Transparency of the Regulatory System
Grenada recognizes that investors value transparent rules and regulations dealing with investment.
The Investment Act and the investment promotion regime promote transparency by authorizing investment incentives to key sectors through the GIDC. This helps to streamline processes, standardize treatment of investors, and better define investment rights. It also provides procedural guarantees and reduces the possibility for political influence in business negotiation.
Grenada also seeks to promote investment by consulting with interested parties, simplifying and codifying legislation, using plain language drafting, developing registers of existing and proposed regulation, expanding electronic dissemination of regulatory material, and publishing and reviewing administrative decisions.
Tax, labor, environment, health and safety, and other laws or policies do not distort or impede investment. Bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent. However, local authorities recognize that the implementation of procedures can sometimes be slow and inefficient.
Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. Public finances and debt obligations, including explicit and contingent liabilities, are also transparent and in keeping with international requirements.
Depending on the type of investment, government will require companies’ environmental, social, and governance (ESG) disclosure. Not only does this facilitate transparency, but also ensures corporate responsibility and protection of the country’s social and environmental resources.
Draft bills, particularly those that directly impact the public, often go through a public consultation process to address any concerns and allow for revision before being brought before cabinet and passed into law.
No new regulatory systems and enforcement reforms have been announced since the last ICS report.
International Regulatory Considerations
Grenada has been a member of the WTO since 1996 and is a party to agreements established under the organization. In pursuit of WTO compliance, Grenada is in the process of negotiating trade and investment agreements that contain provisions better aligned with the provisions of the WTO. Grenada is a member of CARICOM and the CARICOM Single Market Economy, which adheres to the international norms and regulatory standards outlined by the WTO. Also, in keeping with WTO regulations the government notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
The Prime Minister and the cabinet have the executive authority to negotiate and sign international agreements and conventions with other states and international organizations.
Grenada’s judicial system is based on English common law. The judiciary has four levels: the Magistrates Court, the High Court, the Eastern Caribbean Supreme Court, and the UK-based 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 Masters, who are primarily responsible for procedural and interlocutory matters. The Court of Appeal judges are based at the Court’s headquarters in Saint Lucia.
The Privy Council serves as Grenada’s final Court of Appeal. However, the Caribbean Court of Justice has compulsory and exclusive jurisdiction under Section 211 of the Revised Treaty of Chaguaramas, to which Grenada is a party. The Treaty delineates rights and responsibilities within CARICOM to hear and decide disputes concerning the interpretation and application of the Treaty.
The judicial system remains independent of the executive branch, and judicial processes are generally competent, fair, and reliable, however the process can be slow. Provisions are also made for appeals with the relevant court. Grenadian law also provides for the use of arbitration and mediation to resolve investment disputes.
Laws and Regulations on Foreign Direct Investment
The economy is supported by a strong legislative and regulatory framework that encourages FDI and promotes investment initiatives. Grenada augmented the investment climate with a revitalization of its Citizenship by Investment (CBI) program.
In 2016 parliament passed its most recent suite of legislative changes to enhance the investment climate in Grenada. Changes were made to the following Acts:
Value Added Tax Amendment Act – Provides for VAT exemptions for qualifying investments in priority sectors.
Excise Tax Amendment Act – Provides for tax incentives for investors engaged in manufacturing and investors entitled to conditional duties exemptions for motor vehicles.
Property Transfer Tax Amendment Act – Establishes more favorable rates of property transfer tax for investors.
Customs Service Charge Amendment Act – Removes 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 Act– Provides for specified circumstances under which the Minister of Finance may make regulations under the Principal Act.
Bankruptcy and Insolvency Amendment Act – Modernizes the law relating to bankruptcy and insolvency of individuals and companies. The act is based on the Canadian Bankruptcy and Insolvency Act, which has been used as a model in several Caribbean countries.
Income Tax Amendment Act – Provides for a waiver on withholding tax applicable on specified types of repatriated funds relating to investors engaged in tourism accommodation or health and wellness.
The GIDC and the Inland Revenue and Customs Department of Grenada work to ensure adherence to the rule of law and to 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/
Competition and Antitrust Laws
There are no competition laws in Grenada. A number of CARICOM and Organization of Eastern Caribbean States (OECS) proposals on competition are under consideration to strengthen market regimes under the CARICOM Single Market and Economy. CARICOM established a Competition Commission and plans are underway to establish a sub-regional Eastern Caribbean Competition Commission.
Expropriation and Compensation
According to the constitution, Grenada shall not compulsorily acquire or take possession of any investment or any asset of an investor except for a purpose which is legal and non-discriminatory. If the government expropriates property for a legal purpose, it must promptly pay adequate and effective compensation. Owners of expropriated assets have the right to file claims in the High Court regarding the amount of compensation or ownership of the expropriated asset.
In 2016, parliament repealed the 1994 Electricity Supply Act and opened the market to potential investors who will commit to transition to alternative sources of power generation, decreasing costs, reducing dependence on imported fossil fuels, and improving energy efficiency. This repealed the exclusive license that was granted to the country’s sole electricity provider Grenada Electricity Services (GRENLEC) and its majority shareholder, U.S.-owned WRB Enterprises. This regulatory change triggered a clause in the Share Purchase Agreement requiring Grenada to repurchase the GRENLEC shares from WRB. WRB filed a request for arbitration with ICSID, and the Grenada government was ordered to pay $74 million to the U.S. investors following a March 2020 ruling. A negotiated sum of $63 million was paid to WRB Enterprises in December 2020.
In the past, Grenadian citizens had their lands expropriated to permit foreign investments but were compensated for such actions, typically at the market value. There are no sectors at greater risk of expropriation, and there are no laws requiring local ownership. All expropriations have been subject to due process.
ICSID Convention and New York Convention
Grenada is a signatory and contracting member of the International Center for Settlement of Investment Disputes and has engaged this platform to resolve past disputes. While Grenadian laws have adapted the provisions outlined in the New York Convention, the country is not a contracting state and has not ratified the convention.
Investor-State Dispute Settlement
There was an investment dispute between the government of Grenada and a U.S.-owned company, which was the majority shareholder in Grenada Electricity Services Ltd. In 2016, parliament repealed the 1994 Electricity Supply Act and opened the market to potential investors, which put an end to the U.S. company’s 80-year exclusive license. This triggered a clause in the share purchase agreement requiring Grenada to repurchase the shares. The case was brought to arbitration before ICSID. On March 19, 2020, ICSID ruled in favor of the U.S. company. Grenada was ordered to pay $74 million for the shares, and a negotiated $63 million was paid in December 2020. There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
In the event of an investment dispute between two foreign parties, between a foreign investor(s) and Grenadian parties, between Grenadian partners, or between investors and the government of Grenada, Grenadian law mandates that the parties shall first seek to settle their differences through consultation or mediation. If the parties fail to resolve the matter, they may then submit their dispute to arbitration, file a lawsuit in Grenadian courts, invoke the jurisdiction of the Caribbean Court of Justice, or adopt such other procedures as provided for in the Articles of Association of the investment enterprise.
There is no government interference in the court system. Grenada participates in a court-connected mediation mechanism that can be accessed through the Mediation Centre. This Centre extends court-connected mediation to all member states of the OECS and allows for civil actions filed in court to be referred to mediation. Through this system, parties can utilize alternative dispute resolution mechanisms, including mediation, if the court deems them to be appropriate mechanisms for resolving the case.
However, court-connected mediation cannot be used in family proceedings, insolvency, non-contentious probate proceedings, proceedings when the High Court is acting as a prize court, and any other proceeding in the Supreme Court.
The Bankruptcy Act makes provisions for all aspects of bankruptcy and sets out procedures for creditors to apply to the High Court for a bankruptcy order against a debtor and the appointment of a trustee in bankruptcy. There are provisions for the court to appoint an interim receiver pending the outcome of the application for a bankruptcy order. It also includes provisions 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. The High Court exercises exclusive jurisdiction in matters related to bankruptcy.