expropriate private property only if it is deemed to be in the national public interest and only with adequate compensation. There is no evidence to suggest that the government would undertake expropriation in a discriminatory manner or in violation of established principles of international law and standards.
Aside from a massive land expropriation from colonial farmers in 1976 – later recognized by the government as detrimental to STP’s economy – there have not been any documented cases of expropriation of foreign-owned properties. The government has reportedly considered expropriating land to expand the runway at the international airport, but thus far has been reluctant to do so out of concern that any expropriation could be a deterrent to new investment.
ICSID Convention and New York Convention
STP is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
Investor-State Dispute Settlement
STP does not have a Bilateral Investment Treaty with the United States. In May 2018, a dispute between a local businessman and Angolan investor over a brewery, led to government intervention. There are no reports of investor-state disputes that have involved a U.S. person in the past 10 years. The STP courts recognize and enforce foreign arbitral awards issued against the government.
International Commercial Arbitration and Foreign Courts
STP does not have any conflict mediation system but the country has a Voluntary Arbitration Law (LAV). The LAV is largely based on the Portuguese Arbitration Act of 1986. Many of the principles of the UNCITRAL Model Law are incorporated into the LAV. The Arbitration Center, which was housed under the Chamber of Commerce, has ceased activities. STP’s legal system recognizes international arbitration, and local courts recognize foreign arbitral awards, though enforcement may be difficult. No state-owned enterprise (SOE) is currently involved in an investment dispute.
STP has a bankruptcy law, but it is not well developed. In the World Bank’s 2019 Doing Business Report, STP ranks 168 out of 190 economies on the ease of resolving insolvency.