64371 Indicators of foreign direct investment regulation in 87 economies Investment Climate Advisory Services I World Bank Group With ï¬?nancial support from Investing Across Borders 2010 Indicators of foreign direct investment regulation in 87 economies Afghanistan Croatia Macedonia, FYR Serbia Albania Czech Republic Madagascar Sierra Leone Angola Ecuador Malaysia Singapore Argentina Egypt, Arab Rep. Mali Slovak Republic Armenia Ethiopia Mauritius Solomon Islands Austria France Mexico South Africa Azerbaijan Georgia Moldova Spain Bangladesh Ghana Montenegro Sri Lanka Belarus Greece Morocco Sudan Bolivia Guatemala Mozambique Tanzania Bosnia and Herzegovina Haiti Nicaragua Thailand Brazil Honduras Nigeria Tunisia Bulgaria India Pakistan Turkey Burkina Faso Indonesia Papua New Guinea Uganda Cambodia Ireland Peru Ukraine Cameroon Japan Philippines United Kingdom Canada Kazakhstan Poland United States Chile Kenya Romania Venezuela, RB China Korea, Rep. Russian Federation Vietnam Colombia Kosovo Rwanda Yemen, Rep. Costa Rica Kyrgyz Republic Saudi Arabia Zambia Côte d’Ivoire Liberia Senegal Investment Climate Advisory Services I World Bank Group © 2010 The World Bank Group 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved This report is a product of World Bank Group staff. The ï¬?ndings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Ofï¬?ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. About the Investment Climate Department of the World Bank Group Investing Across Borders 2010 is an initiative of the Investment Climate Department of the World Bank Group with funding from the Federal Ministry of Finance of Austria and from FIAS, the multi-donor investment climate platform of the World Bank Group. The Investment Climate Department, working with other units of the International Finance Corporation (IFC) and the World Bank, advises governments on reforms to improve their business environments and encourage and retain investment, thus fostering competitive markets, growth and job creation. Contents Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Summary Data Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Topics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Investing Across Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Starting a Foreign Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Accessing Industrial Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Arbitrating Commercial Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Proï¬?les of Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Project Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Abbreviations and Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 CONTENTS iii This page intentionally left blank. iv INVESTING ACROSS BORDERS 2010 Foreword The global ï¬?nancial crisis and subsequent economic downturn led in 2008-2009 to rapid and signiï¬?cant contraction in international trade and investment. But the ï¬?rst half of 2010 has seen a gradual—though cautious—upswing in global consumer demand, investor conï¬?dence, and economic activity. The resurgence of international commerce and investment is creating new opportunities for companies and countries alike. The factors driving investment decisions by multinational corporations are changing. When seeking business opportunities, companies are now more concerned about ï¬?nancial and political risks, with a focus on stable and predictable business environments. In response, governments everywhere recognize that their chances of attracting more foreign investment depend on making their investment climates more competitive. The Investing Across Borders 2010 report and online database (http://www.investingacrossborders.org) offer companies and governments indicators measuring how countries around the world facilitate market access and operations of foreign companies. For each of the 87 countries surveyed, the report identiï¬?es sectors with restricted entry for foreign investors, deï¬?nes roadmaps for companies seeking to create foreign subsidiaries and acquire real estate, assesses the strength of commercial arbitration systems, and presents dozens of other indicators on regulation of foreign direct investment. For potential investors, the indicators measure the transparency and predictability of countries’ legal environments. For governments, the indicators identify good regional and global practices and offer tools for improving the competitiveness of business climates. For academics and researchers, the indicators provide vast amounts of previously unavailable data that enable the pursuit of new insights and knowledge. This report and its Web site are designed to inform decisions, stimulate discussions, spur policy reforms, and facilitate new research and analysis. And as this is the ï¬?rst of what is planned as a regular report on regulation of foreign direct investment, we especially welcome your feedback. Janamitra Devan Izumi Kobayashi Vice President Executive Vice President Financial and Private Sector Development Multilateral Investment Guarantee Agency World Bank Group World Bank Group FOREWORD v This page left blank intentionally. vi INVESTING ACROSS BORDERS 2010 Introduction 1 L ike trade, foreign direct investment (FDI) The beneï¬?ts of FDI for economic development caused by companies in the extractive and has occurred throughout history. From the 1 have been well established. A global network energy sectors.8 merchants of Sumer around 2500 BCE to of 80,000 multinational corporations and Though some of these criticisms are the East India Company in the 17th century, 800,000 foreign afï¬?liates has helped create warranted, evidence for such claims is investors routinely entered new markets in millions of jobs, transferred technology, often based on narrowly-focused studies of foreign dominions. In 1970 global FDI upgraded skills, fostered competition, and certain industries and economies. While the totaled $13.3 billion. By 2007 it was nearly contributed to the ï¬?scal standing of many potential drawbacks of individual investment 150 times higher, peaking at $1.9 trillion economies.5 Through capital spillovers, projects should not be underestimated, most (ï¬?gure 1.1).2 FDI has encouraged the adoption of new research and empirical evidence ï¬?nds that, production technologies. Foreign companies The economic crisis slashed global FDI on balance, FDI helps foster development in have also stimulated knowledge transfers by flows by about 40% in 2009, affecting all recipient economies.9 The beneï¬?ts of FDI are training local workers, developing their skills, economies, sectors, and forms of investment. particularly ampliï¬?ed in economies with good and introducing new management practices Mergers and acquisitions in high-income governance, well-functioning institutions, and and better organizational arrangements.6 economies contracted the quickest after the transparent, predicable legal environments. Foreign investment has also helped break up 2007 subprime mortgage crisis in the United cozy local oligopolies and cartels. States contributed to banking and ï¬?scal crises in Western Europe and Japan. The contagion Opponents of FDI point out that its impacts are INTRODUCING THE INVESTING gradually spread, affecting new investment in often limited and in some cases detrimental— ACROSS BORDERS INDICATORS emerging markets and developing economies. 3 the consequences of crowding out local The Investing Across Borders (IAB) indicators Developing economies fared marginally better competition, enclave production with limited measure FDI regulation in 4 speciï¬?c during the crisis. FDI in developing economies forward and backward linkages, and “race policy areas. They aim to complement fell 35% in 2009, compared with 41% in to the bottomâ€? effects often related to labor existing measures of the quality of business high-income economies.4 With the global and environmental issues.7 While the main environments. Quantitative data and recession receding somewhat, FDI will likely social argument for FDI is that it generates benchmarking can be useful in stimulating recover in the near future. Most indicators employment, job creation may be limited and policy debate and action, both by exposing signal that FDI will be higher in 2010 than work opportunities may even decrease if local potential challenges and by identifying where in 2009. ï¬?rms are driven out of the market by increased policy makers might look for lessons and competition, or if acquired companies are good practices. Indicators can also provide The recovery in FDI is good news for economies restructured. Critics also cite cases of severe a basis for analyzing how different policy suffering from the global economic downturn pollution and environmental destruction approaches—and different policy reforms— and seeking to stimulate economic growth. contribute to broader desired outcomes such as FDI, competitiveness, and growth. The FIGURE 1.1: FDI in high-income and developing economies, 1970–2009 following examples illustrate how the areas of regulation measured by IAB can be reflected Net FDI inflows: billions of U.S. dollars at current prices and exchange rates in foreign investors’ decisionmaking. $1,400 Developing economies High-income economies A company seeking to expand its global $1,300 $1,200 presence will assess its options before $1,100 deciding on a location for its investment. One $1,000 of the ï¬?rst determinants of location is whether $900 the company is allowed to enter and operate $800 $700 in a speciï¬?c market. Though most economies $600 have liberalized and opened most sectors to $500 foreign investment, some industries continue $400 $300 to be protected from foreign competition. $200 IAB’s Investing Across Sectors indicators $100 ï¬?nd that while primary and manufacturing $0 sectors are mostly open, some industries— 2009 1970 1971 1972 1973 1975 1976 1977 1978 1979 1980 1981 1982 1983 1985 1986 1987 1988 1989 1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 1974 1984 1994 2004 such as media, transportation, energy, and Note: 2009 data are based on preliminary estimates. telecommunications—remain restricted in Source: UNCTAD, Foreign Direct Investment Online, http://stats.unctad.org/fdi. many economies. Some of the more restrictive 2 INVESTING ACROSS BORDERS 2010 economies include large ones such as China, arbitration as a mechanism for resolving Mexico, the Philippines, and Thailand. commercial disputes, although some do not BOX 1.1: The Investing Across Borders Web site have special arbitration laws. Party autonomy Even if a foreign company can enter a levels and enforcement mechanisms for The Investing Across Borders Web site particular sector, it may face other barriers arbitration awards vary. For example, some (http://www.investingacrossborders.org) to market access and operations. Onerous economies have adopted rules to ensure is a public database offering hundreds start-up procedures, excessive licensing and prompt enforcement of arbitration awards. In of previously unavailable data points on permit requirements, and time-consuming contrast, in other economies it takes more than each economy covered by the report. export and import processes are among The site: 2 years to enforce a ï¬?nal arbitration award. the factors that can make an economy less attractive to foreign investors. IAB’s Starting a The IAB indicators comprise measures of the ß Allows user-friendly access to thousands of data points, sorted by Foreign Business indicators show that in some characteristics of laws and regulations (de jure economy or topic. economies foreign companies must complete indicators), and their implementation (de facto ß Displays disaggregated underlying lengthy procedures to obtain investment indicators). IAB’s Web site provides open data for each economy and topic. approvals, adding weeks and sometimes access to these indicators (box 1.1). Below ß Offers international benchmarks. months to the start-up time. In other economies are overviews of the 4 indicator topics: the procedures can be done online and take ß Provides references to FDI-related Investing Across Sectors indicators measure laws. only a few days. the degree to which domestic laws allow ß Lists thousands of leading experts on Once a foreign company has been foreign companies to establish or acquire business and FDI laws and regula- established in a new market, it is likely to local ï¬?rms. The indicators track restrictions tions. need to acquire real estate for its operations. on foreign equity ownership in 33 sectors, Administrative barriers to FDI often include aggregated into 11 sector groups, including difï¬?culties associated with securing access to primary, manufacturing, and service sectors. security of their property, investments, and land.10 The ability to access land or buildings rights. The IAB project does not advocate for Starting a Foreign Business indicators record reducing all regulatory barriers, but hopes to with secure ownership rights, at transparent the time, procedures, and regulations involved improve understanding of how to maximize prices, and with limited restrictions can be in establishing a local subsidiary of a foreign the development beneï¬?ts of FDI through critical to a foreign investor’s decision on company in the form of a limited liability appropriate regulatory frameworks. whether to invest in a new market. IAB’s company. Accessing Industrial Land indicators ï¬?nd that foreign companies cannot own land in some Accessing Industrial Land indicators evaluate GOALS OF THE IAB INDICATORS economies. In others, leasing land can take legal options for foreign companies seeking up to 5 months. And while most economies The World Bank Group’s Doing Business to lease or buy land in a host economy, the have both cadastre and land registry systems, project provides the methodological foundation availability of information about land plots, less than half of those in the IAB sample have for the IAB indicators.12 The Doing Business and the steps involved in leasing land. systems for sharing land-related data across indicators compare regulation of domestically Arbitrating Commercial Disputes indicators owned small and medium enterprises. Those agencies. assess the strength of legal frameworks indicators have helped stimulate hundreds A foreign company might also be concerned for alternative dispute resolution, rules for of reforms worldwide and draw millions of about its ability to resolve disputes with arbitration, and the extent to which the visitors to their online database every year. commercial partners. Complex commercial judiciary supports and facilitates arbitration. Many users of Doing Business data—including contracts require reliable and flexible dispute The indicators compare national regimes governments, policymakers, academics, and resolution mechanisms, and companies often for domestic and international arbitration for other stakeholders—have expressed interest prefer to have alternatives to court litigation. local and foreign companies. in complementary indicators on regulation of Investors favor environments where they foreign-owned companies. The IAB indicators The indicators are structured to reward have flexibility in deciding on arbitration aspire to meet different stakeholders’ needs good regulation and efï¬?cient processes. proceedings and where outcomes are more for information, analysis, and policy action Transparent, predictable, and effective secure and easily enforceable. Thus a stable (table 1.1). laws and regulations are critical to ensuring and predictable arbitration regime, as part that foreign investment results in a win-win Foreign investors and governments concerned of the broader legal framework, is another situation for investors, host countries, and their about the competitiveness of their economy’s factor that can affect conditions for FDI. IAB’s citizens. A solid, consistently applied legal business environment have a broad range Arbitrating Commercial Disputes indicators framework gives investors conï¬?dence in the of resources at their disposal. Table 1.2 lists show that economies generally recognize INTRODUCTION 3 some widely used international indicators TABLE 1.1: Audiences and uses for the IAB indicators and assessments of investment climates. IAB does not provide a complete picture of Audience Uses economies’ investment climates and should Governments ß Identify and share regional and international good practices that help guide and investment policy advocacy priorities. be used in conjunction with other tools to promotion ß Stimulate and advise investment policy reforms. analyze business environments, diagnose intermediaries ß Strengthen the credibility of information provided by investment promotion inter- their strengths and weaknesses, and, if mediaries by using third-party evaluations of the investment climates. appropriate, guide reforms. ß Benchmark economies against one another to reï¬?ne investment promotion strate- gies and publicize successes in improving investment climates. IAB’s value is based on its ability to identify Foreign investors ß Facilitate decisions on global investment locations by complementing other speciï¬?c, actionable, and practical steps that and site location information sources. governments can take to increase domestic consultants ß Provide easy to use, practical indicators on the efï¬?ciency of investment investment competitiveness in the policy processes and the strength of investment laws as implemented worldwide and make them available online. and regulatory areas measured by the IAB indicators. The following features differentiate Advisers and ß Identify legal, regulatory, and administrative impediments to economies’ attrac- consultants on tiveness for investment. IAB from other data sources: investment policy ß Analyze regional and global good practices to better target and design advi- ß Actionable, reform-oriented indicators. and promotion sory efforts. The IAB indicators identify speciï¬?c im- ß Foster competition to strengthen FDI regulations by allowing economies and regions to compare themselves. pediments to FDI in the legal, regulatory, ß Monitor and evaluate the impact of investment climate reforms. administrative, and institutional frameworks of each economy covered. The indicators are reform-oriented because the identi- TABLE 1.2: International indicators and assessments of investment climates ï¬?ed problems can be addressed in the Country Commercial Guides (http://www.buyusainfo.net) short and medium term to strengthen an Country Risk Reports (http://www.ihsglobalinsight.com) economy’s investment climate. They are Doing Business (http://www.doingbusiness.org) based on standardized questionnaires, Economic Freedom of the World (http://www.freetheworld.com/reports.html) allowing for straightforward international Economist Intelligence Unit assessments and other products (http://www.eiu.com) comparisons of results, providing ex- amples of good practices, and encourag- Enterprise Surveys (http://www.enterprisesurveys.org) ing exchanges of information between Euromonitor International (http://www.euromonitor.com) economies. FDI Conï¬?dence Index (http://www.atkearney.com) ß Local expertise. The IAB indicators are FDI Proï¬?les (http://www.vcc.columbia.edu) based on information collected from more fDi Intelligence (http://www.fdiintelligence.com) than 2,350 local experts and practitioners Fitch Ratings (http://www.ï¬?tchratings.com) representing leading law and accounting Global Competitiveness Report (http://www.weforum.org/en/initiatives/gcp) ï¬?rms, chambers of commerce, and invest- Global Location Trends (http://www.ibm.com/bcs/pli) ment promotion institutions. These experts bring a wealth of knowledge based on Global Production Location Scoreboard (http://www.global-production.com/scoreboard) their experiences advising foreign investors Index of Economic Freedom (http://www.heritage.org/index) on market entry and operations in their International Country Risk Guide (http://www.prsgroup.com/icrg.aspx) economies. Investment Policy Reviews (http://www.unctad.org/ipr) ß Focus on laws and their implementation. Market Potential Index for Emerging Markets (http://globaledge.msu.edu/resourcedesk/mpi) The IAB indicators evaluate the scope and Measures of Restrictions on Inward Foreign Direct Investment in Developing Countries paper strength of laws and regulations as well (http://www.swarthmore.edu/SocSci/sgolub1) as, where possible, their implementation. Moody’s Investor Service (http://www.moodys.com) Many economies have adopted modern OCO Insight (http://www.ocoglobal.com/index.cfm?page_name=insight) laws and rules, but these are often not ap- Policy Framework for Investment (http://www.oecd.org/daf/investment/pï¬?) plied effectively. The combined measures Standard and Poor’s (http://www.standardandpoors.com) of de jure and de facto performance World Competitiveness Yearbook (http://www.imd.ch/research/publications/wcy/index.cfm) provide a more comprehensive, realistic picture of business conditions. World Investment Report (http://www.unctad.org/wir) 4 INVESTING ACROSS BORDERS 2010 ß Periodic updates. The IAB report will in this report based on what was desirable, international conventions. It does not focus become a regular publication measuring feasible, and practical. on international investment agreements. changes in FDI regulation worldwide. IAB favored topics that could be affected by ß The project does not cover legal regimes Similar initiatives have shown the power for special economic zones (SEZs), export public policy in the short term and information of regularly updated indicators to stimulate processing zones (EPZs), and other areas that could be captured through surveys of local dialogue and actions that can lead to governed by special legal frameworks experts. It aimed for indicators that assess the systemic, long-term reforms. IAB’s ability designed to promote FDI and exports. treatment of a typical foreign investor and to capture and recognize these improve- offer enough variation across economies to ments on a regular basis gives political warrant the development of global indicator Methodological limitations actors compelling tools for engaging in set. While legal and regulatory frameworks ß IAB is not a survey of investor or company strategic communication and for initiating for FDI are typically not the primary drivers of perceptions. or sustaining reform momentum. investment decision, all other conditions being ß IAB data are not based on a statistically equal, they can tip an investment decision in signiï¬?cant sample of respondents in each favor of a particular economy. Strong, stable EVOLUTION AND LIMITATIONS economy. legal and regulatory frameworks help create OF THE IAB INDICATORS ß The IAB indicators are not necessarily a more transparent, predictable business representative of all investment projects. The IAB indicators have limited thematic environment conducive to business and coverage. The 4 topics covered by this ß Data on the efï¬?ciency of administrative investment. Thus a well-designed, effectively report were chosen from a wide range of processes refer to each economy’s largest implemented legal and regulatory framework policy variables that affect investment climates business city only. signals to investors that foreign investment is and influence investment decisions. These welcome. ß For these data, the methodology assumes include the host economy’s market size and that an investor and its legal counsel have location, availability of natural resources, However, understanding the limitations of full information on what is required and macroeconomic performance, infrastructure the IAB indicators is just as important as that they do not waste time when complet- quality, labor and production costs, and understanding their scope. This section ing procedures. quality of governance and institutions. 13 gives an overview of the IAB project’s ß The IAB indicators are not speciï¬?cally limitations in 3 areas: substantive, focusing designed to indicate whether treatment of Many competitive factors (such as market size, on the content and thematic coverage of the foreign investors is more or less favorable location, and natural resource availability) indicators; methodological, concerned with than that of domestic enterprises. cannot easily be influenced by public policy. the questionnaire design and data collection; Furthermore, other policy-level drivers of and limits to the implications of the indicators, FDI (such as macroeconomic performance, Limits to intepretation and use addressing their potential interpretation, uses, infrastructure quality, and human capital) can and relationships with various economic and ß The IAB indicators do not examine only be influenced in the medium to long social data. These limitations pertain to the whether more regulation is preferable to run. In contrast, most of the areas of business project as a whole and are discussed in less. They focus on good regulation. and FDI regulation measured by IAB can be greater detail in the methodology chapter ß IAB data should not be used as a proxy affected in the short run and at comparatively and on IAB’s Web site. Additional limitations for government reforms in general, and low cost to governments, providing an related speciï¬?cally to each of the 4 topics governments should not assume that excellent opportunity for near-term beneï¬?ts. covered by the project are also presented. improvements in the indicator scores will Readers and users of the IAB indicators are increase FDI. In its conceptual and developmental phases urged to keep these limitations in mind when (2006–08) the IAB project considered and Due to these and other limitations, the IAB interpreting the data. tested indicators measuring policy areas indicators are only partial measures of the such as employment of expatriate workers topics they cover. They are limited in scope and managers, investment incentives and Substantive limitations and explanatory power when it comes promotion, currency convertibility and ß IAB focuses on regulation of FDI, not to actual policies and business realities. repatriation, expropriation, breach of contract, portfolio investment.14 Circumstances in each economy must be public procurement, environmental and social ß Thematic coverage is limited to 4 discrete considered when interpreting the indicators regulation, and intellectual property. The policy areas. and their implications for policies and the team ultimately decided on the more modest ß IAB focuses on national laws and, in investment climate. thematic coverage of the 4 topics presented some cases, on countries’ ratiï¬?cations of INTRODUCTION 5 WHAT’S NEXT? ENDNOTES 12 Doing Business, http://www.doingbusiness. org. Investing Across Borders is a new initiative that 1 According to the International Monetary Fund, 13 MIGA (2009); Nunnenkamp (2002); Porter the IAB team aims to continue to improve in the FDI is a category of cross-border investment that (2008); UNCTAD (2005a). involves residents of one economy obtaining future. Over time the team hopes to increase a lasting interest in an enterprise located in 14 Portfolio investment, in contrast to foreign direct another economy. A lasting interest is commonly investment, represents passive holdings of the number of economies surveyed, introduce understood to involve at least 10% of ordinary securities such as foreign stocks, bonds, or other rankings and other direct comparisons for shareholding or voting power. In effect, FDI ï¬?nancial assets and does not convey signiï¬?cant each topic measured, and engage a growing need not entail much transfer of funds and can control over the management or operations of involve a ï¬?rm bringing its brand, technology, the foreign ï¬?rm. number of questionnaire respondents. Though management, and marketing strengths to bear there are currently no plans to expand the on its local interest. report’s thematic coverage to other areas of 2 The previous peak was in 2000, at $1.4 FDI regulation, this option will be considered trillion, which fell to $561 billion in 2003 before peaking again in 2007. if there is speciï¬?c and sufï¬?cient demand from 3 This report uses developing economies to governments or other stakeholders to carry out refer to all low- and middle-income countries the additional research. with 2008 gross national income (GNI) per capita of $11,905 or less, based on World Bank data. All economies with 2008 GNI per The IAB team also intends to leverage the capita of $11,906 or more are referred to in report’s ï¬?ndings in the research, analysis, this report as high-income economies. and reform advisory work of the World Bank 4 UNCTAD (2010). Group and its partners. Any parties interested 5 UNCTAD (2004). in collaborating on any of these areas are 6 de Mello (1997). welcome to contact the IAB team. The team 7 Centre for Research on Multinational would also be grateful for feedback on the Corporations (2008). data, methodology, and overall project 8 Ibid. design that would make IAB a better, more 9 Nair-Reichert and Weinhold (2001). useful resource for its users. 10 Muir and Shen (2005). 11 The 87 economies contain 86% of the world’s For more information on the project, please population and account for 77% of global visit http://www.investingacrossborders.org. GDP. 6 INVESTING ACROSS BORDERS 2010 Overview 7 Investing Across Borders 2010 (IAB) presents cross-country indicators When it comes to international commercial arbitration, nearly 10% of analyzing laws, regulations, and practices affecting foreign direct IAB countries do not have special statutes for commercial arbitration. investment (FDI) in 87 economies. The indicators focus on 4 thematic Furthermore, 1 in 4 countries has not ratiï¬?ed the New York Convention, areas measuring how foreign companies invest across sectors, start the ICSID Convention, or both.2 Adherence to and implementation local businesses, access industrial land, and arbitrate commercial of international and regional conventions on arbitration signal a disputes. The indicators combine analysis of laws and regulations, as government’s commitment to the rule of law and its investment treaty well as their implementation. They explore differences across countries obligations, which reassures investors. to identify good practices, facilitate learning opportunities, stimulate reforms, and provide cross-country data for research and analysis. Red tape and poor implementation of laws create further barriers to FDI The project’s methodology is based on the World Bank Group’s Doing Business initiative.1 The IAB indicators draw on data collected through The IAB indicators go beyond analyzing the text of laws and the a survey of lawyers, other professional service providers (mainly ratiï¬?cation of international conventions. They also examine the typical accounting and consulting ï¬?rms), investment promotion institutions, experience of investors as they go through administrative processes chambers of commerce, and other expert respondents in each of the countries measured. Between April and December 2009 more than 2,350 experts in 87 economies responded to the survey to provide FIGURE 2.1: Share of IAB countries requiring foreign data for this report. investment approval, by region This chapter presents the report’s main ï¬?ndings including examples High-income of FDI competitiveness-enhancing practices for each indicator area. OECD (12) 0% It also provides key results for each region. IAB does not measure Eastern Europe & Central Asia (20) 0% all aspects of the business environment that matter to investors. For Latin America & 0% example, it does not measure security, macroeconomic stability, market Caribbean (14) IAB global 20% size and potential, corruption, skill levels, or infrastructure quality. Still, average (87) the indicators provide a starting point for governments seeking to Sub-Saharan 38% Africa (21) improve their competitiveness in attracting foreign investment. Middle East & 40% North Africa (5) South Asia (5) 40% MAIN FINDINGS East Asia & 50% Pacific (10) 0 10 20 30 40 50 60 Restrictive and obsolete laws and regulations impede Note: 0% denotes that none of the countries in that region require an FDI investment approval. Source: Investing Across Borders database. Most of the 87 economies measured by IAB have FDI-speciï¬?c restrictions that hinder foreign investment. For example, a ï¬?fth of the countries surveyed require foreign companies to go through a foreign FIGURE 2.2: Restrictions on foreign ownership of companies investment approval process before proceeding with investments in vary by sector light manufacturing (ï¬?gure 2.1). This requirement adds, on average, nearly 1 month to the establishment process—and in some countries Foreign equity ownership index (100=full foreign ownership allowed) up to 6 months. IAB global average=89.3 In addition, almost 90% of countries limit foreign companies’ ability Construction, tourism, 98.1 and retail to participate in some sectors of their economies. While there are Light manufacturing 96.6 few restrictions on foreign ownership in the primary sectors and Health care and 96.0 waste management manufacturing, services—such as media, transportation, and Agriculture and forestry 95.9 electricity—have stricter limits on foreign participation (ï¬?gure 2.2). Mining, oil and gas 92.0 Insurance 91.2 In some sectors—such as banking, insurance, and media—laws often Banking 91.0 limit the share of foreign equity ownership allowed in enterprises. In Telecommunications 88.0 others—such as transportation and electricity—state-owned monopolies Electricity 87.6 preclude both foreign and domestic private ï¬?rms from engaging in the Transportation 78.5 sectors. Media 68.0 0 20 40 60 80 100 Source: Investing Across Borders database. 8 INVESTING ACROSS BORDERS 2010 and interact with public institutions. For instance, the indicators ï¬?nd that subsidiary of a foreign company can take more than 6 months (ï¬?gure leasing privately held industrial land takes, on average, 2 months—and 2.5). In Canada, Georgia, and Rwanda it can be done in less than leasing public land almost 5 months (ï¬?gure 2.3). But there is also large a week. In Sub-Saharan Africa and the Middle East and North Africa variation across countries. Leasing private industrial land in Nicaragua the procedures required of foreign companies take twice as long to and Sierra Leone typically requires half a year, as opposed to less than complete as those for domestic companies. In high-income OECD 2 weeks in Armenia, the Republic of Korea, and Sudan. countries and Eastern Europe and Central Asia these FDI-speciï¬?c additional procedures add only a couple of days, on average. The amount of time required to enforce an arbitration award in local courts also varies by country. On average, more than a year is needed Good regulations and efï¬?cient processes matter for in the South Asian economies measured by IAB. In contrast, in high- FDI income OECD countries such as France and the United Kingdom, enforcement can be completed in less than 2 months (ï¬?gure 2.4). Countries with poor regulations and inefï¬?cient processes for foreign companies receive less FDI and have smaller accumulated stocks of The typical experience of foreign companies trying to start a business FDI (ï¬?gure 2.6). Based on IAB results, countries tend to attract more FDI also varies greatly across countries. In Angola and Haiti establishing a if they allow foreign ownership of companies in a variety of sectors, make start-up, land acquisition, and commercial arbitration procedures efï¬?cient and transparent, and have strong laws protecting investor FIGURE 2.3: Far more time is needed to lease public than private land interests. But this correlation does not imply existence or direction of a causal relationship. Many other variables—such as market size, political â–  # Days to lease land from private holder stability, infrastructure quality, or level of economic development—are â–  # Days to lease land from government likely to better explain the relationship. 99 South Asia (5) 205 IAB also ï¬?nds that countries with smaller populations and markets Latin America & 62 tend to have fewer restrictions on FDI. And countries that have done Caribbean (14) 156 particularly well in attracting FDI (before the recent economic crisis)— Sub-Saharan 72 Africa (21) 151 such as Ireland, Singapore, the United Kingdom, and the United East Asia & 66 States—also score well on the IAB indicators.3 Pacific (10) 151 Eastern Europe & 43 Central Asia (20) 133 Middle East & 59 North Africa (5) 123 FIGURE 2.5: Fastest and slowest countries for starting a High-income 50 foreign business OECD (12) 88 IAB global 61 140 Number of days average Angola 263 Source: Investing Across Borders database. Haiti 212 Venezuela, RB 179 Brazil 166 FIGURE 2.4: The time required to enforce an arbitration Papua New Guinea 108 award varies signiï¬?cantly across regions China 99 Vietnam 94 Cambodia 86 Regional average of the number of days to enforce an arbitration Indonesia 86 award in court Bosnia & 83 Herzegovina South Asia (5) 388 France 9 Middle East & North Africa (5) 288 Singapore 9 East Asia & 215 Egypt, Arab Rep. 8 Pacific (10) Turkey 8 Latin America & Caribbean (14) 206 Macedonia, FYR 8 IAB global average (87) 179 Belarus 7 Sub-Saharan Albania 7 Africa (21) 157 Afghanistan 7 Eastern Europe & 123 Canada 6 Central Asia (20) Georgia 4 High-income OECD (12) 118 Rwanda 4 0 50 100 150 200 250 300 350 400 450 0 50 100 150 200 250 300 Source: Investing Across Borders database. Source: Investing Across Borders database. OVERVIEW 9 FIGURE 2.6: Good regulations and efï¬?cient processes are associated with more FDI Average number of FDI projects, 2005-09 Average FDI stock per capita (USD), 2004-08 Note: Correlations compare aggregate 300 $10,000 IAB score with two measures of FDI. The ï¬?rst ï¬?gure shows the correlation with $9,000 the 5-year average number of new FDI 250 $8,000 projects and is signiï¬?cant at the 5% level. The second shows the 5-year average 200 $7,000 FDI stock per capita and is signiï¬?cant at $6,000 the 1% level. The aggregate IAB score is 150 $5,000 the average of the share of total possible points of the 4 topics. The IAB aggregate $4,000 is broken into 5 quintiles expressed as 100 $3,000 groups of economies below the 20th, 40th, 60th, 80th, and 100th percentile ranking. 50 $2,000 Source: fDi Intelligence database, $1,000 UNCTAD FDI Statistics database, World 0 $0 Bank Group World Development Indica- IAB low score IAB high score IAB low score IAB high score tors database, Investing Across Borders database. FIGURE 2.7: Countries vary widely on the effectiveness of land management systems Effective institutions help foster FDI Easily accessible and reliable information, Share of economies with land information Share of economies in which cadastre and and efï¬?cient and predictable actions by public system (LIS) land/property registry are linked to share data* institutions help create a business environment No No conducive to investment. For instance, studies 77% 61% have shown that 70% of countries miss out on foreign investment due to deï¬?ciencies of Yes 23% investment promotion institutions in providing Yes 39% potential investors with accurate and up-to- date information.4 Electronic services can make administrative processes more efï¬?cient and transparent and Source: Investing Across Borders database. * Only includes 41 economies which have cadastre do not necessarily require costly or complex and land registry. technological solutions. Any public agency with a Web site can start by posting key information online and, over time, provide FIGURE 2.8: Court assistance with arbitration varies by region some services electronically. IAB regional average index of the degree of court assistance with arbitration proceedings The convenience of online access to laws and (100 = maximum assistance) regulations is important to all businesses, but particularly for foreign investors not physically Eastern Europe & Central Asia (20) 51 present in a country. IAB shows that laws on East Asia & Pacific (10) 51 establishing a foreign business are available online in all IAB countries except Ethiopia, Sub-Saharan Africa (21) 57 Ghana, and Liberia. In 83% of IAB countries Latin America & Caribbean (14) 59 laws on commercial arbitration are available 62 online. But many of these are not Web sites IAB global average (87) of government institutions, but of law ï¬?rms. South Asia (5) 63 Economies that provide a lot of information Middle East & North Africa (5) 69 about land, often through a land information system, usually make it accessible online. High-income OECD (12) 82 0 20 40 60 80 100 There is signiï¬?cant variation in the effectiveness of institutions providing land information Source: Investing Across Borders database. 10 INVESTING ACROSS BORDERS 2010 (mainly land registries and cadastres). Except Montenegro, Papua New Guinea, Rwanda, investment climate. Furthermore, countries that in some Eastern European and Central Sierra Leone, and the Solomon Islands. In provide their citizens with good public services, Asian and high-income OECD countries, some countries such institutions are no longer have good institutions, enjoy political stability, public land management institutions are not active, as in Ethiopia and Liberia. and do not suffer from corruption tend to score organized well enough to make information well on the IAB indicators (ï¬?gure 2.9). Courts can make arbitration more effective. easily accessible. Less than a quarter of the During arbitration proceedings, courts may be countries surveyed have functioning land Countries can improve their FDI required to support arbitral tribunals. Similarly, information systems, and many lack effective competitiveness if interim measures are required—such as and coordinated land management institutions The IAB indicators are designed to identify freezing assets, making interim payments, or (ï¬?gure 2.7).5 As technology develops, access good practices that offer governments concrete seizing property—courts must be approached to information becomes paramount—not only tools for improving their investment climates in by the party seeking the order. In many countries to inform investors, but also to improve the the 4 measured indicator areas. Though legal in East Asia and the Paciï¬?c and Eastern Europe countries’ business climates. frameworks and their implementation may and Central Asia laws do not expressly provide The existence of a functioning arbitral for domestic courts to assist the arbitration not be the main drivers of foreign investment institution in a country is an indication of a process with orders for production of documents decisions (see the Introduction chapter), they solid arbitration practice. But more than or appearance of witnesses (ï¬?gure 2.8). can tip the balance in favor of one country 10% of the countries surveyed do not have over another if all other factors are equal. In general, IAB shows that effective institutions Countries that score well on the IAB indicators such an institution, including Afghanistan, that provide easily accessible and reliable share certain features (box 2.1). Angola, Bangladesh, Cambodia, Kosovo, information matter for creating an enabling FIGURE 2.9: Higher IAB scores are associated with better governance, higher institutional quality, lower political risk, and less corruption Note: The ï¬?rst ï¬?gure (top left) shows Avg World Governance Indicators Normalized Score, 2008 Global Investment Promotion Benchmark (GIPB), 2009 the correlation between IAB aggregate (-2.5 = weak, 2.5 = strong) (1 = minimum score, 100 = max score) scores and the average normalized 0.6 80 score for the six indicators that compose the World Bank Governance Indicators: 0.4 voice and accountability, political stability 0.2 60 and absence of violence, government effectiveness, regulatory quality, rule of 0.0 law, and control of corruption. The second -0.2 ï¬?gure (top right) shows the correlation 40 between IAB aggregate scores and the -0.4 Global Investment Promotion Benchmark percentile rank of each country’s -0.6 20 investment promotion agency. This -0.8 indicator measures the quality of each agency’s handling of investor inquiries -1.0 0 and its Web site. The third ï¬?gure (bottom IAB low score IAB high score IAB low score IAB high score left) shows the correlation between IAB aggregate scores and the PRS Group’s International Country Risk Guide political risk ratings. The fourth ï¬?gure (bottom right) shows the correlation between PRS Political Rating Index, 2010 Transparency International Corruption Percetpions Index, 2009 IAB aggregate scores and Transparency (0 = high risk, 100 = low risk) (1 = most corrupt, 10 = least corrupt) International’s Corruption Perceptions Index, which orders countries based 6 on “the degree to which corruption is 80 perceived to exist among public ofï¬?cials and politicians.â€? The IAB aggregate 5 scores are averages of the share of 70 possible point score per topic. The 4 scores have been broken into 5 quintiles ranked from the least to highest number 60 of scored points. All correlations are 3 signiï¬?cant at the 1% level. 50 Source: World Bank Group Worldwide 2 Governance Indicators database, World Bank Group Global Investment Promotion 40 1 Benchmarking database, PRS Group IAB low score IAB high score IAB low score IAB high score Political Risk Ratings, Transparency International Corruption Perceptions Index database, Investing Across Borders database. OVERVIEW 11 BOX 2.1: Characteristics of countries that score well on the IAB indicators Investing Across Sectors ß Allowing foreign ownership in the primary, manufacturing, and service sectors. The results of the Investing Across Sectors indicators illustrate 2 key points. First, the global trend has been to liberalize a growing range of economic sectors. Second, in many countries the beneï¬?ts of openness to foreign capital participation have trumped reasons for restricting certain sectors from foreign ownership. For every country that limits or prohibits foreign equity ownership in certain sectors, several others with similar features allow unrestricted for- eign ownership. But having an open economy is not enough. Other requirements include good regulation and strong investment climate fundamentals, with features such as well-functioning institutions, economic and political stability, and respect for the rule of law. Starting a Foreign Business ß Equal treatment of foreign and domestic investors. The start-up process should be governed by the same rules for all companies regard- less of their ownership. Any differences in treatment should be due to companies’ size, legal form, or commercial activity—not the nationality of its shareholders. ß Simple and transparent establishment process. Countries should consolidate start-up procedures and abolish unnecessary ones (such as company seal requirements or investment approvals for small projects). Obtaining investment approvals can be burdensome for foreign investors. Countries should simplify or abolish such requirements unless foreign investment is in a sector that affects national or economic security. In addition, countries can enable investors to register businesses online. Fast-track alternatives, even if they entail higher pro- cessing fees, are also usually valuable to foreign investors. Finally, countries should not require foreign companies to go through a local third party (lawyer, notary, public entity). Accessing Industrial Land ß Clear laws which provide fair and equal treatment for foreign and domestic companies. Laws should provide sufï¬?cient security to in- vestors—foreign and domestic—so that they feel comfortable operating and expanding their businesses, and should not limit their ability to develop, renew, transfer, mortgage, or sublease land. Laws and regulations should take into account the interests of all stakeholders related to land use—including investors, governments, and local communities. Attention must also be paid to environmental protection. ß Accessible land information. Land records should be up-to-date, centralized, integrated (linked across relevant government agencies), easily accessible (preferably with online access), and provide information useful to investors and the general public. ß Efï¬?cient land acquisition procedures. A country should have clear rules for acquiring private and public land. Rules should remove unnecessary and burdensome steps while enabling authorities to conduct a proper process with fair protections for the greater public good. Arbitrating Commercial Disputes ß Strong arbitration laws in line with arbitration practice. Many countries have enacted modern arbitration laws. Ideally these are con- solidated in one law or a chapter in civil code and are coherent, up-to-date, and easily accessible. A strong legal framework should be associated with effective arbitration practices and greater awareness of the beneï¬?ts of arbitration. ß Autonomy to tailor arbitration proceedings. Good arbitration regimes provide a flexible choice for commercial dispute resolution. Parties should be able to choose how to run their arbitration processes, including whether they will be ad hoc or administered by an arbitral institution, the qualiï¬?cations of the arbitrators, and the language of the proceedings. ß Supportive local courts. A good arbitration regime is associated with strong support from local courts for arbitration proceedings and consistent, efï¬?cient enforcement of arbitration awards. ß Adherence to international conventions. Adherence to and implementation of international and regional conventions on arbitration such as the New York Convention and the ICSID Convention signal a government’s commitment to the rule of law and the protection of investor rights. Source: Investing Across Borders database. 12 INVESTING ACROSS BORDERS 2010 REGIONAL FINDINGS The IAB indicators show signiï¬?cant variation across regions (ï¬?gure 2.10). FIGURE 2.10: Share of possible points per IAB indicator topic by regional average 0 = min., 100 = max. 100% 87% East Asia & Pacific 80% 71% Eastern Europe & Central Asia 58% 60% 60% High-income OECD Latin America & Caribbean 40% Middle East & North Africa 20% South Asia Sub-Saharan Africa 0% Investing Across Starting a Foreign Accessing Arbitrating Sectors Business Industrial Land Commercial Disputes IAB average Note: The IAB average is a simple average of the 87 economies measured by IAB. Source: Investing Across Borders database. EAST ASIA AND THE PACIFIC Investing Across Sectors East Asia and the Paciï¬?c has more restrictions on foreign equity ownership in all sectors than any other region. At the same time, the region displays the greatest intraregional variance, with less populous economies being more open. For example, Singapore and the Solomon Islands have few restrictions, while China and Indonesia impose foreign equity limits in many service sectors. Starting a Foreign Business The ease of establishing a foreign subsidiary varies greatly across East Asia and the Paciï¬?c. Papua New Guinea (108 days), China (99), Vietnam (94), Indonesia (86), and Cambodia (86) are among the 10 IAB economies with the longest start-up processes. On the other hand, Singapore has one of the world’s fastest start-up processes (9 days). Half of the region’s economies surveyed by IAB require investment approvals—China, Indonesia, Papua New Guinea, the Solomon Islands, and Vietnam. In China, Papua New Guinea, and the Solomon Islands foreign companies can hold foreign currency bank accounts only after obtaining approval from authorities. Accessing Industrial Land Except for Malaysia, Thailand, and Singapore, none of the 10 economies surveyed in East Asia and the Paciï¬?c allows private ownership of land. Accordingly, foreign companies lease rather than buy land in the region. But lease rights are not particularly strong. In the Philippines a foreign company cannot mortgage leased land or use it as collateral to buy production equipment. Singapore offers the strongest lease rights, allowing investors to use land as collateral and to sublease and subdivide it. The time required to lease private land ranges from 1 month in Thailand to 4 months in Vietnam. Leasing land from the government takes 3 months in Indonesia—and almost a year in Malaysia. Overall, access to and availability of land information are low in the region. Arbitrating Commercial Disputes All the countries surveyed in East Asia and the Paciï¬?c have laws on commercial arbitration and display them online. The laws generally offer broad party autonomy in arbitration, though some restrictions apply. For instance, Cambodia requires parties to choose an arbitrator who is a member of the National Arbitration Center. In Indonesia arbitrators must be at least 35 and have 15 years of experience in the ï¬?eld. Most countries in the region have active arbitration centers, with the exception of Cambodia, Papua New Guinea, and the Solomon Islands. Enforcement of arbitration awards is slow in most of the region, taking more than a year in the Philippines and Thailand. Papua New Guinea, Thailand, and Vietnam are not parties to the ICSID Convention. In addition, Papua New Guinea has not ratiï¬?ed the New York Convention. OVERVIEW 13 EASTERN EUROPE AND CENTRAL ASIA Investing Across Sectors Across sectors, Eastern Europe and Central Asia is the region most open to foreign equity ownership. Georgia and Montenegro have no restrictions on foreign ownership of companies in any of the sectors measured by the IAB indicators. And every country in the region allows full foreign ownership of companies in banking, construction, health care, retail, tourism, and waste management. Media and transportation are more restricted. Azerbaijan, Belarus, Kazakhstan, and Ukraine impose more restrictions in media than most other countries in the region. Within the region, countries in Central and Eastern Europe have fewer restrictions on foreign equity ownership than those in the Commonwealth of Independent States. Starting a Foreign Business Eastern European and Central Asian countries offer simple establishment processes for foreign companies. Bulgaria, Croatia, and Romania offer online business registration. Half the world’s 10 countries with the fastest start-up processes are from this region—Georgia (4 days), Albania (7 days), Belarus (7 days), the former Yugoslav Republic of Macedonia (8 days), and Turkey (8 days). Although none of the 20 countries surveyed in the region requires an investment approval, 5 require investment notiï¬?cations or declarations. Accessing Industrial Land Foreign companies typically buy rather than lease land in Eastern Europe and Central Asia. Every country in the region except the Kyrgyz Republic allows private ownership of land. Ownership rights are strong. Access to and availability of land information are also generally strong throughout the region, though they vary signiï¬?cantly by country. In Armenia land information and geotechnical maps are publicly accessible through a land information system. But in Romania and Ukraine publicly available land information is limited. The time required to lease land from a private holder ranges from about 1 week in Georgia to nearly 5 months in Poland. The time required to lease land from the government ranges from 2 months in Kosovo to almost a year in Bulgaria. Arbitrating Commercial Disputes About 80% of countries in Eastern Europe and Central Asia have enacted speciï¬?c laws on commercial arbitration, less than in other regions. In contrast, the region has the largest share of countries with laws on commercial mediation and conciliation (11 of 20). All economies except Kosovo are members of the New York Convention. But Eastern Europe and Central Asia also has the largest share of economies that have not ratiï¬?ed the ICSID Convention: the Kyrgyz Republic, Moldova, Montenegro, Poland, and the Russian Federation. Most economies in the region restrict arbitration of commercial disputes over immovable property (70%), and many restrict arbitration of intracompany disputes (55%), shareholders disputes (25%), and disputes involving patents or trademarks (20%). Enforcement of arbitration awards is fast. For domestic awards, excluding appeals, the time ranges from 38 days in Kazakhstan to more than a year in Armenia. HIGH-INCOME OECD Investing Across Sectors High-income OECD countries have relatively few restrictions on foreign equity ownership, though foreign ownership of companies in transportation is far more restricted than in most other regions. In particular, foreign ownership of airlines is limited to a less than 50% stake in all high-income OECD countries covered by the IAB indicators. Greece and Spain apply additional equity restrictions on airport operations, and Japan, France, and Spain have limits on foreign ownership of ports. In the Czech Republic, Ireland, and the Slovak Republic restrictions on foreign equity are limited to the transportation sector, while other countries—such as Greece and Spain—limit foreign ownership in more sectors, including electricity and media. Starting a Foreign Business High-income OECD countries offer easy establishment processes. Canada (6 days) and France (9 days) are among the world’s 10 countries with the fastest start-up processes. Though none of the 12 high-income OECD economies surveyed require investment approvals, 7 require some type of investment notiï¬?cation or declaration—Canada, the Czech Republic, France, Japan, the Republic of Korea, the Slovak Republic, and Spain. Except for Greece and Spain, all the surveyed high-income OECD countries offer downloadable registration documents. 14 INVESTING ACROSS BORDERS 2010 Accessing Industrial Land All the surveyed high-income OECD countries allow private ownership of land and provide strong lease and ownership rights. Access to land information is relatively easy throughout these countries, and many have land and geographic information systems. Ireland offers extensive information on land plots, including environmental impact assessments, tax classiï¬?cations, and utility connections. In Korea, however, such information is not publicly available. Overall, leasing procedures are quick relative to other regions. The time required to lease private land ranges from 2 weeks in Japan to 3 months in the Czech Republic, and the time required to lease land from the government ranges from 3 weeks in Greece to almost 5 months in France. Arbitrating Commercial Disputes Arbitration is a long-established, common mechanism for resolving commercial disputes in all surveyed high-income OECD countries. All have enacted laws on commercial arbitration and make them available online. In addition, all are members of the New York Convention, and only Canada has not ratiï¬?ed the ICSID Convention. Party autonomy in arbitration proceedings is respected in all these countries, though Spain requires arbitrators in domestic arbitrations to be lawyers and Spanish nationals. A number of economies in the region such as Canada, the Czech Republic, France, the United Kingdom, and the United States allow online arbitration, especially for smaller claims. Enforcement of awards is faster than in any other region. For domestic awards excluding appeals, enforcement times range from about 1 month in France to almost a year in Greece. LATIN AMERICA AND THE CARIBBEAN Investing Across Sectors Latin American and Caribbean countries impose few restrictions on foreign equity ownership. Chile, Guatemala, and Peru are among the world’s most open economies, with almost no restrictions on foreign ownership in any sectors covered by IAB. In all of the region’s countries surveyed by IAB, construction, light manufacturing, retail, and tourism have no limits on foreign equity ownership. Banking, insurance, and telecommunications are also more open than in most other regions. However, a number of countries—including Bolivia, Haiti, and Mexico— impose restrictions in these sectors. The electricity sector is more restricted in the region than the global average, with foreign equity ownership of companies limited to a less than 50% stake in Bolivia, Costa Rica, and Mexico. Starting a Foreign Business Establishing a foreign (as well as a domestic) business takes a long time in Latin America and the Caribbean. The region contains countries with some of the world’s slowest start-up processes, including Haiti (212 days), República Bolivariana de Venezuela (179 days), and Brazil (166 days). Still, 9 of the 14 countries surveyed do not require foreign investment approval or notiï¬?cation. Some form of capital importation notiï¬?cation or certiï¬?cation is required in more than half the countries in the region. The use of local third parties in the establishment process is widely required in Latin America and the Caribbean. In addition, foreign companies are prohibited from holding bank accounts in foreign currency in Brazil, Colombia, and República Bolivariana de Venezuela. Accessing Industrial Land Foreign companies typically buy private land in Latin America and the Caribbean, and all the countries surveyed allow private land ownership. While most countries in the region offer strong ownership rights, the strength of lease rights varies. In Guatemala there is no public inventory of lands or buildings and the land registry and cadastre are not linked to share data. By contrast, Costa Rica has a publicly accessible land information system. The time required to lease private land ranges from 3 weeks in Peru to 5 months in Nicaragua. The time to lease land from the government ranges from 3 months in Chile to more than 7 months in Haiti. Arbitrating Commercial Disputes Aside from Argentina, all the countries surveyed in the region have speciï¬?c laws on commercial arbitration. In some countries the legal framework for arbitration is spread across various decrees and codes, resulting in legal controversies and complexities (as in Colombia). Almost half the countries surveyed in the region have also enacted laws on commercial mediation. Every country in the region has ratiï¬?ed the New York Convention, but Bolivia, Brazil, Ecuador, and Mexico are not parties to the ICSID Convention. There are few restrictions on the arbitrability of commercial disputes except in Mexico and República Bolivariana de Venezuela (which restrict the arbitrability of disputes over immovable property), Colombia (which restricts the arbitrability of intracompany disputes), and Chile (which restricts the arbitrability of patent and trademark disputes). Some countries prohibit the selection of foreign nationals as arbitrators in domestic arbitrations. Some require that parties select locally licensed lawyers as arbitrators and that local language be used in domestic arbitration proceedings. Enforcement of domestic awards ranges from 85 days in Ecuador to more than a year in Colombia. OVERVIEW 15 MIDDLE EAST AND NORTH AFRICA Investing Across Sectors Relative to other regions, countries in the Middle East and North Africa are fairly restrictive on foreign equity ownership in many sectors. An exception is Tunisia, which has no limits on foreign ownership of ï¬?rms in nearly all sectors measured by IAB. In several countries in the region, extractive industries (mining, oil, and gas) are much less open to foreign capital participation than in other regions, as are electricity and transportation. Morocco, Tunisia, and the Republic of Yemen restrict foreign equity ownership in electricity transmission and distribution. Equity restrictions also exist in port and airport operations. On the other hand, no country in the region imposes limits on foreign participation in agriculture and forestry. Starting a Foreign Business In the Middle Eastern and North African economies surveyed by IAB, it takes twice as long to start a foreign company as it does a domestic company. Still, the start-up process in the region takes only 19 days on average, compared with the IAB global average of 42 days. The Arab Republic of Egypt (8 days) has one of the fastest establishment processes of all countries covered by IAB. In Saudi Arabia and the Republic of Yemen foreign companies are required to obtain investment approvals or authorizations, which take about 2 weeks. Foreign companies have to go through investment promotion agencies to establish subsidiaries in Egypt and Saudi Arabia. All the countries surveyed in the region except Egypt post business registration documents online. Accessing Industrial Land Foreign companies typically lease private land in the Middle East and North Africa. All the countries surveyed except Morocco allow private land ownership. Compared with other regions, lease rights are not very strong in the region. For example, in Saudi Arabia it is not possible to subdivide or use land as collateral under a lease contract. In Egypt both are possible. Availability of land information is on par with other regions but varies by country. In Morocco the inventory of available land is publicly available, while in Tunisia the land registry does not provide this information. The time required to lease private land ranges from almost 4 weeks in Saudi Arabia to 3 months in Morocco, and the time it takes to lease land from the government ranges from 2 months in the Republic of Yemen to 10 months in Morocco. Arbitrating Commercial Disputes All the countries surveyed in the Middle East and North Africa have laws on commercial arbitration, though only Morocco has enacted a law on mediation. All the region’s countries except the Republic of Yemen are parties to the New York Convention. All have ratiï¬?ed the ICSID Convention. There are few restrictions on subject matter arbitrability—except in Egypt, which restricts arbitration of disputes over immovable property and of intracompany disputes. In contrast, there are restrictions across the region on party autonomy in arbitration proceedings. These include a prohibition on the selection of foreign arbitrators (Saudi Arabia) and of foreign counsel to represent parties in arbitration proceedings (Egypt, Morocco, Saudi Arabia). Only in Egypt and Tunisia have courts stated pro-arbitration policies. The region’s enforcement of arbitration awards in local courts is among the slowest in the world. For domestic awards excluding appeal, this time ranges from almost 3 months in Morocco to more than a year in Saudi Arabia. SOUTH ASIA Investing Across Sectors Economies in South Asia restrict foreign ownership in the primary sector more than do most other regions. In Sri Lanka foreign equity ownership is restricted in the mining, oil, and gas sectors, and in India forestry is closed to foreign investors. On the other hand, many service sectors— including telecommunications and electricity—have fewer restrictions on foreign equity participation than in other regions. India is the only country in the region with restrictions on foreign ownership in telecommunications, and Sri Lanka in electricity. Foreign capital participation in insurance is limited to 26% in India and 51% in Pakistan. In general, India has the region’s most restrictions on foreign equity ownership. Starting a Foreign Business It takes on average 39 days to establish a foreign subsidiary in the South Asian economies surveyed. With 7 days and 4 procedures, Afghanistan offers one of the fastest start-up processes. Except for Pakistan, all countries in the region require some form of investment approval or notiï¬?cation. In Afghanistan and Sri Lanka it takes foreign companies 5 and 26 days, respectively, to obtain investment approvals, while Bangladesh and India merely require declarations. All the countries surveyed in South Asia offer business registration documents online. Restrictions on holding foreign currency bank accounts exist in 3 of the 5 economies covered. In Pakistan and Sri Lanka foreign companies can hold such accounts only after obtaining approvals from public authorities, which take 27 and 5 days, respectively. 16 INVESTING ACROSS BORDERS 2010 Accessing Industrial Land Foreign companies typically lease land from governments in South Asia even though private ownership of land is allowed in all countries except Afghanistan. Lease rights are not particularly strong in the region. For example, in Afghanistan a foreign company cannot mortgage leased land or use it as collateral to buy production equipment. Bangladesh offers the strongest lease rights in the region, allowing land to be used as collateral and in a mortgage contract. Access to and availability of land information are generally high in the region, though they vary. The time it takes to lease land is longer than in most other regions. For private land the time required to lease ranges from 2 months in Bangladesh to 7 months in Afghanistan, and for government land from 3 months in Sri Lanka to 10 months in India. Arbitrating Commercial Disputes All the countries surveyed in South Asia have laws on commercial arbitration, and Afghanistan and Sri Lanka have enacted laws on mediation. In addition, all the region’s countries are parties to the New York Convention and all, except India, to the ICSID Convention. Arbitration laws in the region allow broad party autonomy in arbitration proceedings, with the exception of restrictions on using foreign counsel in domestic arbitration proceedings in Bangladesh, India, and Sri Lanka. None of the laws in the region provide for the conï¬?dentiality of arbitration proceedings. In general, arbitration is not a common method of resolving commercial disputes in the region. Only India and Sri Lanka have active arbitration centers. South Asia is also the slowest region in court enforcement of arbitration awards. In Pakistan and Sri Lanka it takes more than 2 years to enforce arbitration awards. SUB-SAHARAN AFRICA Investing Across Sectors Sub-Saharan countries tend to be more open to foreign equity ownership than those in other regions—particularly in agriculture and forestry, where no countries except Sierra Leone and Sudan have restrictions on foreign equity ownership. On the other hand, countries such as Angola, Tanzania, and Uganda have more restrictions on foreign ownership in banking, insurance, and telecommunications than do most other countries. In Ethiopia these industries are completely closed to foreign capital participation. Indeed, Ethiopia is one of the most restricted countries measured by IAB, with foreign equity limits in most of its service sectors. In contrast, Mauritius and Zambia are among the world’s most open economies to foreign ownership and have consistently been among the largest recipients of FDI per capita. Starting a Foreign Business Establishing a foreign-owned company in Sub-Saharan Africa takes longer, on average, than in other regions. It takes twice as long to start a foreign- owned company than a domestic one. Yet while Angola (263 days) has the slowest establishment process of all the countries surveyed by IAB, Rwanda (4 days) offers the fastest. Investment approval requirements are common in the region. On average, it takes 33 days to obtain an approval—longer than in any other region. Less than a third of the Sub-Saharan countries surveyed make incorporation documents available for download, and only Mauritius allows online company registration. In 8 of the 21 economies surveyed, foreign companies are required to go through local representatives to establish a subsidiary. In some countries foreign investors can open foreign currency bank accounts only after obtaining approval from public authorities. In Burkina Faso, Côte d’Ivoire, Mali, and Senegal the Monetary Union of West Africa (UEMOA) requires a foreign company to receive authorization from a minister of ï¬?nance and ultimately the Central Bank of the West African States (BCEAO) to open a foreign currency bank account. Accessing Industrial Land Foreign companies typically lease land from the state in Sub-Saharan Africa. Almost half the countries surveyed in the region do not allow private ownership of land. The strength of long-term lease rights over state land varies. In Sierra Leone the maximum duration of a land lease contract is only 21 years. In addition, land cannot be subdivided, subleased, or used as collateral. On the other hand, Ghana allows leased land to be mortgaged or used as collateral. Across the region the access to and availability of land information are relatively poor, with some variations. In Nigeria it is easy to ï¬?nd information on land and buildings through the land registry in Lagos, while in Madagascar there is no such public registry. Land information is also publicly available in Mauritius, but not in Ethiopia. The time required to lease land from a private holder ranges from 10 days in Rwanda to 5 months in Mozambique, and the time required to lease land from the government ranges from 2 months in Mali to 10 months in South Africa. Arbitrating Commercial Disputes Many Sub-Saharan economies have modern arbitration statutes that incorporate international standards and good practices. None of the 21 countries surveyed impose legal restrictions on appointing an arbitrator of a different nationality. Many West and Central African economies are subject to the Law on Arbitration of the Organization for the Harmonization of Business Law in Africa (OHADA), which provides uniform provisions on arbitration, including conï¬?dentiality of arbitration proceedings. A third of the region’s economies do not post their arbitration statutes online—a higher share than in other regions. And despite having modern statutes, their implementation is often problematic. In Ghana and Tanzania it takes more than a year to enforce arbitration awards. Liberia and Rwanda have no or only nascent arbitration institutions, making institutional arbitration difï¬?cult. In contrast, Mozambique and South Africa have well-functioning arbitral institutions. All Sub-Saharan economies except Angola, Ethiopia, Sierra Leone, and Sudan have ratiï¬?ed the New York Convention. Angola, Ethiopia, and South Africa have not ratiï¬?ed the ICSID Convention. OVERVIEW 17 18 TABLE 2.1: Summary of IAB indicators Investing Across Sectors Starting a Arbitrating Accessing Industrial Land Foreign equity ownership indexes (100 = full foreign ownership allowed) Foreign Business Commercial Disputes INDEX (0 = MIN, 100 = MAX) MINING, OIL AND GAS AGRICULTURE AND FORESTRY LIGHT MANUFACTURING TELECOMMUNICA- TIONS ELECTRICITY BANKING INSURANCE TRANSPORTATION MEDIA SECTOR GROUP 1 (CONSTR., TOURISM, RETAIL) SECTOR GROUP 2 (HEALTH CARE, WASTE MGT.) TIME (DAYS) PROCEDURES (NUMBER) EASE OF ESTABLISHMENT INDEX (0 = MIN, 100 = MAX) STRENGTH OF LEASE RIGHTS INDEX (0 = MIN, 100 = MAX) STRENGTH OF OWNER- SHIP RIGHTS INDEX ACCESS TO LAND INFORMATION INDEX (0 = MIN, 100 = MAX) AVAILABILITY OF LAND INFORMATION INDEX (0 = MIN, 100 = MAX) TIME TO LEASE PRIVATE LAND (DAYS) TIME TO LEASE PUBLIC LAND (DAYS) STRENGTH OF LAWS INDEX (0 = MIN, 100 = MAX) EASE OF PROCESS INDEX (0 = MIN, 100 = MAX) EXTENT OF JUDICIAL ASSISTANCE INDEX (0 = MIN, 100 = MAX) ECONOMY Afghanistan 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 7 4 68.4 73.3 n/a 9.1 0.0 218 301 68.1 0.0 0.0 Albania 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 70.0 100.0 100.0 7 7 84.2 80.7 100.0 47.4 85.0 36 129 84.0 40.7 68.5 INVESTING ACROSS BORDERS 2010 Angola 74.5 100.0 82.5 75.0 100.0 10.0 50.0 80.0 30.0 100.0 100.0 263 12 39.5 87.9 75.0 36.8 60.0 40 129 74.9 57.3 59.9 Argentina 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 30.0 100.0 100.0 50 18 65.0 79.3 100.0 44.4 85.0 48 112 63.5 72.2 55.1 Armenia 74.5 50.0 100.0 100.0 100.0 100.0 100.0 55.6 100.0 100.0 100.0 18 8 78.9 92.8 100.0 73.7 95.0 10 57 89.9 82.3 27.3 Austria 100.0 100.0 100.0 100.0 70.9 100.0 100.0 79.6 74.5 100.0 100.0 30 10 73.7 85.7 100.0 42.1 80.0 33 79 95.4 83.7 83.0 Azerbaijan 49.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 16.5 100.0 100.0 11 7 71.6 78.5 100.0 42.1 85.0 58 105 82.4 53.6 37.0 Bangladesh 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 55 9 55.3 100.0 100.0 26.3 73.7 58 240 84.9 67.5 55.3 Belarus 100.0 100.0 100.0 75.0 64.3 100.0 49.0 80.0 30.0 100.0 100.0 7 6 78.9 71.4 100.0 50.0 60.0 34 97 78.3 79.0 84.9 Bolivia 49.0 100.0 100.0 49.0 49.0 100.0 100.0 89.8 100.0 100.0 100.0 54 18 63.2 65.0 87.5 33.3 65.0 42 170 80.3 65.7 54.2 Bosnia and Herzegovina 100.0 100.0 87.3 100.0 85.7 100.0 100.0 100.0 49.0 100.0 100.0 83 14 65.8 75.0 100.0 45.0 75.0 31 n/a 72.6 57.1 76.3 Brazil 100.0 100.0 100.0 100.0 100.0 100.0 100.0 68.0 30.0 100.0 50.0 166 17 62.5 85.7 100.0 33.3 75.0 66 180 84.9 45.7 57.2 Bulgaria 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 20 5 78.9 85.7 100.0 36.8 95.0 60 351 93.1 64.7 68.6 Burkina Faso 95.0 100.0 100.0 87.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 15 5 44.7 74.9 50.0 31.6 50.0 .. 120 94.9 67.6 67.9 Cambodia 100.0 100.0 100.0 100.0 85.7 100.0 100.0 69.8 100.0 100.0 100.0 86 10 44.7 92.9 n/a 41.7 52.5 41 119 92.4 48.6 46.0 Cameroon 95.0 100.0 100.0 100.0 71.4 100.0 100.0 49.0 49.0 100.0 100.0 82 14 41.1 73.6 75.0 52.6 55.0 75 108 87.4 79.6 64.6 Canada 100.0 100.0 81.1 46.7 100.0 65.0 100.0 79.6 73.4 100.0 50.0 6 2 81.6 100.0 100.0 46.2 85.0 68 131 89.9 84.7 94.0 Chile 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 29 11 63.2 85.7 100.0 33.3 80.0 23 93 94.9 62.8 74.8 China 75.0 100.0 75.0 49.0 85.4 62.5 50.0 49.0 0.0 83.3 85.0 99 18 63.7 96.4 n/a 50.0 52.5 59 129 94.9 76.1 60.2 Colombia 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 70.0 100.0 100.0 27 13 68.4 85.7 100.0 52.6 80.0 40 111 93.1 52.3 18.2 Costa Rica 100.0 100.0 100.0 100.0 35.0 100.0 100.0 100.0 100.0 100.0 100.0 63 14 73.7 100.0 100.0 73.7 60.0 23 136 92.4 59.0 50.9 Côte d’Ivoire 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 42 12 52.6 86.6 62.5 47.4 75.0 62 276 94.9 82.9 55.8 Croatia 100.0 100.0 100.0 100.0 100.0 100.0 100.0 69.4 100.0 100.0 100.0 23 9 81.6 85.7 100.0 55.0 75.0 78 107 93.1 71.4 52.7 Czech Republic 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 18 11 81.6 85.7 100.0 75.0 90.0 96 131 97.4 88.5 65.8 Ecuador 100.0 100.0 100.0 100.0 85.4 100.0 100.0 69.8 74.5 100.0 100.0 68 16 55.3 61.5 100.0 27.8 77.5 106 151 86.3 58.3 59.8 Egypt, Arab Rep. 100.0 100.0 100.0 100.0 100.0 50.0 100.0 76.0 50.0 83.0 100.0 8 7 63.2 85.7 75.0 30.0 50.0 45 .. 89.9 74.9 54.2 Ethiopia 100.0 100.0 100.0 0.0 50.0 0.0 0.0 10.0 0.0 50.0 100.0 28 10 21.1 74.9 n/a 0.0 2.5 75 142 49.9 74.0 34.8 France 100.0 100.0 80.0 100.0 100.0 100.0 100.0 59.6 20.0 100.0 100.0 9 7 77.5 99.9 100.0 47.4 90.0 91 142 90.0 86.6 94.0 Georgia 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 4 4 84.2 86.7 100.0 52.6 80.0 8 50 85.8 75.2 53.6 Ghana 90.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 72 10 34.2 90.0 n/a 30.0 85.0 104 247 74.9 88.5 40.9 Greece 100.0 100.0 100.0 100.0 0.0 100.0 100.0 49.4 100.0 100.0 100.0 22 18 68.4 85.7 100.0 47.4 80.0 15 20 97.4 86.1 48.6 Guatemala 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 30 12 57.9 78.6 100.0 27.8 70.0 34 168 91.6 72.3 58.4 Haiti 100.0 100.0 100.0 100.0 100.0 49.0 100.0 80.0 100.0 100.0 100.0 212 13 63.2 71.4 87.5 30.0 40.0 90 219 79.9 74.9 28.5 Honduras 100.0 100.0 100.0 100.0 100.0 100.0 100.0 89.8 100.0 100.0 100.0 35 15 68.4 78.6 100.0 55.6 75.0 61 182 97.6 73.3 59.5 India 100.0 50.0 81.5 74.0 100.0 87.0 26.0 59.6 63.0 83.7 100.0 46 16 76.3 92.9 87.5 15.8 85.0 90 295 88.5 67.6 53.4 Indonesia 97.5 72.0 68.8 57.0 95.0 99.0 80.0 49.0 5.0 85.0 82.5 86 12 52.6 78.6 n/a 21.4 85.0 35 81 95.4 81.8 41.3 Ireland 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 14 5 70.0 92.9 100.0 50.0 100.0 70 77 94.9 79.6 75.8 Japan 100.0 100.0 100.0 83.3 100.0 100.0 100.0 39.8 60.0 100.0 50.0 25 10 81.6 85.7 100.0 30.8 75.0 17 96 95.4 77.7 65.9 Kazakhstan 100.0 100.0 100.0 49.0 100.0 100.0 100.0 100.0 20.0 100.0 100.0 34 9 65.8 86.7 66.7 36.8 95.0 37 159 77.5 70.4 78.2 Kenya 100.0 100.0 100.0 70.0 92.9 100.0 66.7 70.0 75.0 100.0 100.0 34 12 57.9 78.6 100.0 22.2 85.0 72 113 94.9 77.1 56.3 Korea, Rep. 100.0 100.0 100.0 49.0 85.4 100.0 100.0 79.6 39.5 100.0 100.0 17 11 71.1 85.7 100.0 68.4 70.0 10 53 94.9 81.9 70.2 Kosovo 100.0 100.0 100.0 100.0 100.0 100.0 100.0 90.0 100.0 100.0 100.0 54 11 73.7 85.7 100.0 47.4 65.0 25 59 74.9 63.9 27.5 Kyrgyz Republic 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 12 4 73.7 91.2 n/a 55.6 82.5 15 154 74.9 72.3 61.7 Liberia 100.0 100.0 100.0 100.0 71.4 100.0 100.0 90.0 100.0 100.0 100.0 25 8 55.3 57.7 n/a 28.6 15.0 28 193 44.9 56.4 42.0 TABLE 2.1: Summary of IAB indicators (continued) Investing Across Sectors Starting a Arbitrating Accessing Industrial Land Foreign equity ownership indexes (100 = full foreign ownership allowed) Foreign Business Commercial Disputes INDEX (0 = MIN, 100 = MAX) MINING, OIL AND GAS AGRICULTURE AND FORESTRY LIGHT MANUFACTURING TELECOMMUNICA- TIONS ELECTRICITY BANKING INSURANCE TRANSPORTATION MEDIA SECTOR GROUP 1 (CONSTR., TOURISM, RETAIL) SECTOR GROUP 2 (HEALTH CARE, WASTE MGT.) TIME (DAYS) PROCEDURES (NUMBER) EASE OF ESTABLISHMENT INDEX (0 = MIN, 100 = MAX) STRENGTH OF LEASE RIGHTS INDEX (0 = MIN, 100 = MAX) STRENGTH OF OWNER- SHIP RIGHTS INDEX ACCESS TO LAND INFORMATION INDEX (0 = MIN, 100 = MAX) AVAILABILITY OF LAND INFORMATION INDEX (0 = MIN, 100 = MAX) TIME TO LEASE PRIVATE LAND (DAYS) TIME TO LEASE PUBLIC LAND (DAYS) STRENGTH OF LAWS INDEX (0 = MIN, 100 = MAX) EASE OF PROCESS INDEX (0 = MIN, 100 = MAX) EXTENT OF JUDICIAL ASSISTANCE INDEX (0 = MIN, 100 = MAX) ECONOMY Macedonia, FYR 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 8 6 76.3 85.6 100.0 68.4 90.0 13 79 93.1 74.9 69.7 Madagascar 100.0 100.0 100.0 74.5 92.9 100.0 100.0 80.0 100.0 100.0 100.0 12 3 65.0 84.5 75.0 26.3 85.0 81 132 85.0 74.2 83.3 Malaysia 70.0 85.0 100.0 39.5 30.0 49.0 49.0 100.0 65.0 90.0 65.0 14 11 60.5 78.5 87.5 23.1 85.0 96 355 94.9 81.8 66.7 Mali 95.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 49.0 100.0 100.0 29 8 42.5 80.0 50.0 28.6 5.0 .. 63 80.0 67.5 8.3 Mauritius 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 60.0 100.0 100.0 11 9 68.4 90.0 87.5 31.3 95.0 19 100 84.9 71.2 77.1 Mexico 50.0 49.0 100.0 74.5 0.0 100.0 49.0 54.4 24.5 100.0 100.0 31 11 65.8 81.3 100.0 33.3 90.0 83 151 79.1 84.7 52.7 Moldova 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 74.5 100.0 100.0 10 9 70.0 79.9 100.0 52.6 70.0 19 75 84.0 81.8 60.9 Montenegro 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 15 14 78.9 69.2 100.0 78.9 65.0 40 185 63.5 60.0 46.5 Morocco 93.8 100.0 100.0 100.0 0.0 100.0 100.0 39.8 100.0 100.0 100.0 18 8 55.3 86.8 n/a 73.7 65.0 101 296 97.6 69.5 64.7 Mozambique 100.0 100.0 100.0 75.0 100.0 100.0 100.0 100.0 20.0 100.0 100.0 34 12 65.8 53.1 n/a 33.3 62.5 148 175 95.4 80.9 22.2 Nicaragua 100.0 100.0 100.0 100.0 100.0 100.0 100.0 89.8 74.5 100.0 100.0 42 8 57.9 72.1 100.0 31.6 75.0 149 267 95.4 73.3 40.3 Nigeria 100.0 100.0 100.0 100.0 100.0 70.0 100.0 100.0 100.0 100.0 100.0 44 12 47.5 78.5 n/a 50.0 67.5 123 254 95.4 82.3 71.5 Pakistan 100.0 100.0 100.0 100.0 100.0 49.0 51.0 79.6 37.0 100.0 100.0 21 11 64.7 85.7 100.0 10.5 65.0 59 96 94.9 68.5 35.5 Papua New Guinea .. .. .. .. .. .. .. .. .. .. .. 108 10 48.9 .. .. .. .. .. .. 59.9 55.6 26.2 Peru 100.0 100.0 100.0 100.0 100.0 100.0 100.0 89.8 100.0 100.0 100.0 43 11 72.5 79.3 100.0 44.4 75.0 20 112 97.4 83.3 62.6 Philippines 40.0 40.0 75.0 40.0 65.7 60.0 100.0 40.0 0.0 100.0 100.0 80 17 57.9 68.8 n/a 23.5 87.5 16 n/a 95.4 87.0 33.7 Poland 100.0 100.0 100.0 100.0 100.0 100.0 100.0 59.2 74.5 100.0 100.0 33 7 85.0 78.6 100.0 35.0 65.0 146 162 74.2 82.8 77.3 Romania 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 11 7 89.5 86.7 100.0 33.3 85.0 57 65 84.8 75.2 93.2 Russian Federation 100.0 100.0 100.0 100.0 100.0 100.0 49.0 79.6 75.0 100.0 100.0 31 10 68.4 85.7 100.0 44.4 90.0 62 231 71.6 76.1 76.6 Rwanda 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 4 3 60.5 89.2 87.5 38.5 50.0 10 99 93.1 80.1 73.3 Saudi Arabia 0.0 100.0 75.0 70.0 100.0 60.0 60.0 40.0 0.0 91.7 50.0 21 6 35.0 64.3 50.0 33.3 50.0 25 60 70.0 30.4 28.6 Senegal 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10 5 45.0 85.6 87.5 50.0 75.0 33 101 89.9 85.1 98.8 Serbia 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 74.5 100.0 100.0 14 8 84.2 78.6 100.0 45.0 75.0 67 177 95.4 71.4 90.2 Sierra Leone 100.0 75.0 100.0 100.0 100.0 100.0 100.0 80.0 100.0 100.0 100.0 43 8 65.0 44.4 n/a 26.3 30.0 210 277 65.0 70.5 20.5 Singapore 100.0 100.0 100.0 100.0 100.0 100.0 100.0 47.4 27.0 100.0 100.0 9 4 78.9 100.0 100.0 55.0 80.0 56 98 94.9 81.8 93.5 Slovak Republic 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 18 8 92.1 84.6 100.0 61.1 75.0 73 85 93.1 85.7 88.5 Solomon Islands 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 66 10 47.9 91.1 n/a 15.8 2.5 138 168 40.0 0.0 0.0 South Africa 74.0 100.0 100.0 70.0 100.0 100.0 100.0 100.0 60.0 100.0 100.0 65 8 78.9 84.5 100.0 47.4 85.0 42 304 82.4 79.0 94.5 Spain 100.0 100.0 100.0 100.0 100.0 100.0 100.0 39.6 50.0 100.0 100.0 61 13 71.1 100.0 100.0 61.1 90.0 32 90 97.4 76.1 75.3 Sri Lanka 40.0 100.0 100.0 100.0 71.4 100.0 100.0 60.0 40.0 100.0 100.0 65 6 47.9 85.7 87.5 31.6 75.0 68 91 95.4 71.3 38.0 Sudan 75.0 75.0 87.5 50.0 50.0 50.0 50.0 60.0 0.0 100.0 100.0 55 13 40.0 71.4 n/a 30.8 30.0 12 60 77.4 73.3 67.8 Tanzania 100.0 100.0 100.0 65.0 100.0 100.0 66.0 100.0 24.5 100.0 100.0 38 14 62.5 81.2 n/a 36.8 62.5 73 82 82.4 74.7 39.1 Thailand 49.0 49.0 87.3 49.0 49.0 49.0 49.0 49.0 27.5 66.0 49.0 34 9 60.5 80.7 62.5 27.8 70.0 30 128 84.9 81.8 40.8 Tunisia 100.0 100.0 100.0 100.0 71.4 100.0 100.0 100.0 100.0 100.0 100.0 19 14 71.1 85.7 87.5 36.8 80.0 69 84 77.5 71.4 52.3 Turkey 100.0 100.0 100.0 100.0 78.6 100.0 100.0 69.4 62.5 100.0 100.0 8 8 65.8 85.7 87.5 63.2 90.0 15 72 89.9 69.5 68.6 Uganda 100.0 100.0 100.0 100.0 71.4 49.0 100.0 100.0 100.0 100.0 100.0 39 21 47.4 71.4 n/a 25.0 77.5 60 80 86.3 62.9 39.3 Ukraine 100.0 100.0 82.5 100.0 100.0 100.0 100.0 79.6 15.0 100.0 100.0 28 11 80.0 88.5 100.0 36.8 55.0 50 209 86.6 78.1 72.6 United Kingdom 100.0 100.0 65.0 100.0 100.0 100.0 100.0 79.6 100.0 100.0 100.0 14 7 85.0 100.0 100.0 50.0 80.0 53 62 99.9 87.5 94.5 United States 100.0 100.0 100.0 100.0 100.0 100.0 100.0 85.0 62.5 100.0 100.0 11 8 80.0 100.0 100.0 50.0 95.0 44 92 85.0 81.8 75.3 Venezuela, RB 74.5 100.0 100.0 100.0 85.7 100.0 100.0 20.0 20.0 100.0 100.0 179 19 42.5 72.5 100.0 44.4 75.0 87 138 89.1 57.1 52.2 Vietnam 50.0 100.0 75.0 50.0 71.4 65.0 100.0 69.4 0.0 100.0 75.5 94 12 57.9 77.3 n/a 57.9 92.5 120 133 84.9 61.8 57.2 Yemen, Rep. 100.0 100.0 100.0 50.0 71.1 100.0 100.0 60.0 100.0 100.0 100.0 29 9 68.4 69.2 62.5 57.9 85.0 53 52 74.9 81.4 44.0 Zambia 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 58 9 47.4 71.4 n/a 37.5 75.0 104 122 97.4 65.7 77.3 OVERVIEW Source: Investing Across Borders database. 19 ENDNOTES 1 The methodology of the Doing Business project can be viewed at http://www.doingbusiness. org. 2 Complete names are the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). 3 According to World Bank’s World Development Indicators, of the 87 economies measured by IAB, the countries with the highest FDI per capita between 2000 and 2007 are Austria, Canada, the Czech Republic, France, Ireland, Singapore, the Slovak Republic, Spain, the United Kingdom, and the United States. 4 World Bank Group, Global Investment Benchmarking Report 2009, Washington, D.C. World Bank Group. 5 Land information systems are parcel-based databases used to acquire, process, store, and distribute land information. They can also be used for legal, administrative, and economic decisionmaking and for planning and development. 20 INVESTING ACROSS BORDERS 2010 Topics 21 Investing Across Sectors FDI) and on the acquisition of shares in existing companies (mergers INTERESTING FACTS and acquisitions). The indicators focus on 33 sectors, aggregated into ß More than a quarter of the 87 countries surveyed by Investing 11 broader sector groups that conform with economic classiï¬?cations, Across Borders (IAB) have few or no sector-speciï¬?c restrictions in order to facilitate data presentation and analysis (box 3.1: Sector on foreign ownership of companies. coverage of the Investing Across Sectors indicators).1 While the industry ß Smaller countries have fewer restrictions on foreign owner- coverage of the Investing Across Sectors indicators is not exhaustive, ship of companies, while larger countries—such as China, the 33 sectors capture most of the economic activity, and in aggregate Mexico, the Philippines, and Thailand—are among those with account for over 80% of global GDP and FDI flows.2 the most. ß Countries in Eastern Europe and Central Asia and Latin The indicators are based on the text of investment codes, commercial America and the Caribbean tend to be the most open to laws, merger and acquisition laws, and other related statutes (box foreign ownership of companies. 3.2). ß Though services account for a growing share of global for- Unlike trade policy, cross-country comparisons of foreign investment eign direct investment (FDI), foreign ownership of companies regimes, and especially limits on foreign ownership, have not received is more restricted in the service sector than in the primary and manufacturing sectors. sufï¬?cient analysis.3 Early attempts at quantifying national-level FDI restrictions have been limited to simply counting the number of policies ß Worldwide, restrictions on foreign ownership are strictest in media, transportation, electricity, and telecommunications that negatively affect FDI, without weighing the relative importance industries. of the individual policies.4 Recognizing that service sectors are more restricted than primary and secondary sectors, other attempts ß Most countries allow foreign ownership of equity in alternative energy companies—with some countries in Middle East and at a numeric presentation of FDI restrictions have primarily relied on North Africa being notable exceptions. the Mode 3 commitments of the General Agreement on Trade in Services (GATS).5 The methodology chapter of this report explores the Source: Investing Across Borders 2010. relationship between the Investing Across Sectors indicators and GATS commitments. INTRODUCING THE INVESTING ACROSS SECTORS The design of the Investing Across Sectors indicators is based principally INDICATORS on an approach presented in 1997 by the Australian Productivity The Investing Across Sectors indicators measure overt statutory restrictions Commission,6 and later developed further by the OECD and UNCTAD on foreign ownership of equity in new investment projects (greenï¬?eld FDI restrictiveness indexes.7 The indicators follow the recommendations BOX 3.1: Sector coverage of the Investing Across Sectors BOX 3.2: Types of laws measured by the Investing Across indicators Sectors indicators ß Mining, oil and gas. ß Investment laws (for example investment codes, investment ß Agriculture and forestry. promotion laws and regulations, foreign investment acts, laws and regulations governing sectors closed to foreign ß Light manufacturing. investment). ß Telecommunications: ï¬?xed-line and mobile/wireless infrastruc- ture and service provision. ß Company and business organization laws (for example com- mercial codes, foreign company laws, company registration ß Electricity: generation (coal, hydro, biomass, solar, wind), laws). transmission and distribution. ß Merger and acquisition laws. ß Banking. ß Foreign exchange laws and regulations. ß Insurance. ß Sector-speciï¬?c laws and regulations (for example telecommu- ß Transportation: railway freight, domestic and international air, nications law, energy law). airport and port operation. ß Industrial policy orders. ß Media: newspaper publishing and TV broadcasting. ß Civil codes. ß Sector group 1: construction, tourism and retail. ß Constitutions. ß Sector group 2: health care and waste management. 22 INVESTING ACROSS BORDERS 2010 of a 2006 UNCTAD report, which suggest that “future research should seek to verify and FIGURE 3.1: Eastern Europe and Central Asia has the least restrictions on foreign ownership of companies reï¬?ne the results reported in the paper, extend the data collection and analysis to additional countries … [and provide] more detailed Foreign equity ownership index (100=full foreign ownership allowed) analysis of the FDI laws and regulations 100 94.3 91.6 91.2 IAB global average 89.3 90.2 88.2 pertaining to services in different countries.â€? 8 83.5 80 74.4 The Investing Across Sectors indicators place a particular emphasis on providing detailed 60 measures of the service sectors, given the relative prevalence of FDI restrictions in 40 services in relation to other economic sectors, as well as the growing importance of services 20 in the global economic output and FDI flows 0 (box 3.3). Eastern Latin America High-income Sub-Saharan South Asia Middle East & East Asia Europe & & Caribbean OECD Africa (5) North Africa & Pacific Central Asia (14) (12) (21) (5) (10) In summary, the Investing Across Sectors (20) indicators measure one of the fundamental Source: Investing Across Borders database. areas of market access for FDI—statutory openness to foreign equity participation in the primary, manufacturing, and service sectors. The strengths and particular advantages RESULTS OF THE INVESTING Several countries in the most open regions ACROSS SECTORS INDICATORS do not impose any restrictions in any of of these indicators are that they explicitly, the sectors covered by the indicators; these and in a publicly veriï¬?able manner, identify Looking at the results through a regional include Chile, Georgia, Guatemala, and restrictions on foreign companies’ equity perspective puts in contrast the openness Montenegro. In contrast, economies such as participation across sectors. The indicators to foreign ownership of companies in the China, Indonesia, Malaysia, the Philippines, however also face certain limitations, which countries in Eastern Europe and Central Asia Thailand, and Vietnam restrict foreign are explored in the methodology chapter of and Latin America and the Caribbean relative participation in many economic sectors. this report. to East Asia and the Paciï¬?c (ï¬?gure 3.1).15 The Middle East and North Africa is also a relatively restricted region, with countries such as Morocco and Saudi Arabia limiting foreign BOX 3.3: The growing role of services in GDP and FDI capital participation in many industries. The share of services in the national products of most countries has been rising steadily, Eastern Europe and Central Asia is more open reaching 73% of GDP in high-income, 53% of GDP in middle-income, and 45% of GDP in low-income countries in 2006.9 The composition of FDI has also been shifting to foreign capital participation than the IAB toward the service sector. Services now account for 59% of FDI inflows worldwide, up global average in every single sector group from 50% in 1990 and 25% in the 1970s.10 According to the 2009 UNCTAD World measured by the indicators. On the other Investment Report, this shift toward services and an accompanying decline in the share hand, East Asia and the Paciï¬?c scores lower of FDI in natural resources and manufacturing has been the most important change in than any other region in nearly all sectors the sectoral and industrial pattern of FDI over the past quarter century.11 (table 3.1). The composition of services FDI itself is also changing. Until recently, it was concen- Despite the relatively high degree of trated in trade and ï¬?nance, which together still accounted for 47% of the inward stock restrictiveness, East Asia has a strong record of services FDI and 35% of flows in 2002 (compared to 65% and 59%, respectively, in attracting FDI over the last several decades. in 1990).12 However, industries such as electricity, water, telecommunications, and Analysis of this apparent paradox points to business services (including IT-enabled corporate services) are becoming more promi- the limitations of interpreting the narrow nent. Between 1990 and 2007, for example, the value of the FDI stock in electric measure of the indicators, and juxtaposes power generation and distribution rose 34-fold; in telecommunications, storage, and transportation 31-fold; and in business services 21-fold.13 In South Africa, for instance, the good performance of the region in FDI FDI in telecommunications and information technology has overtaken that in mining and attraction in absolute terms versus below- extraction.14 average performance relative to the size of the economy and population (box 3.4) INVESTING ACROSS SECTORS 23 TABLE 3.1: Restrictions on foreign equity ownership across sectors and regions Foreign equity ownership index (100=full foreign ownership allowed) East Asia Eastern Europe High-income Latin America Middle East & South Sub-Saharan IAB sector & Paciï¬?c & Central Asia OECD & Caribbean North Africa Asia Africa average Sector group (10 countries) (20 countries) (12 countries) (14 countries) (5 countries) (5 countries) (21 countries) (87 countries) Mining, oil and gas 75.7 96.2 100.0 91.0 78.8 88.0 95.2 92.0 Agriculture and forestry 82.9 97.5 100.0 96.4 100.0 90.0 97.6 95.9 Light manufacturing 86.8 98.5 93.8 100.0 95.0 96.3 98.6 96.6 Telecommunications 64.9 96.2 89.9 94.5 84.0 94.8 84.1 88.0 Electricity 75.8 96.4 88.0 82.5 68.5 94.3 90.5 87.6 Banking 76.1 100.0 97.1 96.4 82.0 87.2 84.7 91.0 Insurance 80.9 94.9 100.0 96.4 92.0 75.4 87.3 91.2 Transportation 63.7 84.0 69.2 80.8 63.2 79.8 86.6 78.5 Media 36.1 73.1 73.3 73.1 70.0 68.0 69.9 68.0 Sector group1: construction, 91.6 100.0 100.0 100.0 94.9 96.7 97.6 98.1 tourism, and retail Sector group 2: health care and 84.1 100.0 91.7 96.4 90.0 100.0 100.0 96.0 waste management IAB regional average 74.4 94.3 91.2 91.6 83.5 88.2 90.2 89.3 Source: Investing Across Borders database. BOX 3.4: The apparent paradox of East Asia and the Paciï¬?c The fact that FDI has played a crucial role in supporting economic growth in parts of East Asia and the Paciï¬?c over the past 40 years is well known. Yet, in this report the average foreign equity ownership index for economies in East Asia is lower than in all other regions. Should one then infer that the relationship between overall openness to foreign equity ownership and actual FDI inflow is tenuous? The answer is no. Here is why: 1. The Investing Across Sectors indicators only measure the percentage of foreign equity ownership allowed in a sector. This is an incom- plete measure of overall openness to FDI. Country X can allow 100% of foreign equity participation in a sector, yet impose any number of the dozen or so restrictions permitted under WTO agreements (such as limiting the number of licenses, or capping the value of trans- actions).16 Country Y can let in 75%, but with no other conditions. Which country is more open to FDI is debatable. The IAB indicators do not provide a full answer to this issue as they only focus on restrictions to foreign ownership of equity. 2. Although the foreign equity ownership index for East Asia and the Paciï¬?c is the lowest among the regions, as explained earlier in the report, actual FDI inflows are determined by a range of factors from the size and growth prospects of an economy, to low transaction costs, predictability and stability, among others. In many of these factors East Asia and the Paciï¬?c does rather well. What is certain is that countries with blanket restrictions in many sectors will get little FDI, but an average equity ceiling of around 75% appears to have been deemed sufï¬?cient for FDI to pour into East Asia and the Paciï¬?c region. It is only in relative terms, that is when compared to the average equity limit of other regions, that East Asia and the Paciï¬?c ranks low. However, it could be hypothesized that East Asia could attract even more FDI if some sectors were more open. In China and Vietnam, for example, foreign equity limit in banking is ap- proximately 60%, and in insurance and telecommunications it is under 50%. The limits are even lower in electricity and transportation services. But again, these equity ceilings alone are not a major deterrent to FDI, and countries may feel there are good “market failureâ€? reasons to regulate sectors whose tradability is nascent and evidence on beneï¬?ts is less robust. 3. It is also the case that the performance of FDI inflows to East Asia and the Paciï¬?c is uneven, and varies with the yardstick used. Ac- cording to UNCTAD, between 2000 and 2007, China, Malaysia, Singapore, and Thailand received among the highest average FDI flows in the region in absolute terms.17 However, when FDI flows and stock data are calculated on a per capita basis, only Korea, Malaysia, and Singapore stand out. China, the Philippines, and Vietnam, among others, perform below average of the 87 countries in the IAB sample. And when FDI flows or stock data are ranked relative to the economy’s size (GDP), Korea, Malaysia, Singapore, and the Solomon Islands do relatively well, while the other countries in the region rank below the average of the countries included in the IAB 2010 report. Source: Investing Across Borders. 24 INVESTING ACROSS BORDERS 2010 Further disaggregating Investing Across Sectors data to the level of individual FIGURE 3.2: Equity limits on foreign ownership of companies vary across sectors countries reveals the gap between the most Foreign equity ownership index (100=full foreign ownership allowed) open and closed economies to foreign IAB global average=89.3 ownership. On the one hand, more than Construction, tourism, and retail 98.1 10% of the countries surveyed do not have 96.6 Light manufacturing any restrictions on foreign ownership in any of 96.0 Health care and waste management the sectors measured. These countries receive 95.9 Agriculture and forestry a full index score of 100 in all sectors. On Mining, oil and gas 92.0 the other hand, many countries in the world Insurance 91.2 not only limit foreign ownership in some Banking 91.0 sectors, but altogether prohibit foreign capital Telecommunications 88.0 participation in speciï¬?c sectors. Ethiopia, the Electricity 87.6 Philippines, and Thailand are amongst the Transportation 78.5 world’s most restricted economies, with an Media 68.0 indicator score of 0 for several sectors. The 0 20 40 60 80 100 following economies restrict foreign ownership Source: Investing Across Borders database. in one third or more of the sectors measured by the indicators: Bolivia, China, Ethiopia, Greece, India, Indonesia, Malaysia, Mexico, FIGURE 3.3: Foreign ownership of airlines is more restricted than other Morocco, the Philippines, Saudi Arabia, transportation sectors Sudan, Thailand, and Vietnam. Foreign equity ownership index (100=full foreign ownership allowed) IAB global average=78.5 Results by sector 83.4 Airport operation As a general trend, there are very few Port operation 82.4 restrictions on foreign equity ownership Railway freight 82.0 in manufacturing and the primary sectors International air 75.1 (agriculture, forestry, mining, oil and Domestic air 69.5 gas), whereas service sectors tend to be 0 20 40 60 80 100 characterized by a larger number of limitations Source: Investing Across Borders database. (ï¬?gure 3.2). This variation reflects the fact that FDI in manufacturing has been more common for a longer period of time with known FIGURE 3.4: Foreign ownership in electricity generation is less restricted than in evidence of cross-country impact. Services, electricity transmission and distribution in contrast, have become more tradable and liberalized in most economies only in Foreign equity ownership index (100=full foreign ownership allowed) recent years, and countries are less certain â–  Generation â–  Transmission â–  Distribution about the optimal balance between openness 100 and restrictiveness. Many countries view service sectors such as media, transportation, 80 electricity, and telecommunications as strategic assets, or industries related to national 60 economic security. As a result, many countries 40 tend to restrict foreign equity ownership in these sectors. 20 Of all sectors covered by the indicators, foreign ownership of TV broadcasting and 0 South Asia Eastern Sub-Saharan High-income East Asia Latin America Middle IAB global newspaper companies is most restricted. In (5) Europe & Africa OECD & Pacific & Caribbean East & average Central Asia (21) (12) (10) (14) North Africa (87) 11% of surveyed economies it is completely (20) (5) prohibited. In contrast, almost two-thirds of Source: Investing Across Borders database. countries allow foreign companies to own INVESTING ACROSS SECTORS 25 100% of newspaper businesses. Even in the It should be noted, however, that in some line and the wireless/mobile sectors are high-income OECD countries, many of whom countries the renewable energy sector is only particularly marked in Sub-Saharan Africa and have limits on foreign ownership in these presumed to be open to foreign capital, as it is Middle East and North Africa (ï¬?gure 3.6). sectors, all countries allow foreign capital not explicitly covered by energy or investment Foreign ownership is largely unrestricted in participation in newspaper publishing, and legislation. As a consequence, it is unclear the primary sectors. Agriculture is the least only Spain completely bans foreign companies whether the relative absence of foreign restricted industry, followed by mining and from entering TV broadcasting. ownership restrictions in alternative energy is forestry. In 5 of the 7 regions measured by a result of a conscious national policy choice, The second most restricted sector is the indicators, there are no limits on foreign or whether these sectors are too new to have transportation, measured by the indicators ownership in agriculture. Only Mexico and yet been properly regulated. including railway freight, air transportation the following countries in East Asia and the (domestic and international), and airport In telecommunications, ï¬?xed-line infrastructure Paciï¬?c have ownership restrictions in this and port ownership (ï¬?gure 3.3). Of these, and services sectors are less open to foreign sector: Indonesia, Malaysia, the Philippines, foreign ownership is most restricted in air ownership than the wireless/mobile sector. and Thailand. Oil and gas sector has transportation. In particular, foreign capital Provision of wireless services is the most open relatively more restrictions, particularly in the participation in domestic airlines tends to be business activity within the telecommunications Middle East and North Africa. limited in many countries across the globe. sector. The differences between the ï¬?xed- Foreign equity in the air transportation sector is most severely restricted in the high-income OECD countries. In contrast, these sectors are FIGURE 3.5: Most regions welcome FDI in alternative energy mostly open in Sub-Saharan Africa. Foreign equity ownership index (100=full foreign ownership allowed) The electricity sector presents an interesting case. Foreign ownership in electricity â–  Hydro â–  Biomass â–  Solar â–  Wind â–  Coal 100 generation is less restricted than the downstream activities of electricity transmission 80 and distribution (ï¬?gure 3.4). The most severe restrictions on foreign ownership of electricity 60 transmission and distribution companies can be found in Middle East and North Africa and 40 East Asia and the Paciï¬?c. In comparison to the other service industries, electricity also has the 20 highest concentration of public monopolies, 0 compounding the effect of equity restrictions South Asia Eastern Sub-Saharan High-income East Asia Latin America Middle IAB global (5) Europe & Africa OECD & Pacific & Caribbean East & North average on FDI access. Central Asia (21) (12) (10) (14) Africa (87) (20) (5) As climate-sensitive sectors rapidly gain Source: Investing Across Borders database. importance on a global scale, IAB has placed a particular emphasis on measuring foreign ownership restrictions in alternative FIGURE 3.6: Foreign ownership in the ï¬?xed-line telecommunications sector is more energy sectors—that is, generation of restricted than in the wireless/mobile sector in Middle East and North Africa electricity from renewable sources, including and Sub-Saharan Africa solar, wind, hydro, and biomass. Results demonstrate that all regions of the world are Foreign equity ownership index (100=full foreign ownership allowed) highly open to foreign capital participation in â–  Wireless/mobile telecommunications these sectors (ï¬?gure 3.5). On a relative scale, â–  Fixed-line telecommunications Eastern Europe and Central Asia region and 94.0 South Asia are most open, with hardly any Middle East & restrictions. In contrast, East Asia and the North Africa 74.0 Paciï¬?c as well as Middle East and North 86.3 Africa are more restrictive. In most countries, Sub-Saharan Africa 82.0 the laws afford investors the same degree of 0 20 40 60 80 100 access to alternative energy generation as they do to coal-based electricity generation. Source: Investing Across Borders database. 26 INVESTING ACROSS BORDERS 2010 All measured manufacturing sectors are almost universally open prominent in service sectors than in manufacturing and other export- to FDI in all countries, including light manufacturing, agribusiness, oriented industries. In particular, many sectors that are considered pharmaceuticals, and publishing. Whereas the ï¬?rst 3 sectors are of strategic importance to countries, such as media, transportation, almost universally open to foreign capital participation, publishing is electricity, and telecommunications, still show a relatively high level subject to foreign ownership restrictions in many countries around the of restrictiveness. In terms of the regional differences, economies in globe. In particular, economies in East Asia and the Paciï¬?c tend to Eastern Europe and Central Asia as well as Latin America and the restrict foreign equity ownership in this industry. Middle East and North Caribbean tend to have fewer restrictions than economies in East Asia Africa, South Asia, as well as the high-income OECD countries also and the Paciï¬?c and the Middle East and North Africa. achieve a lower than average score in publishing. In summary, the analysis of Investing Across Sectors data highlights CONCLUSIONS AND IMPLICATIONS the fact that restrictions on foreign equity ownership are still more Simple correlation analysis shows a weak but positive and statistically signiï¬?cant association between FDI and openness to foreign equity FIGURE 3.7: Statutory restrictions on foreign equity ownership ownership (ï¬?gure 3.7).18 Countries that restrict foreign ownership of limit FDI companies do not attract much FDI, while many countries—such as Chile, the Czech Republic, and Georgia—that have opened up major Foreign equity ownership index and net FDI inflows as % of GDP sectors of their economies have attracted signiï¬?cant FDI. These results 30 do not imply a causal relationship between openness and FDI, nor do Net FDI inflows as % of GDP, 2005-2007 average MNE they indicate a direction of the association. 25 There is also a negative and statistically signiï¬?cant association 20 between openness to foreign equity ownership and country size (ï¬?gure 15 GEO 3.8). Countries with smaller populations or markets—such as Chile, Montenegro, and Rwanda—have opened up more of their sectors 10 CHL to FDI. In contrast, larger economies—such as China, India, and CZE 5 THA Mexico—can rely more on the pull of their large markets to attract ETH PHL investment. 0 40 60 80 100 Overall, the openness of sectors to foreign equity ownership—as Foreign equity ownership index measured by the Investing Across Sectors indicators—is a necessary but insufï¬?cient condition for attracting FDI. Having a relatively closed Note: Correlation coefficient is 0.267, significant at the 5% level for CHL (Chile), CZE (the Czech Republic), ETH (Ethiopia), GEO (Georgia), MNE (Montenegro), economy (as in Ethiopia or Sudan) restricts and in some cases prohibits PHL (the Philippines) and THA (Thailand). Source: Investing Across Borders database; World Bank Group World Development FDI in certain sectors. On the other hand, having an economy Indicators database. completely open to foreign capital participation (as in Afghanistan, FIGURE 3.8: Small economies have fewer restrictions on foreign equity Foreign equity ownership index and log of GDP Foreign equity ownership index and log of population 14 10 13 9 Log of GDP, 2005-2007 avergae 12 Log of population, 2008 11 8 10 7 9 6 8 7 5 6 40 60 80 100 4 40 60 80 100 Foreign equity ownership index Foreign equity ownership index Note: Correlation coefficient is –0.352, significant at the 1% level. Note: Correlation coefficient is –0.497, significant at the 1% level. Source: Investing Across Borders database; World Development Indicators database.19 Source: Investing Across Borders database; World Development Indicators database. INVESTING ACROSS SECTORS 27 Bangladesh, Kosovo, or Senegal) does not 5 Paciï¬?c Economic Cooperation Council Investing Across Borders 2010 is a (1995). guarantee success in attracting more FDI. new initiative that we hope to continue 6 Hardin and Holmes (1997). Other factors are also involved, including to improve in the future. IAB plans to 7 Golub (2003), UNCTAD (2006b). market size, infrastructure quality, political leverage the data for research and stability, and economic growth potential. 8 Ibid. analysis of relationships between 9 World Development Indicators database, World indicators and various socio-economic Bank Group, (http://www.worldbank.org). For political, economic, security, cultural, and and political measures of countries’ other reasons some countries have restricted 10 UNCTAD (2004), UNCTAD (2009). development to better understand driv- foreign ownership in some sectors. But the 11 Ibid. ers and impacts of business environ- Investing Across Sectors indicators illustrate 2 12 Ibid. ment reforms. IAB will also consider key points. First, until the recent ï¬?nancial crisis, expanding and deepening the scope 13 Ibid. the global trend was to liberalize a growing of its indicators. We welcome your 14 Ibid. range of economic sectors. Second, in many comments and feedback. 15 The data are reported through sector-speciï¬?c countries the beneï¬?ts of openness to foreign foreign equity ownership indexes, where 100 denotes a sector with no equity restrictions on capital participation have trumped reasons FDI. for restricting certain sectors from foreign 16 World Trade Organization, Guidelines for the ENDNOTES ownership. For every country that limits or scheduling of speciï¬?c commitments under the 1 The Methodology section of this report General Agreement on Trade in Services (GATS) prohibits foreign equity ownership in certain available online provides more details about (http://www.wto.org/english/tratop_e/ sectors, several others with similar features the nature and structure of the Investing Across serv_e/sl92.doc). allow unrestricted foreign ownership. Sectors indicators as well as on the aggregation 17 UNCTAD, Key Data from WIR Annex Tables, methods employed in the construction of the (http://www.unctad.org/templates/Page. indicators. However, an open economy cannot substitute asp?intItemID=3277&lang=1). 2 Foreign Direct Investment database, UNCTAD for a well-regulated economy with strong (http://www.unctad.org); World Development 18 For the purposes of this analysis, net FDI inflows expressed as a percentage of GDP have been investment climate fundamentals such as Indicators database, World Bank Group, considered in order to account for the varying (http://www.worldbank.org). well-functioning institutions, economic and sizes of economies across the data sample. political stability, respect for the rule of law, 3 Christiansen (2004). 19 Ibid; Adler and Hufbauer (2008), Lim (2001). and other key drivers of investment. The main 4 Hoekman (1997); Pierre Sauvé and Karsten Steinfatt, “Assessing the Scope for Further goal of the Investing Across Sectors indicators Investment Regime Liberalisation: An Analysis is to help countries benchmark their policies Based on Revealed Liberalisation Preferences,â€? OECD, unpublished. against those of their peers—and to use these comparisons to inform their policy decisions. 28 INVESTING ACROSS BORDERS 2010 Starting a Foreign Business In contrast, setting up a foreign-owned subsidiary in Canada requires INTERESTING FACTS only 6 days and 2 procedures (adding 1 procedure and 1 day to the ß In most countries measured by Investing Across Borders, process required of a domestic company). The company ï¬?rst ï¬?les for starting a foreign company takes longer and requires more federal incorporation and provincial registration via Industry Canada’s steps than starting a domestic company. online Electronic Filing Centre (5 days). It then notiï¬?es Investment ß The most common additional procedure required of foreign Canada of the investment. The notiï¬?cation can be ï¬?led up to 30 days companies is the foreign investment approval or declaration, after the investment is made. required in 48% of the 87 surveyed countries. Anywhere in the world, a company deciding on where to establish its ß In Eastern Europe and Central Asia, the additional procedures next subsidiary may be attracted by large markets, natural resources, required of foreign businesses add only 4 days on average to or low input prices. Beyond these factors, however, as highlighted the total start-up time. by the previous examples, a country’s regulatory framework can also ß Georgia and Rwanda have the fastest process for starting a greatly affect the investment process. There is little a government can do foreign business of all measured countries. about its country’s size or natural resource endowment. It can, however, ß Only 3 of the 87 surveyed countries do not have their com- create a legal and regulatory environment that makes the country more mercial laws and regulations publicly available online. attractive to foreign direct investment (FDI). Easing business start-up is one ß Companies are able to download business registration forms important area where the government can implement positive changes. in 59% of all measured countries, but only 18% of them offer electronic registration services. Companies seek to avoid administrative hurdles when setting up ß Four out of the 87 surveyed countries do not allow foreign business in foreign countries. In a survey of companies worldwide, companies to hold foreign currency bank accounts. 16% of ï¬?rms polled identiï¬?ed business licensing and permits as a major ß Haiti is the only IAB country where the minimum capital constraint (ï¬?gure 4.1).2 In addition, a recent study measuring restrictions requirements are more favorable for foreign than domestic on FDI in the service sector ï¬?nds that the difï¬?culty of navigating the companies. various requirements involved in starting a foreign business can have an important impact on companies’ investment decisions.3 Source: Investing Across Borders 2010. The starting a business indicator of the Doing Business project has shown that establishment procedures for domestic enterprises vary HOW THE PROCESS OF SETTING UP A FOREIGN- widely from country to country. In a study reviewing the effects of entry regulation on domestic small and medium enterprises, the authors OWNED SUBSIDIARY MATTERS FOR FOREIGN note that, “[i]n a cross-section of countries…stricter regulation of entry DIRECT INVESTMENT A foreign company setting up a subsidiary in Angola might assume FIGURE 4.1: Business licensing can be perceived as a major that, like a local enterprise, it will be able to start operating in about constraint 68 days.1 The reality, however, is that it can take as long as 263 days to establish a wholly foreign-owned subsidiary in Angola’s capital, Percentage of firms identifying business licensing and permits Luanda. as a major constraint In addition to the 8 procedures required of a local company (which Middle East & 27.94 North Africa include depositing the initial capital in a bank, paying the registration Latin America & 15.89 fee, and obtaining the commercial operations permit, among others), the Caribbean it takes another 4 procedures for a foreign company to get started. Eastern Europe & 15.81 Central Asia After authentication of the parent company’s documents, the planned Global average 15.55 investment project is submitted for approval to the National Agency for Private Investment (ANIP) as well as, for larger investments, to the Sub-Saharan 15.52 Africa Council of Ministers. This approval process can take up to 180 days. South Asia 11.93 After the investment is approved, the foreign company applies for a certiï¬?cate of capital importation with the National Bank of Angola. This East Asia 10.83 & Pacific process takes about 15 days. Finally, a foreign company wanting to High-income 9.72 import and export goods must request a trade license from the Ministry OECD 0 5 10 15 20 25 30 of Commerce, which adds a ï¬?nal 14 days to the process. Source: Enterprise Surveys database, World Bank Group. STARTING A FOREIGN BUSINESS 29 is associated with sharply higher levels of of starting a business has elicited the most procedures. They are designed to reward corruption, and a greater relative size of the reforms. Since 2004, 134 economies have an effectively regulated environment, provide unofï¬?cial economy.â€?4 The same argument can facilitated the start-up process through 254 examples of good practices that protect be made by analogy for foreign companies, reforms. Some of the advantages of easier markets without overburdening investors, which, as pointed out in that same study, start-up procedures include, among others, and suggest improvements in areas where frequently face additional veriï¬?cations and greater entrepreneurship, higher productivity, certain administrative requirements add little other procedures. increased growth and investment rates, and value. They build on the data gathered by the lower perceived level of corruption. Doing Business starting a business indicator Similarly, legal and administrative requirements and highlight areas that are of speciï¬?c for establishing foreign-owned subsidiaries interest to foreign investors. Consideration is also vary in scope and stringency.5 An IFC INTRODUCING THE STARTING given to both the regulatory framework and study on FDI found that foreign investments are A FOREIGN BUSINESS its implementation, thus ensuring a more often subject to ofï¬?cial approvals or registration INDICATORS comprehensive measure of the business requirements. Where investment approvals environment faced by investors. are required, additional complications often While some argue that strict entry regulations arise from dispersal of authority. While some provide more legal protection, global practice shows that legal certainty does not Structure of the Starting a Foreign countries have centralized their approvals require costly and complex procedures.7 The Business indicators in a single agency, many countries require multiple-agency approvals or worse yet, Investing Across Borders (IAB) data conï¬?rm The Starting a Foreign Business indicators approvals by a minister or prime minister. that fast and efï¬?cient start-up systems are often comprise 3 components measuring the time Navigating through the approval process in found in investor-friendly countries known for needed, procedural steps required, and certain countries can take months or even their effective legal frameworks. regulatory regime for establishing a foreign- years, and the uncertainty of the outcome, or owned subsidiary (box 4.1). The Starting a Foreign Business indicators even the process, dissuades potential investors The Starting a Foreign Business indicators quantify the procedural burden that foreign from applying.6 do not cover all aspects of countries’ start- companies face when entering a new Of the 10 indicator topics covered by Doing market. The indicators provide information up regimes for foreign companies. The Business, the one that measures the process for countries looking to reform their start-up methodology chapter of this report provides an extensive list of the indicators’ substantive and methodological limitations, including guidance BOX 4.1: What the Starting a Foreign Business indicators measure for how to interpret and use the data. 1. Procedures (number): This indicator covers the number of procedural steps involved in establishing a wholly foreign-owned subsidiary. Both pre- and post-incorporation Case study assumptions procedures that are ofï¬?cially required for a foreign investor to formally operate a busi- To ensure consistency and comparability of ness are recorded. data across all 87 countries, the Starting a 2. Time (days): This indicator measures the number of days needed to go through each Foreign Business indicators are based on a of the procedural steps for establishing a subsidiary of a foreign company. case study that sets out assumptions about a foreign company hoping to establish a 3. Ease of establishment index: This index evaluates the regulatory regimes for business local subsidiary. The most critical elements start-up. It focuses on the following areas: of this case study are provided below. The ß Restrictions to the composition of the board of directors or appointment of manag- methodology section of this report available ers. online provides additional general case study ß Requirements forcing the use of a local third party (counsel, notary, investment assumptions. promotion agency) during the establishment process. ß Possibility to expedite establishment procedures through an ofï¬?cial channel (avail- The foreign company: ability of fast-track procedures). ß Plans to manufacture electric household ß Requirement of an investment approval (nature of investment approval require- appliances (such as refrigerators, electric ment, possibility of appeal, minimum required size of investment, period of or microwave ovens). validity). ß Is domestically incorporated in the largest ß Limitations of the business registration process. business city as a limited liability company ß Restrictions on holding a foreign currency commercial bank account. (LLC). ß Minimum capital requirements. ß Plans an initial capital investment of $10 ß Availability of electronic services (online laws, regulations, documents, and million. registration). 30 INVESTING ACROSS BORDERS 2010 ß Plans to initially employ 50 people, RESULTS OF THE STARTING ß Opening a bank account. including 3 expatriate managers. A FOREIGN BUSINESS ß Registering with a business registry. ß Is not applying to receive any special INDICATORS ß Obtaining a tax identiï¬?cation number (tax beneï¬?ts and privileges (extraordinary tax ofï¬?ce registration). holidays/breaks/exemptions, customs Starting a foreign-owned business ß Registering with retirement and pension duty exemptions), apart from the invest- Perhaps unsurprisingly, establishing a local funds. ment incentives available automatically on subsidiary of a foreign company takes longer ß Registering for social security. a legal basis. and requires more steps than establishing a ß Will not be investing in an export process- domestic enterprise. On average, this process The Starting a Foreign Business indicators of ing zone (EPZ), special economic zone takes a foreign business 14 more days and 2 the Investing Across Borders project document (SEZ), or any other zone governed by a more procedures than a domestic enterprise the additional procedures required of foreign special FDI regime. in that same country (ï¬?gure 4.2). The results companies looking to engage in international ß Plans to sell its manufactured product lo- are most striking in Sub-Saharan Africa and business transactions. These procedures cally as well as to export it. Middle East and North Africa, where it takes include: ß Will import about 60–70% of the value of twice as long to start a foreign company as ß Authentication of the parent company’s its production inputs other than its capital it does a domestic one. Overall the process legal documents abroad. equipment. takes longest for companies in Latin America ß Investment approval or notiï¬?cation. and the Caribbean, where over 2 months are ß Certiï¬?cate of capital importation or regis- Key laws evaluated by the required, on average, to establish a domestic tration with the central bank. Starting a Foreign Business survey or a foreign-owned business. In contrast, the ß Trade (import/export) license or customs process of starting a wholly foreign-owned Below are some of the laws evaluated by registration certiï¬?cate (the assumption subsidiary is rather similar to establishing a the Starting a Foreign Business indicators is that the foreign company will want to domestically owned company in the high- (box 4.2). Some countries have enacted engage in international trade). income OECD countries and in Eastern speciï¬?c investment-related laws, while others Europe and Central Asia. In China, for instance, it takes 99 days to have included relevant stipulations in various start a foreign business that wants to engage business and civil laws. A vast majority of the For domestically-owned small and medium in international trade, 62 days longer than countries in the IAB sample have made these enterprises, some of the most common a domestic business. In addition to the laws publicly available online. procedures include (but are not limited to):8 regular procedures required of a domestic ß Searching for a company name. company (such as registration certiï¬?cation, ß Notarizing articles of association. company seal, statistics, and tax registration), BOX 4.2: Key laws relating to Starting FIGURE 4.2: It takes longer to start a foreign business a Foreign Business indicators Number of days to start a foreign and domestic business, including trade licenses ß Investment-related laws: Investment â–  Procedures required only of a foreign company codes, investment promotion laws â–  Procedures required for trade and regulations, foreign investment â–  Procedures required of both domestic and foreign companies 80 acts. 5 ß Company and business organization 70 9 laws: Commercial codes, foreign 60 19 company laws, company and legal 50 entities registration laws, business 5 16 laws and company laws. (corpora- 40 9 6 60 tions), laws for business associations, 30 5 5 9 foreign exchange transactions laws, 44 2 2 20 private international law codes, 29 28 1 1 9 23 trade laws, tax laws, labor laws. 10 18 17 0.2 ß Civil codes and civil procedure 0 9 Latin America East Asia Sub-Saharan IAB global South Asia Eastern High-income Middle codes/rules. & Caribbean & Pacific Africa average (5) Europe & OECD East & ß Ministerial and presidential decrees. (14) (10) (21) (87) Central Asia (20) (12) North Africa (5) ß Constitutions. Source: Doing Business 2010 and Investing Across Borders database. STARTING A FOREIGN BUSINESS 31 FIGURE 4.3: Starting a foreign business in Shanghai, China, takes almost 3 times as long as starting a domestic one Starting a foreign business in China – examples of procedures required of foreign firms 100 1 Authentication of 1 1 90 documentation overseas 10 2 80 13 Investment approval 70 1 â–  Procedures required of domestic 5 Foreign and foreign companies 60 exchange 13 â–  Additional procedures required Days registration only of foreign companies or 50 certificate 7 companies involved in 1 cross-border trade. 40 5 1 1 5 30 Customs registration certificate/other foreign trade licenses Financial certificate 20 30 for foreign investment 10 0 1 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Procedures Source: Doing Business 2010 and Investing Across Borders database. FIGURE 4.4: Start-up times vary greatly BOX 4.3: Availability of electronic services Number of days to start a foreign-owned business The convenience and efï¬?ciency of access Angola 263 to online information is important to all Haiti 212 businesses, but in particular to foreign Venezuela, RB 179 investors who are not physically present Brazil 166 in the country. For this reason, it is helpful Papua New Guinea 108 if information on laws and regulations China 99 are available online. Better yet is the Vietnam 94 availability of registration forms and other Cambodia 86 related documents for download, and the Indonesia 86 possibility of e-registration and monitoring. Bosnia & Herzegovina 83 Only 3 countries (Ethiopia, Ghana, and Liberia) of the 87 surveyed do not have their laws available online. In all other IAB France 9 countries, some or all of the laws relevant Singapore 9 to establishing a foreign business (such as Egypt, Arab Rep. 8 investment codes, commercial codes, civil Turkey 8 codes, civil procedure codes) are available Macedonia, FYR 8 online. Belarus 7 Albania 7 Companies are able to download Afghanistan 7 registration forms in 59% of IAB countries, but Canada 6 only 18% of them offer electronic registration Georgia 4 services. With the exception of Greece and Rwanda 4 Spain, all surveyed high-income OECD 0 50 100 150 200 250 300 economies offer downloadable registration documents. In Sub-Saharan Africa, less Source: Investing Across Borders database. than 30% of the countries have documents available for download and only Mauritius allows online company registration. 32 INVESTING ACROSS BORDERS 2010 a foreign company must also authenticate its FIGURE 4.5: All surveyed countries in South Asia offer downloadable registration documentation overseas, obtain an investment documents approval, a customs registration certiï¬?cate (this would also be required of a domestic Availability of registration documents online by region company involved in international trade), a ï¬?nancial certiï¬?cate for foreign investment, Sub-Saharan Africa (21) 29% and a foreign exchange registration certiï¬?cate Latin America & Caribbean (14) 36% (ï¬?gure 4.3). IAB global average (87) 59% Despite the additional requirements for foreign Eastern Europe & Central Asia (20) 65% companies, some countries manage to keep East Asia & Pacific (10) 80% their start-up process short. Figure 4.4 shows Middle East & North Africa (5) 80% the number of days required to start a foreign High-income OECD (12) 83% company in the fastest and slowest countries South Asia (5) 100% measured by IAB. 0% 20% 40% 60% 80% 100% Providing electronic services is one of the tools Source: Investing Across Borders database. that countries can use to make administrative processes more efï¬?cient and transparent. Electronic services do not necessarily require FIGURE 4.6: Investment approval is the most time consuming additional procedure costly and complex technological solutions. for foreign investors Any public agency with a Web site can start by posting the key information online, and, Average time required to comply with additional procedures, in days over time, enabling the provision of some of its services electronically. Box 4.3 assesses Investment approval 27 how common it is for countries to make their laws and other information available on the Trade license 9 Internet, and to allow online registration. Certificate of capital importation 8 IAB ï¬?nds that investment approvals, foreign 0 5 10 15 20 25 30 exchange certiï¬?cates, and trade licenses Source: Investing Across Borders database. are among the most common procedures required of foreign companies in addition to the registration requirements for domestic FIGURE 4.7: 20% of all IAB countries require an investment approval ï¬?rms. On average, these 3 procedures take 27, 9, and 8 days, respectively, in IAB Percentage of countries where an investment approval is required countries (ï¬?gure 4.6). Authentication of the documents of the foreign parent company is High-income OECD (12) 0% also a common start-up procedure in many Eastern Europe & Central Asia (20) 0% countries. The IAB team has, however, Latin America & Caribbean (14) 0% excluded this administrative step from ï¬?gure 4.6 because the time needed to comply IAB global average (87) 20% with this requirement depends on a number Sub-Saharan Africa (21) 38% of factors beyond the control of the foreign Middle East & North Africa (5) 40% company and authorities in the host country. South Asia (5) 40% East Asia & Pacific (10) 50% Investment approval and 0 10 20 30 40 50 60 notiï¬?cation requirements Note: 0% denotes that none of the countries in that region require an investment approval. Many countries require foreign investors Source: Investing Across Borders database. to go through an approval or authorization process before proceeding with their planned investment. 20% of the 87 IAB countries require such an approval (ï¬?gure 4.7). In STARTING A FOREIGN BUSINESS 33 East Asia and the Paciï¬?c, 50% of the countries surveyed require an Vietnam, for example, the application for an investment certiï¬?cate for investment approval, namely China, Indonesia, Papua New Guinea, a foreign-owned LLC must include a speciï¬?c business project (including Solomon Islands, and Vietnam. a feasibility study and environmental assessment) and can take up to 2 months. On average, the process takes longest in Sub-Saharan Africa Obtaining an approval takes on average 27 days. In some countries and is fastest in the Middle East and North Africa (ï¬?gure 4.8). this can take as long as 6 months and in others as little as 2 days. In Figure 4.9 illustrates how long it takes on average to get an investment approval in the 8 Sub-Saharan African countries where it is required. BOX 4.4: The Hague Apostille Convention For the same procedure, there is a range of possible time frames. In The Hague Apostille Convention of 1961 facilitates the 9 Angola, the investment approval can take up to 180 days, while it can legalization requirements of foreign public documents between be as short as 1 day in Ethiopia. states which are party to the Convention. The legalization process is meant to satisfy a foreign court or person that the FIGURE 4.8: Investment approvals take longest in Sub- document is indeed what it declares itself to be. The convention Saharan Africa has replaced the cumbersome formalities of this lengthy process with the issuance by a single government entity of an apostille Average time required to obtain an investment approval, by region certiï¬?cate that authenticates the origin of the public document. For companies, this is especially useful as it greatly facilitates 35 33 the recognition of the parent companies’ documents during the 30 27 registration process in a new country. 26 25 Currently, a total of 98 states are party to the Hague Apostille Convention—38 of them are countries surveyed by IAB. 20 16 15 Following is the list of the countries measured by IAB. Those in 15 bold font are party to the Convention. Those in regular font are 10 not. 5 Sub-Saharan Africa N/A N/A N/A Angola, Burkina Faso, Cameroon, Côte d’Ivoire, Ethiopia, 0 High-income OECD (12) South Asia (5) Eastern Europe & Central Asia (20) Sub-Saharan Africa (21) East Asia & Pacific (10) Latin America & Caribbean (14) IAB global average (87) Middle East & North Africa (5) Ghana, Kenya, Liberia, Madagascar, Mali, Mauritius, Mozambique, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Sudan, Tanzania, Uganda, Zambia. East Asia and the Paciï¬?c Note: N/A denotes regions in which investment approvals are not required. Cambodia, China, Indonesia, Malaysia, the Philippines, Papua Source: Investing Across Borders database. New Guinea, Singapore, Solomon Islands, Thailand, Vietnam. Eastern Europe and Central Asia FIGURE 4.9: Obtaining an investment approval can take 180 Albania, Armenia, Azerbaijan, Belarus, Bosnia and days in Angola Herzegovina, Bulgaria, Croatia, Georgia, Kazakhstan, Number of days to get an investment approval in the Sub-Saharan Kosovo, Kyrgyz Republic, Macedonia, FYR, Moldova, African countries where it is required Montenegro, Poland, Romania, Russian Federation, Serbia, Turkey, Ukraine. 200 180 Latin America and the Caribbean Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, 150 Ecuador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Peru, Venezuela, RB. 100 Middle East and North Africa Egypt, Arab Rep., Morocco, Saudi Arabia, Tunisia, Yemen, Rep. 50 33 31 South Asia 17 14 Afghanistan, Bangladesh, India, Pakistan, Sri Lanka. 11 7 3 1 0 Ghana Uganda Ethiopia IAB regional average Cameroon Sudan Mauritius Mali High-income OECD Angola Austria, Canada, Czech Republic, France, Greece, Ireland, Japan, Korea, Rep., Slovak Republic, Spain, United Kingdom, United States. Source: Investing Across Borders database. 34 INVESTING ACROSS BORDERS 2010 Some countries require only a notiï¬?cation or declaration of the investment. Most commonly FIGURE 4.10: Incoming foreign capital requires notiï¬?cation in many countries such a notiï¬?cation is made to a ministry of Percentage of IAB countries that require incoming foreign capital registration, by region trade or commerce or the central bank. This does not delay the planned investment project South Asia (5) 0% and can typically be done in conjunction High-income OECD (12) 8% with other start-up procedures. In Bosnia and Eastern Europe & Central Asia (20) 10% Herzegovina, for example, before a local IAB global average (87) 26% subsidiary established by a foreign company Sub-Saharan Africa (21) 29% is registered with the court, it must be registered with the Ministry of Foreign Trade Middle East & North Africa (5) 40% and Economic Relations. The Ministry keeps East Asia & Pacific (10) 40% a registry of all foreign investments and then Latin America & Caribbean (14) 57% conï¬?rms the notiï¬?cation to the court. 0 10 20 30 40 50 60 Note: 0% denotes that none of the countries in that region requires a foreign capital notification. Source: Investing Across Borders database. Capital importation requirements In most countries, companies that bring in foreign capital require some kind of FIGURE 4.11: Importing capital takes only 1 day in high-income OECD IAB countries authorization. Usually, foreign investors must have their investment capital or external loans Number of days it takes on average to complete a foreign capital registration, by region registered with the national bank of the country 12 11 in which they are investing. In many cases, this registration is required for the purposes of 10 9 future payments abroad or the repatriation of 8 8 7 proï¬?ts when necessary. 6 5 5 Some form of capital importation notiï¬?cation or certiï¬?cate is required in 26% of all IAB 4 countries (ï¬?gure 4.10). While it is not required in any of the South Asian countries 2 1 surveyed by IAB, 57% of Latin America and N/A 0 the Caribbean countries have some form of South Asia High-income Middle Latin IAB global Eastern Sub-Saharan East Asia (5) OECD East & America & average Europe & Africa & Pacific notiï¬?cation requirement, usually a registration (12) North Africa Caribbean (87) Central Asia (21) (10) (5) (14) (20) with the central bank. Note: N/A denotes regions in which notifications are not required. Source: Investing Across Borders database. On average, it takes 7 days for this registration to become effective (ï¬?gure 4.11). In Korea, under the Foreign Investment Promotion Act of currency at the ofï¬?cial exchange rate and of all IAB countries require companies to get a Korea, cash contributions in foreign currency repatriate dividends, proceeds of capital trade-related license or authorization in order must be reported to, and cleared by Korea reductions, or sale of shares covered by such to import and export (ï¬?gure 4.12). These Trade-Investment Promotion Agency (KOTRA) registration. In Ghana, a local authorized licenses are most common in Latin America or a foreign exchange bank. This usually dealer bank must conï¬?rm the transaction to and the Caribbean (required in 79% of IAB takes only 1 day. In Brazil, registration with the Bank of Ghana, which in turn conï¬?rms the countries) and in Sub-Saharan Africa (required the Central Bank can be done online. The transaction to Ghana Investment Promotion in 81% of IAB countries). Central Bank does not need to issue an Centre for registration purposes. approval of the registration but merely acts Obtaining a trade license takes on average as a receiver of the appropriate information. 9 days (ï¬?gure 4.13). In many countries, it is Trade licenses and other customs- A foreign company must be registered prior a simple online application (in Thailand, for related procedures to making any investments in its subsidiary in example, registration can be done online and As mentioned earlier, the IAB case study is issued immediately). In others, it can take Brazil. In República Bolivariana de Venezuela, assumes a foreign company interested in longer. In Brazil, Honduras, South Africa, and investment registration is necessary in order importing and exporting goods. Almost half Zambia the process can take up to a month. to request authorization to purchase foreign STARTING A FOREIGN BUSINESS 35 The Latin America and the Caribbean provides FIGURE 4.12: Half of the IAB countries require a trade license for international a telling example of the differences among trading countries in how long it takes to obtain a trade Percentage of IAB countries that require a trade license, by region license. In Brazil, the process of registering with the Integrated Foreign Trade System of Middle East & North Africa (5) 20% the Federal Tax Authority (RADAR—Registro e 25% Rastreamento da Atuação dos Intervenientes Eastern Europe & Central Asia (20) Aduaneiros) can take as long as 40 days. In High-income OECD (12) 25% Honduras, companies that want to introduce East Asia & Pacific (10) 40% foreign raw material into their factory must South Asia (5) 40% submit an application with the Industry and IAB global average (87) 49% Commerce Secretariat of the Ministry of Latin America & Caribbean (14) 79% Finance. This can take a month. On the Sub-Saharan Africa (21) 81% other hand, the process takes only 2 days in 0 20 40 60 80 100 Bolivia, Colombia, Costa Rica, Ecuador, and Source: Investing Across Borders database. Nicaragua, and only 1 day in Guatemala. The discussion thus far has focused on the FIGURE 4.13: International trade licenses can take as little as 1 day various administrative steps required to start a foreign company. The laws of each Number of days it takes on average to obtain a trade license, when required, by region country also regulate other aspects of the 14 establishment process, such as composition of 12 12 the board of directors, possible requirements 11 11 10 to use local third parties, or minimum capital 10 9 requirements. The rest of this chapter presents 8 IAB results in these areas. 6 4 4 Restrictions on nationality or 4 residency of company board 2 1 members or managers 0 Many countries impose certain conditions on East Asia & Latin Sub-Saharan South IAB global High-income Eastern Middle Pacific America & Africa Asia average OECD Europe & East & the composition of the board of directors or (10) Caribbean (21) (5) (87) (12) Central Asia North Africa the appointment of managers of a company (14) (20) (5) (table 4.1). These restrictions, though not Source: Investing Across Borders database. targeted at foreign-owned companies, mostly deal with issues of nationality and FIGURE 4.14: Obtaining a trade license takes longest in Brazil residence, and are hence particularly relevant for foreign companies. Speciï¬?cally, some Number of days it takes on average to obtain a trade license in Latin America and the Caribbean countries require the directors or managers 45 of foreign-owned companies to be nationals 40 40 or permanent residents of the country of 35 incorporation. Such requirements limit the 30 foreign companies’ freedom to appoint any 25 executives that the parent company feels 20 20 20 would be most competent in managing the 15 15 15 local subsidiary’s operations. 11 10 5 2 2 2 2 2 1 0 Brazil Colombia Nicaragua Guatemala Bolivia Costa Rica Honduras IAB regional average Argentina Venezuela, RB Mexico Ecuador Source: Investing Across Borders database. 36 INVESTING ACROSS BORDERS 2010 Required use of a local third party TABLE 4.1: Examples of restrictions on nationality or residency of company board members or managers in IAB countries It is unlikely that a large company establishing a subsidiary in a foreign country will want Country Conditions to do so without consulting a local lawyer. Brazil Executive Ofï¬?cers of Brazilian companies must be either Brazilian citizens or Depending on its understanding of the local foreigners who hold a permanent resident visa. laws and regulations, it might, however, be Canada Under the Canadian Business Corporation Act, at least 25% of the directors must able to do it alone with its in-house counsel. be resident Canadians. Certain countries allow this, while others Colombia Only 20% of the managerial workforce can be foreigners—this restriction will require going through a local counsel or extend to directors and executive ofï¬?cers if they are employees. an investment promotion agency for certain Egypt, Arab Rep. At least one manager must be an Egyptian national (unless the company is established under the Law of Investment Guarantees and Incentives of 1997). start-up procedures, a requirement that might burden foreign companies with unnecessary Greece, At least one of the directors must be a resident. Madagascar, expenses and lengthy delays. This is the case and Mauritius mainly in the Middle East and North Africa Honduras The tax authority requires the legal representative of the company to have a and Latin America and the Caribbean. In residence permit in order to issue a Tax Identiï¬?cation Card. This process is contrast, it is not a requirement in any of the burdensome and can take months. As a result, many companies name a Honduran representative then change the bylaws in order to elect the desired representative. countries in South Asia or Eastern Europe and Central Asia surveyed by IAB. Indonesia The director of human resources must be an Indonesian national. In practice, the Minister of Law and Human Rights only approves the foreign-owned legal entity if In Latin America and the Caribbean, local its board of directors contains at least one or more Indonesian nationals. professionals must conduct the registration Ireland An Irish company is required to have at least one director who is a resident of the European Economic Area. process in 8 of the 14 IAB countries. In Argentina, a notary public is involved in the Slovak Republic A foreign member of the board of directors or executive ofï¬?cer who is not a citizen of the member states of the European Union or the OECD requires a residency incorporation process, either by certifying permit. signatures or granting a deed of incorporation. South Africa The Broad-Based Black Economic Empowerment Act urges companies to have In Brazil, all articles of incorporation must be meaningful representation of previously disadvantaged groups. signed by an attorney duly enrolled with the Philippines The number of directors can be no fewer than 5 and no more than 15, the Brazilian Bar Association. In Chile, Peru, and majority of whom should be residents. Nicaragua, a local lawyer must draft the Zambia At least 50% of the directors must be residents. organizational documents as a requirement Source: Investing Across Borders database. for notarization. In 8 of the 21 Sub-Saharan African IAB FIGURE 4.15: Foreign investors can establish a subsidiary on their own in South Asia countries, foreign companies are required and Eastern Europe & Central Asia to go through local representatives in order to establish a company. In Cameroon, the Required use of local third party, by region company must go through a local notary. In Angola, the law requires foreign companies to South Asia 0% contract local accountants, audit companies, Eastern Europe & Central Asia 0% and legal counsel. In Kenya, the Advocates Act High-income OECD 8% requires that an advocate of the High Court of East Asia & Pacific 10% Kenya prepare and submit the incorporation documentation. In Nigeria, only a local IAB global average 25% counsel accredited by the Corporate Affairs Middle East & North Africa 40% Commission can incorporate companies. Sub-Saharan Africa 43% In some cases, investors are required to Latin America & Caribbean 57% go through the local investment promotion 0 10 20 30 40 50 60 70 authority. In Saudi Arabia, for example, the Note: 0% denotes that none of the countries in that region requires foreign companies to go through a local Saudi Arabian General Investment Authority third party to establish themselves. Source: Investing Across Borders database. (SAGIA) is the ï¬?rst stop for investors requiring an investment license. SAGIA requires all investors to have a local representative throughout the establishment process. STARTING A FOREIGN BUSINESS 37 Minimum capital requirements TABLE 4.2: Examples of minimum capital requirements in IAB Minimum capital requirements are usually a larger obstacle for small countries and medium enterprises than they are for large foreign investors. A foreign company will, in most cases, be investing more than the Country Minimum capital requirements minimum capital requirement even though some smaller multinational Belarus While there is no minimum capital requirement for domestic companies, if a company is established in the form of a companies might ï¬?nd even the lower thresholds to be an impediment. foreign LLC the amount is $20,000. Charter capital must However, high minimum capital requirements may still discourage be paid in full prior to establishment of domestic companies companies from investing and do not offer much protection against while the Investment Code states that only 50% of the charter capital of foreign companies needs to be paid unscrupulous entrepreneurs. during the ï¬?rst year of establishment and in full within 2 years. Fifty out of the 87 countries surveyed by IAB (57%) have some form of minimum capital requirement for LLCs. In 10 IAB countries, the Ethiopia The minimum capital requirement for a foreign investor is $100,000 unless it invests with a domestic partner, in minimum capital requirement is different for domestic and foreign which case the minimum capital requirement is $60,000. companies. In some cases, the amount required of foreign companies Ghana The Ghana Investment Promotion Centre Act (GIPC) sets is higher than that required of domestic businesses. In other cases, out speciï¬?c amounts that must be invested by foreigners. foreign companies are subject to minimum capital requirements while In a wholly foreign-owned enterprise, the minimum capital domestic companies are not. Table 4.2 shows some examples of IAB requirement is $50,000. It drops to $10,000 for joint ventures with a Ghanaian partner. In the case of trading countries in which the minimum capital requirement differs for domestic enterprises, the minimum capital requirement is $300,000. and foreign companies. Haiti Haiti is the only IAB country where the minimum capital requirements are more favorable to foreign companies. If a Foreign currency bank accounts requirements wholly foreign-owned company is being registered, there is no speciï¬?c minimum capital requirement. In the case of Foreign investors often need foreign currency in order to trade and joint ventures with one or more Haitian shareholders, the conduct business with overseas partners. In the following 4 IAB minimum capital is HTG 100,000 (~$2,500) for industrial countries, there is an outright prohibition on holding a bank account companies or HTG 25,000 (~$630) for commercial companies. in foreign currency: Brazil, Colombia, Morocco, and República Nigeria At least 25% of the authorized share capital must be fully Bolivariana de Venezuela. issued prior to the company’s establishment. The minimum share capital for a domestic company is N10,000 In other countries, foreign investors can hold such an account only (~$65), while the minimum for a foreign company is after obtaining approval from public authorities. This approval can be N10,000,000 (~$65,000). difï¬?cult to obtain. In Burkina Faso, Côte d’Ivoire, Mali, and Senegal, the Philippines Domestic companies are required to have not less than PHP Regulation of the Monetary Union of West Africa (UEMOA) requires a 5,000 (~$112) paid-in capital. However, a company with foreign company to receive authorization from the Minister of Finance more than 40% foreign equity must have a minimum paid-in capital of PHP 9,000,000 (~$200,000) if it produces and ultimately the Central Bank of the West African States (BCEAO) in goods for sale or engages order to hold a foreign currency bank account. The situation is similar in business in the Philippines. If it exports at least 60% in Cameroon, where resident companies are not allowed to hold a of its output, the minimum paid-in capital required is bank account in a foreign currency unless they receive approval from PHP 5,000. the Bank of Central African States (BEAC). Saudi Although the amended Companies Law abolished capital Arabia requirements, in practice foreign companies must comply Receiving an approval from these central banks can take weeks, with the following minimum capital requirements in order to obtain a business license: and, on occasion, several months. In the other IAB countries where ß SR 100,000 (~$27,000) for individual establishments an approval is requested, this process is easier and takes a matter of ß SR 500,000 (~$135,000) for companies days or weeks. These countries are Pakistan (27 days), Papua New ß SR 1,000,000 (~$270,000) for industrial projects Guinea (11 days), Solomon Islands (7 days), Sri Lanka (5 days), China ß SR 25,000,000 (~$6,750,000) for agricultural (4 days), and Azerbaijan (3 days). projects. Zambia A foreign company establishing a subsidiary in Zambia must be issued a certiï¬?cate of compliance for the following CONCLUSIONS minimum capital requirements: ß K5,000,000 (~$1,000) for private companies Establishment procedures alone are not a strong determinant of ß K50,000,000 (~$10,000) for public companies FDI inflows. However, burdensome processes are an irritant and at ß K250,000,000 (~$50,000) for foreign exchange times a deal breaker, particularly for small and medium multinational ofï¬?ces corporations. As the ï¬?rst interactions the foreign investor has with ß K500,000,000 (~$100,000) for ï¬?nancial institutions or insurance companies a country’s administration, start-up procedures can quickly seal a ß K1,000,000,000 (~$200,000) for banks. country’s reputation as being investor-friendly or not. Reforms in start- Source: Investing Across Borders database. up procedures have been shown to lead to improved governance, 38 INVESTING ACROSS BORDERS 2010 reduced corruption, and send the signal that business start-up process, which enables indication of the overall regulatory environment the government is open for business, including investors to register their businesses online. that they can expect in the host country. This FDI.10 The availability of fast-track alternatives, report has presented examples of a number even if they entail a higher processing fee, of countries at various levels of income and Motivated by the growing competitiveness is usually valuable to foreign investors. Last institutional development that have well- of international commerce, countries have but not least, one other hurdle that makes organized systems for business start-up. good reasons to modernize and streamline the establishment process burdensome their regulatory frameworks. Countries that to foreign companies is the requirement have done well in the Doing Business starting Investing Across Borders 2010 is a to go through a local third party (lawyer, a business indicator (Canada, Singapore, new initiative that we hope to continue notary, public entity). Countries can make to improve in the future. IAB will also and Georgia) also do well in the Starting a this requirement optional. consider expanding and deepening the Foreign Business indicators of the Investing ß Simpliï¬?cation of the investment approval: scope of its indicators. We welcome Across Borders project. The foreign investment approval can be a your comments and feedback. The Starting a Foreign Business data for the burdensome requirement for foreign inves- 87 countries surveyed point to the following tors. They must in some instances prove good practices: minimum projected annual sales or dem- ENDNOTES ß Equal treatment of foreign and domestic onstrate net economic beneï¬?ts in order to 1 Doing Business, starting a business investors: The start-up process should be be allowed to enter the market. In other indicators (http://www.doingbusiness.org/ governed by the same regime and rules cases, the requirements are unclear and ExploreTopics/StartingBusiness/). for all companies irrespective of their own- give public authorities discretion to ap- 2 World Bank Enterprise Surveys (http://www. enterprisesurveys.org). ership. Any differences in treatment should prove or decline an investment approval request. To remedy this, countries can 3 Golub (2006). be due to the companies’ size, legal form, simplify their investment approval require- 4 Djankov (2002). or commercial activity, rather than the ment, making it a simple notiï¬?cation or 5 UNCTAD (2006b). nationality of its shareholders. 6 International Finance Corporation (1997). ß Simpliï¬?cation of the establishment abolishing it altogether, unless the foreign investment is made in a strategic sector 7 Doing Business (2010). process: While it takes only about 4 to 6 days to establish a foreign-owned subsid- that might have an impact on national or 8 Doing Business, starting a business indicators (http://www.doingbusiness.org/ iary in certain countries, this process can economic security. ExploreTopics/StartingBusiness/). take more than several months in others. The Starting a Foreign Business indicators 9 Full text of the Hague “Convention Abolishing Countries can improve the establishment the Requirement of Legalisation for Foreign Public measure effective regulation, leading to Documents,â€? of October 5, 1961, as well as process by consolidating procedures and predictable and transparent administrative additional details, can be found at http://www. abolishing the unnecessary or obsolete processes for foreign investors. In an hcch.net/index_en.php?act=conventions. pdf&cid=41. ones (for example, company seal require- increasingly competitive world, an investor- 10 Djankov (2002). ment, investment approval for small proj- friendly regime for FDI entry is often viewed by ects). Also, countries can computerize the foreign companies as an important signal and STARTING A FOREIGN BUSINESS 39 Accessing Industrial Land up to 100 years if it so desires. The company is optimistic about its INTERESTING FACTS business prospects and is looking forward to investing in Turkey. ß In 1 in 4 of the countries surveyed by Investing Across Borders These examples show that the ease of accessing industrial land can (IAB), foreign companies cannot own private land. affect a company’s decision to invest—and that difï¬?cult access to land ß All the countries surveyed allow foreign-owned companies to can signiï¬?cantly impede foreign direct investment (FDI).1 The World lease land. Bank’s Enterprise Surveys have found that many ï¬?rms consider access ß More than half the countries surveyed do not allow foreign to land a major or severe obstacle to operating and expanding their companies to use land leases as collateral. businesses around the world (ï¬?gure 5.1). ß It takes as little as10 days to lease private land in Armenia— Accessing land can impede foreign investment and doing business and as many as149 days in Nicaragua. more generally for many reasons, including: ß Across the 87 IAB countries the average time it takes to lease land from the government is more than twice that required to ß Mistrust and discrimination. Foreign investors seeking to acquire lease land from a private holder. land—particularly in Eastern Europe, Sub-Saharan Africa, and Southeast Asia—often face sensitive land issues rooted in historical, ß Nearly two-thirds of countries require an additional approval to authorize the lease of government-held land to foreign indigenous, and colonial traditions.2 Mistrust of private owner- companies. ship, particularly foreign ownership, still exists in many economies, ß In only one-third of countries with both a land registry and leading to policies that discriminate against foreign companies or cadastre are the two public agencies linked to share data, individuals.3 Such policies may include restrictions on ownership, facilitating information access. types of land that can be acquired, and approvals for foreign ß Less than half the countries do not provide accessible public investors.4 documentation on previous environmental impact assessments ß Weak legal framework for land. Once a company obtains rights conducted on industrial lands. to an investment site, weak land use rights can impede its ability Source: Investing Across Borders 2010. to operate and plan for the long term. Limits on land use rights can include short lease terms, obstacles to renewing and transferring land rights, and restrictions on the ability to mortgage land or use it WHY LAND ACCESS MATTERS TO FOREIGN as collateral.5 INVESTORS ß Burdensome acquisition procedures. It may be difï¬?cult to obtain A South African manufacturing company is interested in expanding its market presence in East Africa and is short-listing potential investment FIGURE 5.1: In many regions access to land is a signiï¬?cant destinations in the region. It hopes to establish a locally incorporated obstacle to investment food processing plant that will export packaged goods back to South Africa and other markets. While seeking to identify a land plot for Percentage of foreign-owned manufacturing firms identifying the plant, the company learns that the only way to access industrial access to land as a major or severe obstacle to operating and land in Addis Ababa, Ethiopia’s capital, is by leasing public land, expanding business since private ownership of land is prohibited. Land is leased through Sub-Saharan Africa (38) 20.4% a government auction, and the process can take 6 months. Acquiring Eastern Europe & 19.3% information on land is time-consuming and requires visits to several Central Asia (28) agencies. In some cases it is unclear where to ï¬?nd needed information. East Asia & Pacific (11) 19.2% These circumstances may lead the South African company to look for Middle East & North Africa (4) 18.2% opportunities elsewhere. Global average 18.0% In contrast, a German manufacturing company is looking to open a South Asia (4) 17.4% locally incorporated subsidiary in Istanbul, Turkey’s commercial center. High-income OECD (14) 14.1% The subsidiary plans to manufacture light electronics and distribute Latin America & 11.2% them to its retailers in Europe and Asia. Thanks to the easily accessible Caribbean (20) information on land plots at Istanbul’s Directorate of Land Registry and Note: The sample includes all economies surveyed in the Enterprise Surveys Database Cadastre, the company has already identiï¬?ed a suitable location for from two surveys: one from 2002 to 2005 and one from 2006 to the present. The numbers in parentheses are the number of economies in each region that had 30 or the factory. Leasing private land in Istanbul is efï¬?cient and streamlined, more majority foreign-owned firms respond to the survey. Many economies are included multiple times because they were surveyed in multiple years. For example, Belarus is taking just over 2 weeks. The lease can be valid for 50 years, and included 3 times because it was surveyed in 2002, 2005, and 2008. helpful regulations should enable the company to renew the lease for Source: World Bank Group Enterprise Surveys Database. 40 INVESTING ACROSS BORDERS 2010 clear land titles,6 and acquiring industrial all stakeholders—including investors, host provides an extensive list of the indicators’ land is often inefï¬?cient, nontransparent, countries, and their citizens. A solid legal substantive and methodological limitations, and a source of corruption.7 framework gives investors conï¬?dence in the including guidance for how to interpret and ß Lack of information. Foreign investors security of their land, investments, and rights. use the data. often face major challenges in ï¬?nding That framework also allows governments to suitable investment locations. Challenges ensure that investors respect the law and can include insufï¬?cient information about that their activities in host countries enhance INTRODUCING THE ACCESSING encumbrances, valuation, geographic socioeconomic development. INDUSTRIAL LAND INDICATORS characteristics, utility connections, and The Accessing Industrial Land indicators Making land a tool for economic development environmental and social risks.8 quantify 3 aspects of land administration requires more than providing easy access regimes important for foreign companies Improving access to land and ensuring its to industrial land for companies. It also seeking to acquire land for their industrial security provides signiï¬?cant beneï¬?ts for requires ensuring that access is secure and investment projects. The indicators focus both foreign investors, governments, and other complemented by inputs such as natural on the legal framework and its implementation. stakeholders. Effective, efï¬?cient, secure land resources, working and human capital, and In doing so they provide detailed information administration is one of the drivers of foreign institutions for credit, ï¬?nance, insurance, for countries looking to reform their land investment. Better access to land can also infrastructure, land registration, and contract administration frameworks and policies. facilitate investment—foreign and domestic— enforcement, including land’s ability to be The indicators are structured to reward and may increase prosperity. Secure land rights used as collateral.18 In addition, it requires predictable, transparent, and well-regulated can unleash a country’s economic potential,9 balancing the needs of investors, governments, land administration systems, which do not with beneï¬?ts for domestic and foreign investors and citizens, with proper safeguards to protect overburden investors and provide sufï¬?cient alike. In addition, improving land security can the environment and the people living on the protections to land holders. The indicators encourage private investment,10 diversify labor land.19 also provide a useful reference of examples force allocation,11 increase the market value The Accessing Industrial Land indicators do of good practices. of land,12 boost productivity,13 raise income not encourage governments to promote land and consumption,14 and reduce poverty.15 transactions at the cost of environmental Structure of the Accessing But better access to land for investment can and social protections. Despite efforts to Industrial Land indicators also pose signiï¬?cant socioeconomic and balance the beneï¬?ts and costs of regulation The Accessing Industrial Land indicators political risks. There is justiï¬?ed concern that in the indicators, major limitations remain. The comprise the following 3 components: improving foreign access to land may hurt indicators do not speciï¬?cally highlight issues 1. Strength of land rights: These indicators environmental and social protections in the related to environmental and social protections, compare economies on the types of host economy. Critics often claim that land though the IAB survey did examine these in land rights available and the strength of reforms are not pro-poor and ignore customary the context of leasing land. In most countries legal rights they offer to investors—for ownership systems that have been in place an environmental or social impact assessment instance, land-holding options that are for centuries.16 They also argue that improving (or both) is not conducted when a foreign available to foreign companies, wheth- access to land can increase speculation and company leases or buys land. Instead, such er or not there is different treatment for encourage governments to allow affluent assessments occur when a company intends foreign and domestic companies and foreigners to buy or lease prime real estate to construct on the land or begins operations whether the land can be sub-leased, at prices well below its market value, leaving in an environmentally sensitive sector. subdivided, mortgaged, transferred or communities without land to live on.17 When interpreting and using these indicators, used as collateral. Improving access to land for private investment it should be kept in mind that they focus 2. Access to and availability of land requires striking a balance between efï¬?cient primarily on laws and regulations governing information: These indicators bench- and effective regulation that is both pro- foreign companies’ access to industrial land, mark economies regarding the access business and supports economic development. and less on legal protections for countries’ to and availability of key pieces of land The Accessing Industrial Land indicators do citizens and environments. Like many information. not speciï¬?cally examine the issue of more indicator sets, the IAB indicators should not 3. Ease of leasing land: These indicators versus less regulation. Instead they measure be considered in isolation, but in conjunction measure the time it takes to lease land good regulation and efï¬?cient processes. with other indicators and reports—such as from both a private holder and the the Land Governance Assessment Framework government. Transparent, predictable, and effective laws (LGAF)20—that reflect a country’s other needs and regulations with proper safeguards and socioeconomic development concerns. More details on how the indicators are are critical to ensuring that foreign The methodology chapter of this report constructed and what they include are investment results in a win-win situation for ACCESSING INDUSTRIAL LAND 41 presented in table 5.1. The methodology chapter available TABLE 5.1: Accessing Industrial Land indicators online provides a detailed list of speciï¬?c issues evaluated in Thematic each of the components. area Indicator Measures Land rights Strength of ß Ability of foreign-owned companies to lease land Key laws evaluated by the Accessing lease rights without entering into partnership with a domestic index company or individual Industrial Land survey (0-100) ß Whether leasing procedures are the same for Box 5.1 presents some of the principal laws evaluated by the foreign and domestic companies Accessing Industrial Land indicators. Some economies have ß Whether there is a statutory maximum duration of land-speciï¬?c laws and regulations, while others regulate land lease contracts matters through relevant stipulations of civil and commercial ß Whether there is a statutory maximum on the size of land plot a foreign-owned company may lease codes, or as part of the Constitution. Many economies have ß Ability of foreign-owned companies to renew, land-related laws and regulations in all of the sources listed transfer, sublease, subdivide, and/or mortgage in the box. leased land, or use it as collateral Strength of ß Ability of foreign-owned companies to purchase ownership land without entering into partnership with a BOX 5.1: Key laws measured by the Accessing rights index domestic company (0-100) Industrial Land indicators ß Whether purchase procedures are the same for foreign and domestic companies ß Land or property laws, which may take the follow- ß Whether there is a statutory maximum on the size ing forms depending on the country: Land title act, of land plot a foreign-owned company may buy land title registration act, land registry act, state ß Ability of foreign-owned companies to renew, transfer, sublease, subdivide, use as collateral lands act, government lands act, municipal property and/or mortgage purchased land act, property registration act, mortgage act, con- veyancing act, deeds registries act, cadastre and Land Access to land ß Whether the land registry and/or cadastre have information information a publicly accessible inventory of private and/ property register act, agricultural land ownership index or public lands and use act, lands commission act, foreigners land (0-100) ß Whether the land registry and/or cadastre have acquisition act, state property and contracts act, an online inventory of private and/or public land tenure ordinance lands ß Investment codes, laws, or acts ß Whether the land registry and/or cadastre share data about land ß Civil codes and civil procedure codes or rules ß Whether there is a publicly accessible land ß Commercial laws or codes information system (LIS) and/or geographic information system (GIS). ß Constitutions Availability ß Availability of the following 18 pieces of informa- of land tion about land plots: information - previous land contracts RESULTS OF THE ACCESSING INDUSTRIAL index (0-100) - plot size - land value LAND INDICATORS - street address - mailing address Context for understanding Accessing - immovable property on the land Industrial Land indicators - spatial information about the land Understanding the context of how a wholly foreign-owned, - geotechnical description - documentation on environmental impact as- locally incorporated subsidiary (for the rest of this chapter this sessment legal form will referred to as a ‘foreign company’) accesses - zone classiï¬?cation industrial land is important for comparing the characteristics - tax classiï¬?cation of countries’ land administration regimes. These contextual - information on surroundings - carrying capacity of the land aspects are not included in the construction of the indicators, - local population density rather they are presented in this chapter to provide the - utility connections appropriate setting for the subsequent presentation and - encumbrances discussion for the Accessing Industrial Land indicator results. - existing land claims - legal jurisdiction of the land How investors acquire land Ease of Time to lease ß Total number of days to lease land from a private There is a wide degree of variation around the world in leasing land private land owner the way foreign companies prefer to hold land (ï¬?gure 5.2). Time to lease ß Total number of days to lease land from the public land government 42 INVESTING ACROSS BORDERS 2010 Typically, this preference depends mostly on FIGURE 5.2: Most common type of land acquisition varies by region the availability of local legal options. Given that investors commonly prefer the maximum Most common form of land acquisition, share of economies per region security over land, in countries which allow â–  Lease public land â–  Buy private land â–  Lease private land full private ownership of land investors tend to 100% prefer to lease or buy private land rights (as 60% 60% 52% opposed to public land rights). The choice of 57% 75% whether to lease or buy typically depends on the nature of the company’s commercial activity 75% 50% and the size of investment (both in terms of 58% capital invested and amount of land needed). 56% 25% In countries which do not allow private ownership of land because all land is held by the state, foreign companies will typically 0% East Asia & Eastern High-income Latin America Middle East & South Asia Sub-Saharan lease public land from the government. Pacific Europe & OECD & Caribbean North Africa (5) Africa (10) Central Asia (12) (14) (5) (21) (20) Foreign companies prefer, on average, to Note: Values are provided only for that type of landholding that is commonly preferred by most foreign companies. These buy private land for the realization of their data are not part of the Strength of land rights index analyzed in the previous section, or of any other indicator that scores economies’ performances. They offer only contextual information. investment projects in the following regions Source: Investing Across Borders database. of the world: Eastern Europe and Central Asia, Latin America and the Caribbean, and the Middle East and North Africa. In TABLE 5.2: Common means of land acquisition by foreign ï¬?rms in South Asia East Asia and the Paciï¬?c and high-income Type of land rights available OECD economies foreign companies most Country Lease private land Buy private land Lease public land Buy public land commonly lease rather than buy private land. Finally, in South Asia and Sub-Saharan Africa Afghanistan Most Common Not Possible Common Not Possible companies are more likely to lease land Bangladesh Common Most Common Common Not Possible from the government, as private ownership India Common Common Most Common Not Common is prohibited in many economies in these Pakistan Common Common Most Common Not Common regions. Sri Lanka Not Common Common Most Common Not Common South Asia illustrates an example of a Source: Investing Across Borders database. considerable variation of practices among countries even within a region (table 5.2). In India, Pakistan, and Sri Lanka it is most FIGURE 5.3: Regions vary on whether or not foreign companies can own land common for foreign companies to lease land from the government, although it is highly Share of countries which allow public and private land to be purchased, by region unusual to buy land from the government. â–  Private land â–  Public land 100% Restrictions on ownership High-income OECD (12) 100% In some economies it may not be possible for 100% Latin America & Caribbean (14) 86% foreign companies to buy land under certain 95% contract arrangements. Eighteen of the 87 Eastern Europe & Central Asia (20) 85% countries surveyed do not allow any form of 80% South Asia (5) 60% private ownership of land, often due to the 80% legal and political history of a country. In other Middle East & North Africa (5) 60% countries, despite allowing private ownership 52% Sub-Saharan Africa (21) 48% of land, the overwhelming majority of land 33% remains state owned.21 Most economies in East Asia & Pacific (10) 33% East Asia and the Paciï¬?c and Sub-Saharan 0 20 40 60 80 100 Africa do not allow foreign companies to own Source: Investing Across Borders database. private or public land (ï¬?gure 5.3). ACCESSING INDUSTRIAL LAND 43 Nine of the 21 Sub-Saharan economies Differences in legal treatment between of speciï¬?c areas of land or impose resident surveyed—Ethiopia, Ghana, Liberia, domestic and foreign companies and requirements on foreigners wishing to acquire Mozambique, Nigeria, Sierra Leone, Sudan, individuals land.27 Tanzania, and Uganda—do not allow any form In the majority of economies surveyed, legal Another form of discrimination concerns legal of freehold (full ownership)22 land title (table provisions for access to land apply to all treatment of wholly foreign-owned, locally 5.3). According to the Federal Constitution of locally incorporated companies irrespective incorporated companies seeking to acquire Ethiopia, for example, the right to own land of whether they are domestically- or foreign- and use land. Seventy six percent of the is exclusively vested in the state and peoples owned. In these economies the Accessing countries surveyed would consider this type of Ethiopia.23 Land rights in Sub-Saharan Industrial Land indicators are not necessarily of a company as a domestic company and Africa have evolved in response to changing FDI-speciï¬?c since they are also applicable give it equal treatment before the law in the political, social, and economic conditions, to domestic companies. Nevertheless, many land leasing processes. However 21 of the and to this day many indigenous communal- or countries around the world still have speciï¬?c 87 countries would still consider the company clan-based land systems prevail.24 Thus, many legal restrictions on rights to occupy and use a foreign company. These countries have Sub-Saharan African economies only offer land by foreign companies and individuals. speciï¬?c restrictions on foreign companies, long-term lease rights.25 For example, Bosnia and Herzegovina including different leasing procedures, and the Philippines do not allow foreign additional costs, required partnerships with companies to lease public land. There may nationals to acquire land, or additional also be restrictions on the type of land foreign approvals from the government for selling entities can acquire. In Angola, Armenia, land (table 5.4). Azerbaijan, Bangladesh, Belarus, Bosnia TABLE 5.3: Many Sub-Saharan and Herzegovina, Bulgaria, Madagascar, Saudi Arabia, Romania, and Thailand foreign Strength of land rights indicators African economies do not allow freehold land title of any form individuals can not own residential land The Strength of land rights indicators consist even though land ownership is allowed for of 2 quantitative indicators evaluating the Can a foreign-owned legal framework governing land rights for company… nationals. In 8 of the 87 countries surveyed, foreign individuals cannot own commercial foreign companies. The ï¬?rst is the Strength of …purchase …purchase government/ private land and in 16 countries foreign companies lease rights which includes all 87 countries Country public land? land? cannot own agricultural land despite the surveyed and measures the strength of Angola Yes Yes fact that nationals can.26 This phenomenon rights a land lease contract offers foreign Burkina Faso Yes Yes is not restricted to developing and transition companies. The second is the Strength of economies. Many high-income OECD ownership rights which includes only those Cameroon Yes Yes economies also have restrictions against 68 countries surveyed which allow private Côte d’Ivoire Yes Yes foreigners. Denmark, Finland, Greece, and ownership of land. Ethiopia No No Ireland for instance, restrict foreign ownership Ghana No No Kenya Yes Yes Liberia No No TABLE 5.4: Comparison between legal treatments of foreign companies seeking to Madagascar Yes Yes acquire land Mali Yes Yes For the purpose of leasing land a wholly Mauritius No Yes foreign owned, locally incorporated company Mozambique No No is considered a domestic or foreign company (share of economies)? Nigeria No No Question Considered domestic Considered foreign Rwanda Yes Yes Number of economies surveyed 76% 24% Senegal Yes Yes Different procedures for leasing private land? 5% 10% Sierra Leone No No Different procedures for leasing public land? 2% 21% South Africa Yes Yes Additional cost for leasing private land? 0% 15% Sudan No No Additional cost for leasing public land? 2% 11% Tanzania No No Require partnership with a national to own land? 18% 56% Uganda No No Require permission from government to sell 2% 18% Zambia No Yes purchased land? Source: Investing Across Borders database. Source: Investing Across Borders database. 44 INVESTING ACROSS BORDERS 2010 Strength of lease rights index—overall leases, the lower index scores illustrate the of land-holding options, do not treat foreign results fact that many countries do not allow foreign companies differently from domestic ones, High-income OECD economies provide companies to subdivide leased land or use and allow foreign companies to freely use foreign companies with a strong set of lease land as collateral. the land for various business transactions. rights and options regarding land use (ï¬?gure Many of the economies that offer the fewest Eight of the 87countries score the maximum of 5.4). In Latin America and the Caribbean options for land acquisition and have the 100 out of 100 because they offer the most land leases are less common and using weakest lease rights are from Sub-Saharan options to foreign companies on how they can leased land for collateral and other purposes Africa (4 economies). Many economies in the use leased land (ï¬?gure 5.5). Five of the top is thus not typical. Rather, most economies in low performing regions do not allow foreign 10 performers come from high-income OECD the region provide stronger ownership rights. companies to use leased land as collateral. economies—Canada, Spain, the United In contrast, in the Sub-Saharan economies Kingdom, the United States, and France. Limits on use of lease contracts where land is typically held in long-term All these economies provide a complete set All 87 economies surveyed allow foreign companies to lease land. However, there are FIGURE 5.4: Strongest lease rights are available in high-income OECD countries distinctions across economies on the legal limits for maximum lease duration, and on Strength of lease rights index (100 = strongest rights), by region how leased land can be used for business High-income OECD (12) 92 activities. Many economies, especially in Sub- Saharan Africa and East Asia and the Paciï¬?c South Asia (5) 88 have legal limits on the maximum duration of East Asia & Pacific (10) 85 a lease contract (ï¬?gure 5.6). If the terms are Eastern Europe & Central Asia (20) 83 too short foreign companies may be limited in 78 their capacity to plan long-term. For example Middle East & North Africa (5) in Thailand there is maximum lease duration Latin America & Caribbean (14) 78 of 30 years for any foreign company seeking Sub-Saharan Africa (21) 77 to lease land. 0 20 40 60 80 100 The indicators also reveal that more than Note: Please refer to the methodology section online for identification of all components of the Strength of land rights index. half of the 87 economies surveyed do not Source: Investing Across Borders database. allow foreign companies to use land leases as collateral to obtain credit for purchase of machinery or production equipment. This FIGURE 5.5: Strength of lease rights vary greatly across countries is mostly the case in Latin America and the Strongest and weakest country performers on strength of lease rights index Caribbean where 13 of the 14 economies (100=strongest rights) surveyed do not allow leased land to be used as collateral, although all of them allow Bangladesh 100 Canada 100 purchased land to be used for collateral. In Costa Rica 100 Colombia a lease is considered a contractual Singapore 100 right (that is, a right to use the land) and not a Spain 100 United Kingdom 100 property right (that is, a right to dispose of the United States 100 land). Consequently, since the lessee does not France 100 96 have the right to dispose of the land, it cannot China Cambodia 93 be used as collateral. Ethiopia 75 Allowing lease contracts to be used as Yemen, Rep. 69 collateral is not common in the Middle East and Montenegro 69 North Africa. Of the 5 economies surveyed, Philippines 69 Bolivia 65 Egypt and Saudi Arabia do not allow leases Saudi Arabia 64 to be used as collateral (table 5.5). In Saudi Ecuador 62 Arabia even purchased land cannot be used Liberia 58 Mozambique 53 as collateral by foreign companies. Sierra Leone 44 Source: Investing Across Borders database. ACCESSING INDUSTRIAL LAND 45 FIGURE 5.6: Nearly all economies in Sub-Saharan Africa have legal limits on the duration of lease contracts Percentage of economies that have legal limits on the maximum Percentage of economies which do not allow foreign companies duration of a lease contract to use lease contracts as collateral Sub-Saharan 90% Latin America & 93% Africa (21) Caribbean (14) East Asia 70% Eastern Europe & 75% & Pacific (10) Central Asia (20) Latin America & High-income 50% 50% OECD (12) Caribbean (14) Eastern Europe & East Asia & 50% 40% Pacific (10) Central Asia (20) Middle East & Middle East & North Africa (5) 20% North Africa (5) 40% High-income Sub-Saharan OECD (12) 8% Africa (21) 24% South Asia (5) 0% South Asia (5) 0% 0 20 40 60 80 100 0 20 40 60 80 100 Note: None of the 5 economies surveyed in South Asia had either a limit on the maximum duration of a lease contract or a restriction on whether a lease could be used for collateral, thus the region is reported as showing 0%. Source: Investing Across Borders database. Other issues covered in the Strength of lease TABLE 5.5: Ability to use land contracts for collateral in the Middle East and North rights index include whether or not foreign Africa companies can sublease or subdivide their Can foreign companies use… leased land, and whether or not leased land Country …leased land for collateral? …purchased land for collateral? can be mortgaged. Eighty percent of countries surveyed allow leased land to be subleased Egypt, Arab Rep. No Yes to another company, but only 38% allow Morocco Yes N/A leased land to be mortgaged (ï¬?gure 5.7). Saudi Arabia No No Tunisia Yes Yes Strength of ownership rights index— Yemen, Rep. Yes Yes overall results Note: Morocco does not allow foreign companies to buy land and thus the question of whether or not purchased land can be used Only 68 of the 87 economies surveyed allow as collateral does not apply. private ownership of land, and it is only these Source: Investing Across Borders database. that are measured by the Strength of ownership rights index. The remaining 19 economies which do not allow private ownership are FIGURE 5.7: Many economies have limitations on long term lease contracts for not evaluated. The global average for the foreign companies Strength of ownership rights index is 92, which is rather high. It indicates that most Share of countries which allow foreign-owned Share of countries which allow foreign-owned economies provide foreign companies with companies to sublease leased land companies to mortgage leased land a strong set of land ownership rights and No No options regarding land use. The region with 20% 62% the most restrictions on the use of ownership contracts by foreign investors is the Middle East and North Africa, where countries like Saudi Arabia have restrictions on the size of Yes 38% land which can be purchased, and whether Yes the purchased land can be subdivided and 80% used as collateral by foreign companies (ï¬?gure 5.8). Source: Investing Across Borders database. 46 INVESTING ACROSS BORDERS 2010 BOX 5.2: Stronger lease rights security is associated with FIGURE 5.8: Most economies in the world offer strong greater prosperity ownership rights GNI per capita, 2009 Atlas Method Strength of ownership rights index (100 = strongest rights), by region $20,000 High-income OECD (12) 100 $15,000 Latin America & Caribbean (14) 98 Eastern Europe & Central Asia (20) 98 $10,000 South Asia (5) 94 $5,000 East Asia & Pacific (10) 83 Sub-Saharan 77 $0 Africa (21) Weak rights Strong rights Middle East & North Africa (5) 69 ß Initial ï¬?ndings suggest that the strength of lease rights index is 0 20 40 60 80 100 highly correlated with higher levels of prosperity (income per Note: Please refer to the methodology section of this report and IAB’s Web site for capita) for the 87 IAB economies. identification of all components of the Strength of land rights index. ß High-income OECD economies tend to offer investors the Source: Investing Across Borders database. widest range of options for accessing industrial land and the most freedom over the use of the land once they have acquired it. In contrast, low income economies, often due The land information indicators evaluate economies around the world to the legacy of their past, tend to signiï¬?cantly limit the legal on 2 important factors related to public provision of land information. choices for securing land. First, the access to information about land through the countries’ land ß However, the correlation does not imply the existence or the administration systems—land registries, cadastres and land information direction of a causal relationship. Stronger land rights may systems, among others. Second, the availability of key information at be the result of economic development and increased pros- these public sources. perity. Conversely, improving the strength of land rights may create a platform for development and greater prosperity. The indicators do not measure a third and often even more critical Land rights may also be important in different ways depend- factor—which is the quality of land information provided by public ing on a country’s stage of economic development. institutions. In many economies around the world the quality of Note: The relationship is signiï¬?cant at the 1% level. The Strength of lease rights index information located within public land management institutions is very has been broken into 5 quintiles expressed as groups of economies below the 20th, poor. As quality of land information is not the focus of the Accessing 40th, 60th, 80th, and 100th-percentile rank from weakest to strongest land rights. The economies ranked in the 80th percentile rank are an anomaly as they both have strong Industrial Land indicators, interested readers are encouraged to lease rights and less prosperity, these countries include; Angola, Côte d’Ivoire, Georgia, use other resources, including country-speciï¬?c reports, to ï¬?nd this Kazakhstan, Morocco, Romania, Rwanda, and Ukraine. Source: Investing Across Borders database, World Bank Group World Development complementary information. Indicators database. Access to land information index—overall results There is signiï¬?cant variation across economies in the ease of access Some countries offer fast-track procedures for land purchase registration, by private parties to public land information through public institutions including Argentina, Georgia, Kazakhstan, Moldova, Romania, and and in the effectiveness of those systems. In general most economies the Slovak Republic. In Kazakhstan the fast-track option for land surveyed perform relatively poorly on the Access to land information registration was approved March 30, 2009; it remains to be seen if index, as public land management institutions are not well coordinated implementation is effective. and in many countries not very effective. Notable exceptions are some high-income OECD and Eastern Europe and Central Asian economies Access to and availability of land information (ï¬?gure 5.9). indicators Once a foreign company has decided to invest in a country, it begins Effective land administration systems and their integration the process of looking for a suitable investment location. This typically There are as many different types of institutions that house land- involves identifying the relevant government authorities regulating land, related information as there are different legal and cultural traditions hiring a local real estate agency or consultancy to look for a plot that govern land use around the world. Typically, a country has some of land as well as beginning due diligence online and in person. form of land or property registry28 or cadastre,29 regardless of whether ACCESSING INDUSTRIAL LAND 47 Many economies in Eastern Europe and FIGURE 5.9: Access to land information is difï¬?cult for investors Central Asia provide modern and integrated land management systems (table 5.6). Most Access to land information index (100 = most information), by region economies in the region have both land registries and cadastres, and most either High-income OECD (12) 52 house them in the same public authority or Eastern Europe & Central Asia (20) 50 have them set up to share data. The only Middle East & North Africa (5) 46 exceptions are Bosnia and Herzegovina Latin America & Caribbean (14) 40 and Poland, which do neither. Nearly three- quarters of the economies in the region, East Asia & Pacific (10) 35 however, do not use either a land information Sub-Saharan Africa (21) 34 system (LIS) or geographic information system South Asia (5) 20 (GIS). Such systems can provide a better 0 10 20 30 40 50 60 means to acquire, manage, retrieve, analyze, Source: Investing Across Borders database. and display land records.31 Availability of land information it is of civil or common law origin. Nearly Only 22% of the economies surveyed have index—overall results three-quarters of economies surveyed by IAB a functioning LIS and only 39% of the 41 The overall results of the Availability of land have both a land or property registry and a economies with both a land registry and information index for the top and bottom 10 cadastre (ï¬?gure 5.10). cadastre have information technology IAB economies surveyed show that 4 of the top systems set up that allow the 2 institutions to 10 economies that make the most information However, many economies around the world share information (ï¬?gure 5.11). An example available are in Eastern Europe and Central do not have functioning land information of a poorly functioning system is found in Asia and 4 more are high-income OECD systems (LIS).30 More speciï¬?cally, many Cambodia, where the registry and cadastre economies, including the overall top performer economies do not have modern or coordinated are neither located in the same agency nor Ireland (ï¬?gure 5.12). Economies that provide land management systems. This can be a set up to share data. On the other hand, a lot of information about land, often through serious problem, contributing to land-related Georgia has a modern and well-functioning a land information system (LIS), typically make disputes. And in many economies, the largest land management system. The land registry it accessible online. On the other hand key backlogs in the courts are due to the large and cadastre are both located in the National information about land plots is most difï¬?cult number of disputes arising from poor land Agency of Public Registry within the Ministry to come by in Sub-Saharan Africa, with 7 of information provided by the public land- of Justice and interested parties can go online the bottom 10 economies coming from that related institutions, which often do not contain to search an interactive LIS system to help region. Many other economies also provide information on all land, as not all land is narrow down possible investment locations. relatively little information—the Solomon properly registered. Islands, for example, lacks public information on such matters as land value, encumbrances, FIGURE 5.10: Share of economies FIGURE 5.11: Large variations across economies on the effectiveness of land- with land registry and cadastre management systems Share of economies with land information Share of economies in which cadastre and system (LIS) land/property registry are linked to share data* Cadastre Neither No No 4% 4% 77% 61% Land/Property Registry Yes 19% 23% Yes Both 39% 73% Source: Investing Across Borders database. * Only includes 41 economies which have cadastre Source: Investing Across Borders database. and land registry. 48 INVESTING ACROSS BORDERS 2010 geotechnical descriptions of property, and TABLE 5.6: Characteristics of land administration systems in Eastern Europe and zone and tax classiï¬?cations. Central Asia High-income OECD economies such as the Characteristics of land administration system Czech Republic provide easily accessible Land or Land Geographic property Same public Share Information Information information on plot size, land value, spatial Country registry Cadastre agency data System System information, zone and tax classiï¬?cation, utility Albania Yes Yes Yes N/A No No connections, and encumbrances. In fact, Armenia Yes Yes Yes N/A No No Czech Invest, the Czech Republic’s investment promotion and business development agency, Azerbaijan Yes Yes No Yes No No provides a modern database of available Belarus Yes Yes Yes N/A No No business properties. This makes it easy for a Bosnia and Herzegovina Yes Yes No No No No foreign company to go online and begin due diligence on possible investment locations Bulgaria Yes Yes No Yes No No even before arriving in the country. Many Croatia Yes Yes No Yes Yes Yes economies in Sub-Saharan Africa, on the other Georgia Yes Yes Yes N/A Yes Yes hand, are still struggling to piece together Kazakhstan Yes Yes No Yes No No functioning and credible land information Kosovo Yes Yes Yes N/A No No systems. In many economies on the continent, Kyrgyz Republic Yes Yes Yes N/A Yes Yes land information is often found in maps and systems dated from colonial times. In Sierra Macedonia, FYR Yes Yes Yes N/A Yes Yes Leone, for example, it is nearly impossible to Moldova Yes Yes No Yes Yes No get credible land information from a public Montenegro Yes Yes Yes N/A Yes Yes agency without visiting and surveying the land Poland Yes Yes No No No No in person. This is because much of the land Romania Yes Yes Yes N/A No No has yet to be surveyed and maps from the Russian Federation Yes Yes Yes N/A Yes No colonial era are out of date. The Directorate Serbia Yes Yes No Yes No No of Surveys in the Ministry of Lands, Country Planning, and the Environment does not at Turkey Yes Yes Yes N/A No No present have the capacity to provide up-to- Ukraine Yes Yes Yes N/A No No date geotechnical descriptions of land parcels Note: N/A in the Share data column refers to those economies that either lack both a land registry and cadastre or locate them in the same public agency. without starting from scratch and conducting Source: Investing Across Borders database. new surveys. Publicly available land information FIGURE 5.12: Economies that provide the most and least amount of land-related In many economies in East Asia and the information Paciï¬?c the government retains tight control Availability of land information index (100 = most information), by country over land and land-related information, which is not always publicly available to interested Ireland 100 United States 95 third parties (table 5.7). Cambodia, China, Armenia 95 and the Solomon Islands make it particularly Bulgaria 95 Kazakhstan 95 difï¬?cult to ï¬?nd land-related information such Mauritius 95 Vietnam 93 as documentation on land plot value, mailing Mexico 90 addresses, environmental impact assessments, Spain 90 Czech Republic 90 tax classiï¬?cations, and utility connections. Rwanda 50 Burkina Faso Haiti 40 50 Ease of leasing land indicators Sudan 30 After a foreign company has located a Sierra Leone 30 Liberia 15 suitable piece of land for its investment it will Mali 5 Soloman Islands 3 need to buy or lease the land from its holder. Ethiopia 3 The process of leasing both private and Afghanistan 0 public land differs from country to country. It Source: Investing Across Borders database. ACCESSING INDUSTRIAL LAND 49 TABLE 5.7: Key land-related information available to investors in East Asia and the Paciï¬?c Public availability of land information Type of information Cambodia China Indonesia Malaysia Philippines Singapore Solomon Islands Thailand Vietnam Land contract Yes Yes Yes Yes Yes Yes No Yes Yes Plot size Yes Yes Yes Yes Yes Yes No Yes Yes Land value No No No No Yes No No Yes Yes Street address Yes Yes Yes Yes Yes Yes No Yes Yes Mailing address No No No No Yes Yes No No No Immovable property Yes Yes Yes Yes Yes No No Yes Yes Spatial info Yes Yes Yes Yes Yes Yes No Yes Yes Geotechnical description Yes Yes Yes Yes Yes Yes No No Yes Documentation on Environmental No No Yes Yes Yes No No No Yes Impact Assessment Zone classiï¬?cation No Yes Yes Yes Yes Yes No Yes Yes Tax classiï¬?cation No No Yes Yes Yes Yes No Yes Yes Information on surroundings Yes No Yes Yes Yes Yes No Yes Yes Carrying capacity of the land No Yes Yes Yes Yes Yes No No Yes Local population density No No Yes Yes Yes Yes No No Yes Utility connections No No Yes Yes No No No Yes Yes Encumbrances Yes Yes Yes Yes Yes Yes No Yes Yes Existing land claims Yes No Yes Yes Yes Yes No Yes Yes Legal jurisdiction of the land Yes Yes Yes Yes Yes Yes No Yes Yes Source: Investing Across Borders database. involves different procedures and interactions BOX 5.3: Providing more land related information is associated with better quality of public services with different authorities and takes varying amounts of time to complete, from a few days Government Effectiveness, 2008 ß Initial ï¬?ndings suggest that the to several months, and, in some instances, (-2.5=weak, 2.5=strong) availability of land information index almost a year. 0.8 is highly correlated with greater 0.6 government effectiveness and better Overall results 0.4 quality of public services for the 87 The Accessing Industrial Land indicators 0.2 IAB economies. measure the time required to lease land. The 0.0 ß Economies that have higher-quality indicators exclude the process of buying land, public institutions tend to have more -0.2 because private land ownership is not allowed modern and coordinated land- -0.4 in many of the measured economies. The management systems as a result. -0.6 time required to lease land from both private These systems tend to provide more -0.8 information to interested parties. holders and the government varies (ï¬?gure Least Most information information 5.13). Foreign companies seeking to lease ß However, the correlation does not imply the existence or the direction private land in the 5 economies surveyed in Note: The relationship is signiï¬?cant at the 1% level. The availability of land information index has been broken into 5 quintiles of a causal relationship. It is equally South Asia might need as long as 3 months expressed as groups of economies below the 20th, 40th, 60th, 80th, and 100th-percentile rank from least to most information. likely that generating more land- to complete the process. On the other hand, it The Government Effectiveness indicator measures the quality related information encourages the takes an average of 43 days to lease private of public services, the capacity of the civil service and its independence from political pressures, and the quality of policy creation of more effective govern- land in the 20 economies surveyed in Eastern formulation. The economies ranked in the 80th percentile rank ment institutions to manage that Europe and Central Asia. In Sub-Saharan are an anomaly as they both have abundant land information information. Africa, the process takes signiï¬?cantly longer but less government effectiveness; these countries include: Albania, Argentina, Azerbaijan, Ghana, India, Indonesia, Kenya, than in the high-income OECD economies. Malaysia, Republic of Yemen, Romania and South Africa. Source: Investing Across Borders database, World Bank Gover- nance Indicators (2008). 50 INVESTING ACROSS BORDERS 2010 Leasing land from a private holder FIGURE 5.13: Time needed to lease public and private land In many IAB economies, the process of leasing private land is efï¬?cient and takes less â–  # Days to lease land from private holder â–  # Days to lease land from government than 2 weeks (ï¬?gure 5.14). One example South Asia (5) 99 of a country where leasing private land 205 is short and transparent is Georgia, a top 62 Latin America & Caribbean (14) 156 Doing Business reformer. In its capital city— Sub-Saharan Africa (21) 72 151 Tbilisi—the process takes 8 days, including 66 East Asia & Pacific (10) the optional lease registration before a court. 151 This procedure is not legally required, but is 43 Eastern Europe & Central Asia (20) 133 advisable if the company would like to use 59 Middle East & North Africa (5) 123 the lease in ï¬?nancial transactions. On the 50 opposite end of the spectrum, the typical High-income OECD (12) 88 process for leasing private land in Kabul, IAB global average 61 140 Afghanistan, takes 218 days, largely due to Source: Investing Across Borders database. the lengthy due diligence process, which can take 3 months and includes formal visits to the Provincial Court, the Municipality, and the FIGURE 5.14: Fastest and slowest economies for leasing land from a private holder Afghan Geodesy and Cartography Ofï¬?ce. Number of days The ease of leasing land indicators also Afghanistan 218 reveal considerable variation within regions. Sierra Leone 210 Consider Latin America and the Caribbean Nicaragua 149 Mozambique 148 (ï¬?gure 5.15). In Chile, Costa Rica, and Peru Poland 146 Solomon Islands 138 the process is fast and takes roughly 3 weeks. Nigeria 123 In contrast, the process can take 3 months Vietnam 120 Ecuador 106 or more in Ecuador, Haiti, and Nicaragua. Ghana 104 In Nicaragua, the lease agreement must be 16 Philippines registered in the Public Registry, and it can Greece 15 Turkey 15 take several months to receive certiï¬?cation of Kyrgyz Republic 15 Macedonia, FYR 13 the registration. 12 Sudan Korea, Rep. 10 Armenia 10 Leasing land from the government Rwanda 10 Georgia 8 The process to lease land from the government Source: Investing Across Borders database. is signiï¬?cantly more burdensome than that to lease private land and takes, on average, twice as long across all 87 IAB economies. FIGURE 5.15: Time needed to lease land from private holders in Latin America and This is because in addition to the procedures the Caribbean required to lease land from a private holder, one must often obtain a government approval Number of days or go through formal process such as an 149 Nicaragua auction, concession, or tender. The fastest Ecuador 106 IAB economies can lease government land Haiti 90 Venezuela, RB 87 to foreign companies in little more than 1-2 Mexico 83 months, while the slowest take up to a year Brazil 66 (ï¬?gure 5.16). Honduras 61 Argentina 48 Of the economies surveyed, 65% require an Bolivia 42 additional approval to authorize the lease of Colombia 40 Guatemala 34 government-held land to foreign companies 23 Costa Rica (ï¬?gure 5.17). This additional approval takes Chile 23 2 months, on average, signiï¬?cantly extending Peru 20 Source: Investing Across Borders database. ACCESSING INDUSTRIAL LAND 51 the overall process of acquiring land. Leasing public land is fastest CONCLUSIONS in Greece and involves a transparent and quick government auction This chapter has shown the wide range of practices across countries through the Municipal Government Ofï¬?ce in Athens. The entire process on the strength of land rights, the amount of available land information, including the auction, due diligence, and signing the contract takes and the ease of leasing land. Some countries allow foreign companies an average of 20 days. The steps involved in leasing public land are to buy industrial land. Others—mostly in East Asia and the Paciï¬?c most burdensome in Kuala Lumpur, Malaysia. Here, foreign companies and Sub-Saharan Africa—do not. Some countries, mainly high-income interested in leasing land from the government must ï¬?rst obtain approval OECD members, provide easily accessible information about land from the District Land Ofï¬?ce and the National Economic Planning Unit. plots that is shared across multiple government agencies. Finally, while Obtaining the 2 approvals can take anywhere from 1 to 2 years. some countries have quick and transparent procedures for leasing land, others—such as many in South Asia and Sub-Saharan Africa—make the process administratively burdensome and time-consuming. FIGURE 5.16: Fastest and slowest economies for leasing land Improving access to land does not guarantee that a country will attract from the government more FDI. However, all other things being equal, serious constraints to land access can be deal killers for interested investors. As a result, Number of days the strength of land rights, availability of information, and ease of Malaysia 355 leasing land can affect a country’s investment climate and overall Bulgaria 351 competitiveness. South Africa 304 Afghanistan 301 The Accessing Industrial Land indicators point to the following good Morocco 296 India 295 practices: Sierra Leone Côte d'Ivoire 277 276 ß Efï¬?cient land acquisition procedures. A country should have clear Nicaragua 267 rules for acquiring private and public land. Rules should remove Nigeria 254 unnecessary and burdensome steps while enabling authorities to Mali 63 conduct a proper process with fair protections for the greater pub- United Kingdom 62 lic good. Land administration institutions should provide businesses Saudi Arabia 60 Sudan 60 with a single point of access—and if the land acquisition process Kosovo 59 is lengthy, the option to use a fast-track procedure for a higher fee. Armenia 57 Korea, Rep. 53 ß Clear laws which provide fair and equal treatment for foreign Yemen, Rep. 52 and domestic companies. Laws should provide sufï¬?cient security Georgia 50 Greece 20 to investors—foreign and domestic—so that they feel comfortable operating and expanding their businesses, and should not limit Source: Investing Across Borders database. FIGURE 5.17: Obtaining government approvals adds signiï¬?cant time to leasing procedures Share of economies which require an approval to lease public land Average number of days to obtain an approval to lease public land (for economies which require one) South Asia (5) 100% South Asia (5) 58 Sub-Saharan 84% Sub-Saharan Africa (21) Africa (21) 57 Latin America & 71% Latin America & Caribbean (14) Caribbean (14) 43 East Asia & 67% East Asia & Pacific (10) Pacific (10) 98 Middle East & Middle East & North Africa (5) 60% 12 North Africa (5) Eastern Europe & Eastern Europe & Central Asia (20) 45% 55 Central Asia (20) High-income High-income OECD (12) 42% OECD (12) 30 0 20 40 60 80 100 0 20 40 60 80 100 Source: Investing Across Borders database. 52 INVESTING ACROSS BORDERS 2010 their ability to develop, renew, transfer, stakeholders, including domestic investors mortgage, or sublease land. Laws and and governments. The indicators may help ENDNOTES regulations should also take into account governments determine how to prioritize 1 Muir and Shen (2005). the interests of all stakeholders related to land policy reforms that constrain their 2 Seidman (2003). land use—including investors, govern- competitiveness. Finally, the indicators provide 3 FIAS (2006). ments, and communities. Attention must a platform for dialogue among governments, 4 McAuslan (2010). also be paid to environmental protection. businesses, and civil society—dialogue that 5 FIAS (2005). ß Accessible land information. Land records could trigger needed reforms. 6 Adams, Turner and White (2004). should be up-to-date, centralized, inte- 7 FIAS (2001). grated (linked across relevant government 8 FIAS (2004). Investing Across Borders 2010 is a agencies), easily accessible (preferably new initiative that we hope to continue 9 de Soto (2000). with online access), and provide informa- to improve in the future. IAB plans to 10 Besley (1995), di Tella, Galiani,and Schargrodsky (2007). tion useful to investors and the general leverage the data for research and analysis of relationships between 11 Field (2007). public. indicators and various socio-economic 12 Feder, Onchan, Chalamwong, and Land administration is affected by a wide Hongladarom (1988), and Jimenez (1984). and political measures of countries’ range of issues. The Accessing Industrial Land development to better understand driv- 13 Hornberger (2007), and Iyer and Do (2008). indicators focus on the administrative and ers and impacts of business environ- 14 Deininger, Jin, and Nagarajan (2008). regulatory framework for foreign companies ment reforms. IAB will also consider 15 Deininger and Mpuga (2009). seeking to access industrial land. Despite this expanding and deepening the scope 16 Kingwell, Cousins, Cousins, Hornby, Royston, limited focus, the indicators can play a crucial of its indicators. We welcome your and Smit (2006). role in ï¬?lling an information gap, beneï¬?ting comments and feedback. 17 Mitchell (2004). foreign investors and a wide range of other 18 de Janvry and Sadoulet (2005). 19 Ibid. 20 Burns and Deininger (2009). BOX 5.4: Efï¬?cient process of leasing land is associated with better perceptions about 21 Undeland (2010). the quality of land administration 22 Freehold is full ownership of land in common law, providing the owner with the largest Rating of access to land as problem for investment ß Initial ï¬?ndings suggest that the ease bundle of rights of ownership. (1=no problem, 4=major obstacle) of leasing land is highly correlated 23 Article 40(8) of the Federal Constitution of 4 with perceptions about the quality of Ethiopia. land administration for the 87 IAB 24 Adams and Turner (2006). economies. 25 Ibid. 3 ß Economies that have more efï¬?cient 26 These types of restrictions are not measured by land leasing processes are also the Accessing Industrial Land indicators which perceived as having better land focus strictly on access to industrial land by 2 foreign companies. administration. 27 Ibid. ß However, the correlation does not im- 28 The deï¬?nitive record of all registered properties, ply the existence or the direction of a it comprises the registered details for each 1 Slow process Fast process causal relationship. The reverse could property. also be true: in economies where 29 A cadastre is a parcel-based land-information Note: The relationship is signiï¬?cant at the 1% level. The ease the quality of land administration is system containing a record of interests in of leasing land time (an average of the public and private well-perceived, quicker bureaucracy land (rights, restrictions and responsibilities). It lease lengths) has been broken into 5 quintiles expressed as usually includes a geometric description of land groups of economies below the 20th, 40th, 60th, 80th, and and faster leasing procedures are the parcels linked to other records describing the 100th-percentile rank from slowest to fastest process. result. nature of the interests, and ownership or control Source: Investing Across Borders database. of those interests, and often the value of the parcel. A cadastre is more common in civil law jurisdictions than in common law jurisdictions. 30 LIS is a parcel-based land database system, used for acquiring, processing, storing, and distributing land-related information. It can also be a tool for legal, administrative, and economic decision making and an aid for planning and development. 31 UNECE (2005). ACCESSING INDUSTRIAL LAND 53 Arbitrating Commercial Disputes Assume that the foreign subsidiary is established in Prague, Czech INTERESTING FACTS Republic. The company and its commercial partners can choose between ad hoc, institutional, and online arbitration services for both ß All Investing Across Borders (IAB) countries recognize arbitra- domestic and international disputes.3 A single coherent arbitration tion as a tool for resolving commercial disputes, and only 8 act provides default rules for arbitration proceedings and regulates of the 87 countries do not have a speciï¬?c arbitration law: enforcement of arbitral awards. The company can submit all types Albania, Argentina, Bosnia and Herzegovina, Ethiopia, of commercial disputes for arbitration and can appoint any foreign Liberia, Mali, Montenegro, and Poland.1 arbitrators with any professional qualiï¬?cations selected by the ß About half of IAB countries have laws that distinguish between company. Arbitration of commercial disputes with public entities is also domestic and international arbitration. allowed without restrictions. The company can appoint foreign counsel ß The Czech Republic and Mexico are among 17 IAB countries to represent it and can choose the language of the proceedings. The where businesses can conduct arbitration proceedings online. law guarantees the conï¬?dentiality of the proceedings. At the request ß In most countries in Latin America and the Caribbean, foreign of arbitrators, local courts provide orders for provisional measures and lawyers without local bar membership are not permitted to represent parties in arbitration proceedings. the production of evidence. ß There are no functional arbitration institutions in Cambodia Compare the experience of a similar company incorporated in Bogota, and Sierra Leone, while Colombia and Malaysia have many Colombia. The company and its local partners can choose between active institutions. ad hoc arbitration and the 3 well-established arbitration institutions in ß In most countries in East Asia and the Paciï¬?c, laws do not Bogota. But it is a challenge to navigate the legal framework. Four require courts to assist during arbitration proceedings with main decrees regulate arbitration in Colombia, along with other laws orders for production of evidence or appearance of witness- regulating issues such as fees for arbitration centers, recognition and es. In contrast, 4 of the 5 IAB countries in South Asia legally enforcement of foreign arbitration awards, and investment arbitration. require domestic courts to assist in arbitrations. In addition, the foreign company can only appoint arbitrators who ß Many countries in Eastern Europe and Central Asia have are Colombian nationals and licensed to practice law in Colombia. adopted special rules to ensure fast enforcement proceedings Arbitration proceedings must be conducted in Spanish. The company of arbitration awards, such as establishing special authorities outside the judiciary to issue writs of execution. and its local partners do not have enough autonomy to customize arbitration as they would prefer. Source: Investing Across Borders 2010. For governments interested in attracting foreign direct investment (FDI), improving the rule of law, including the country’s dispute resolution WHY AN EFFECTIVE COMMERCIAL ARBITRATION mechanisms, is a top priority. A stable, predictable arbitration regime, REGIME MATTERS FOR FOREIGN INVESTORS as part of the broader framework for the rule of law, is one of the factors that drive foreign investment. Consider the following situation. A multinational corporation establishes a subsidiary in a foreign country to manufacture, sell, and export An effective commercial arbitration regime matters for foreign investors household appliances. This company enters into contracts with domestic for 2 main reasons: and foreign companies as well as public utilities. The contracts state how ß Complex commercial contracts require reliable, flexible dispute the companies will resolve commercial disputes should they arise. The resolution mechanisms. Arbitration and other forms of alterna- subsidiary prefers to avoid court litigation, which can be slow and highly tive dispute resolution—such as mediation—give commercial formal. The company must also ensure that contract disputes can be parties considerable autonomy to create systems tailored to their resolved through an efï¬?cient system that can be tailored to the dispute. disputes.4 The characteristics of arbitration—conï¬?dentiality, The company wants to be able to rely on its in-house legal counsel and flexible procedures, party autonomy, and easy enforcement— to appoint decision-makers with qualiï¬?cations related to the subject of cater to businesses’ concerns in dispute resolution.5 the dispute. The company therefore decides to resolve its commercial ß Companies often prefer to have alternatives to court litigation. For- disputes through arbitration and includes arbitration agreements in all its mal dispute resolution through domestic litigation can be slow and contracts. Arbitration is a method of resolving disputes out of court. It is one ineffective. Even if courts treat foreign companies fairly, domestic tool out of several that are jointly called “alternative dispute resolutionâ€?.2 ï¬?rms are more familiar with court procedures and can use their The parties can design the arbitration process to ï¬?t their needs and the own lawyers and language.6 Foreign ï¬?rms view a well-established, arbitration hearing is held in private with a binding decision given by predictable arbitration regime as mitigating risk by providing legal arbitrators, who play a similar role to judges. This company wants to security to investors (including assurance of contract enforcement be able to arbitrate certain disputes in the host country because of the rights, due process, and access to justice).7 proximity of the evidence and the time and cost savings. 54 INVESTING ACROSS BORDERS 2010 From a country’s perspective, not only does an arbitration regime assist in attracting FDI, FIGURE 6.1: Many arbitration regimes are undeveloped and do not encourage FDI but it eases the strain on local courts—which The extent to which a country's arbitration regime is an obstacle to FDI, by region are often congested and have huge case backlogs—by providing an alternative method South Asia (5) of dispute resolution that can have fewer and East Asia & Pacific (10) more flexible procedural rules than litigation. Middle East & North Africa (5) Straightforward commercial disputes, without Sub-Saharan Africa (21) public policy concerns, might not need to be IAB global average (87) litigated in domestic courts. Eastern Europe & Central Asia (20) Foreign companies prefer to use international Latin America & Caribbean (14) arbitration rather than domestic litigation to High-income OECD (12) resolve disputes, whether with a private party No Minor Moderate Major or the state.8 Past studies have found that more obstacle obstacle obstacle obstacle than two-thirds of multinational corporations Note: These results are based on the following question posed to local counsel of foreign investors in 87 countries: prefer international arbitration, either alone “Please rate the extent to which the quality of the legal framework for arbitration and mediation, including implementation, is an obstacle in your country.â€? or combined with other alternative dispute Source: Investing Across Borders database. resolution mechanisms, to resolve cross-border disputes.9 an arbitration tribunal can do if a jurisdiction practitioners’ guides.13 However, there is Although international commercial arbitration allows courts to intervene. no report or online database that provides is often the preferred method for resolving consistent and objective data on commercial disputes, its availability and predictability are At the same time, arbitration bears a close arbitration regimes and covers all world problematic in some regions. The Arbitrating relationship to domestic courts at certain stages regions, including Sub-Saharan Africa; allows Commercial Disputes indicators of the Investing of the arbitration process—such as in the for cross-country benchmarking by translating Across Borders (IAB) project quantify the legal enforcement of arbitration awards. Accordingly, qualitative information into numeric indicators; and practical challenges that foreign companies it is important that national courts support and provides an in-depth comparison face when choosing to use arbitration in the arbitration as a means of resolving commercial between countries on a regular basis. This host country of their investments. The current disputes.12 Although arbitration reforms can is precisely how the Arbitrating Commercial legal framework and practice for arbitration be undertaken independently, governments Disputes indicators seek to add value. Further are perceived as a signiï¬?cant obstacle to should keep in mind their overall institutional information is set out in the methodology foreign investors in South Asia, East Asia and framework, and encourage judicial support of chapter of this report and online. the Paciï¬?c, and the Middle East and North alternative forms of dispute resolution. Africa (ï¬?gure 6.1). Only in high-income OECD Structure of the Arbitrating countries is the legal framework for arbitration INTRODUCING THE Commercial Disputes indicators generally perceived as only a minor obstacle ARBITRATING COMMERCIAL The Arbitrating Commercial Disputes indicators or no obstacle to foreign investors. Some of comprise 3 principal components: the problems faced by private investors when DISPUTES INDICATORS using commercial arbitration and other forms 1. Strength of laws index (0–100): The Arbitrating Commercial Disputes indicators of alternative dispute resolution include lack analyzes the strength of countries’ legal of the IAB project aim to measure the legal, of awareness of alternative dispute resolution frameworks for alternative dispute resolu- institutional, and administrative regimes for mechanisms in the country, lack of modern and tion, as well as the countries’ adherence commercial arbitration in 87 countries across coherent arbitration legislation, practice that is to the main international conventions the globe. The indicators focus on domestic not always consistent with the legal framework, related to international arbitration; and international commercial arbitration and slow enforcement of arbitration awards by 2. Ease of arbitration process index between two companies, or contractual local courts.10 (0–100): assesses the ease of the disputes between a company and a state arbitration process, and whether there entity. The indicators also explore, to a Corporations want simple arbitration are restrictions or other obstacles that limited extent, the regulation of commercial proceedings with limited court intervention, the disputing parties face in seeking a mediation. and arbitration awards that are easily resolution to their dispute; enforced.11 Though many modern arbitration A number of studies have been conducted in 3. Extent of judicial assistance index (0– statutes limit court intervention, there is little the area of international arbitration, including 100): measures the interaction between perception surveys, legal assessments, and domestic courts and arbitral tribunals, ARBITRATING COMMERCIAL DISPUTES 55 including the courts’ willingness to assist during the arbitration studies (box 6.1). The methodology section of this report includes process and their effectiveness in enforcing arbitration awards. additional general case-study assumptions. The Arbitrating Commercial Disputes indicators do not cover all aspects The types of laws evaluated by the Arbitrating Commercial Disputes of countries’ arbitration regimes. The methodology chapter of this report indicators are set out in box 6.2. and the online database provide guidance on how to interpret and use the data, as well as an extensive list of the indicators’ substantive and methodological limitations. RESULTS OF THE ARBITRATING COMMERCIAL DISPUTES INDICATORS Assumptions underlying the Arbitrating Commercial This section examines a sample of results from the Arbitrating Disputes indicators Commercial Disputes indicators in the context of a typical commercial To help ensure consistency across all 87 countries, the Arbitrating arbitration. It illustrates how the data might affect investors when they Commercial Disputes indicators are based on simple standard case contemplate using commercial arbitration as a dispute resolution tool. First, a brief summary of the principal stages of commercial arbitration is set out below (ï¬?gure 6.2). The rest of this section describes the BOX 6.1: Case-study assumptions and IAB deï¬?nitions indicators’ results for each of the key steps and phases in the arbitration process. There are 2 different case studies relating to (i) domestic com- mercial arbitration and (ii) international commercial arbitration. FIGURE 6.2: Key steps of an arbitration process (simpliï¬?ed) ß The ï¬?rst case study relates to a domestic arbitration between 2 companies incorporated in the same country. Company PHASE 1: A is 100% foreign-owned by a multinational corporation. Parties enter into commercial contract and include arbitration clause Company B is owned by a domestic investor. ß The second case study relates to an international arbitration between the local Company B and a multinational Company C, which is incorporated and operates in a foreign country. PHASE 2: Both arbitrations take place in the same country. Dispute arises and arbitration proceedings commence Accordingly, IAB assumes 3 different types of arbitral awards: ß A domestic arbitration award given in the respective host country. PHASE 3: ß An international arbitration award given in the respective host Arbitration Award is rendered country in favor of a foreign company. ß A foreign arbitration award rendered in a foreign country PHASE 4: following arbitration proceedings in a country other than the Parties voluntarily Losing party refuses to host country. comply with the pay/challenges the award Respondents are asked questions relating to the domestic and arbitration award international arbitration regime and process in their host country, as well as the ease of enforcing domestic and foreign awards. Court proceedings to enforce the award in court BOX 6.2: Key laws measured by the Arbitrating Commercial Disputes indicators Award is enforced Award is set The Arbitrating Commercial Disputes indicators evaluate the fol- in court aside in court lowing types of laws insofar as they relate to alternative dispute resolution (arbitration and mediation): ß Alternative dispute resolution laws (including civil code provisions) on commercial arbitration and on mediation and Phase 1: The parties enter into a commercial contract leading court decisions. and include an arbitration agreement ß Civil codes, civil procedure codes/rules, regulations. When 2 companies enter into a commercial contract, they must decide how to resolve a dispute that might arise from a breach of that ß Investment laws and codes. contract. Given its advantages, the companies might voluntarily agree ß Ratiï¬?cation of international treaties: New York Convention; to use commercial arbitration to resolve their dispute. They might also ICSID Convention. 56 INVESTING ACROSS BORDERS 2010 choose to use other mechanisms for alternative dispute resolution, such as mediation, where FIGURE 6.3: Only 34% of countries have mediation laws, but 92% have arbitration laws the parties attempt to reach a mutual settlement with the help of a mediator. Alternatively, they Share of countries with a specific law on Share of countries with a specific law on might decide to rely on traditional litigation in commercial arbitration commercial mediation the host country’s domestic courts. Assuming 34% have a 8% do not that the parties agree to include an arbitration have a law mediation law clause in their contract, there are several issues that arise for their consideration at the drafting stage of the contract. 66% do not have a 92% have mediation a law Does the host state recognize law arbitration, and if so, how? Given that the arbitration process is usually governed by the law of the host state, it is Source: Investing Across Borders database. important to know whether arbitration is even recognized as a dispute resolution mechanism in that country. Our survey results show that The disparity in treatment between the 2 arbitration is recognized as a dispute resolution FIGURE 6.4: Countries need to exploit regimes ranges from minor differences to technology to improve investors’ tool in all 87 countries in our sample. Of those entirely separate procedures. In Mauritius, access to laws countries, 92% have a speciï¬?c commercial the law governing domestic arbitrations arbitration statute or a chapter in a civil code speciï¬?es that there must be one arbitrator (or Ease of access to arbitration statutes online setting out provisions governing commercial an odd number). However, the law governing 17% do not arbitrations in their country. The other 8% have have laws online international arbitrations speciï¬?es that there some provisions scattered throughout civil must be 3 arbitrators (or an odd number). In codes or other laws which do not provide France, domestic awards can be appealed but sufï¬?cient regulation of arbitration. These international awards cannot be. In Morocco, countries are Albania, Argentina, Bosnia the law governing domestic arbitrations is and Herzegovina, Ethiopia, Montenegro, 83% have more detailed than that governing international Liberia and Poland. In comparison, only laws online arbitrations, and in Saudi Arabia, 2 domestic 34% of the 87 countries have a formal law entities are obliged to hold their arbitration in regulating commercial mediation (ï¬?gure 6.3). Saudi Arabia. Source: Investing Across Borders database. Having such laws gives parties the security Although governments might have legitimate of predictability and enhances the country’s policy reasons for having separate regimes, appeal as a legal forum for domestic as well general development of a country’s business there are fundamental concepts in arbitration as international disputes. climate. Improvements in access to information that should be the same for both domestic will also encourage economic change.15 and international regimes, including party Is the law easily accessible? autonomy and arbitrators’ impartiality, To facilitate access to information, arbitration Does the law differentiate between discussed below. laws should be available online. Eighty-three domestic and international arbitrations? percent of countries in our sample were able The companies should also consider whether Is the foreign-owned company to provide Web sites where these laws could their respective arbitration is characterized considered a domestic or foreign be found (ï¬?gure 6.4). However, many of these in the national law as an international or entity? sites were not ofï¬?cial government sources but domestic arbitration, as the 2 regimes could be It should be noted that in countries that rather Web sites of private law ï¬?rms, which regulated in a different manner. The deï¬?nitions treat domestic and international arbitrations provide laws for their clients’ purposes. In for domestic and international arbitrations differently, foreign-owned but locally contrast, 96% of countries provide ofï¬?cial used by the Arbitrating Commercial Disputes incorporated companies will want to know government Web sites relating to the indicators are set out above (box 6.1). In our whether they can use the less restrictive establishment of companies. 14 As technology sample, 54% of the countries have distinct regime (usually international arbitration). In the continues to develop, ease and speed of regimes for domestic and international case of Bulgaria, the arbitration law considers access to information is becoming paramount, arbitrations. a foreign-owned company as foreign, even not only for foreign investors, but also for the if it is locally incorporated. As a result, this ARBITRATING COMMERCIAL DISPUTES 57 company would fall under the international liberal approach to the meaning of a written commercial arbitration regime in Bulgaria. arbitration agreement, and an oral agreement BOX 6.3: Components of IAB party autonomy index Chile and Turkey follow this example. that is recorded in any form constitutes an arbitration agreement.16 Countries that The party autonomy index is an ag- Most countries in our sample that differentiate recognize oral agreements as binding gregate index that evaluates countries’ between domestic and international arbi- arbitration agreements include Canada, laws in relation to the parties’ freedom trations, however, consider a foreign-owned Cameroon, Chile, France, Mozambique, Sri of choice in choosing: but locally incorporated company as domestic. Lanka and the United Kingdom. ß Arbitrators of their choice For example, in Azerbaijan, Brazil, China, ß Foreign counsel to represent them in Colombia, Croatia, Ecuador, Georgia, Do the parties have freedom of choice the arbitration proceedings Honduras, India, Ireland, Kazakhstan, in how to conduct their arbitration ß Language of the proceedings Madagascar, Mauritius, Mexico, Korea, proceedings? Romania, and Spain a locally incorporated ß Any arbitral institution As described above, arbitration provides a entity is considered a domestic entity flexible choice for dispute resolution, which regardless of its foreign ownership or control. arbitration.18 In Sub-Saharan Africa, however, is very attractive to companies. Parties can there is often a disconnect between the strength Parties should accordingly understand how choose how to run their arbitration process, of legal provisions and arbitration practice on their company is characterized under domestic deciding whether the arbitration should be the ground. The reform of arbitration systems law, in order to know which arbitration regime administered by a speciï¬?c arbitral institution should therefore be extended to the level of applies. There might be legitimate policy (or whether it is ad hoc),17 determining the practice. Such reform would also assist in reasons for having restrictions in the domestic qualiï¬?cations of the arbitrators and selecting developing domestic legal institutions. regime, for example, in relation to the language the language of the proceedings. Domestic of the arbitration process. Nonetheless, laws, however, might set out certain The Middle East and North Africa region, governments should consider that if they restrictions that limit the parties’ freedom in in contrast, has several restrictions on party have different regimes, local companies with organizing arbitration proceedings. The autonomy, including the choice of language predominantly foreign ownership will want Arbitrating Commercial Disputes indicators of the proceedings. In the Latin America and to fall under the less restrictive regime, given assess the parties’ freedom of choice by the Caribbean region, many countries have the international element in their corporate aggregating certain elements of choice into protectionist legal regimes that affect party structures. Governments should therefore a party autonomy index (box 6.3). autonomy. For example, foreign counsel is not consider whether international arbitration permitted to represent parties in arbitration should be liberally deï¬?ned in their laws. Results show that high-income OECD countries proceedings, even if counsel does not appear are the most liberal in promoting party before the domestic courts. This is the case What are the formal requirements for autonomy (ï¬?gure 6.5). Sub-Saharan Africa in Argentina, Bolivia, Brazil, Costa Rica, an arbitration agreement? also scores highly. Many of these countries Ecuador, Guatemala, and the República Some countries set formal requirements for have recently adopted modern legislation Bolivariana de Venezuela for both domestic the conclusion of arbitration agreements that that recognizes fundamental principles of and international arbitrations. Countries need to be followed. In circumstances where the contract is considered invalid for example, because the contract is against a country’s FIGURE 6.5: Which countries provide parties with most flexibility? public policy, the arbitration agreement Regional comparison of party autonomy index (100=full autonomy) contained therein might still be autonomous and binding. Such “severabilityâ€? of the 100 96 89 90 83 arbitration agreement provides parties with 78 80 80 73 74 74 the security that they have an effective dispute 70 resolution mechanism in place. 60 50 Eighty-six percent (86%) of the countries 40 in our sample recognize severability of the 30 arbitration agreement. However, only 10% 20 recognize that an arbitration agreement does 10 not have to be “writtenâ€? in the traditional 0 Latin America Middle South Asia East Asia Eastern IAB global Sub-Saharan High-income & Caribbean East & (5) & Pacific Europe & average Africa OECD sense of the word. As the Revised Articles (14) North Africa (10) Central Asia (87) (21) (12) of the UNCITRAL Model Law illustrate, (5) (20) good arbitration practice is adopting a Source: Investing Across Borders database. 58 INVESTING ACROSS BORDERS 2010 FIGURE 6.6: Parties are most restricted in selecting arbitrators in South Asia BOX 6.4: IAB countries without an active arbitral institution Degree of party autonomy to select arbitrators, by region (100=full autonomy) Ten countries have no arbitral institution, 98 100 93 which is indicative of a weak or nonex- 84 84 istent domestic arbitration practice: 78 78 79 80 80 Afghanistan, Angola, Bangladesh, Cambodia, Kosovo, Montenegro, 60 Papua New Guinea, Rwanda, Sierra Leone, and Solomon Islands. 40 Some countries have institutions that are 20 no longer active, such as Ethiopia and Liberia. 0 South Asia IAB global Latin America Middle Eastern East Asia Sub-Saharan High-income (5) average & Caribbean East & Europe & & Pacific Africa OECD that were completed in 2008, the number of (87) (14) North Africa Central Asia (10) (21) (12) (5) (20) qualiï¬?ed arbitrators, and of those, how many Source: Investing Across Borders database. are women (table 6.1). Some countries have several arbitral institutions, such as Bolivia, Brazil, Chile, Costa Rica, restrictions do not apply to international which is a strong indication of a thriving arbitration and Ecuador also require that arbitration arbitrations. The principal reason why the practice. The East Asia and the Paciï¬?c region proceedings be conducted in Spanish, South Asia region scores poorly is the lack of includes countries with numerous operational particularly in domestic arbitrations. regulation on this matter in Afghanistan. and active arbitral institutions, including China, Indonesia, Malaysia, Singapore, and Thailand. The extent to which national law restricts Phase 2: A dispute arises under In some countries, external arbitral institutions, parties from selecting an arbitrator of their the contract and arbitration such as the ICC in China and Malaysia, have choice is examined below, taking into account proceedings commence also started to administer arbitrations due to restrictions based on nationality, gender and Phase 2 looks at what occurs if a dispute growing demand.19 Latin America and the professional qualiï¬?cations (ï¬?gure 6.6). arises and the aggrieved party commences Caribbean also has active arbitral institutions, Spain is the only high-income OECD country arbitration proceedings. If the parties with Argentina, Brazil, Chile, Colombia, and that restricts parties’ abilities to select the have agreed that an arbitral institution will Mexico having several arbitral institutions in the arbitrators’ nationality and professional administer the arbitration, the relevant rules capital, as well as in other major cities in the qualiï¬?cations in domestic arbitrations. of that institution will guide the arbitration country. procedure. The rules might specify arbitrators’ Many middle-income countries have fees, the time frame for the submission of Are technological advances being restrictions regarding parties’ choice of an applied? pleadings, and the procedural timetable. arbitrator. In Eastern Europe and Central The parties might also have the option of Asia, many countries’ laws specify that Is there a domestic arbitral institution choosing electronic or online arbitration, arbitrators be locally barred lawyers in that can administer the arbitration? which can signiï¬?cantly cut down on costs domestic arbitrations, for example, in The existence of a functioning arbitral and logistics. Online arbitration can be Azerbaijan, Bosnia and Herzegovina, the institution in a country is an indication of a especially effective for small commercial Kyrgyz Republic, Kazakhstan, and the Russian solid arbitration practice and a useful channel disputes or domestic disputes. Such disputes Federation. In some countries in the Middle that can be used to improve resources, can be simpler, and less administratively East and North Africa region women are public awareness and education relating to intensive than international disputes. They rarely appointed as arbitrators, for example, arbitration. Most surveyed countries have at therefore beneï¬?t greatly from the speed of in Saudi Arabia and the Republic of Yemen. least one active arbitral institution but there online communication and being able to In general, regulation is stricter for domestic are still some which do not (box 6.4). avoid hearings in person, such as procedural arbitrations than for international ones. hearings to regulate the arbitration process. In Azerbaijan, Colombia, Ecuador, and Certain criteria reveal an active arbitration Vietnam, for example, the parties can only culture in several Sub-Saharan African Only 10% of the IAB countries have developed choose someone with legal qualiï¬?cations countries. Such criteria include whether the technology to offer online arbitration and certain language skills to act as an the institution administers arbitrations and as a method of administering commercial arbitrator in their domestic arbitration. These mediations, the number of domestic arbitrations disputes (ï¬?gure 6.7). However, as technology ARBITRATING COMMERCIAL DISPUTES 59 TABLE 6.1: Arbitral institutions in a sample of Sub-Saharan African countries Does the Number of institution domestic Number of Percentage administer arbitrations qualiï¬?ed of women arbitration and completed in arbitrators on arbitrators on Country Institution mediation? 2008 roster roster Burkina Faso Centre d’arbitrage, médiation et conciliation d’Ouagadougou Yes 0 32 15% Ghana Ghana Arbitration Centre Yes 7 12 4% Kenya Dispute Resolution Centre (Nairobi) Yes 2 11 10% Mali Chambre de Commerce et d’Industrie du Mali—Chambre de Yes 0 40 3–4% conciliation et d’arbitrage Mozambique CACM Centre for Arbitration Conciliation and Mediation Yes 13 187 30% Nigeria Regional Centre for International Commercial Arbitration Yes 4 55 5% Senegal Centre d’arbitrage, conciliation et de médiation - Chambre de Yes 0 120 40% Commerce et d’Industrie et de l’agriculture de la région de Dakar South Africa The Arbitration Foundation of Southern Africa (AFSA) Only arbitration 70 625 7% Zambia Zambia Centre for Dispute Resolution Ltd. Yes 8 261 22% Source: Investing Across Borders database. develops, it is expected that online arbitration order from the domestic court forcing such Results show that East Asia and Paciï¬?c will continue to offer cost and time savings to production. Similarly, if any interim measures countries lag behind, mainly because local disputing parties. are required, such as freezing assets, making laws do not expressly provide for domestic interim payments, or seizing property, the courts to assist the arbitration process with Are the courts supportive of domestic courts must be approached by the orders for production of documents or arbitral tribunals during arbitration respective party seeking the order or by the appearance of witnesses, as is the case in proceedings? arbitrators. China, Indonesia, Papua New Guinea, and During arbitration proceedings, domestic Vietnam (ï¬?gure 6.8). courts may be required to support arbitral It is important that domestic laws contain tribunals, notably in relation to third parties explicit provisions for domestic courts There are fewer legal provisions requiring over whom arbitral tribunals have no authority. assistance with the production of evidence domestic courts to assist with the arbitration For example, if a party refuses to produce key and with provisional measures. The court process in Eastern Europe & Central Asia witnesses or certain documents as part of assistance index (box 6.5) feeds into the and the East Asia & Paciï¬?c region than in their evidence, the other party can seek an overall extent of judicial assistance index, other regions. Moreover, having such legal and examines the extent to which domestic provisions for court assistance, does not courts support the use of arbitration as a tool necessarily translate into practice (table 6.2). FIGURE 6.7: Which countries offer to resolve disputes. In contrast, 4 of the 5 IAB countries in the online arbitration? South Asia region (Bangladesh, India, Countries that offer online arbitration as a method of dispute resolution BOX 6.5: Components of IAB court assistance index 10% of countries have online arbitration The court assistance index evaluates 4 issues: ß Whether local courts follow a general policy in favor of enforcing domestic and interna- 90% of tional arbitration agreements, a “pro-arbitration policyâ€? countries do not ß Whether tribunals are able to decide whether a dispute falls within their own jurisdiction have online arbitration or competence as opposed to domestic courts deciding the forum ß Whether the national law provides for local courts’ assistance with orders on the produc- tion of evidence or the appearance of witnesses ß Whether the national law provides for local courts’ assistance with orders of interim relief Source: Investing Across Borders database. 60 INVESTING ACROSS BORDERS 2010 implies that countries that have a strong rule FIGURE 6.8: Court assistance is weak in Eastern Europe & Central Asia and East of law21 also tend to have good arbitration Asia & the Paciï¬?c regimes. Such a comparison suggests that where the broader legal climate and public IAB regional average index of the degree of court assistance with arbitration proceedings (100 = maximum assistance) legal institutions are effective, arbitration regimes can thrive. Eastern Europe & Central Asia (20) 51 Once the parties in a dispute have submitted East Asia & Pacific (10) 51 their arguments and evidence, there is an 57 arbitration hearing in the chosen country. The Sub-Saharan Africa (21) arbitral tribunal renders a binding arbitration Latin America & Caribbean (14) 59 award,22 specifying which party has won, IAB global average (87) 62 and the compensation the company is entitled to receive. The issues which might concern the South Asia (5) 63 parties at this stage of the arbitration process, Middle East & North Africa (5) 69 are explored below. High-income OECD (12) 82 Are arbitrators obliged to be 0 20 40 60 80 100 independent and keep arbitration Source: Investing Across Borders database. conï¬?dential? One of the perceived advantages of commercial arbitration is that proceedings TABLE 6.2: Domestic courts’ willingness to provide interim relief in international are typically conï¬?dential, unlike in litigation arbitration proceedings: sample of Eastern European and Central Asian countries cases where court judgments are published. Does the law expressly provide In practice, how often do courts Conï¬?dentiality is an important aspect of for courts to assist arbitrators agree to assist by providing arbitration at all stages of the process. by providing interim relief in interim relief in international Country international arbitrations? arbitrations? Furthermore, arbitrators should be impartial and independent, without a bias toward Albania No Rarely either party. The tribunal integrity index looks Armenia Yes Usually at whether laws specify that arbitrators are Belarus Yes Rarely obliged to keep the proceedings conï¬?dential, Bosnia and Herzegovina No Rarely as well as remain impartial and independent Bulgaria Yes Usually during the arbitration process (box 6.6). Georgia No Rarely Many laws in South Asian, East Asian and Kosovo Yes Rarely the Paciï¬?c, and the high-income OECD Kyrgyz Republic No Usually countries do not expressly bind the arbitrators Montenegro Yes Rarely to conï¬?dentiality of arbitration proceedings, Russian Federation Yes Rarely whereas in Morocco and the Republic of Ukraine No Rarely Yemen in the Middle East and North Africa Source: Investing Across Borders database. region they do (ï¬?gure 6.10). The Sub- Saharan Africa countries governed by the Pakistan, and Sri Lanka) have legal provisions cannot just examine arbitration in isolation. OHADA Uniform Act on Arbitration, namely, requiring courts to assist with interim relief, and There is a relationship between private Burkina Faso, Cameroon, Côte d’Ivoire, the lawyers have responded in all countries arbitral proceedings, domestic courts, and Mali, and Senegal also speciï¬?cally provide that, in practice, the courts usually provide the the general legal climate of a country, that for conï¬?dentiality of the proceedings. All assistance requested. can be explored through a comparison Eastern Europe and Central Asia countries in of the Rule of Law index of the Worldwide our sample have legal provisions asserting How does judicial support of Governance Indicators (WGI)20 with the the independence and impartiality of the arbitration proceedings enhance the Arbitrating Commercial Disputes extent of arbitrators in international arbitrations, with the strength of the rule of law? judicial assistance index (ï¬?gure 6.9). Results exception of Albania23 and Montenegro. When countries attempt to improve the show that there is a strong positive correlation strength of their arbitration regimes, they between these 2 measures. This correlation ARBITRATING COMMERCIAL DISPUTES 61 What is the expertise of the domestic court in enforcement FIGURE 6.9: Countries with a strong rule of law tend to have proceedings? efï¬?cient arbitration regimes Domestic courts that have sufï¬?cient expertise to deal with arbitration awards will ensure an efï¬?cient enforcement process. Given the Correlation between the Worldwide Governance Indicators (WGI) and IAB Arbitrating Commercial Disputes scores technical nature of arbitration awards, high level courts or specially designated courts, rather than lower-level general courts of ï¬?rst instance, are more appropriate for dealing capably and consistently IAB Extent of Judicial Assistance Index (0-100) with commercial arbitration awards.27 Of the 87 countries sampled, less than half designate a higher-level or specialized court to handle foreign arbitration awards, for both domestic and international arbitration awards (ï¬?gure 6.11). Eastern Europe and Central Asia has the highest share of countries (60% of the countries in the region) that designate a high level court with the supervision power to conduct both procedural and substantive examination over domestic and foreign arbitral awards. In Sub-Saharan Africa, 57% of the countries sampled designate a high-level court. The share in East Asia and the Paciï¬?c is 50%. Of the high-income OECD countries surveyed by IAB, the United Kingdom and Ireland grant such WGI Rule of Law Normalized Score (-2.5 - 2.5) supervision power to a high level or a specially designated court/ judge.28 Source: Investing Across Borders database and Worldwide Governance Indicators (WGI), World Bank Group. Designating a special court to handle enforcement proceedings may not be necessary or even practical in large countries or in countries with a high volume of enforcement proceedings where judges are knowledgeable about the process and issue consistent decisions. In Phase 3: Once an award is rendered, it can be smaller countries with little arbitration practice, however, lower-level complied with, enforced, or set aside courts can have difï¬?culty applying newly enacted arbitration laws and The previous 2 sections explore what happens when parties enter into self-executing international conventions. In such countries, endowing a an arbitration agreement at the contractual stage of their relationship, higher court to enforce or vacate domestic awards could ensure faster and trace the arbitration process from when a dispute arises until and more predictable results. arbitrators decide on a ï¬?nal and binding arbitration award. Once an arbitration award is rendered, the losing party must compensate the How long does it take to enforce an arbitration award? winning party. In most cases, the parties voluntarily comply with the On average across the globe, it takes 179 days to enforce an arbitration award, and no further action is necessary.24 If the losing party refuses award in court. This is measured by asking private practitioners to to pay, the winning party may bring enforcement proceedings in the estimate the length of time from ï¬?ling an application for enforcement of local courts.25 Alternatively, the losing party may dispute the arbitration an arbitration award (handed out in the respective country) to attaching award and ask the domestic court to set it aside or annul it.26 the losing party’s assets (ï¬?gure 6.12). It does not take into account the length of an appeal, which can greatly increase the length of time. As can be imagined, the length of enforcement of an award is a very important consideration for the winning party. There is no point in having an award if it cannot be enforced in an easy and timely BOX 6.6: Components of IAB tribunal integrity index manner, and the winning party can collect easily. The South Asia region is the slowest to enforce domestic arbitration The tribunal integrity index is an aggregate index that measures awards. Within the region it takes longest to enforce a domestic or whether countries have legal provisions that relate to: international arbitration award in Pakistan (table 6.3). As respondents ß Arbitrators’ independence in the proceedings note, however, this might be because domestic courts are slow and ß Arbitrators’ impartiality in the proceedings there are no speciï¬?c enforcement periods in the law. Accordingly, ß Arbitrators’ conï¬?dentiality of the proceedings/award periods of enforcement vary from case to case, and in general, it is a It further examines whether countries discriminate between how lengthy process. they regulate arbitrators in domestic arbitrations and international arbitrations. 62 INVESTING ACROSS BORDERS 2010 FIGURE 6.10: All but 2 Eastern Europe and Central Asia countries have legal provisions FIGURE 6.11: Fifty-ï¬?ve percent (55%) asserting the independence and impartiality of arbitrators in international arbitrations of countries enforce foreign arbitration awards in general ï¬?rst instance courts Regional comparison on the tribunal integrity index (100=maximum) Share of countries that use a specialized or Eastern Europe & Central Asia (20) 70 higher level court in enforcement proceedings Middle East & North Africa (5) 70 45% of countries have Latin America & Caribbean (14) 66 a higher court IAB global average (87) 64 55% of Sub-Saharan Africa (21) 63 countries do not have a High-income OECD (12) 60 higher court East Asia & Pacific (10) 55 South Asia (5) 30 0 10 20 30 40 50 60 70 80 90 100 Source: Investing Across Borders database. Source: Investing Across Borders, database Many countries in Eastern Europe and Central Asia have adopted special rules to ensure FIGURE 6.12: It takes roughly 4 months to enforce an award in the high-income a speedy and uninterrupted enforcement OECD countries process: eliminating the possibility for an Regional average of the number of days to enforce an arbitration award in court appeal of the ï¬?rst instance court decision on enforcement (for example Romania) and South Asia (5) 388 establishing a special authority outside of the 288 Middle East & North Africa (5) judiciary, which issues a writ of execution for East Asia & Pacific (10) 215 7 days (for example Georgia). At the other Latin America & Caribbean (14) 206 extreme, courts in South Asia and Latin America and the Caribbean can take several years to IAB global average (87) 179 enforce an arbitration award, and longer if Sub-Saharan Africa (21) 157 an appeal(s) is made. This undermines the Eastern Europe & Central Asia (20) 123 beneï¬?t of a faster and more efï¬?cient dispute 118 High-income OECD (12) resolution process through arbitration. 0 50 100 150 200 250 300 350 400 450 Foreign awards might require Source: Investing Across Borders database. recognition proceedings Imagine arbitration proceedings taking place in Paris between an Indian and a Chilean TABLE 6.3: The longest period for enforcement in South Asia is the attachment of assets multinational company. The Chilean company Average number of weeks for enforcement proceedings for an arbitration award in South Asia. wins and wants to attach assets held by the Average time Indian company in New Delhi. This foreign Average time Average time from the ï¬?nal arbitration award will need to be “recognizedâ€? from ï¬?ling an from the date of court decision application of the ï¬?rst hearing to the writ Total average by Indian courts before it can be enforced. enforcement to the ï¬?rst of execution time from ï¬?ling Recognition is the process by which the to the hearing instance court attaching assets to attachment Country (weeks) decision (weeks) (weeks) (weeks) domestic courts of a country give validity to a foreign arbitration award. Given the extent Afghanistan No practice No practice No practice N/A of cross-border transactions in today’s world, Bangladesh 9 13 4 26 as well as the numerous locations for holding India 4 9 20 33 assets, recognition of an award can be a very Pakistan 14 9 92 115 important stage of the arbitration process. Sri Lanka 26 51 26 103 Source: Investing Across Borders database. ARBITRATING COMMERCIAL DISPUTES 63 There are international legal instruments, such Commercial arbitration with the example, if a company enters into a contract as conventions and treaties, to help regulate state and state entities with a state-owned oil company, can they use recognition. The 1958 New York Convention arbitration to resolve their disputes? Are there Consider briefly another element of on the Recognition and Enforcement of any restrictions on arbitrating over certain commercial arbitration—arbitrating with the Arbitration Awards (New York Convention) subject matters, such as natural resources or state and its entities. is the most global of these conventions. It concession agreements? Of the 87 countries requires that the domestic courts of contracting Arbitrating with the state is a specialized form in our sample, 17 countries restrict foreign states give effect to arbitration agreements of arbitration. The dispute might arise from an companies’ abilities to arbitrate disputes arising and recognize and enforce awards made alleged breach on the part of the host state from speciï¬?c types of contracts with the state or in other states, subject to limited exceptions of an investment treaty.29 As discussed above, state entities (table 6.4). discussed above. It is therefore a powerful Arbitrating Commercial Disputes indicators instrument in international arbitration, and do not examine investment treaty arbitration Is there a designated point of contact is widely subscribed to by 142 countries. in any detail. However, looking at which with a state entity? Nonetheless, there are still 7 of the sampled countries have signed the ICSID Convention Certain countries have designated special countries that have not yet ratiï¬?ed the New provides further evidence of the strength of a agencies or units in the government to deal with York Convention: Angola, Ethiopia, Kosovo, country’s general arbitration climate. Of the 87 claims against the state. These countries tend Papua New Guinea, Solomon Islands, Sudan countries, 17 have not yet ratiï¬?ed the ICSID to have more streamlined methods of handling and the Republic of Yemen. Convention: Angola, Bolivia, Brazil, Canada, claims than countries with no established Ethiopia, Ecuador, India, Kyrgyz Republic, point of contact for disputes involving public How long does it take to enforce a Mexico, Moldova, Montenegro, Papua New entities. In particular, IAB data illustrates that foreign award? Guinea, Poland, Russian Federation, South regions that have experienced investor-state In most countries, enforcement of foreign Africa, Thailand, and Vietnam. arbitrations in the past often appoint an awards takes more time than domestic authority in the government to manage such The Arbitrating Commercial Disputes indicators awards due to long recognition proceedings cases, thereby facilitating proceedings. More do investigate the ability of a party to arbitrate and the additional documentation required. than half of the Middle East and North Africa with a state or state entity disputes arising out of For example, the Latin America and the and high-income OECD countries sampled contracts with foreign-owned companies. For Caribbean region experiences lengthy have designated a special public authority proceedings in executing the award because recognition proceedings are still required in many countries in the region (for example TABLE 6.4: Restrictions on arbitrating with the state or state companies Brazil, Colombia and Mexico), they are IAB-surveyed Restricted arbitrability Restricted arbitrability Restricted arbitrability separate from the enforcement proceedings, countries with of concession of infrastructure of contracts dealing restrictions agreements contracts with natural resources and different courts are involved in both. In addition, there are multiple possibilities for Belarus X X appeal of the ï¬?rst instance court decision on Bolivia X X enforcement of foreign awards. Countries such Costa Rica X as Mexico and Brazil even allow a special France X X X appeal of the ï¬?rst instance enforcement Georgia X X decision before the Constitutional Court. Such Guatemala X “constitutionalâ€? appeal is not observed in any Kazakhstan X X X other region. None of the countries in Latin Madagascar X X X America and the Caribbean designate a high-level court to vacate domestic awards. Mexico X However, 50% of the IAB countries in the Latin Poland X America and the Caribbean region designate Romania X X a high court to rule on the recognition of Russian Federation X foreign arbitration awards: Bolivia, Brazil, Saudi Arabia X X X Chile, Colombia, Costa Rica, Honduras, and Tunisia X X X Nicaragua. Ukraine X United States X X X Venezuela, RB X X X Source: Investing Across Borders database. 64 INVESTING ACROSS BORDERS 2010 to handle administrative, logistical, and other issues related to investors’ disputes with the FIGURE 6.13: Relatively few countries designate a public authority state or a state entity (ï¬?gure 6.13). Examples include the Department of International Law in Share of countries in each region that have designated a public authority to handle administrative, logistical, and other issues related to arbitration with the state the Ministry of Finance of the Czech Republic, the Legal Council of State in Greece, or the 100 Ofï¬?ce of the Assistant Legal Advisor for 80 International Claims and Investment Disputes within the Department of State’s Ofï¬?ce of the 57% 58% 60% 60 Legal Advisor in the United States. In contrast, 50% 41% 43% none of the countries in the South Asia region 40 have a designated authority to deal with claims against the state. 20% 20 0% 0 CONCLUSIONS South Asia Eastern IAB global Sub-Saharan East Asia Latin High-income Middle (5) Europe & average Africa & Pacific America & OECD East & The Arbitrating Commercial Disputes indicators Central Asia (87) (21) (10) Caribbean (12) North Africa (20) (14) (5) illustrate that most countries recognize the importance of an efï¬?cient, stable regime for Source: Investing Across Borders database. alternative dispute resolution in their efforts to attract foreign investment. arbitration will be ad hoc or administered resolve disputes. Motivated by the growing preference of by a speciï¬?c arbitral institution, determin- ß Adherence to international conventions. businesses to use arbitration to resolve ing the qualiï¬?cations of the arbitrators and Adherence to and implementation of commercial disputes, countries have made selecting the language of the proceed- international and regional conventions on substantial progress in improving their ings. Such flexibility should be available to arbitration such as the New York Conven- arbitration frameworks. Countries with good the extent possible for both domestic and tion and the ICSID Convention signal a scores on the Arbitrating Commercial Disputes international arbitration proceedings in the government’s commitment to the rule of indicators have focused on modernizing their same country. law and its investment treaty obligations, legal frameworks and ensuring their consistent ß Strong arbitration laws (de jure) in line which reassures investors. Countries with implementation. Countries that score well also with arbitration practice (de facto). Many good arbitration regimes are members of work on increasing awareness, resources, and countries have enacted modern arbitration the main international arbitration conven- court support to ensure that their arbitration laws. But practice is rare or nonexistent, tions and regional treaties which regulate regimes are effective and in compliance with and where it does exist, it often does not or provide for arbitration. international standards. conform to the law. Having a strong legal The Arbitrating Commercial Disputes indicators The Arbitrating Commercial Disputes data for regime should be associated with a healthy measure the clarity and effectiveness of the 87 countries surveyed show that countries arbitration practice, supportive domestic ADR regulation, including the reliability and which perform well on the indicators share the courts, and solid awareness of what arbi- stability of the arbitration frameworks and fast following characteristics: tration entails as a dispute resolution tool. and predictable enforcement processes. This ß Supportive local courts. A good arbitra- ß Clear arbitration provisions consolidated tion regime is associated with strong report has presented examples of countries in one law or a chapter in a civil code. at various levels of income and institutional support from local courts for arbitration Having coherent, up-to-date, and easily development that have well-established proceedings and consistent, efï¬?cient en- accessible legislation increases legal systems for alternative dispute resolution. The forcement of arbitration awards. In many certainty and transparency. Arbitrating Commercial Disputes indicators countries courts perceive arbitration as a ß Strong party autonomy to tailor arbi- should stimulate interest in reforms, identify threat to their jurisdiction. They have not tration proceedings. Good arbitration good practices that countries can learn from, articulated pro-arbitration policies and do regimes provide a flexible choice for com- and enhance knowledge of arbitration. not always support tribunals with interim mercial dispute resolution, which is very injunctions or orders related to evidence. attractive to companies. Parties should be Many countries have extremely long en- able to choose how to run their arbitra- forcement proceedings, which undermine tion process including deciding whether arbitration as a faster and cheaper way to ARBITRATING COMMERCIAL DISPUTES 65 14 61/33. Revised articles of the Model Law 25 Enforcement proceedings are legal proceedings on International Commercial Arbitration of the that take place in the domestic court where the Investing Across Borders 2010 is a United Nations Commission on International assets are located. They convert an arbitration new initiative that we hope to continue Trade Law, and the recommendation regarding award into a court judgment, which the winning to improve in the future. IAB will also the interpretation of article II, paragraph 2, and party can then rely upon to collect the money article VII, paragraph 1, of the Convention on the owed to him. consider expanding and deepening the Recognition and Enforcement of Foreign Arbitral scope of its indicators. We welcome 26 Proceedings to set an arbitration award aside Awards, done at New York, 10 June 1958. are legal proceedings requesting domestic your comments and feedback. 15 See the Starting a Foreign Business chapter of this courts to order that the arbitration award have report. no effect and that it is invalid on certain limited grounds. 16 Malecki (1997). 27 Chen, (2005), p. 4, available at http:// 17 Ad hoc arbitrations are not administered by www.oecd.org: “…[I]n order to more strongly ENDNOTES arbitral institutions, but rather require parties to prevent the reverse and negative effect of “local formulate their own rules governing the procedure 1 Some of these countries have some arbitration protectionismâ€? imposed on the recognition and of the arbitration, the selection of arbitrators, etc. provisions as part of other laws but they do enforcement of a foreign award, and also in not contemplate sufï¬?cient minimum regulation 18 Angola’s law, for example, is from 2003, Sudan’s order to more effectively prevent the possible of arbitration in the country (for example, the from 2005, and Mauritius’s and Rwanda’s from mistakes made by some judges of local courts Law on Chamber of Commerce of Montenegro 2008. in judicial examination and supervision over a contains provisions enabling the establishment foreign arbitral award (probably due to their 19 Indeed, recent articles have observed the growing of an arbitration court within the Chamber of lower professional proï¬?ciency), some advanced arbitration practice in East Asia and the Paciï¬?c Commerce). experience in the practice of international and report results that show that the number of arbitration enactments should be taken for 2 See glossary for deï¬?nitions. arbitrations in the region is beginning to surpass reference. That is, the supervision power to that in the high-income OECD countries. See 3 See glossary for deï¬?nitions. conduct both procedural and substantive Shahla (2009), p. 3. (http://www.allbusiness. examination over domestic and foreign arbitral 4 UNCTAD (2005). com/legal/labor-employment-law-alternative- awards is authorized without exception to some dispute-resolution/12384454-1.html). 5 PwC and Queen Mary University high level courts, which would have judges of a (2006). In a 2006 survey, conducted by 20 Worldwide Governance Indicators (WGI) of higher caliber, so as to show prudence and to PriceWaterhouseCoopers, more than 150 the World Bank Institute aggregate individual guarantee both justice and efï¬?ciency.â€? international companies cited flexibility, governance indicators for 212 countries 28 The UK and Ireland designate the High Court, enforceability, privacy, and selection of and territories. One of the six dimensions of Canada designates the Superior Court of arbitrators as the 4 most important advantages governance that these indicators measure is the Justice, in France it is President of the Tribunal of of international commercial arbitration as rule of law. First Instance. Other “good practiceâ€? countries a dispute resolution mechanism. See also, 21 The Rule of Law is deï¬?ned as “the extent to which are not included in the 2010 IAB country UNCTAD (2005). which agents have conï¬?dence in and abide by sample follow the same practice: the supervision 6 PwC and Queen Mary University (2006); the rules of society, in particular the quality of and examination power over domestic and UNCTAD (2005). contract enforcement, the police, and the courts, foreign arbitral awards is authorized to the as well as the likelihood of crime and violenceâ€? Supreme Court in Australia (Article 38, New 7 Moran and West (2005). (WGI), available at http://info.worldbank.org/ South Wales 1984 Commercial Arbitration 8 USAID (2005); USAID (1998). governance/wgi/pdf/rl.pdf. Act). Swiss law provides that such supervision power shall be exercised in principle by the 9 PwC and Queen Mary University (2006). 22 Note that the ï¬?nal and binding nature of Federal Supreme Court, with the exception that arbitration, which is agreed to by the parties, 10 These are some of the problems pointed out both parties may agree that this power shall is what distinguishes arbitration from other by IAB survey respondents in 87 countries, be exercised by the speciï¬?c state court where nonbinding forms of alternative dispute resolution, Investing Across Borders (2010). the arbitration tribunal is located, instead of the such as mediation. Federal Supreme Court (Article 191, Private 11 As proved by the results of the survey conducted 23 However, article 408 of the Code of Civil International Law Act of Switzerland). by PwC and Queen Mary University (2006). Procedure of the Republic of Albania provides for 29 UNCTAD Series on International Investment 12 Ball (2006), p. 73. the impartiality and independence of arbitrators Policies for Development (2008). in domestic arbitrations. 13 See, for example, ICC International Court of Arbitration Bulletin (2008); Wegen, Wilske, and 24 The PwC 2008 survey estimates that in 80% of Lutz, eds., (2010); Rowley, ed., (2006); The cases, arbitration awards are voluntarily complied International Comparative Legal Guide (2009); with, PwC and Queen Mary University (2008). PwC and Queen Mary University (2006); PwC and Queen Mary University (2008). 66 INVESTING ACROSS BORDERS 2010 Methodology 67 T he indicators presented in Investing Across 23 economies.3 The feasibility and desirability of including topics were evaluated using the Selection of survey respondents Borders 2010 (IAB) assess laws that affect As noted, law ï¬?rms, other professional services foreign direct investment (FDI) and the efï¬?ciency following criteria: providers (mainly accounting and consulting of administrative processes in 87 economies. ß Is the topic already sufï¬?ciently covered ï¬?rms), investment promotion institutions, The project’s methodology is based on that by Doing Business or other annual chambers of commerce, law professors, and of the World Bank Group’s Doing Business benchmarking exercises? Many resources other local experts in the measured economies project.1 The indicators highlight differences measure the quality and competitiveness were the principal respondents to the IAB among countries in their regulatory treatment of business environments worldwide. The survey. These individual and organizations of FDI to identify good practices, facilitate IAB indicators are designed to comple- had both knowledge of their economies’ learning opportunities, stimulate reforms, and ment these resources by focusing on areas legal and regulatory frameworks for FDI and provide cross-country data for research and of regulation particularly pertinent to FDI. experience advising foreign investors on analysis. ß Is the topic affected by public policy, regu- market entry and operations. The indicators are based on a survey of latory and administrative frameworks, or Respondents were self-selected based on lawyers, other professional service providers does it mostly depend on other factors— their interest, availability, and willingness (mainly accounting and consulting ï¬?rms), such as natural resource endowments or to contribute to IAB on a pro bono basis. investment promotion institutions, chambers of market size? About 25% of those invited to complete the commerce, law professors, and other expert ß Can public authorities take short-term ac- surveys elected to participate in the project, respondents in the countries covered. Between tions in the topic area that the IAB indica- on average. IAB identiï¬?ed its potential pool of April and December 2009 more than 2,350 tors could track and capture on a regular respondents based primarily on the following respondents were surveyed in 87 countries basis, or does the topic lend itself more to sources of information: (that is, 27 per country, on average).2 The long-term reforms? ß International guides identifying leading average number of respondents across ß Is a regular survey of investment lawyers providers of legal services, including countries varied. It was higher in countries and other business intermediaries the their specialization, in each country. The with higher levels of income, institutional appropriate data collection method for guides include Chambers and Partners, capacity, and greater degree of professional this topic, or would the topic require a Martindale, IFLR1000, Helpline Law, specialization of the expert respondents. different type of respondent—such as a HG Law, International Correspondence foreign investor? Lawyers and Financial Experts, The ß Is it possible to collect objective and Internet’s Lawyer Directory, and Terra Lex. IAB’s thematic focus areas, veriï¬?able data on the topic, or is its nature ß Large international law and accounting respondents, and economies such that it should be evaluated through ï¬?rms with extensive global networks of subjective data based on survey respon- Selection of thematic focus areas ofï¬?ces or local partner groups. dents’ perceptions and sentiments? IAB indicators focus on 4 thematic areas ß Members of the International Bar ß Can survey questions capture standard, Association, country bar associations, (referred to in this report also as topics) of FDI everyday treatment of a typical foreign regulation selected over a 2-year process from chambers of commerce, and other mem- investor, or is the nature of the topic such a much wider range of investment climate bership organizations. that it mostly depends on ad hoc, discre- factors, including foreign equity ownership ß Professional services providers identiï¬?ed tionary decisions and actions by public restrictions, investment promotion, approval on Web sites of embassies, investment authorities? procedures, performance requirements, promotion institutions, business chambers, ß Is there sufï¬?cient heterogeneity of perfor- and other local organizations. access to land, employment of expatriate mance across economies to warrant de- personnel, restrictions on board members, ß Professional services providers recom- veloping a global indicator set, or is there currency convertibility and repatriation, mended by country ofï¬?ces of the World a relatively small set of economies whose protection against expropriation, protection Bank and International Finance Corpora- policies and regulations treat the topic dif- of intellectual property, provision of national tion (IFC). ferently from most other economies? treatment principles, investment incentives, and access to international commercial and ß Does IAB have sufï¬?cient human and ï¬?nan- Foreign investors were not invited to ï¬?ll out cial resources to measure each topic? the surveys. The IAB team had interviewed investment arbitration. During this 2-year investors in several countries during the initial process the IAB team consulted academic Applying the above selection criteria pilot tests, and found that they were often not literature on FDI determinants, investor surveys narrowed the list of possible topics to the familiar with the speciï¬?cs of the countries’ on barriers to doing business, and FDI current set of 4 IAB indicator areas. Over legal and regulatory frameworks and that specialists comprising IAB’s expert consultative time, IAB will consider adding topics to its their survey responses were limited to unique groups. The team also conducted pilot tests in thematic coverage. sector-speciï¬?c experiences at one point in 68 INVESTING ACROSS BORDERS 2010 time. In contrast, commercial lawyers—many of whom serve as local counsel to foreign investors—and other professional service providers BOX 7.1: Economies covered by this report were ideally positioned to complete the IAB survey. They were able to ß Sub-Saharan Africa (21 economies): Angola, Burkina Faso, provide more up-to-date responses based on their experiences advising Cameroon, Côte d’Ivoire, Ethiopia, Ghana, Kenya, Liberia, numerous clients in various sectors. Indeed, the group of respondents Madagascar, Mali, Mauritius, Mozambique, Nigeria, providing IAB data in each country had, on average, roughly 180 Rwanda, Senegal, Sierra Leone, South Africa, Sudan, foreign clients during a 12-month period before data collection. This Tanzania, Uganda, Zambia. signiï¬?cantly increases the number of transactional experiences as a ß East Asia and the Paciï¬?c (10 economies): Cambodia, China, basis for IAB data. Indonesia, Malaysia, Papua New Guinea, Philippines, Singapore, Solomon Islands, Thailand, Vietnam. Selection of economies ß Eastern Europe and Central Asia (20 economies): Albania, IAB covers 87 economies in 7 regions (box 7.1), selected based on Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, the following criteria: Bulgaria, Croatia, Georgia, Kazakhstan, Kosovo, Kyrgyz ß All economies where the IAB indicators were piloted in 2007–08. Republic, FYR Macedonia, Moldova, Montenegro, Poland, ß Population size, to capture the larger countries. Romania, Russian Federation, Serbia, Turkey, Ukraine. ß Economies in the current and expected future project portfolio of ß Latin America and the Caribbean (14 economies): Argentina, the World Bank Group’s Investment Climate Advisory Services. Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, ß Economies that have requested Doing Business reform assistance, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Peru, and have thus shown interest in using indicators to motivate República Bolivariana de Venezuela. reforms. ß Middle East and North Africa (5 economies): Arab Republic ß Economies that have demonstrated commitment to business environ- of Egypt, Morocco, Saudi Arabia, Tunisia, Republic of Yemen. ment improvements and been recognized by Doing Business as ß South Asia (5 economies): Afghanistan, Bangladesh, India, leading reformers. Pakistan, Sri Lanka. ß Post-conflict economies, which are one of IFC’s corporate priorities. ß High-income OECD (12 economies): Austria, Canada, Czech ß Middle- and high-income economies that have done particularly Republic, France, Greece, Ireland, Japan, Republic of Korea, well in attracting FDI, and could thus be interesting comparators Slovak Republic, Spain, United Kingdom, United States. and case studies for identifying good practices. Given the report’s pilot nature and the project’s resource constraints, not FIGURE 7.1: IAB’s data collection, veriï¬?cation, and analysis all economies were included in IAB 2010. In future years, IAB plans process to expand its coverage of economies. This increase will be driven Questionnaires emailed to local experts in the measured primarily by demand and resource availability. Step 1 countries Data collected by email, telephone, or personal interviews Step 2 Construction and characteristics of the IAB indicators Step 3 Data consolidated and analyzed Selected data verified through desk reviews of available resources, including country laws reviewed by IAB legal experts and through Data collection and analysis Step 4 a partnership with the Georgetown University Law Center The IAB indicators are based on primary data collected mostly by Multiple rounds of follow-up conducted with questionnaire respondents to validate data email (and in some cases by telephone or personal interviews) using Step 5 standardized questionnaires completed in each economy by expert Data finalized and IAB indicators developed respondents. (Questionaire templates are available on the project’s Step 6 Data aggregated using various scoring and weighting Web site http://www.investingacrossborders.org.) Figure 7.1 shows methodologies to construct indicators Step 7 the steps involved in data collection, veriï¬?cation, and analysis. Indicators and preliminary results for selected topics reviewed by members of expert consultative groups To ensure accuracy of collected data, the IAB team engaged in several Step 8 rounds of interactions by email and telephone with many survey Data and indicators reviewed by World Bank and IFC country offices and headquarters-based specialists respondents to verify data and explore the reasons for inconsistent Step 9 responses. This approach was followed until the conflicting responses IAB 2010 and indicators cleared by World Bank Group management were reconciled. The IAB team, along with law students from the Step 10 Georgetown University Law Center, also reviewed countries’ laws Public launch of IAB 2010 and online database Step 11 and regulations when respondents’ answers to the survey questions METHODOLOGY 69 were inconsistent. In addition, the IAB team traveled to 18 of the 87 economies for personal interviews with survey respondents.4 TABLE 7.1: Types of indicators used in Investing Across Borders Respondents were asked both to ï¬?ll out questionnaires and provide Indicator Indicator type references to relevant laws and regulations to facilitate data veriï¬?cation Investing Across Sectors indicators for quality assurance. The surveys captured more than 1,200 data points for each economy. Raw data from the questionnaires were Foreign equity ownership indexes (0-100) De jure electronically extracted and compared with the original surveys to Starting a Foreign Business indicators minimize transcription errors. Every step was documented to ensure Time (days) De facto traceability of data and derivation of the ï¬?nal data set. Procedures (number) De facto Ease of establishment index (0–100) De jure and de facto Structure and characteristics of the IAB indicators Accessing Industrial Land indicators The IAB indicators comprise measures of the characteristics of laws Strength of lease rights index (0–100) De jure and regulations (de jure indicators) and their implementation (de facto Strength of ownership rights index (0–100) De jure indicators; table 7.1). Access to land information index (0–100) De jure and de facto De jure indicators are based on a country’s legal framework. Data for Availability of land information index (0–100) De jure and de facto these indicators were collected through close-ended survey questions Time to lease private land (days) De facto that assessed whether certain provisions and clauses are present in a Time to lease public land (days) De facto country’s legal and regulatory frameworks. All de jure indicators are Arbitrating Commercial Disputes indicators objective and publicly veriï¬?able. Examples of IAB’s legal indicators Strength of arbitration laws index (0–100) De jure include the foreign equity ownership indexes and strength of arbitration laws index. Ease of arbitration process index (0–100) De jure and de facto Extent of judicial assistance index (0–100) De jure and de facto In some cases IAB complemented these de jure indicators with de facto measures of how laws are actually applied in practice. For example, sections on IAB’s Web site identify the exact questions that fed into a regulation might stipulate a time limit within which a public agency each index. All questions were equally weighted. Alternative weighting must complete an administrative requirement, such as registration of a methods were also explored (including factor and principal component foreign-company. But if this time limit is rarely respected in practice, analysis, expert judgment, and others).7 Due to the high correlation of the IAB indicators recognize this through the de facto indicators. Thus results among the various methods, the equal weights approach was the combination of the de jure and de facto data provide a more selected because it is most commonly used by other indicator sets, is comprehensive and realistic measure of investment climates for FDI. easily replicable (and so facilitates veriï¬?cation of results), and is most The Starting a Foreign Business and Accessing Industrial Land indicators easily understood and communicated to a variety of audiences. also use speciï¬?c de facto indicators to measure the amount of time a The IAB indicators are not aggregated at a topic level and are not foreign company needs to establish a subsidiary and access industrial ordered to produce a ranking of economies’ performance. IAB will land in the local economy. These indicators were collected following consider introducing rankings of economies in the future years after the the standard time and motion studies used by Hernando de Soto5 and project’s methodology has been stabilized. Doing Business. Each administrative process was broken down into 6 separate steps to ensure more precise estimates. Survey respondents IAB maintains respondents’ anonymity. Although all data are based with signiï¬?cant and routine experience in the relevant transactions on respondents’ answers and information provided through the provided the time estimates. IAB uses the following deï¬?nitions to questionnaires, all original data are treated conï¬?dentially and the measure procedures and time: indicators cannot be traced to the responses of individual survey ß Procedure: any interaction between a foreign company (owners, contributors. managers, and/or their legal representatives) and other parties Regional and global averages of indicator scores in this report are all (government agencies or departments, public entities or public based on IAB’s current data set for 87 economies. If another source authorities, local banks). was used, it is clearly identiï¬?ed. The classiï¬?cation of economies ß Time: the time involved in completing each procedure is calculated by region and income group is based on the World Bank Group’s in calendar days (rather than business days) and based on the country classiï¬?cation criteria and conforms to the system used by Doing median time needed in practice to complete each procedure in the Business.8 experience of each respondent. All indexes (such as extent of judicial assistance index) are aggregates of individual survey questions. The topic- and index-speciï¬?c methodology 70 INVESTING ACROSS BORDERS 2010 Limitations of the IAB BOX 7.2: Investing Across Borders and international investment agreements indicators International investment agreements have various purposes, including promoting and This section presents the main limitations of protecting investments, and liberalizing investment regimes. Many of these agreements the IAB project and the topic-speciï¬?c IAB cover the same issues, such as scope and deï¬?nition of foreign investment, admission of indicators in 3 areas: substantive, focusing investment or pre-establishment, treatment of investment (both national treatment and most on the content and thematic coverage of the favored nation treatment), guarantees and compensation related to expropriation, transfer indicators; methodological, concerned with of funds and repatriation of capital and proï¬?ts, and dispute settlement—both between the questionnaire design and data collection; states and between investors and states. and limits to the implications of the indicators, But individual international investment agreements treat these issues very differently, mak- addressing their potential interpretation, uses, ing it challenging to use a standardized survey to assess how laws and regulations are and relationships with various economic and administered across countries. Bilateral investment treaties and free trade agreements are social data. Readers and users of the IAB increasingly complex, raising concerns about implementation challenges. In addition, indicators are urged to keep these limitations many of these treaties and agreements have exemption clauses that allow the country in mind when interpreting the data. which has taken the exemption the freedom to regulate some issues in a different way from the one committed to in the agreement. For example, the United States took such a Substantive limitations reservation in the North American Free Trade Agreement (NAFTA) for the national treat- IAB focuses on regulation of FDI, not portfolio ment of foreign investors in telecommunications and broadcasting services. investment.9 For example, the Investing Across IAB does not measure country commitments to international investment agreements for the Sectors indicators consider both greenï¬?eld FDI following reasons: and mergers and acquisitions when assessing ß Nearly 3,000 bilateral investment treaties are in place. The United Nations Confer- sector-speciï¬?c restrictions on foreign equity ence on Trade and Development (UNCTAD) tracks them and, to an extent, analyzes ownership. The Starting a Foreign Business their content. Doing anything beyond what UNCTAD has done—and doing it consis- and Accessing Industrial Land indicators focus tently on a global scale—would be a very demanding undertaking. more on greenï¬?eld FDI by evaluating the ß The contents of international investment agreements of any one country vary depending process of establishing a local subsidiary and on the agreements’ bilateral or regional partners and on when they were negotiated its options for and ease of accessing industrial and signed. Methodologically, the appropriate step would be to analyze all of them— land. The IAB indicators do not delve into any which, again, would require signiï¬?cant resources. of the factors critical to portfolio investment, ß IAB aims to give governments tools to affect change unilaterally and in relatively short such as countries’ capital markets, sovereign periods. While governments can change domestic legislation, they have much less ability to alter bilateral investment treaties and free trade agreements, which would credit ratings, or currency stability. require renegotiation. This is particularly the case for developing countries trying to IAB focuses on national laws and, in negotiate or renegotiate agreements with high-income countries. some cases, on countries’ ratiï¬?cations of While recognizing that international agreements play an important role in sending a posi- international conventions governing selected tive signal to foreign investors, the IAB indicators provide a more up-to-date and accurate aspects of FDI. The indicators do not measure picture of a country’s FDI policies because they measure the current state of national laws, international investment agreements such as regulations, and policies, rather than countries’ commitment to liberalizing and promoting bilateral and regional investment treaties and investment. The indicators reflect de jure policies on FDI equally applicable to investors free trade agreements (box 7.2). The topic- from all countries. speciï¬?c chapters of this report list the laws that serve as the basis for the indicators. of FDI by national legislation, which is most businesses in several areas covered by IAB. While IAB recognizes that many developing relevant to a large sample of countries and a For example, the land rights are often the countries attract signiï¬?cant FDI in special large share of global FDI. This methodology same for all locally incorporated companies economic zones (SEZs) and that these are in allows IAB to provide comparable data on regardless of whtehr they are domestically- many countries important to FDI competitiveness, the regulation and efï¬?ciency of administrative or foreign-owned. However, access to land legal regimes for SEZs, export processing zones processes for FDI across all economies covered often presents a greater administrative and (EPZs), and other areas governed by special by the project. bureaucratic hurdle for foreign companies legal frameworks are excluded from the scope unfamiliar with local regulations. Thus IAB Some IAB indicators can apply to FDI as of the project. SEZ development has grown indicators focus on practical issues commonly well as to domestic investment. While IAB’s rapidly but is concentrated in relatively few identiï¬?ed as obstacles by foreign investors, objective is to provide measures of FDI countries and few product areas—sometimes rather than exclusively measuring areas of regulation, laws in many countries afford with mixed results. Most FDI ends up outside regulation that differentiate between domestic equal treatment to foreign and domestic SEZs. IAB’s goal is to measure the treatment and foreign investment. METHODOLOGY 71 Methodological limitations involve an element of judgment by expert Main limitations of interpreting IAB is not a survey of perceptions of investors respondents. The reported time represents the IAB data median value of several responses given under or companies. The IAB indicators are based IAB’s thematic coverage is limited to 4 areas of the assumptions of the standardized case.10 on legal facts and expert responses collected FDI regulation. As discussed, the IAB indicators Furthermore, the methodology assumes that through a standardized set of questionnaires do not provide comprehensive measures of an investor and its legal counsel have full completed by a small number of FDI specialists countries’ legal and regulatory frameworks for information on what is required and do not in each measured economy. FDI. The 4 thematic areas were selected from waste time when completing procedures. In a wider set of possible variables because IAB data are not based on a statistically practice, completing a procedure may take of their policy relevance, relative ease and signiï¬?cant sample of respondents in each longer if the investor and its legal counsel lack precision in measurement, reform potential, economy. To counterbalance this limitation, information or are unable to follow up promptly. and other practical considerations. Given the an intensive consultation process with Alternatively, they may choose to disregard importance of other factors to attracting FDI, respondents was used to verify data. But as some burdensome procedures. For both it should not be assumed that improvement in in all global studies, the quality of the ï¬?nal reasons, the times to complete administrative the indicator scores will necessarily lead to results is based primarily on the quality of processes reported in IAB could differ from increased FDI. the underlying data. As one would expect, the perceptions of entrepreneurs reported in IAB data for large middle- and high-income the World Bank Group’s Enterprise Surveys or IAB data should not be used as a proxy for economies tend to be more robust and are other investor surveys. government reforms in general. The main based on responses from more respondents purpose of the IAB indicators is to benchmark The IAB indicators are not designed to than those for small low-income economies. FDI regulations around the world—and in so indicate whether treatment of FDI is more doing, facilitate policy dialogue by identifying The IAB indicators are not necessarily or less favorable than treatment of domestic good practices, track reforms, facilitate representative of all investment projects. investment. The IAB indicators across the 4 sharing of reform experiences, and enable They aim to measure the typical experience topics and 87 economies provide a mixed research and analysis on the links between of a foreign company looking to enter and picture. For some indicators (such as Arbitrating reforms in measured areas and desired operate in a new market. Uniformity and Commercial Disputes) the legal rules afforded outcomes. Any reforms that countries wish to comparability of data are achieved through to foreign companies are typically more undertake should be considered in a broader detailed assumptions of a case study tailored favorable than those for domestic businesses. context of priorities. for each IAB topic. Actual experiences of For others (such as Starting a Foreign Business) foreign companies are however likely to vary there tend to be additional requirements for The indicators are structured to reward depending on the nature of their commercial FDI. Finally, laws often provide the same rules good regulation and efï¬?cient processes. activities, the size of their investments, their for foreign and domestic companies. For Transparent, predictable, and effective relationships with the government and business example, if a particular economic sector is laws and regulations are critical to ensuring community, their negotiating power, the closed to both domestic and foreign private that foreign investment results in a win-win location of their investment, and other factors. sector participation because it is dominated situation for investors, host economies, and by a state-owned monopoly, the Investing their citizens. A solid, consistently applied IAB data on the efï¬?ciency of administrative Across Sectors indicators reflect this scenario legal framework gives investors conï¬?dence processes are speciï¬?c to the country’s largest as a restriction on FDI even though the in the security of their property, investments, business city (examples are indicators on the restriction also applies to domestic investors. and rights. The IAB project does not advocate number of days to start a foreign business Accordingly, the indicators are not structured to for reducing all regulatory barriers, but or to lease industrial land). The case study clearly measure derogations from the national hopes to improve understanding of how to underlying IAB data assumes that a foreign treatment principle. As such, the indicators do maximize the development beneï¬?ts of FDI company will seek to incorporate and operate not present exact measures of areas where through appropriate and effective regulatory in a country’s center of commercial activity, laws and regulations discriminate against frameworks. thereby interacting with public authorities in foreign or domestic companies. They evaluate that city. Thus IAB data are not necessarily The following section presents limitations of legal and regulatory frameworks from the representative of common practices in other each of the 4 speciï¬?c topics covered by IAB. perspective of foreign investors and include cities in each economy, particularly in large These limitations are additional to the general all restrictions that affect foreign investors, or federal economies. project-wide limitations presented above. even if those restrictions also affect domestic IAB measures of time, captured in particular businesses. through some of the de facto indicators, 72 INVESTING ACROSS BORDERS 2010 Limitations speciï¬?c to the indicator legal restrictions on FDI (de jure measures). reasons include a sector’s underlying market topic area This is in contrast to other IAB indicators, structure and the discretionary authority of which also measure how laws are applied regulatory bodies granting sector-speciï¬?c Investing Across Sectors in practice (de facto measures). As a result, licenses (especially in service sectors). The absence of foreign ownership restrictions countries may score higher on the Investing as measured by the Investing Across Sectors Even in the realm of de jure restrictions, limits Across Sectors indicators than they would indicators is an important but insufï¬?cient on foreign equity are just one among many if their actual openness to foreign presence condition for attracting FDI. Aside from possible legal and regulatory impediments in various sectors were measured by the de openness to foreign ownership, other to FDI. Binding constraints on market access facto constraints or by actual FDI. Despite the determinants of FDI include market size, might also include limits on the number of project’s efforts, capturing actual practices in infrastructure quality, political stability, and operators allowed, types of legal entities, all the measured sectors proved infeasible economic growth potential. Restrictions on and minimum values of transactions or assets. with the existing survey instrument given the foreign ownership limit and in some cases Some of this information was collected through relatively small sample of respondents in each prohibit FDI in certain sectors. But abolishing the Investing Across Sectors questionnaires country and the wide variety of reasons that foreign ownership restrictions and having a and is available on IAB Web site (http:// could prevent FDI in a particular market. These completely open economy do not guarantee investingacrossborders.org). But given that success in attracting more FDI. The indicators cover a large share of economic BOX 7.3: Investing Across Borders and commitments under the General Agreement sectors but are not all-encompassing. Coverage on Trade in Services of the primary and manufacturing sectors is relatively limited given that past studies have Unlike trade policy, cross-country comparisons of foreign investment regimes have received insufï¬?cient analysis.11 Early attempts to quantify national FDI restrictions have shown—and this report conï¬?rms—that most been limited to simply counting the number of policies that undermine FDI, without weigh- countries do not restrict foreign ownership ing the relative importance of the individual policies.12 Recognizing that service sectors in these sectors. The coverage of the service are more restricted than primary and manufacturing sectors, other attempts at a numeric sectors, though more extensive than in past presentation of FDI restrictions have mainly relied on the General Agreement on Trade in studies, is also not exhaustive. For example, Services.13 the indicators do not include certain public utilities (such as water or natural gas Most of the IAB Investing Across Sectors indicators deal with FDI in services. There is no international agreement on standardized reporting of policies for FDI in services, with the distribution), professional services (such as partial exception of schedules for the General Agreement on Trade in Services (GATS) legal, accounting, and consulting services), governed by the World Trade Organization (WTO). But GATS schedules are a weak and social services (such as education). These guide to FDI policies in most countries because they generally underestimate how much and other service sectors were not included countries have opened up services to FDI. in the survey questionnaire for one or more of the following reasons: FDI plays a small GATS commitments are made in the form of “positiveâ€? lists representing ofï¬?cial commit- role in the sector, FDI restrictions ( if present) ments to open markets, in contrast to “negativeâ€? lists of exceptions to liberalization. Under GATS, the absence of a positive commitment does not necessarily imply a restriction. often do not take the form of equity limits, To retain policy flexibility, a country may simply have chosen not to list the sector in its views in the development literature diverge schedule. Alternatively, if the sector is restricted, GATS may be silent on the nature of the on the appropriate role of foreign capital in restriction—creating ambiguity about the country’s actual policies. the sector, and methodological constraints limited the length of the questionnaire and Furthermore, current GATS schedules date from about 2000 and may not capture more potential quality of responses. Finally, sectors recent country-level changes. Thus country policies and practices are typically more open where countries may have legitimate security, than what countries commit to in international agreements like GATS. For example, India has committed to allowing 51% foreign equity ownership in software, construction, and cultural, or religious reasons for prohibiting tourism under its GATS commitments. But in national law and practice, it permits 100%. FDI are omitted from the indicators’ coverage. In telecommunications India’s GATS commitment is 25%, but in national law and practice These include weapons, nuclear power, it is 74% or more. Most tellingly, while India has not even listed commitments in trans- toxic waste, and manufacturing of tobacco port, the sector is not closed. Indeed, India allows 100% foreign ownership in road and products and alcoholic beverages. maritime transport. Because one of the underlying principles of IAB The Investing Across Sectors indicators provide an up-to-date and accurate picture of is to collect objective, veriï¬?able, quantiï¬?able a country’s equity restrictions because they measure the present state of the laws and information, the Investing Across Sectors policies, rather than the country’s commitment to liberalize, now or at some point in the indicators are currently limited to analyzing future. The indicators reflect de jure policies on FDI applicable to all countries in a non- discriminatory manner. METHODOLOGY 73 this information is incomplete, it was not The indicators also do not cover the following ß The ease of acquiring, securing, and used in the construction of the indicators. The types of licenses: using land by individuals—domestic or indicators also do not measure the ability ß Sector-speciï¬?c licenses (such as explora- foreign. of foreign companies to bid on concession tion or mining permits). ß The ease of acquiring land for specialized contracts. ß Permits for international and domestic purposes such as developing residential (including municipal) health, food safety, real estate, renting ofï¬?ce space, and buy- The indicators focus on restrictions captured in and product and labor standards and ing or leasing land in special economic countries’ statutes, and not on commitments to regulations. zones or industrial parks. open sectors to FDI captured in international investment agreements (such as bilateral ß Work and residency permits for foreign ß The amount of land available for invest- investment treaties or free trade agreements) employees, though these play an impor- ment in or near the country’s largest or WTO commitments (box 7.3). tant role in the start-up a foreign-owned business city. Many large urban centers subsidiary. have limited industrial land available for Starting a Foreign Business ß Government reviews of foreign acquisi- investment, but this is not measured by the The process for establishing a foreign-owned indicators. tions in sensitive and strategic sectors. subsidiary may differ by city, province, Such reviews are often conducted for ß Acquisition of land along a country’s or region within countries—especially reasons of national, economic, and trade- borders or coastlines. large or federal countries. The Starting a mark security and protection. ß The ease of developing land, including Foreign Business indicators assume that the factors such as land privatization, land use establishment process occurs in the country’s Accessing Industrial Land planning, location permits, construction largest business city and do not explore The process for accessing industrial land permits, rezoning applications, utility con- possible variations in other parts of the may differ by city, province, or region nections, and sector-speciï¬?c regulations. country. within countries—especially large or federal ß The quality and effectiveness of comple- countries. The indicators assume that the mentary ï¬?nancial and legal institutions Because the case study stipulates that a process of leasing land occurs in the country’s (such as credit bureaus and courts). subsidiary will be established as a limited largest business city and they do not explore liability companies (LLC), the Starting a ß Land and property tax regimes for foreign possible variations in other parts of the Foreign Business indicators do not measure companies and investors. country. the number of procedures required to establish ß The cost of acquiring land (through lease other type of a business (such as corporation The Accessing Industrial Land indicators do or purchase). or partnership). The indicators also do not not cover: ß Environmental and social protections for consider other types of foreign investment ß The ease of acquiring agricultural land by host countries, beyond what is measured projects (such as joint ventures, licensing foreign individuals and companies. Many by the Ease of leasing land indicators. agreements, or establishment of branch countries there may have additional restric- ofï¬?ces), which are often treated differently— The Accessing Industrial Land indicators do not tions for foreign investment in agricultural both by law and in practice—than foreign encourage governments to promote efï¬?cient land (as in the European Union and the subsidiaries. land transactions at the cost of environmental United States). Due to the sensitive nature and social protections. Despite an explicit The case study also stipulates that the foreign of the topic and its potential negative con- effort to strike the proper balance between subsidiary will be operating a manufacturing sequences for communal land holders in the beneï¬?ts and costs of regulation in the facility and engage in international trade rural areas, it was deliberately excluded. indicators, major limitations remain. As noted, (importing some production inputs and ß The time and procedural steps involved the indicators do not highlight issues related exporting some manufactured goods). Thus in purchasing private or public land, to environmental and social protections for the indicators consider obtaining a trade because purchasing land is not possible in host countries, though the IAB survey did license a required procedure for the start-up some of the economies surveyed. examine these in the context of leasing land. process. ß The amount of land (public or private) In most countries environmental and social registered in land or property registration impact assessments are not conducted when Because the foreign company is assumed not systems, and the quality of this information. a foreign company leases or buys land, but to be applying for special beneï¬?ts or privileges from host countries (such as extraordinary tax ß Aspects of the functionality of land regis- instead when it intends to construct on it or holidays, breaks, or exemptions; or customs tries and cadastres. to begin operations in a sector sensitive to duty exemptions) apart from automatic ß The proportion of land held privately environmental and social concerns. investment incentives, procedures that are rather than publicly. When interpreting and using the Accessing only required to obtain special beneï¬?ts are not Industrial Land indicators, it should be kept in considered essential to the start-up process. mind that they focus primarily on laws and 74 INVESTING ACROSS BORDERS 2010 regulations governing foreign companies’ tion awards by the International Centre for Afghanistan, Angola, Azerbaijan, Bangladesh, Burkina Faso, Cambodia, Côte d’Ivoire, Haiti, access to industrial land, and less on legal Settlement of Investment Disputes (ICSID). 15 Kenya, Liberia, Mali, Montenegro, Papua protections for host countries’ citizens and ß Levels of awareness and acceptance of New Guinea, Rwanda, Senegal, the Solomon environments. The indicators (like many other Islands, South Africa, and Sudan. arbitration practices by countries’ legal data sets) should not be considered in isolation, 5 de Soto (1989). and business communities. but in conjunction with other indicators and 6 Ibid. ß Levels of training of countries’ arbitration reports—such as the Land Governance 7 For example, the correlation coefï¬?cient of the practitioners and judges. end results utilizing various scoring, weighting, Assessment Framework (LGAF)14—that reflect ß Effectiveness of arbitral institutions. and aggregation methodologies for the Investing Across Sectors data was 0.98. Given a country’s other needs, circumstances, and socioeconomic development. ß Extent to which arbitration is preferred the high correlation coefï¬?cient, simple weights were adopted for the reasons explained in the over other dispute resolution tools in each text. Arbitrating Commercial Disputes country. 8 See: http://www.worldbank.org/data/ The methodology for the Arbitrating ß Effectiveness of commercial litigation countryclass. Investing Across Borders 2010 reports 2008 gross national income per Commercial Disputes indicators is primarily (which is already measured by the World capita as published in the World Bank’s World limited to analyzing objective and veriï¬?able Bank Group’s Doing Business enforcing Development Indicators 2009. Income is calculated using the Atlas method (current $). data, such as the legal framework and most contracts indicator).16 For population data, Investing Across Borders common practices in each country. The survey 2010 uses mid-year 2008 population statistics Due to these and other limitations, the IAB as published in World Development Indicators used a methodology consisting mainly of yes 2009. indicators are only partial measures of the or no questions about whether certain laws or topic areas they cover. They are limited in 9 Portfolio investment, in contrast to foreign direct regulations exist in the country. It contained few investment, represents passive holdings of scope and explanatory power relative to securities such as foreign stocks, bonds, or other perception-based questions. Thus coverage actual policies and business realities. The ï¬?nancial assets and does not convey signiï¬?cant of actual practice is limited, given the survey control over the management or operations of speciï¬?c contexts of each economy must be methodology and the nature of arbitration, the foreign ï¬?rm. considered when interpreting the indicators which is private and conï¬?dential. 10 The de facto indicators do not capture the and their implications for that country’s policies degree of variation an investor may experience and investment climate. when completing the procedures. The project There is no such thing as a “one size ï¬?ts allâ€? thus investigates whether or not a measure arbitration regime. But by asking standardized of the degree of variation of the individual questions in the survey, the IAB project aims to responses should be included so as to compare Detailed information about the consistency of treatment across economies. For identify good practices that can help countries example, if in one country it takes a median of methodology, case study assumptions, benchmark the strength of their arbitration 90 days to establish a foreign-owned company and construction for the individual with a standard deviation of 5, while another regimes. indicators associated with the 4 topics takes only 60 days with a standard deviation of 45, an investor is likely to want to ensure is available online at Many countries that have recently adopted that the burden of the regulation takes 2 months http://www.investingacrossborders.org. rather than somewhere between 2 weeks and arbitration statutes (such as Afghanistan and the 4 months. Solomon Islands) have little or no experience 11 Christiansen (2004). with international arbitration. This makes it 12 Hoekman (1997); Sauvé, Pierre and Karsten hard to compare them with countries where ENDNOTES Steinfatt, “Assessing the Scope for Further arbitration is a well-established mechanism Investment Regime Liberalisation: An Analysis 1 The methodology of the Doing Business Based on Revealed Liberalisation Preferences,â€? for resolving commercial disputes. Countries project can be viewed online at http://www. OECD, unpublished. with little or no experience are excluded from doingbusiness.org. 13 Paciï¬?c Economic Cooperation Council some of the analysis on court assistance and 2 More detailed statistics on the number of (1995). respondents are available on IAB’s Web site. enforcement. 14 Burns and Deininger (2009). 3 The group of pilot countries comprised Argentina, Austria, Bangladesh, Cameroon, 15 Countries have different numbers of bilateral The indicators do not cover: investment treaties, and even the same treaty Canada, Chile, China, Colombia, Egypt, ß Evaluation of arbitration clauses in bilater- Ethiopia, Ghana, Madagascar, Mozambique, can have differences across countries in their Nicaragua, Nigeria, Peru, Russian Federation, substantive and dispute resolution clauses. Thus al investment treaties, investment chapters Serbia, Singapore, the United States, República the IAB methodology is not suitable to measure of free trade agreements, investment treaty Bolivariana de Venezuela, Vietnam, and the the quality of countries’ frameworks for bilateral Republic of Yemen. investment treaties. arbitrations, and enforcement of arbitra- 4 The group of countries were data was collected 16 World Bank, Doing Business, Enforcing through face-to-face interviews comprised Contracts (Washington, D.C. METHODOLOGY 75 This page left blank intentionally. 76 INVESTING ACROSS BORDERS 2010 Bibliography Adams, Martin and Stephen Turner. 2004. Case Studies on Brainard, S. Lael. 1997. “An Empirical Assessment of the Proximity- Investment in Community Land in Southern Africa. World Concentration Trade-off Between Multinational Sales and Bank Group, Foreign Investment Advisory Service (FIAS). Trade,â€? American Economic Review 87 (4): 520–44. Washington, D.C.: Mokoro. 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Vienna. 80 INVESTING ACROSS BORDERS 2010 Proï¬?les of Economies 81 Afghanistan South Asia (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Afghanistan is among the countries with least overt statutory restrictions on foreign ownership as measured Mining, oil and gas 100.0 88.0 92.0 by the Investing Across Sectors indicators. Among the 33 industry sectors covered by the indicators no such Agriculture and forestry 100.0 90.0 95.9 restrictions were identiï¬?ed. The country is an interesting example of the fact that the absence of foreign equity Light manufacturing 100.0 96.3 96.6 ownership restrictions across sectors is a necessary, but not sufï¬?cient condition for attracting FDI. Several deter- Telecommunications 100.0 94.8 88.0 minants are at play simultaneously, including market size, quality of infrastructure, political stability, economic Electricity 100.0 94.3 87.6 growth potential, with openness to foreign equity ownership being only one among those factors. Banking 100.0 87.2 91.0 Insurance 100.0 75.4 91.2 Transportation 100.0 79.8 78.5 Media 100.0 68.0 68.0 Sector group 1 (constr., tourism, retail) 100.0 96.7 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 4 procedures and 7 days to start a foreign-owned limited liability company (LLC) in Afghanistan (Kabul). 7 39 42 (days) This is among the shortest processes in South Asia and the IAB countries globally. A foreign company establish- Procedures ing a subsidiary in Afghanistan will need to authenticate the parent company’s documents abroad. Investments 4 9 10 (number) of more than $3,000,000 must go through the Afghanistan Investment Support Agency (AISA). AISA issues the Ease of establishment index business license and the tax identiï¬?cation number. Companies in Afghanistan are free to open and maintain a 68.4 62.5 64.5 (0 = min, 100 = max) bank account in foreign currency. There is no minimum capital requirement for foreign or domestic companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index The process of acquiring land in Afghanistan is unpredictable. Foreign companies seeking to access land have 73.3 87.5 82.1 (0 = min, 100 = max) the option to lease privately or publicly held land. It is difï¬?cult to determine from which authority one must Strength of ownership rights index seek approval to lease public land. Depending on the interests involved, one might need to seek approval from N/A 93.8 92.2 (0 = min, 100 = max) the president, minister, or head of a department. All land transactions must be registered with the courts, but Access to land information index only a fraction of transactions are in fact registered. This creates insecurity regarding the status of land. There 9.1 20.1 41.3 (0 = min, 100 = max) are, however, no legal restrictions on the lessee’s right to subdivide, sublease, and mortgage the leased land. Availability of land information index (0 = min, 100 = max) 0.0 59.7 70.6 This is determined by the lease contract between the relevant parties. In Kabul, there are no formal institu- tions that provide coherent land-related information. The information, if it exists, is scattered among various Time to lease private land (days) 218 99 61 municipal ofï¬?ces, ministries, and courts. Time to lease public land (days) 301 205 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Alternative dispute resolution (ADR) in Afghanistan is governed by the Afghan Commercial Arbitration Law 68.1 86.4 85.2 (0 = min, 100 = max) (2007) and the Commercial Mediation Law (2007), which invalidate the Commercial Mediation Law of 1995. Ease of process index According to both laws, the Ministry of Commerce and Industry (MOCI) may propose regulations and enact 0.0 55.0 70.6 (0 = min, 100 = max) and approve rules and procedures for better implementation of the laws. It is unclear, however, if any such Extent of judicial assistance index rules and procedures have been enacted. Currently there is no active ADR institution in Afghanistan and ADR 0.0 36.4 57.9 (0 = min, 100 = max) is not a common method of dispute resolution. Legal counsel in Afghanistan were therefore unable to provide detailed answers to survey questions on the commercial arbitration regime. The country has ratiï¬?ed the New York Convention and the ICSID Convention. For more information on this country, please go to http://www.investingacrossborders.org 82 INVESTING ACROSS BORDERS 2010 Albania Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The Albanian legal system grants foreign and domestic investors equal rights of ownership of local companies, Mining, oil and gas 100.0 96.2 92.0 following the principle of “national treatment.â€? Of the 33 sectors covered by the Investing Across Sectors indi- Agriculture and forestry 100.0 97.5 95.9 cators, 30 are fully open to foreign equity ownership. The only exceptions are the domestic and international air Light manufacturing 100.0 98.5 96.6 transportation and the television broadcasting sectors. Foreign ownership of airline companies is limited to a Telecommunications 100.0 96.2 88.0 maximum share of 49% for both domestic and international air transportation. These equity restrictions, how- Electricity 100.0 96.4 87.6 ever, apply only to investors from countries outside of the Common European Aviation Zone. The Law on Public Banking 100.0 100.0 91.0 and Private Radio and Television in the Republic of Albania (No. 8410/1998) stipulates that no natural person Insurance 100.0 94.9 91.2 or legal entity, foreign or Albanian, may own more than 40% of the share capital of a television company. Transportation 79.6 84.0 78.5 Media 70.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 7 procedures and 7 days to establish a foreign-owned limited liability company (LLC) in Albania 7 22 42 (days) (Tirana). This is faster than both the IAB regional average for Eastern Europe and Central Asia and the IAB Procedures global average. A foreign company is not required to seek investment approval, although, if it wants to engage 7 8 10 (number) in international trade, it must register with the customs system in order to import goods. Registration with Ease of establishment index the National Registration Center (NRC) takes only a day and the required documents are available online. 84.2 76.8 64.5 (0 = min, 100 = max) Entrepreneurs can complete company, tax, social insurance, health insurance, and labor directorate registrations using a single application procedure with the NRC. Any company in Albania may freely open and maintain bank accounts in foreign currency. Usually, Albanian banks allow accounts in ALL, Euros, and $. Speciï¬?c banks may also permit other currencies (based on market request). The minimum capital requirement for domestic and foreign LLCs has been signiï¬?cantly reduced, by Law No. 9901, to ALL 100 (~$1). ACCESSING INDUSTRIAL LAND Strength of lease rights index In Albania, it is possible to lease or own both privately and publicly held land. The process of leasing public 80.7 82.9 82.1 (0 = min, 100 = max) land, though legally possible, is difï¬?cult in practice. Public land can only be leased through a competitive bid Strength of ownership rights index and requires several administrative procedures. Lease contracts are limited to 99 years for agricultural land and 100.0 97.6 92.2 (0 = min, 100 = max) 30 years for other land. Only lease agreements for a period of more than 9 years require registration with the Access to land information index relevant ofï¬?ce. The lease contract can offer the lessee the right to sublease and/or subdivide the land as well as 47.4 50.3 41.3 (0 = min, 100 = max) the right to mortgage the land or use it as collateral. There are no restrictions on the amount of land that may Availability of land information index (0 = min, 100 = max) 85.0 78.9 70.6 be leased. Key land-related challenges that investors are likely to face are the result of unresolved conflicting claims rendering title documents insecure. One should exercise due diligence when seeking to acquire land in Time to lease private land (days) 36 43 61 Tirana. Time to lease public land (days) 129 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index In 2003, Albania enacted legislation on mediation based on the UNCITRAL Model. The Albanian Civil Procedure 84.0 82.5 85.2 (0 = min, 100 = max) Code (1996) has a short section on domestic arbitration and notes that international arbitration will be regu- Ease of process index lated by a special law that has not yet been adopted. The section on domestic arbitration applies only to arbi- 40.7 69.7 70.6 (0 = min, 100 = max) tration proceedings conducted in Albania, in which all the parties are Albanian residents. The law allows for all Extent of judicial assistance index property claims or other rights related to property to be resolved through arbitration. The arbitration agreement 68.5 64.4 57.9 (0 = min, 100 = max) must be concluded in writing. An agreement reached through email communications between the parties is not considered valid. Based on the deï¬?nition of domestic arbitration in the Code of Civil Procedure, it is unclear whether 2 Albanian entities residing in Albania may agree to arbitrate disputes outside of Albania. Local courts might refuse to enforce an award resulting from such arbitration. It is also unclear whether the provisions for domestic arbitration apply in cases of international arbitration taking place in Albania. The law does not specify which court has jurisdiction to oversee arbitration proceedings in cases of enforcing an arbitration agreement, assisting the arbitrators with orders for provisional measures, and taking evidence. Arbitration proceedings in Albania must be conducted in Albanian. Only lawyers licensed to practice in Albania may represent parties in domestic arbitration. The district court of ï¬?rst instance has jurisdiction to enforce awards made in Albania, which can take 14 weeks on average for domestic awards and 15 weeks for foreign awards from ï¬?ling an ap- plication to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 83 Angola Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) With statutory ownership restrictions on 9 of the 33 sectors covered by the Investing Across Sectors indicators, Mining, oil and gas 74.5 95.2 92.0 Angola limits foreign equity participation in its economy more so than most countries in Sub-Saharan Africa Agriculture and forestry 100.0 97.6 95.9 included in the report. Aside from the oil and gas sectors, where foreign ownership is limited to 49%, restric- Light manufacturing 82.5 98.6 96.6 tions in Angola are found primarily in the service sectors. In particular, private capital participation (domestic or Telecommunications 75.0 84.1 88.0 foreign) in the ï¬?xed-line telecommunications infrastructure sector is prohibited. In the ï¬?nancial services sectors, Electricity 100.0 90.5 87.6 foreign investment in insurance companies is limited to 50% and in banks to 10%. Foreign capital participa- Banking 10.0 84.7 91.0 tion in excess of these limits is possible with the approval of the Council of Ministers or the central bank. In the Insurance 50.0 87.3 91.2 publishing, TV broadcasting, and newspaper media sectors, foreign ownership is limited to a 30% share. Transportation 80.0 86.6 78.5 Media 30.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 263 days to establish a foreign-owned limited liability company (LLC) in Luanda, 263 48 42 (days) Angola. This is longer than the IAB regional and global averages. LLCs (Sociedades por Quota) must have at Procedures least 2 shareholders. The 4 additional procedures required exclusively of foreign companies add 195 days to the 12 10 10 (number) establishment process. A foreign company must translate the parent company’s documents into Portuguese and Ease of establishment index certify them in the country of origin. In addition, a foreign company must obtain an investment project approval 39.5 51.5 64.5 (0 = min, 100 = max) from the National Agency for Private Investment (ANIP) and the Council of Ministers (Conselho de Ministros), which takes on average 180 days. If the project has an initial capital investment of less than $5,000,000, it is submitted to ANIP for simpliï¬?ed approval proceedings. Foreign investments under $100,000 do not require ANIP approval. The foreign company, if it wants to engage in international trade, must also obtain a trade license from the Ministry of Commerce, which takes on average 14 days. A certiï¬?cate of capital importation is also required and is issued after the investment project is approved by the Angolan National Bank (Banco Nacional de Angola—BNA). Foreign companies are legally required to contract local accountants and auditors as well as legal counsel. Foreign companies must open a foreign currency bank account in a local bank domi- ciled in Angola. The minimum capital requirement for establishing an LLC in Angola is AOA 85,719 (~$1,000). ACCESSING INDUSTRIAL LAND Strength of lease rights index According to Article 12 of the Constitutional Law of Angola, all lands are originally property of the Angolan 87.9 76.6 82.1 (0 = min, 100 = max) state. Private land is not common, although it does exist. The state grants lease rights to investors, but the state Strength of ownership rights index usually retains ownership of the land. Only domestic companies can purchase publicly owned land. While it 75.0 77.3 92.2 (0 = min, 100 = max) is legally possible for a company to own or lease private land, the more common option to lease public land. Access to land information index The transfer of land to another party is possible, but depends on authorization from the relevant ofï¬?cial. There 36.8 33.9 41.3 (0 = min, 100 = max) are time limits and certain conditions that limit the possibility of transfer. For example, the holder must use Availability of land information index (0 = min, 100 = max) 60.0 58.5 70.6 leased land for a minimum of 5 years. The intention is to thwart land speculation. There are certain limits on the amount of land that may be leased. For land greater than 2 hectares in urban areas and 5 hectares in rural Time to lease private land (days) 40 72 61 ones, a ministerial grant may be required. Time to lease public land (days) 129 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration Law No. 16/03 (2003) governs domestic and international arbitrations in Angola. It is based on 74.9 82.4 85.2 (0 = min, 100 = max) the UNCITRAL Model Law. Domestic arbitrations are extremely rare, however, and it is therefore difï¬?cult to Ease of process index assess how effectively the law is implemented. Under the law, private commercial disputes can be arbitrated. 57.3 73.8 70.6 (0 = min, 100 = max) Administrative contracts involving the state acting in its public capacity, however, are subject to greater restric- Extent of judicial assistance index tions. Parties can appoint arbitrators of any nationality or professional qualiï¬?cations, although only lawyers 59.9 55.9 57.9 (0 = min, 100 = max) registered in Angola may represent parties in arbitration proceedings taking place in Luanda. Parties may choose the language of international arbitration proceedings, but domestic arbitrations must be conducted in Portuguese. There are no arbitral institutions in Luanda. This means that parties may appoint a foreign arbitral institution. The law provides for courts to assist arbitral tribunals, but it is difï¬?cult to assess the effectiveness of such assistance, given the lack of practice. Similarly, it is difï¬?cult to estimate the time needed to enforce arbitra- tion awards, due to the lack of practice for the enforcement of arbitration awards rendered in Luanda or in a foreign country. Based on the time limits set out in the law, it should take 10 weeks to enforce an award ren- dered in Angola from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org 84 INVESTING ACROSS BORDERS 2010 Argentina Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 29 are fully open to foreign equity Mining, oil and gas 100.0 91.0 92.0 ownership in Argentina. The only exceptions are the air transportation and media industries. According to the Agriculture and forestry 100.0 96.4 95.9 Aeronautic Code (Law No. 17.285), foreign capital participation in companies providing commercial passengers Light manufacturing 100.0 100.0 96.6 transportation, on both domestic and international routes, is limited to 49%. In addition, the company must Telecommunications 100.0 94.5 88.0 be incorporated according to Argentine laws and must be domiciled in Buenos Aires. For the media sectors, Electricity 100.0 82.5 87.6 Law No. 25.750 establishes a limit on foreign ownership of newspapers, journals, magazines, and publishing Banking 100.0 96.4 91.0 companies, as well as on television and radio companies. According to Article 2 of the law, foreign companies Insurance 100.0 96.4 91.2 are allowed to hold up to a 30% stake in the capital and voting rights of such companies. Transportation 79.6 80.8 78.5 Media 30.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 18 procedures and 50 days to establish a foreign-owned limited liability company (LLC) that wants 50 74 42 (days) to engage in international trade, in Argentina (Buenos Aires). This is longer than the IAB global average, but Procedures shorter than the IAB regional average for Latin America and the Caribbean. Full foreign equity ownership is not 18 14 10 (number) restricted. However, Argentine law requires at least 2 equity holders, with the minority equity holder maintain- Ease of establishment index ing at least a 5% interest. The Argentine Constitution and Foreign Investment Act stipulate that foreigners may 65.0 62.8 64.5 (0 = min, 100 = max) invest in Argentina without prior approval and under the same conditions as local investors. In addition to the procedures required of a domestic company, a foreign company establishing itself in Argentina must legalize the parent company’s documents, register the incoming foreign capital with the Central Bank, and obtain a trading license. Compliance with Central Bank regulations facilitates the repatriation of funds, according to Argentina’s Foreign Exchange Market regulation. Companies in Argentina may open only a savings account in foreign currency. There is a minimum capital requirement of ARS 12,000 (~$3,100), 25% of which must be paid in at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Argentina have the option to lease or buy land from private 79.3 78.2 82.1 (0 = min, 100 = max) or public owners. Publicly owned land is always sold through public auction. Registration of leases is not Strength of ownership rights index mandatory for either privately or publicly owned land. There are, however, certain exceptions for the lease of 100.0 98.2 92.2 (0 = min, 100 = max) agricultural land. There is no statutory maximum duration for the lease of land. The steps involved in leasing Access to land information index public land are similar to those for leasing land from a private owner, but the lease of public land requires 44.4 40.4 41.3 (0 = min, 100 = max) governmental approval by provincial decree. The time that it takes to obtain such a decree varies. Although an Availability of land information index (0 = min, 100 = max) 85.0 73.0 70.6 environmental impact assessment is not legally required to lease land, such an assessment is required to obtain a license to operate an industrial plant. Hence, it is usually advisable to perform an environmental due diligence Time to lease private land (days) 48 62 61 prior to the lease or purchase of land destined to hold industrial facilities. Time to lease public land (days) 112 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Argentina does not have a speciï¬?c law governing arbitration, but it has adopted a mediation law (Law No. 63.5 87.5 85.2 (0 = min, 100 = max) 24.573/1995), which makes mediation mandatory prior to litigation. Some arbitration provisions are scattered Ease of process index throughout the Civil Code, the National Code of Civil and Commercial Procedure, the Commercial Code, and 72.2 66.8 70.6 (0 = min, 100 = max) 3 other laws. None of these laws contains deï¬?nitions of domestic or international arbitration; nor do they Extent of judicial assistance index regulate the severability of the arbitration agreement from the main contract nor require the conï¬?dentiality of 55.1 51.7 57.9 (0 = min, 100 = max) arbitration or the impartiality of arbitrators. The Code of Civil and Commercial Procedure states that when par- ties have not agreed on the applicable procedural rules, the arbitration must be conducted under the same pro- cedural rules as those that govern cases litigated in court. The following methods of concluding an arbitration agreement are not binding under Argentine law: electronic communication, fax, oral agreement, and conduct on the part of one party. Generally, all commercial matters are arbitrable. There are no legal restrictions on the identity and professional qualiï¬?cations of arbitrators. Parties must be represented in arbitration proceedings in Argentina by attorneys who are licensed to practice locally. The grounds for annulment of arbitration awards are limited to substantial procedural violations, an ultra petita award (award outside the scope of the arbitra- tion agreement), an award rendered after the agreed-upon time limit, and a public order violation that is not yet settled by jurisprudence when related to the merits of the award. On average, it takes around 21 weeks to enforce an arbitration award rendered in Argentina, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 18 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 85 Armenia Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) In Armenia, overt statutory ownership restrictions on foreign capital, as measured by the Investing Across Mining, oil and gas 74.5 96.2 92.0 Sectors indicators, exist in a number of key sectors of the economy. Foreign ownership of air transportation Agriculture and forestry 50.0 97.5 95.9 companies (domestic and international), for example, is limited to a maximum of 49%. In addition to these Light manufacturing 100.0 98.5 96.6 restrictions, which can be found in many countries in Eastern Europe and Central Asia, Armenian laws also limit Telecommunications 100.0 96.2 88.0 foreign ownership in the airport operation and railway transportation sectors to 40%. These industries, as well Electricity 100.0 96.4 87.6 as the electricity transmission sector, are, furthermore, characterized by monopolistic market structures, further Banking 100.0 100.0 91.0 impeding foreign investment. Restrictions also exist in selected primary sectors such as the forestry industry, Insurance 100.0 94.9 91.2 which is closed to foreign investment, and in the oil and gas sector, where foreign capital participation is Transportation 55.6 84.0 78.5 limited to a maximum of 49%. Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 18 days to establish a foreign-owned limited liability company (LLC) in Armenia 18 22 42 (days) (Yerevan), a process in line with the regional average for IAB countries in Eastern Europe and Central Asia. A Procedures foreign company is not required to seek an investment approval, although, if it wants to engage in internation- 8 8 10 (number) al trade, it must register with the customs authority in order to import goods; this can take 2 days. Registration Ease of establishment index with the State Registrar must be either approved or denied within 5 working days. According to the Law on 78.9 76.8 64.5 (0 = min, 100 = max) State Registry of Enterprises, a registration may be refused only if the legal entity’s founding documents are ei- ther incomplete or inaccurate. There are no electronic services for company registration. Companies in Armenia are free to open and maintain bank accounts in foreign currency and there is no minimum capital requirement for foreign or domestic companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Armenia have the option to lease or buy land from both private 92.8 82.9 82.1 (0 = min, 100 = max) and public owners. The process of leasing private land is streamlined and extremely fast compared to the Strength of ownership rights index regional or global average. Leasing of publicly held land takes place through a public tender process, after 100.0 97.6 92.2 (0 = min, 100 = max) which the successful party enters into direct negotiations with the relevant public body. Land can be leased for Access to land information index up to 99 years and the lessee has the right to subdivide, sublease, or mortgage the leased land. There are no 73.7 50.3 41.3 (0 = min, 100 = max) restrictions on the amount of land that may be leased. Yerevan, Armenia’s capital, has both a land registry and Availability of land information index (0 = min, 100 = max) 95.0 78.9 70.6 a cadastre located in the same agency, and they are linked and coordinated to share data. There is, however, no land information system (LIS) or geographic information system (GIS) in place that centralizes relevant informa- Time to lease private land (days) 10 43 61 tion at a single point of access. Time to lease public land (days) 57 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Armenia recently adopted a Law on Commercial Arbitration (2006), which is based on the UNCITRAL Model 89.9 82.5 85.2 (0 = min, 100 = max) Law but applies to both domestic and international arbitration. The Armenian law stipulates that local courts Ease of process index must enforce arbitration awards that are made in Armenia and in the states that are signatories to the 1958 82.3 69.7 70.6 (0 = min, 100 = max) New York Convention, on the basis of reciprocity (Art. 35). All commercial disputes are arbitrable, including Extent of judicial assistance index banking, investment, ï¬?nancing and insurance disputes, exploitation, and concession agreements. The law, how- 27.3 64.4 57.9 (0 = min, 100 = max) ever, does not cover intra-company and patent or trademark disputes. Parties are free to appoint arbitrators of any nationality or professional qualiï¬?cations, and may choose foreign lawyers to represent them in proceedings in Armenia. The law sets a default rule of conï¬?dentiality of the proceedings. It takes less than 30 days to obtain an arbitration award in the Arbitration Court of the Armenian Chamber of Commerce. The arbitration award must be conï¬?rmed by an Armenian court, which issues a writ of execution (Art. 35). The conï¬?rmation hearings are conducted according to the regular rules of civil procedure and scheduled like any other court case, depend- ing on the caseload of the particular court. On average, it takes around 58 weeks to enforce an arbitration award rendered in Armenia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). Arbitration is still new in Armenia and practice is scarce. For more information on this country, please go to http://www.investingacrossborders.org 86 INVESTING ACROSS BORDERS 2010 Austria High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The Austrian legal system does not have any general restrictions on foreign ownership of local companies. Mining, oil and gas 100.0 100.0 92.0 Overall, the country offers a welcoming environment to foreign investors, with foreign equity ownership Agriculture and forestry 100.0 100.0 95.9 restrictions in only a limited number of the sectors covered by the Investing Across Sectors indicators. As in all Light manufacturing 100.0 93.8 96.6 other European Union member countries, foreign ownership in the air transportation sector is limited to 49% Telecommunications 100.0 89.9 88.0 for investors from outside of the European Economic Area (EEA). The Act on Ownership in Austrian Electricity Electricity 70.9 88.0 87.6 Industry stipulates that a minimum of 50% (in some cases 51%) of the shares (and, in particular, of the voting Banking 100.0 97.1 91.0 rights) in former government-owned companies in the Austrian electricity industry (generation, transmission, Insurance 100.0 100.0 91.2 and distribution) must be held by the Austrian republic, states, communities, or publicly owned enterprises. Transportation 79.6 69.2 78.5 Foreign equity ownership in newly established companies is not limited. Foreign capital participation in Austrian Media 74.5 73.3 68.0 television broadcasting companies is limited to a maximum of 49% by the Austrian Private Television Act. Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned subsidiary in Austria (Vienna) is slower than the IAB average for 30 21 42 (days) high-income OECD countries, but faster than the IAB global average. The 2 additional procedures required Procedures exclusively of foreign companies add 2 days to the process. A foreign enterprise must notarize the documents 10 9 10 (number) of the parent company abroad. In addition, foreign direct investments (FDI) must be reported to the Austrian Ease of establishment index National Bank for statistical purposes. This notiï¬?cation takes only 1 day. No investment approval is required. 73.7 77.8 64.5 (0 = min, 100 = max) Companies can download business registration documents and submit their applications online. They are also free to open and maintain bank accounts in foreign currency. Share capital, though, can only be denominated in euros ( ). The minimum nominal share capital of a limited liability company in Austria amounts to 35,000, half of which ( 17,500) must be paid in cash upon formation of the company. In cases where less than half of the minimum statutory capital is paid in cash, an auditor is required to certify that the contribution in kind equals the value of half of the minimum capital. ACCESSING INDUSTRIAL LAND Strength of lease rights index In general, it is quite easy for a foreign company to acquire land in Austria. Such companies have the option 85.7 92.2 82.1 (0 = min, 100 = max) to lease or buy land from both private and public owners. Leasing publicly owned land is not substantially dif- Strength of ownership rights index ferent from leasing privately owned land, although public authorities appear to be slower in their process. The 100.0 100.0 92.2 (0 = min, 100 = max) process of leasing private land is extremely efï¬?cient compared to the regional and global average. Registration Access to land information index of leases is uncommon in Vienna, as it is not required by law. If the lease agreement is ï¬?led with the land 42.1 52.5 41.3 (0 = min, 100 = max) registry, it is publicly available in the register of deeds. Lease contracts can be of unlimited duration and can Availability of land information index (0 = min, 100 = max) 80.0 84.2 70.6 offer the lessee the right to subdivide, sublease, mortgage the leased land, or use it as collateral. There are no restrictions on the amount of land that may be leased. Austria is one of the few countries that have a function- Time to lease private land (days) 33 50 61 ing land information system (LIS) and geographic information system (GIS). Time to lease public land (days) 79 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The original rules regulating arbitration in Austria are found in sections 577 to 618 of the Austrian Code of 95.4 94.2 85.2 (0 = min, 100 = max) Civil Procedure. These do not distinguish between domestic and international arbitrations, and contain speciï¬?c Ease of process index provisions on consumer and labor disputes. The Arbitration Act (2006) amends these provisions, and is based 83.7 83.3 70.6 (0 = min, 100 = max) closely on the UNCITRAL Model Law. All pecuniary disputes are arbitrable, although there may be restric- Extent of judicial assistance index tions on intra-company disputes depending on the facts of the case. Specialized legislation may also exempt 83.0 77.6 57.9 (0 = min, 100 = max) other matters from arbitration. Arbitration agreements cannot be concluded orally. Parties are free to appoint arbitrators of any nationality, gender, or professional qualiï¬?cations. Arbitration is not available online in Austria, although the parties are free to use any arbitral institution of their choice. The International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna (VIAC) administers international arbitrations. Austrian courts are supportive of arbitration. The courts are able to provide interim injunctions during arbitration proceedings. Because this has only been permitted since 2006, there has been little practice illustrating their effectiveness. Applications for enforcement of arbitration awards are made in the district court. On average, it takes around 9 weeks to enforce an arbitration award rendered in Austria, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 14 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 87 Azerbaijan Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Azerbaijan presents above average restrictions on foreign equity ownership compared to the countries in the Mining, oil and gas 49.0 96.2 92.0 Eastern Europe and Central Asia region included in the report. According to its laws, the state must retain Agriculture and forestry 100.0 97.5 95.9 a controlling stake in companies operating in the mining or oil and gas sectors. Thus, foreign (as well as Light manufacturing 100.0 98.5 96.6 domestic) capital participation is limited to a maximum of 49%. Foreign ownership in the media sectors is Telecommunications 100.0 96.2 88.0 strictly limited as well. Unless any relevant international agreement with Azerbaijan should provide otherwise, Electricity 100.0 96.4 87.6 foreign shareholding in media companies is limited to 33% for newspaper publishers and is prohibited for TV Banking 100.0 100.0 91.0 broadcasting companies. Currently, there are no such international agreements in place. While restrictions on Insurance 100.0 94.9 91.2 foreign equity ownership in the ï¬?nancial services sectors (banking and insurance) have already been abolished, Transportation 100.0 84.0 78.5 there are still sector-wide limits for total foreign capital participation. Media 16.5 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 7 procedures and 11 days to establish a foreign-owned limited liability company (LLC) in Azerbaijan. 11 22 42 (days) This is faster than the regional IAB average for Eastern Europe and Central Asia and much faster than the IAB Procedures global average. There are no additional procedures required of a foreign-owned company establishing a subsid- 7 8 10 (number) iary in Baku, Azerbaijan’s capital, other than the requirement to provide an apostille or notarized and translated Ease of establishment index copy of the incorporation documents and charter of the parent company abroad. A foreign-owned company 71.6 76.8 64.5 (0 = min, 100 = max) does not need to get an investment approval to establish itself in Azerbaijan. The company registration is done at a one-stop shop that also serves for registration for VAT. The Ministry of Taxes issues the business registration within 3 business days and the VAT number within 5 days of application. In order to open a bank account (in local or foreign currency), the company submits a Ministry of Taxes registration form to the appropriate bank. The whole process can be done online and usually takes only 2–3 days. There is no minimal capital requirement for LLCs, although the capital must be fully paid in prior to the state registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Azerbaijan, most foreign companies prefer to lease public land. The lease of public land is subject to the 78.5 82.9 82.1 (0 = min, 100 = max) approval of the relevant governing authority. Other available options include leasing private land and purchas- Strength of ownership rights index ing privately or publicly held land. The purchase of public land is complex and time-consuming. It is legally 100.0 97.6 92.2 (0 = min, 100 = max) possible to purchase private land, but not common in practice. Lease contracts can be held for a maximum of Access to land information index 99 years. Lease contracts are commonly for 30 years and offer the lessee the right to subdivide, sublease, or 42.1 50.3 41.3 (0 = min, 100 = max) mortgage the leased land. There are no restrictions on the amount of land that may be leased. Baku has both Availability of land information index (0 = min, 100 = max) 85.0 78.9 70.6 a land registry and a cadastre, located in different agencies. They are, however, linked and coordinated to share data. There is no land information system (LIS) or geographic information system (GIS) in place that centralizes Time to lease private land (days) 58 43 61 relevant information at a single point of access. Time to lease public land (days) 105 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Azerbaijani Law on International Arbitration (1999) applies only to arbitrations with an international ele- 82.4 82.5 85.2 (0 = min, 100 = max) ment (the place of business of one of the parties must be abroad or the subject matter of the dispute must be Ease of process index related to another country). The Civil Procedure Code (2000) stipulates that domestic arbitration be regulated 53.6 69.7 70.6 (0 = min, 100 = max) by law. No such law was ever issued, however. The following disputes are not arbitrable: those involving im- Extent of judicial assistance index movable property, patents or trademarks, claims against carriers in shipping agreements, and intra-company 37.0 64.4 57.9 (0 = min, 100 = max) and shareholder disputes. Arbitration agreements must be concluded in writing. An agreement reached through email communication between the parties is not considered valid. The law does not provide for conï¬?dential- ity of the arbitration proceedings. The Azerbaijan International Commercial Arbitration Court was established pursuant to the arbitration law, but its caseload is low. Under the law, the Supreme Court of the Republic of Azerbaijan is the only body that rules on the recognition and enforcement of arbitration awards and its decision is ï¬?nal. However, under the Civil Procedure Code, Supreme Court decisions can be further appealed to the Plenum of the Supreme Court. So, theoretically, the Supreme Court decision on recognition can be further ap- pealed, making the enforcement process longer. On average, it takes around 51 weeks to enforce an arbitration award rendered in Azerbaijan, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 45 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 88 INVESTING ACROSS BORDERS 2010 Bangladesh South Asia (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Bangladesh is one of the most open countries to foreign equity ownership, as measured by the Investing Across Mining, oil and gas 100.0 88.0 92.0 Sectors indicators. All of the 33 sectors covered by the indicators are fully open to foreign capital participation. Agriculture and forestry 100.0 90.0 95.9 In practice certain strategic sectors, including port and airport operation, railway freight transportation, and Light manufacturing 100.0 96.3 96.6 electricity transmission and distribution are dominated by publicly owned enterprises operating under mo- Telecommunications 100.0 94.8 88.0 nopolistic market structures, representing obstacles for foreign investors. Furthermore, registration of a foreign Electricity 100.0 94.3 87.6 investment project with the Board of Investment (BOI) is currently only possible for investors in the manufactur- Banking 100.0 87.2 91.0 ing sectors. Investments in the service sectors do not enjoy the beneï¬?ts associated with this registration (for Insurance 100.0 75.4 91.2 example free repatriation of proï¬?ts). Transportation 100.0 79.8 78.5 Media 100.0 68.0 68.0 Sector group 1 (constr., tourism, retail) 100.0 96.7 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time Two shareholders are required to form a limited liability company (or private limited company) in Dhaka. 55 39 42 (days) It takes approximately 55 days to set up a foreign-owned subsidiary engaging in international trade in Procedures Bangladesh, longer than the IAB regional and global averages. Only 1 procedure is speciï¬?c to foreign-owned 9 9 10 (number) businesses—the authentication of the parent company’s documentation abroad. This authentication is required Ease of establishment index to ï¬?le as a shareholder with the Registrar of Joint Stock Companies and Firms (RJSC) prior to incorporation. 55.3 62.5 64.5 (0 = min, 100 = max) Investment approval is not a mandatory prerequisite, although it is helpful to register with BOI in order to have access to the different facilities and institutional support provided by the government to registered investors. Permission to open a foreign-exchange bank account may be granted by Bangladesh Bank (Central Bank) on a case-by-case basis subject to adequate justiï¬?cation and compliance with the Bank’s foreign-exchange transac- tion guidelines. There is no minimum paid-in capital requirement for setting up a foreign LLC. However, the BOI will not issue a work permit for companies investing less than $50,000. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign-owned companies seeking to access land in Bangladesh have the option to lease from both private and 100.0 87.5 82.1 (0 = min, 100 = max) public owners. It is not possible, however, for a foreign company to buy publicly held land, unlike private land. Strength of ownership rights index Before leasing land in Dhaka, foreign companies may require approval from BOI and RJSC. A foreign-owned 100.0 93.8 92.2 (0 = min, 100 = max) company may not buy agricultural land. Leases of publicly owned land may be granted for up to 99 years. Access to land information index Leases for privately owned land can be of unlimited duration. Lease contracts can offer the lessee the right to 26.3 20.1 41.3 (0 = min, 100 = max) subdivide, sublease, or mortgage the leased land, or use it as collateral. There are no restrictions on the amount Availability of land information index (0 = min, 100 = max) 73.7 59.7 70.6 of land that may be leased. Land-related information may be found in the registry and cadastre, which are located in the same agency, but are not linked or coordinated to share data. Currently there is no land informa- Time to lease private land (days) 58 99 61 tion system (LIS) or geographic information system (GIS) in Bangladesh. Time to lease public land (days) 240 205 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act (2001) governs both domestic and international arbitrations in Bangladesh, although there 84.9 86.4 85.2 (0 = min, 100 = max) is no statutory deï¬?nition of domestic arbitration. The statute is based on the UNCITRAL Model Law, although Ease of process index there are a few differences. The Arbitration Act, for example, grants the high court division of the Supreme 67.5 55.0 70.6 (0 = min, 100 = max) Court of Bangladesh the power to determine the jurisdiction of the arbitral tribunal in certain circumstances. Extent of judicial assistance index Commercial matters can generally be submitted to arbitration. Arbitration agreements must be in writing. The 55.3 36.4 57.9 (0 = min, 100 = max) parties are free to select arbitrators of any gender, nationality, or professional qualiï¬?cations in both domestic and international arbitrations. However, foreign counsel cannot represent parties in arbitral proceedings unless they are locally licensed. There is no institution in Bangladesh that speciï¬?cally administers arbitrations. Although the arbitration law is modern, in practice, the courts in Bangladesh are not yet fully supportive of the arbitration process. Furthermore, the domestic courts are overburdened, which lengthens the enforcement process. On average, it takes around 26 weeks to enforce an arbitration award in local courts, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 89 Belarus Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) With restrictions on foreign equity ownership in many sectors, in particular the service industries, in Belarus Mining, oil and gas 100.0 96.2 92.0 limits on foreign equity participation are above the average for the 20 countries covered by the Investing Agriculture and forestry 100.0 97.5 95.9 Across Sectors indicators in the Eastern Europe and Central Asia region. Sectors such as ï¬?xed-line telecom- Light manufacturing 100.0 98.5 96.6 munications services, electricity transmission and distribution, and railway freight transportation are closed to Telecommunications 75.0 96.2 88.0 foreign equity ownership. In several other sectors, including media and insurance, foreign ownership is limited Electricity 64.3 96.4 87.6 to a less-than-50% stake. In addition, a comparatively large number of sectors are dominated by government Banking 100.0 100.0 91.0 monopolies, including, but not limited to, those mentioned above. Those monopolies, together with a high Insurance 49.0 94.9 91.2 perceived difï¬?culty of obtaining required operating licenses, make it difï¬?cult for foreign companies to invest. Transportation 80.0 84.0 78.5 The government of Belarus has, however, announced its intent to privatize additional state-owned companies Media 30.0 73.1 68.0 and relax some of the restrictions on the aforementioned sectors in the near future. Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 7 days and 6 procedures to establish a foreign-owned limited liability company (LLC) in Belarus (Minsk), 7 22 42 (days) making it one of the fastest countries in the IAB sample. The certiï¬?cate of state registration, for example, is Procedures typically issued within 1 working day after the necessary documents are submitted. An LLC in Belarus needs 6 8 10 (number) at least 2 shareholders. Unlike a domestic enterprise, a foreign LLC needs a minimum authorized capital of Ease of establishment index $20,000 (50% of which must be paid within the ï¬?rst year and the remainder within the following year). 78.9 76.8 64.5 (0 = min, 100 = max) ACCESSING INDUSTRIAL LAND Strength of lease rights index In Minsk, Belarus, the most common option for foreign companies wishing to access land is leasing public land. 71.4 82.9 82.1 (0 = min, 100 = max) Other options include leasing privately held land or buying land from private and public owners. While foreign Strength of ownership rights index companies are not legally prohibited from buying publicly or privately held land, in practice, this option is 100.0 97.6 92.2 (0 = min, 100 = max) exercised rarely. Procedures involved in leasing land do not differ signiï¬?cantly for foreign-owned and domestic Access to land information index companies. Lease contracts are limited to 99 years. The lease contract can offer the lessee the right to sublease 50.0 50.3 41.3 (0 = min, 100 = max) and/or mortgage the leased land. The right to subdivide requires a long and complex procedure and therefore Availability of land information index is not easily available. There are no restrictions on the amount of land that may be leased. Most land-related 60.0 78.9 70.6 (0 = min, 100 = max) information can be acquired from the local (territorial) agency on state registration, but this information is Time to lease private land (days) 34 43 61 located in several different registries within the agency, and separate applications must be submitted, and Time to lease public land (days) 97 133 140 separate fees paid, in order to obtain it. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Belarusian Law on the International Arbitration Court (1999) is largely based on the UNCITRAL Model Law. 78.3 82.5 85.2 (0 = min, 100 = max) It regulates arbitrations taking place under the auspices of the International Arbitration Court of the Belarusian Ease of process index Chamber of Commerce and Industry as well as ad hoc arbitrations in Belarus. The following commercial dis- 79.0 69.7 70.6 (0 = min, 100 = max) putes are not arbitrable: those involving immoveable property, intra-company disputes, disputes over sharehold- Extent of judicial assistance index er arrangements, and disputes involving patents and trademarks. Belarus does not recognize oral arbitration 84.9 64.4 57.9 (0 = min, 100 = max) agreements or those inferred through conduct. Parties are free to choose either local or foreign counsel in both domestic and international arbitrations in the country. If both companies are incorporated in Belarus they must choose Belarus as their seat of arbitration. The Supreme Commercial Court has refused to recognize awards made abroad when the parties were Belarusian, as contrary to public order. Belarus is one of the IAB countries that enforce foreign arbitration awards the fastest (6 weeks on average), with one streamlined recognition and enforcement proceeding. Arbitration between the state and foreign companies is not allowed in the following cases: concession agreements, disputes involving natural resources, and disputes involving state-owned prop- erty, including privatization and nationalization of property. For more information on this country, please go to http://www.investingacrossborders.org 90 INVESTING ACROSS BORDERS 2010 Bolivia Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Bolivia’s restrictions on foreign equity ownership are above average among the 14 countries in the Latin Mining, oil and gas 49.0 91.0 92.0 America and the Caribbean region covered by the Investing Across Sectors indicators. The new Bolivian Agriculture and forestry 100.0 96.4 95.9 Constitution, adopted in 2009, stipulates restrictions on foreign equity ownership in a number of strategic Light manufacturing 100.0 100.0 96.6 sectors. For example, the exclusive right to develop and exploit oil and gas reserves is granted to a state-owned Telecommunications 49.0 94.5 88.0 company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB). Foreign investors can enter into joint venture Electricity 49.0 82.5 87.6 agreements with YPFB, but they can only have a maximum share of 49%. Similarly, foreign capital participation Banking 100.0 96.4 91.0 in the mining industry is limited to a less-than-50% stake. Overt statutory ownership restrictions exist in the Insurance 100.0 96.4 91.2 telecommunications sector as well—where foreign ownership is limited to 49% for ï¬?xed-line and wireless/ Transportation 89.8 80.8 78.5 mobile infrastructure and services—and in the electricity sector, which has a limit of 49% in electricity genera- Media 100.0 73.1 68.0 tion, transmission, and distribution. With the adoption of the new Constitution, additional legislation imposing Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 restrictions on FDI is expected. Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 18 procedures and 54 days to establish a foreign-owned limited liability company (LLC) in Bolivia (La 54 74 42 (days) Paz). This is longer than the IAB global average, but shorter than the IAB regional average for Latin America Procedures and the Caribbean. Full foreign ownership is allowed in Bolivia. However, LLCs must have a minimum of 2 18 14 10 (number) shareholders. Foreign investors do not need an investment approval in Bolivia. In addition to the procedures Ease of establishment index required of a domestic company, a foreign company establishing a subsidiary in Bolivia must legalize the parent 63.2 62.8 64.5 (0 = min, 100 = max) company’s documents abroad, register the incoming foreign capital with the Central Bank, and if it wants to engage in international trade, register with the customs ofï¬?ce as a frequent importer. A duly registered com- pany in Bolivia is free to open and maintain a bank account in foreign currency. There is no minimum capital requirement for LLCs in Bolivia, although all the authorized capital must be paid in full before incorporation. In the case of a corporation (sociedad anónima), at least 50% of shares must be subscribed and at least 25% of all subscribed shares must be effectively paid in at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Most foreign companies seeking to start an industrial development project in La Paz, Bolivia buy land from an 65.0 78.2 82.1 (0 = min, 100 = max) existing private land owner. Leasing private land is less common. Further, the lease or purchase of public land Strength of ownership rights index is not possible, unless the Bolivian Congress passes speciï¬?c legislation. The purchase and use of public land, 87.5 98.2 92.2 (0 = min, 100 = max) therefore, is usually granted in the form of concessions, mainly for companies exploiting natural resources. Access to land information index Foreign investors may not acquire land within 50 kilometers of Bolivia’s borders. Private leases may be entered 33.3 40.4 41.3 (0 = min, 100 = max) into if the duration is less than 5 years. For greater durations, the lease is entered into as a public deed. The Availability of land information index (0 = min, 100 = max) 65.0 73.0 70.6 Civil Code stipulates that lease agreements may not exceed 10 years. A lease contract offers the lessee the right to sublease or subdivide the land, subject to the terms of the contract, but not to mortgage the lease or Time to lease private land (days) 42 62 61 use it as collateral. Land-related information can be found in the land registry and cadastre, which are located Time to lease public land (days) 170 156 140 in different agencies and are not linked or coordinated to share information. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Bolivian Arbitration and Conciliation Law No. 1770 (1997) is based on the UNCITRAL Model Law. Unlike 80.3 87.5 85.2 (0 = min, 100 = max) the Model Law, however, it requires a judicial review of the kompetenz-kompetenz principle, among other judi- Ease of process index cial interventions, in the case of an arbitrator challenge. All commercial matters are arbitrable and the doctrine 65.7 66.8 70.6 (0 = min, 100 = max) of severability of the arbitration agreement is recognized. Arbitration agreements are only valid if concluded in Extent of judicial assistance index writing. In domestic arbitration, proceedings must be conducted in Spanish, according to the rules in the Code 54.2 51.7 57.9 (0 = min, 100 = max) of Civil Procedure, which are applicable by default. This is not required for international arbitration proceedings conducted in Bolivia. There are no legal restrictions on the choice of arbitrators in domestic or international arbitrations, but they must be an odd number. The law expressly states that arbitrators must be independent and impartial and must preserve the conï¬?dentiality of the proceedings. Parties can only choose lawyers who are licensed to practice in Bolivia to represent them in arbitrations in Bolivia. The civil commercial court enforces domestic arbitration awards. Bolivian law states that decisions granting enforcement of an arbitration award are not subject to subsequent appeal. Foreign arbitral awards must undergo recognition before the Bolivian Supreme Court of Justice, after which a competent civil commercial court can issue a writ of execution. On average, it takes around 13 weeks to enforce an arbitration award rendered in Bolivia, from ï¬?ling an applica- tion to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 45 weeks to enforce a foreign award. In 2007, Bolivia denounced the ICSID Convention. Since then, if arbitration between foreign companies and public entities is agreed upon, references to local law and submission to local arbitration insti- tutions are included. Currently, the Bolivian executive branch only enters into domestic arbitrations. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 91 Bosnia and Herzegovina Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) According to the Law on the Policy of Foreign Direct Investment in Bosnia and Herzegovina, foreign investors Mining, oil and gas 100.0 96.2 92.0 are entitled to invest in any sector of the economy in the same form and under the same conditions as those Agriculture and forestry 100.0 97.5 95.9 deï¬?ned for local residents. Thus, in practice, most business sectors in Bosnia and Herzegovina are fully open to Light manufacturing 87.3 98.5 96.6 foreign equity ownership. Notable exceptions to this general rule are select strategic sectors, such as publishing Telecommunications 100.0 96.2 88.0 and media, where foreign ownership is restricted to 49%, and electric power transmission, which is closed to Electricity 85.7 96.4 87.6 foreign investment. In practice, additional sectors are dominated by government monopolies (such as air trans- Banking 100.0 100.0 91.0 portation and airport operation) or characterized by oligopolistic market structures (such as telecommunications Insurance 100.0 94.9 91.2 and electricity generation), making it difï¬?cult for foreign investors to engage. Transportation 100.0 84.0 78.5 Media 49.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 83 days and 14 procedures to establish a foreign-owned subsidiary that wants to engage in interna- 83 22 42 (days) tional trade, in Bosnia and Herzegovina (Sarajevo). A foreign investment approval from the Ministry of Foreign Procedures Trade and Economic Relations (MoFTER) is required of foreign companies and can take up to 10 days to obtain. 14 8 10 (number) This mandatory approval was abolished by the Law on Amendment of Law on FDI Policy at MoFTER, which was Ease of establishment index passed in 2010. While this law is still not in force, it is expected to come into force in mid-2010. Registration 65.8 76.8 64.5 (0 = min, 100 = max) is not possible online and the documents required are not available for download. Bank accounts in foreign currency are allowed after submitting a customs registration number certiï¬?cate. There is a minimum capital requirement of BAM 2,000 (~$1,300) for limited liability companies (LLCs). The statutory minimum amount of share capital for an LLC must be paid in before registering the company. Gradual payment of the share capital in an LLC is possible, but only for the amount exceeding the statutory minimum, provided that at least half of the share capital is paid in before submission of the application for registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Bosnia and Herzegovina have the option to purchase either pri- 75.0 82.9 82.1 (0 = min, 100 = max) vately or publicly held land. Lease contracts can be of unlimited duration, and can offer the lessee the right to Strength of ownership rights index subdivide, sublease, or mortgage the leased land. The laws and regulations that govern the acquisition of land 100.0 97.6 92.2 (0 = min, 100 = max) in Sarajevo are available online. There are no restrictions on the amount of land that may be leased. While most Access to land information index of the relevant land-related data for investors is available, in principle, it typically requires in-depth research 45.0 50.3 41.3 (0 = min, 100 = max) involving different authorities and information providers. Sarajevo has a land registry and cadastre, but they are Availability of land information index (0 = min, 100 = max) 75.0 78.9 70.6 not located in the same agency nor are they linked to coordinate and share data. There is no land information system (LIS) or geographic information system (GIS) in place that centralizes relevant information at a single Time to lease private land (days) 31 43 61 point of access. However, reforms are underway to provide such services. Time to lease public land (days) n/a 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Bosnia and Herzegovina has not enacted a law on commercial arbitration. The Law on Civil Procedure (2003) 72.6 82.5 85.2 (0 = min, 100 = max) contains some provisions on arbitration that are not based on the UNCITRAL Model Law. With assistance Ease of process index from the IFC and other international institutions, the central government enacted legislation on mediation in 57.1 69.7 70.6 (0 = min, 100 = max) 2004. The mediation law is based on the UNCITRAL Model Law on International Commercial Conciliation. Extent of judicial assistance index The Law on Civil Procedure does not contain deï¬?nitions and hence does not differentiate between domestic 76.3 64.4 57.9 (0 = min, 100 = max) and international arbitration. Arbitrators are required to have a legal degree and parties can choose only an odd number of arbitrators. Foreign-owned but locally incorporated companies can only select nationals of Bosnia and Herzegovina as counsel in arbitration proceedings. The Cantonal Court in Sarajevo has jurisdiction to decide on the recognition of foreign arbitration awards. Only after this court has reached a decision, may a party apply for enforcement before a Sarajevo Municipality Court. On average, it takes around 13 weeks to enforce a foreign arbitration award from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org 92 INVESTING ACROSS BORDERS 2010 Brazil Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Brazil’s restrictions on foreign equity ownership are above average among the countries in the Latin America Mining, oil and gas 100.0 91.0 92.0 and the Caribbean covered by the Investing Across Sectors indicators. Compared with other BRIC (Brazil, Agriculture and forestry 100.0 96.4 95.9 Russian Federation, India, and China) countries only Russia has fewer restrictions on foreign equity ownership Light manufacturing 100.0 100.0 96.6 than Brazil. Brazil restricts foreign equity ownership in the air transportation sector to a maximum of 20% Telecommunications 100.0 94.5 88.0 and in media industries (both TV broadcasting and newspaper publishing) to a maximum of 30%. The health Electricity 100.0 82.5 87.6 care sector is closed to foreign capital participation. In general terms, though, Brazilian legislation grants equal Banking 100.0 96.4 91.0 treatment to foreign and domestic companies. Insurance 100.0 96.4 91.2 Transportation 68.0 80.8 78.5 Media 30.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 50.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time Foreign companies establishing subsidiaries in Brazil (São Paulo) must have at least 2 shareholders. Executive 166 74 42 (days) ofï¬?cers of Brazilian companies (companies incorporated in Brazil, regardless of the origin of its capital stock) Procedures must be either Brazilian citizens or foreigners who hold a Brazilian permanent visa. The permanent visa may be 17 14 10 (number) issued to the statutory manager of a Brazilian company. In this case, however, the company must have at least: Ease of establishment index (a) $200,000 of its capital stock directly invested by the foreign company; or (b) $50,000 (in cash or assets) of 62.5 62.8 64.5 (0 = min, 100 = max) its capital stock directly invested by the foreign company as long as the company commits itself to create 10 new positions for Brazilians in the following 2 years. To ï¬?le with the Commercial Registry, the company may pay an additional fee and register through SIMPI (Sindicato da Micro e Pequena Indústria do Estado de São Paulo), which offers an expedited registration process. Forms for registration with the National Corporate Taxpayers’ Registry of the Ministry of Finance may be downloaded and registration may be monitored online. While government approval is not required, foreign investments must be registered with the Brazilian Central Bank. According to the Rules for the Exchange Market and Foreign Capital (Regulamento do Mercado de Câmbio e Capitais Internacionais) issued by the Central Bank of Brazil, only a few entities are entitled to hold a foreign currency bank account in Brazil. ACCESSING INDUSTRIAL LAND Strength of lease rights index In São Paulo, the lease of publicly held land by foreign companies is not common, as it involves a time-con- 85.7 78.2 82.1 (0 = min, 100 = max) suming process. Publicly held land may be leased if such land is not designated for public use or services. Other Strength of ownership rights index options for foreign companies seeking to access land include leasing privately held land and buying privately or 100.0 98.2 92.2 (0 = min, 100 = max) publicly held land. Certain restrictions for companies controlled by foreign capital apply on ownership of land Access to land information index located in certain areas, such as in rural areas, along the coastline or borders, or in the Amazon region. Lease 33.3 40.4 41.3 (0 = min, 100 = max) contracts can be of unlimited duration and offer the lessee the right to subdivide and sublease the land as per Availability of land information index (0 = min, 100 = max) 75.0 73.0 70.6 municipality legislation. The leased land cannot be mortgaged or used as collateral. There are no restrictions on the amount of land that may be leased. Land-related information can be found in the land registry and cadas- Time to lease private land (days) 66 62 61 tre, which are located in different agencies and are not linked or coordinated to share information. Time to lease public land (days) 180 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Brazil’s Arbitration Law (1996) is largely based on the UNCITRAL Model Law, except that all arbitral awards 84.9 87.5 85.2 (0 = min, 100 = max) made in Brazil are considered domestic. All types of commercial disputes are arbitrable. Brazil has a large Ease of process index number of arbitral institutions and arbitration is becoming increasingly popular. The use of arbitration to 45.7 66.8 70.6 (0 = min, 100 = max) resolve shareholder disputes has also become common. There are no restrictions on the selection of arbitrators. Extent of judicial assistance index However, arbitration in Brazil must be conducted in Portuguese, and parties in both domestic and international 57.2 51.7 57.9 (0 = min, 100 = max) arbitrations can only be represented by lawyers licensed to practice in Brazil. Arbitrators are not legally required to preserve the conï¬?dentiality of the proceedings. The law provides for court assistance with orders for interim measures and evidence taking. Brazil is one of the slowest IAB countries in enforcing foreign arbitration awards. It takes on average 1 year to recognize and enforce a foreign award assuming there is no appeal, be- cause proceedings are two-pronged, involving recognition before the Superior Court of Justice and enforcement at the Federal Court of São Paulo. A three-stage appeals process, including a constitutional appeal before the Supreme Federal Court, is also possible. Brazil has not ratiï¬?ed the ICSID Convention. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 93 Bulgaria Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Compared with other economies in Eastern Europe and Central Asia, Bulgaria has fewer restrictions on foreign Mining, oil and gas 100.0 96.2 92.0 equity ownership. Over the past few years, Bulgarian legislation has undergone harmonization with European Agriculture and forestry 100.0 97.5 95.9 Union legislation. During this process, many sectors of the economy have been opened to foreign capital par- Light manufacturing 100.0 98.5 96.6 ticipation. Today, Bulgaria does not apply any restrictions on foreign equity ownership in 31 of the 33 sectors Telecommunications 100.0 96.2 88.0 measured by the Investing Across Sectors indicators. As in the other EU countries, Bulgarian Civil Aviation Act Electricity 100.0 96.4 87.6 imposes restrictions on the air transportation sector, in which foreign ownership is limited to 49%. These equity Banking 100.0 100.0 91.0 restrictions, however, do not apply to investors from countries of the European Economic Area (EEA). Insurance 100.0 94.9 91.2 Transportation 79.6 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 5 procedures and 20 days to establish a foreign-owned limited liability company (LLC) in Bulgaria 20 22 42 (days) (Soï¬?a). This is in line with the IAB regional average for Eastern Europe and Central Asia and faster than the IAB Procedures global average. There are no additional procedures required of a foreign-owned company establishing a subsid- 5 8 10 (number) iary in Soï¬?a other than the requirement to provide an apostille or notarized and translated copy of the incorpo- Ease of establishment index ration documents and charter of the parent company abroad. A foreign-owned company does not need to get 78.9 76.8 64.5 (0 = min, 100 = max) an investment approval. The company registration is entirely electronic and companies can monitor the whole process on the ofï¬?cial Web page of the registry agency. Companies in Bulgaria are free to open and maintain bank accounts in foreign currency. Bulgaria has a minimum capital requirement of BGL 5,000 (~$3,460) for domestic and foreign companies, 35% of which must be paid in at the time of registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index Leasing public land in Soï¬?a is slow compared to the regional and global average. It requires several procedures 85.7 82.9 82.1 (0 = min, 100 = max) and takes place after approval by the respective governing bodies, and after undergoing a tender procedure. Strength of ownership rights index Purchase of public land is not common, as the process is time-consuming. The most common means of acquir- 100.0 97.6 92.2 (0 = min, 100 = max) ing land is by the purchase or lease of private land. Registration of a lease agreement is not mandatory, and Access to land information index registered lease agreements constitute a minor percentage of existing lease agreements. In the last few years, 36.8 50.3 41.3 (0 = min, 100 = max) however, registration of lease agreements has gained in popularity and most commercial lease agreements are Availability of land information index (0 = min, 100 = max) 95.0 78.9 70.6 now registered. Registration of a lease agreement is not a complicated procedure. It usually takes 2–3 days to complete. Generally, the duration of commercial leases can be unlimited, unless the land is publicly held, in Time to lease private land (days) 60 43 61 which case the statutory maximum duration is 10 years. A major land-related challenge in Soï¬?a is the lack of a Time to lease public land (days) 351 133 140 uniï¬?ed land registry and the fact that the cadastre does not cover all regions. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Bulgarian International Commercial Arbitration Act (ICAA, 1988, last updated 2007) regulates international 93.1 82.5 85.2 (0 = min, 100 = max) commercial arbitration, but also includes references to domestic commercial arbitration. Other national laws Ease of process index do not impose any restrictions that could hinder the application of ICAA provisions. Bulgaria has also enacted 64.7 69.7 70.6 (0 = min, 100 = max) a Mediation Act (2004). All commercial disputes are arbitrable except those involving rights over immovable Extent of judicial assistance index property and intra-company disputes. There are 2 main arbitral institutions in Bulgaria and these have a sig- 68.6 64.4 57.9 (0 = min, 100 = max) niï¬?cant caseload. If both parties are nationals or have registered ofï¬?ces in Bulgaria, they must choose Bulgaria as the seat of arbitration, unless one party has dominant foreign capital participation. Parties to a domestic arbitration may not choose a foreign arbitrator unless a party to the dispute has dominant foreign capital participation. Domestic arbitration proceedings must be conducted in Bulgarian. The law does not give powers to the arbitrators to decide ex aequo et bono. The law requires the impartiality and independence of arbitrators. Lawyers acting in arbitration proceedings in Bulgaria must be licensed to practice in Bulgaria. Courts may suspend the execution of an arbitral award as an interim measure upon the appellant’s request and provision of a guarantee in the amount of the awarded interest. Soï¬?a City Court has exclusive jurisdiction to oversee arbitration proceedings and enforce domestic and international arbitration awards. On average, it takes around 17 weeks to enforce an arbitration award rendered in Bulgaria, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 27 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 94 INVESTING ACROSS BORDERS 2010 Burkina Faso Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 21 countries covered by the Investing Across Sectors indicators in the Sub-Saharan Africa region, Mining, oil and gas 95.0 95.2 92.0 Burkina Faso is one of the more open economies to foreign equity ownership. Most of its sectors are fully open Agriculture and forestry 100.0 97.6 95.9 to foreign capital participation, although the law requires companies providing mobile or wireless communica- Light manufacturing 100.0 98.6 96.6 tion services to have at least 1 domestic shareholder. Furthermore, the state automatically owns 10% of the Telecommunications 87.5 84.1 88.0 shares of all companies active in the mining sector. The government is entitled to nominate 1 member of the Electricity 100.0 90.5 87.6 board of directors for such companies. Select additional strategic sectors are characterized by monopolistic mar- Banking 100.0 84.7 91.0 ket structures. In particular, the oil and gas sector, the electricity transmission and distribution sectors, and the Insurance 100.0 87.3 91.2 ï¬?xed-line telephony sector are dominated by publicly owned enterprises, making it difï¬?cult for foreign investors Transportation 100.0 86.6 78.5 to engage. Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 5 procedures and 15 days to establish a foreign-owned limited liability company (LLC) in Burkina Faso 15 48 42 (days) (Ouagadougou). This is faster than the average for IAB countries both in Sub-Saharan Africa and globally. In Procedures addition to the procedures required of a domestic company, if a foreign company is managed by foreigners, 5 10 10 (number) it must get an investment approval (autorisation d’exercer le commerce) from the Ministry of Commerce. The Ease of establishment index authorization is never refused and usually does not take long. The law allows companies to show proof of 44.7 51.5 64.5 (0 = min, 100 = max) request in order to start operating. Companies register with the Center for Business Formalities (Centre des Formalités des Entreprises—CEFORE) and are assigned a unique company ID number for company registration, ï¬?scal identiï¬?cation, and social security. This usually takes about 9 business days. According to a directive of the Economic Community of West African States (ECOWAS), companies in Burkina Faso are not allowed to open bank accounts in foreign currency unless they get approval from the Burkina Faso Ministry of Finance and the Central Bank of West Africa. This approval must be renewed yearly. The minimum capital requirement of XOF 1,000,000 (~$2,000) is applicable across all OHADA (Organization for the Harmonization of Business Law in Africa) member states. It must be paid in full for the incorporation of an LLC. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Burkina Faso have the option to buy either privately or publicly 74.9 76.6 82.1 (0 = min, 100 = max) held land. Leasing or buying public land is not recommended, because the process is unpredictable. There are Strength of ownership rights index cases where it has taken years to lease or buy public land. Lease contracts can be held for a maximum of 99 50.0 77.3 92.2 (0 = min, 100 = max) years. If provided for in the terms of the lease contract, a lessee can subdivide, sublease, or mortgage the leased Access to land information index land or use it as collateral. There are no restrictions on the amount of land that may be leased. While most of 31.6 33.9 41.3 (0 = min, 100 = max) the relevant land-related data for investors is available, in principle, acquiring it is burdensome, as it requires in- Availability of land information index (0 = min, 100 = max) 50.0 58.5 70.6 depth research involving different authorities and information providers. Ouagadougou has a land registry and cadastre, but they are not located in the same agency nor are they linked to coordinate and share data. Time to lease private land (days) .. 72 61 Time to lease public land (days) 120 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The OHADA Uniform Act on Arbitration, which was adopted in 1999, governs both domestic and international 94.9 82.4 85.2 (0 = min, 100 = max) arbitrations in Burkina Faso. It is easily accessible online. There are certain mandatory provisions in the act. In a Ease of process index domestic arbitration, for example, parties are not free to choose the nationality of the arbitrator. Parties to an 67.6 73.8 70.6 (0 = min, 100 = max) international arbitration are not free to choose the professional qualiï¬?cations of the arbitrator. Although the Extent of judicial assistance index law stipulates that arbitrators must be independent and impartial in both domestic and international arbitra- 67.9 55.9 57.9 (0 = min, 100 = max) tions, it does not require that arbitrators preserve the conï¬?dentiality of arbitration proceedings. Arbitration agreements must be in writing. It is not possible to conduct arbitrations online in Burkina Faso. The Centre d’arbitrage, de médiation et de conciliation d’Ouagadougou (CAMCO) administers arbitrations. The law does not require domestic courts to assist the arbitration process by ordering the production of documents or the ap- pearance of witnesses. It takes approximately 10 weeks from the application for a hearing to the granting of a writ of execution attaching the assets in a domestic arbitration assuming there is no appeal, and several weeks longer for an international arbitration award. The enforcement of a foreign award takes about 13 weeks if no appeal is ï¬?led. Arbitration is not common in Burkina Faso. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 95 Cambodia East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Cambodia is one of the more open countries to foreign equity ownership in the East Asia and the Paciï¬?c Mining, oil and gas 100.0 75.7 92.0 region. Most of the sectors covered by the Investing Across Sectors indicators are fully open to foreign capital Agriculture and forestry 100.0 82.9 95.9 participation. Overt legal ownership restrictions do exist on port and airport operation and on the electricity Light manufacturing 100.0 86.8 96.6 transmission industries. Pursuant to the Law on Electricity, the only national transmission license is granted Telecommunications 100.0 64.9 88.0 to the publicly owned electricity company EDC. This sector is thus closed to private investment (domestic or Electricity 85.7 75.8 87.6 foreign). Port operation is closed to foreign capital participation as well. All port facilities in Cambodia are cur- Banking 100.0 76.1 91.0 rently owned and operated directly by the public port authorities. Furthermore, Cambodian laws stipulate that Insurance 100.0 80.9 91.2 the government of Cambodia must retain a majority ownership and control of basic airport infrastructure and Transportation 69.8 63.7 78.5 aeronautical navigation services infrastructure. Foreign capital participation in the airport operation sector is Media 100.0 36.1 68.0 thus limited to a less-than-50% stake. Sector group 1 (constr., tourism, retail) 100.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 86 days to establish a foreign-owned limited liability company (LLC) in Cambodia. 86 68 42 (days) This is slower than both the IAB regional average for East Asia and the Paciï¬?c and the IAB global average. An Procedures LLC must have a minimum of 2 shareholders, up to a maximum of 30 shareholders. A foreign company requires 10 11 10 (number) no additional procedure other than the authentication and notarization of the parent company’s documents Ease of establishment index abroad, which must be submitted to incorporate the subsidiary. Investment approval is not required unless 44.7 57.4 64.5 (0 = min, 100 = max) the foreign company applies to the Council for the Development of Cambodia (CDC) for investment incentives and a tax exemption. The business registration process is not yet available online. Foreign companies are free to open and maintain bank accounts in foreign currency. KHR 4,000,000 (~$1,000) is the minimum paid-in capital requirement for establishing an LLC in Cambodia. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Cambodia, it is possible to lease privately or publicly held land. Due to the difï¬?culty of enforcing legal rights 92.9 84.9 82.1 (0 = min, 100 = max) against the state, and the additional legal formalities and procedures that must be followed to lease publicly Strength of ownership rights index held land, it is easier to lease private land. Companies in which foreign nationals own more than 49% of the n/a 83.3 92.2 (0 = min, 100 = max) shares are prohibited from buying land. Under Cambodian law, leases of less than 15 years are considered Access to land information index contractual rights and are legally classiï¬?ed as short-term leases. Leases of 15 years or more are legally classi- 41.7 35.1 41.3 (0 = min, 100 = max) ï¬?ed as long-term leases and constitute real property rights. These rights may be transferred to another party. Availability of land information index (0 = min, 100 = max) 52.5 67.5 70.6 Lease contracts can be of unlimited duration and the amount of land that may be leased is unlimited. They can offer the lessee the right to subdivide, sublease, or mortgage the leased land. Although there is a land registry Time to lease private land (days) 41 66 61 in Phnom Penh, the process of lease registration is relatively new. The issuance of long-term lease registration Time to lease public land (days) 119 151 140 certiï¬?cates became possible in May 2008. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Cambodia’s Law on Commercial Arbitration was passed in 2005 and can be found online. It contains differing 92.4 83.8 85.2 (0 = min, 100 = max) deï¬?nitions for domestic and international arbitrations, and, like many laws in the East Asia and Paciï¬?c region, Ease of process index is based on the UNCITRAL Model Law. Arbitration agreements can be concluded via email or fax, but not 48.6 66.1 70.6 (0 = min, 100 = max) orally without written agreement. The majority of commercial disputes can be referred to arbitration. Disputes Extent of judicial assistance index involving rights over immoveable property that is located in Cambodia, however, are referred to the Cadastral 46.0 46.6 57.9 (0 = min, 100 = max) Commission. Parties may select an arbitrator of any nationality or gender. However, under the current law, the arbitrator must be a member of the National Arbitration Center. Furthermore, the parties can only appoint legal counsel that is licensed to practice in Cambodia. Arbitration is still being developed in Cambodia, and although the legal framework is being worked on, practice must still be encouraged. The Arbitration Center is in the pro- cess of being developed, for example, and practitioners are unaware of any institutional arbitration, domestic or international, that has taken place in the past 12 months. It is also difï¬?cult to assess whether courts support arbitration or the enforcement of arbitration awards, as court decisions are not published. On average, it takes around 26 weeks to enforce an arbitration award rendered in Cambodia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org 96 INVESTING ACROSS BORDERS 2010 Cameroon Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The Investment Charter (Law No. 2002/004 of April 19, 2002) of Cameroon abolished several limitations to Mining, oil and gas 95.0 95.2 92.0 foreign equity ownership that had existed under previous regulations (that is, the small and medium enterprises Agriculture and forestry 100.0 97.6 95.9 [SME] regime). Thus, most of the primary sectors and all of the manufacturing sectors covered by the Investing Light manufacturing 100.0 98.6 96.6 Across Sectors indicators are now fully open to foreign capital participation. Like a number of other countries Telecommunications 100.0 84.1 88.0 in the Sub-Saharan Africa region, Cameroon limits foreign investment in the mining sector, in which 10% of Electricity 71.4 90.5 87.6 the capital of such companies must belong to the state. Further ownership restrictions exist predominantly in Banking 100.0 84.7 91.0 the service industries, where, for example, the electricity transmission and distribution sectors are closed to Insurance 100.0 87.3 91.2 foreign investment. Foreign capital participation is limited to 49% in the media industries (TV broadcasting and Transportation 49.0 86.6 78.5 newspaper publishing) and in the transportation sectors (port and airport operation, domestic and international Media 49.0 69.9 68.0 air transportation, and railway freight transportation). Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 14 procedures and 82 days to establish a foreign-owned limited liability company (LLC) in Douala, 82 48 42 (days) Cameroon. This process is lengthier and more complex than the IAB regional and global averages. While only 2 Procedures additional steps are required of foreign companies compared to domestic ones, these steps add an additional 14 10 10 (number) 48 days to the overall establishment process. A declaration of foreign investment to the Ministry of Finance is Ease of establishment index mandatory 30 days prior to the beginning of the establishment process. In addition, if the company wants to 41.1 51.5 64.5 (0 = min, 100 = max) engage in international trade, registration in the importers’ ï¬?le is required to obtain a “sydoniaâ€? number (a custom computer identiï¬?cation). This number facilitates the entry and exit of goods produced by the company. The authentication of the parent company’s documentation abroad is required only to establish a subsidiary. Foreign-owned resident companies that wish to maintain foreign currency bank accounts in Douala must obtain prior approval. The Minister of Finance issues such authorization, which is subject to approval from the Bank of Central African States (BEAC—Banque des Etats de l’Afrique Centrale) as per Section 24 of the exchange control regulations. This approval takes on average 38 days to obtain. There is a minimum paid-in capital requirement of CFA 1,000,000 (~$2,060) for setting up foreign as well as local LLCs. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Cameroon have the option to lease or buy privately or publicly 73.6 76.6 82.1 (0 = min, 100 = max) held land. The process of leasing public land is unpredictable, depending on the interests of the public authority Strength of ownership rights index that owns the land. In some instances, it takes a very short time and in others, may take a number of months. 75.0 77.3 92.2 (0 = min, 100 = max) Most foreign companies acquire land from the state as part of an investment package. In Douala, the role of Access to land information index the notary public is crucial in the process of land acquisition and determines how fast it takes. The lease con- 52.6 33.9 41.3 (0 = min, 100 = max) tract can be of an unlimited duration and can offer the lessee the right to sublease, subdivide, or mortgage the Availability of land information index 55.0 58.5 70.6 leased land. There are no restrictions on the amount of land that may be leased. Most land-related information (0 = min, 100 = max) can be acquired from the registry or cadastre. There is no land information system (LIS) or geographic informa- Time to lease private land (days) 75 72 61 tion system (GIS) that centralizes relevant land information. Time to lease public land (days) 108 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The OHADA Uniform Act on Arbitration (1999) which is based on the UNCITRAL Model Law governs both 87.4 82.4 85.2 (0 = min, 100 = max) domestic and international arbitrations in Cameroon. The Uniform Act supersedes the existing national laws Ease of process index on arbitration. The principal arbitral institution under OHADA is the Common Court for Justice and Arbitration 79.6 73.8 70.6 (0 = min, 100 = max) (CCJA) in Abidjan, Côte d’Ivoire. The Groupement Interpatronal du Cameroon (GICAM), created in 2005, also Extent of judicial assistance index administers arbitration and mediation proceedings, although the CCJA remains the primary institution for 64.6 55.9 57.9 (0 = min, 100 = max) settling arbitration disputes. Cameroon has ratiï¬?ed the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards and the Washington Convention for the Settlement of Investment Disputes (ICSID). Cameroon recognizes more grounds for refusal of recognition or enforcement of foreign arbitration awards than those listed under the New York Convention. On average, it takes around 15 weeks to enforce an arbitration award rendered in Cameroon, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 24 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 97 Canada High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 12 high-income OECD countries covered by the Investing Across Sectors indicators, Canada pres- Mining, oil and gas 100.0 100.0 92.0 ents more stringent restrictions on foreign equity ownership. It imposes overt statutory ownership restrictions Agriculture and forestry 100.0 100.0 95.9 on a number of service sectors. Foreign capital participation in the domestic and international air transportation Light manufacturing 81.1 93.8 96.6 sectors, for example, is limited to a maximum share of 49%. Furthermore, under the Canadian telecommunica- Telecommunications 46.7 89.9 88.0 tions and broadcasting regime, foreign investors may own only up to 20% of the shares of a Canadian operat- Electricity 100.0 88.0 87.6 ing company directly, plus an additional 33% of the shares of a holding company. In aggregate, total direct and Banking 65.0 97.1 91.0 indirect foreign ownership in the telecommunications sector (ï¬?xed-line and mobile/wireless infrastructure and Insurance 100.0 100.0 91.2 services) and in the television broadcasting sectors is limited to 46 %. The health care sector is de facto closed Transportation 79.6 69.2 78.5 to FDI because private hospitals and clinics may not receive payments from provincial health insurance funds, Media 73.4 73.3 68.0 which are critical for the ï¬?nancial viability of operators in the sector. Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 50.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time With only 6 days and 2 procedures, Canada (Toronto) enjoys one of the fastest and simplest processes of 6 21 42 (days) establishing a foreign-owned limited liability company (LLC). Compared to domestic companies, a foreign Procedures company requires no additional procedure other than the post-incorporation notiï¬?cation of the Investment 2 9 10 (number) Canada Agency. This notiï¬?cation must be made within 30 days of incorporation. Under the Investment Canada Ease of establishment index Act, unless the investment is made in “cultural industriesâ€?, affects the country’s national security, or is made 81.6 77.8 64.5 (0 = min, 100 = max) in restricted sectors, it is not subject to review. Foreign investors have the option of ï¬?ling either for federal incorporation or provincial registration. Federal incorporation entails one procedural step that can be done online, using “Industry Canada’sâ€? electronic ï¬?ling center. Filing can also be done by regular mail, fax, courier, or in person. A federally incorporated subsidiary has the right to operate anywhere in Canada. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement for foreign or domestic companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index Although it is possible to lease or purchase both privately and publicly held land, the lease or purchase of 100.0 92.2 82.1 (0 = min, 100 = max) private land is more common. The purchase of public land may be subject to requirements to build to certain Strength of ownership rights index speciï¬?cations within a deï¬?ned timetable, failing which the public body will have reserved the right to re- 100.0 100.0 92.2 (0 = min, 100 = max) purchase the land from the buyer. Due to such contractual constraints, foreign companies rarely purchase public Access to land information index land. Leases with a term of 50 years or more are subject to a land transfer tax. There is no statutory maximum 46.2 52.5 41.3 (0 = min, 100 = max) for the duration of leases. Leases can offer the lessee the right to sublease, mortgage the leased land, or use it Availability of land information index (0 = min, 100 = max) 85.0 84.2 70.6 as collateral, if provided by the contract. With respect to subdivision, leases for 21 years or more may require consent from public authorities. The province of Ontario, in which Toronto is located, is in the ï¬?nal stages of Time to lease private land (days) 68 50 61 converting to a Register of Titles system from a Register of Deeds system. Time to lease public land (days) 131 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Canada’s arbitration legislation reflects its federal nature. All Canadian provinces and territories have enacted 89.9 94.2 85.2 (0 = min, 100 = max) legislation that governs domestic commercial arbitrations and international commercial arbitrations taking Ease of process index place in their provinces. The Province of Ontario has enacted the Arbitration Act (1991), which governs domes- 84.7 83.3 70.6 (0 = min, 100 = max) tic arbitration and is based on the UNCITRAL Model Law, and the International Commercial Arbitration Act Extent of judicial assistance index (1990), which governs international arbitration and expressly adopts the UNCITRAL Model Law. The legislation 94.0 77.6 57.9 (0 = min, 100 = max) of the Province of Ontario is strongly governed by the principle of “party autonomy.â€? Commercial disputes are arbitrable, unless legislation stipulates that certain matters are expressly within the courts’ jurisdiction. Parties are free to appoint arbitrators of any nationality, gender, or professional qualiï¬?cations. Foreign lawy ers representing parties in an arbitration must be licensed by the Law Society in order to provide legal services in Ontario. The parties are free to choose any arbitral institution of their choice, the most common being the ADR Institute of Canada. Canada is also one of the few jurisdictions in the world to provide online arbitration. The courts are generally very supportive of commercial arbitration. On average, it takes around 11 weeks to enforce an arbitration award, whether rendered in Canada or in a foreign country, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). Appeals can be made to the Ontario Court of Appeal. Canada has not ratiï¬?ed the ICSID Convention. For more information on this country, please go to http://www.investingacrossborders.org 98 INVESTING ACROSS BORDERS 2010 Chile Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Chile is one of the most open countries to foreign equity ownership, as measured by the Investing Across Mining, oil and gas 100.0 91.0 92.0 Sectors indicators. All 33 sectors covered by the indicators are fully open to foreign capital participation. There Agriculture and forestry 100.0 96.4 95.9 are no sectors with monopolistic or oligopolistic market structures, with the exception of the oil and gas indus- Light manufacturing 100.0 100.0 96.6 try, nor are there any perceived difï¬?culties in obtaining any required operating licenses. Telecommunications 100.0 94.5 88.0 Electricity 100.0 82.5 87.6 Banking 100.0 96.4 91.0 Insurance 100.0 96.4 91.2 Transportation 100.0 80.8 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 11 procedures and 29 days to establish a foreign-owned limited liability company (LLC) in Chile 29 74 42 (days) (Santiago). This is one of the shortest processes among the IAB Latin America and the Caribbean countries. Procedures Full foreign ownership is allowed in Chile. LLCs need a minimum of 2 shareholders. In addition to the steps 11 14 10 (number) required of a domestic company, a foreign company establishing a subsidiary in Chile must authenticate the Ease of establishment index parent company’s documents abroad and register the incoming capital with the Central Bank. This procedure, 63.2 62.8 64.5 (0 = min, 100 = max) established under Chapter XIV of the Foreign Exchange Regulations, requires a notice of conversion of foreign currency into Chilean pesos when the investment exceeds $10,000. The registration process at the Registry of Commerce of Santiago is available online. Companies in Chile are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement for foreign or domestic companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Chile, public land is bought or leased by public auction. There are some exceptions that allow a direct sale 85.7 78.2 82.1 (0 = min, 100 = max) of public land after approval from the public authority holding the land. Foreign companies may also lease or Strength of ownership rights index purchase private land. Leases of private land do not need to be executed before any authority such as a notary 100.0 98.2 92.2 (0 = min, 100 = max) public. They also do not need to be registered at any public or private institution. Nevertheless, it is advisable to Access to land information index execute such agreements by means of a public deed before a notary public to make the document eligible for 33.3 40.4 41.3 (0 = min, 100 = max) registration and to provide easier enforcement of the lease. A lessee may be able to sublease, subdivide, mort- Availability of land information index (0 = min, 100 = max) 80.0 73.0 70.6 gage, or transfer the lease, subject to the terms of the contract. There are restrictions on the amount of public land that may be leased, but not on private land. The process of leasing private and public land is efï¬?cient. Time to lease private land (days) 23 62 61 Land-related information may be found in the land registry. There is no cadastre, land information system (LIS), Time to lease public land (days) 93 156 140 or geographic information system (GIS) in Santiago. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Chile has a dual arbitration system. Domestic arbitration is governed by the Chilean Code of the Judiciary 94.9 87.5 85.2 (0 = min, 100 = max) (1943) and the Chilean Code of Civil Procedure (1893). International commercial arbitration is governed by the Ease of process index Chilean Law on International Commercial Arbitration (2004), which strictly follows the 1985 UNCITRAL Model 62.8 66.8 70.6 (0 = min, 100 = max) Law. Regulation of domestic arbitration, although not based on the UNCITRAL Model Law, is in line with the Extent of judicial assistance index general principles of party autonomy, including “kompetenz-kompetenzâ€? and the impartiality of arbitrators. 74.8 51.7 57.9 (0 = min, 100 = max) Domestic arbitration awards may be subject to challenges relating to the facts and/or merits of the dispute before the Chilean courts of justice as opposed to international arbitration awards rendered in Chile. All com- mercial disputes are arbitrable except those involving patents and trademarks. In domestic arbitrations, parties may only choose an arbitral institution located in Chile. In addition, arbitrators must be Spanish speaking and be Chilean citizens. Chilean law differentiates between arbitration at law and arbitration at equity. In domestic arbitrations at law, arbitrators must be Chilean lawyers. Freedom to choose a non-Chilean lawyer exists only in ex aequo et bono (equity) arbitrations. In domestic arbitrations at law, parties may only be represented by Chilean lawyers, as arbitral tribunals are regarded as courts of justice. None of these restrictions apply to inter- national arbitration in Chile. On average, it takes around 33 weeks to enforce an arbitration award rendered in Chile, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and only 12 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 99 China East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) China’s limits on foreign equity ownership are stricter compared to the countries covered by the Investing Mining, oil and gas 75.0 75.7 92.0 Across Sectors indicators in East Asia and the Paciï¬?c, and globally. The principal rules governing FDI are found Agriculture and forestry 100.0 82.9 95.9 in the Catalogue of Industries for Guiding Foreign Investment (amended in 2007), which lists speciï¬?c sectors in Light manufacturing 75.0 86.8 96.6 which foreign investment is encouraged, restricted, or prohibited. It imposes restrictions on foreign equity own- Telecommunications 49.0 64.9 88.0 ership in the majority of the sectors covered by the Investing Across Sectors indicators, in particular the service Electricity 85.4 75.8 87.6 industries. Sectors such as publishing, television broadcasting, and newspaper publishing are closed to foreign Banking 62.5 76.1 91.0 ownership. In several other sectors, including telecommunications (ï¬?xed-line and mobile/wireless), electricity Insurance 50.0 80.9 91.2 transmission and distribution, railway freight transportation, air transportation (domestic and international), Transportation 49.0 63.7 78.5 and airport and port operation, foreign ownership is limited to a less-than-50% stake. Further restrictions are Media 0.0 36.1 68.0 imposed on foreign capital participation in the oil and gas industry, the ï¬?nancial services sectors (banking and insurance), health care, and the tourism industry. The majority of manufacturing sectors, though, which in the Sector group 1 (constr., tourism, retail) 83.3 91.6 98.1 past have been the main sources of FDI into the country, are fully open to foreign equity ownership. Sector group 2 (health care, waste mgt.) 85.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 18 procedures and 99 days to establish a foreign-owned limited liability company (LLC) in Shanghai, 99 68 42 (days) China. This is slower than both the IAB regional average for East Asia and the Paciï¬?c and the IAB global aver- Procedures age. Five procedures are required exclusively of foreign companies. The incorporation documents of the parent 18 11 10 (number) company must be notarized by a local notary and authenticated by a Chinese consulate in the country of origin. Ease of establishment index Foreign investors must submit their applications, along with feasibility studies and charters of association, 63.7 57.4 64.5 (0 = min, 100 = max) to the Foreign Investment Commission (under the district government for foreign investment approval) after obtaining a company name pre-registration. This step usually takes 30 days. Foreign companies that wish to engage in international trade must also get customs registration certiï¬?cates and foreign trade licenses, which can take on average 13 days. In addition, foreign companies must obtain a ï¬?nancial certiï¬?cate for enterprises with foreign investment as well as a foreign exchange registration certiï¬?cate, which take about 2 weeks each. Company registration documents are available online, although submissions may not yet be made online. Foreign companies wishing to maintain bank accounts in foreign currency need the approval of the State Administration of Foreign Exchange, which takes on average 4 days. The minimum paid-in capital requirement for an LLC is CNY 30,000 (~$4,390). Chinese law allows for deposit of the capital contribution in installments, provided that the ï¬?rst payment is no less than 15% of the registered capital. The balance of the registered capital must be paid within 2 years of the issuance of the business license. ACCESSING INDUSTRIAL LAND Strength of lease rights index In China, land is either owned by the state and local governments, or collectively by farmers. Private land 96.4 84.9 82.1 (0 = min, 100 = max) ownership is not allowed. A foreign company can obtain land-use rights directly from the government by grant Strength of ownership rights index or by the lease, or purchase of previously granted land-use rights. Buying the right to use certain land from the n/a 83.3 92.2 (0 = min, 100 = max) state is considered the most efï¬?cient way for foreign companies to access land. The purchase of the land-use Access to land information index right of industrial land, however, is subject to a mandatory public bidding process. Land rights may not be 50.0 35.1 41.3 (0 = min, 100 = max) pledged, mortgaged, leased, or transferred. They may also be obtained by grant for a maximum term of 50 Availability of land information index (0 = min, 100 = max) 52.5 67.5 70.6 years, renewable upon expiration by paying a grant fee to the government. If a lessee intends to transfer the land-use right to another company, the land must be developed to a certain level before the transfer. Land- Time to lease private land (days) 59 66 61 related information may be found in the land registry and cadastre. Time to lease public land (days) 129 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The People’s Republic of China’s Arbitration Law of 1995 is largely based on the UNCITRAL Model Law. The 94.9 83.8 85.2 (0 = min, 100 = max) law regulates arbitrations taking place under the auspices of the Chinese International Economic and Trade Ease of process index Arbitration Commission (CIETAC) or any of the other 200 arbitral institutions. While an arbitration agreement 76.1 66.1 70.6 (0 = min, 100 = max) may be concluded by email or fax, it must be in writing. The Chinese Arbitration Law limits court intervention in Extent of judicial assistance index arbitral proceedings, both international and domestic. Parties may select arbitrators of any gender, nationality, 60.2 46.6 57.9 (0 = min, 100 = max) or professional qualiï¬?cations. The arbitrator must, however, be on the CIETAC arbitrators’ list. One of the most signiï¬?cant departures from the UNCITRAL Model Law is that under Article 16 of the Chinese Arbitration Law, the arbitration agreement must name an arbitral institution. Therefore, ad hoc arbitration is not permitted in China and any arbitration must be conducted under the auspices of CIETAC or another institution. On average, it takes around 26 weeks to enforce an arbitration award rendered in China, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 31 weeks for a foreign award. The difference between the recognition or enforcement of domestic and international arbitration decisions is that any refusal to enforce a foreign arbitral decision must be approved by the Supreme People’s Court, reflecting the pro- arbitration stance of Chinese law. For more information on this country, please go to http://www.investingacrossborders.org 100 INVESTING ACROSS BORDERS 2010 Colombia Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 14 countries in Latin America and the Caribbean covered by the Investing Across Sectors indica- Mining, oil and gas 100.0 91.0 92.0 tors, Colombia is one of the most open economies to foreign equity ownership. With the exception of TV Agriculture and forestry 100.0 96.4 95.9 broadcasting, all other sectors covered by the indicators are fully open to foreign capital participation. Foreign Light manufacturing 100.0 100.0 96.6 ownership in TV broadcasting companies is limited to 40%. Companies publishing newspapers can have up to Telecommunications 100.0 94.5 88.0 100% foreign capital investment; there is a requirement, however, for the director or general manager to be a Electricity 100.0 82.5 87.6 Colombian national. Banking 100.0 96.4 91.0 Insurance 100.0 96.4 91.2 Transportation 100.0 80.8 78.5 Media 70.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time With a total of 13 procedures taking 27 days, the process of establishing a foreign-owned subsidiary that 27 74 42 (days) wants to engage in international trade, in Colombia (Bogotá) is faster than both the IAB regional and global Procedures averages. In addition to the procedures required of a domestic company, the foreign subsidiary must apply for 13 14 10 (number) a Proportionality Certiï¬?cate for foreign workers. In a company employing more than 20 workers, only 20% Ease of establishment index of the workforce can be foreigners; this includes the board of directors, if they are also employees. Limited 68.4 62.8 64.5 (0 = min, 100 = max) liability companies (LLC) in Colombia must have a minimum of 2 shareholders. There is no need to obtain prior investment approval. Foreign investment must be registered at the Central Bank upon depositing the capital contributions. This registration can be submitted online. Registration with the Chamber of Commerce cannot be submitted online although investors may monitor the process online. Colombian banks cannot offer foreign currency accounts. However, Colombian residents are allowed to hold foreign currency accounts abroad. If the account is used to handle funds for certain transactions (such as offshore loans, foreign investments, imports, and exports) the account must be registered with the Central Bank within 30 days and it must be managed in compliance with the foreign exchange rules. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Colombia have the option to lease or buy land from private or 85.7 78.2 82.1 (0 = min, 100 = max) public owners. The process of leasing publicly owned land may require participation in a public bidding proce- Strength of ownership rights index dure. Lease contracts can be of unlimited duration and can offer the lessee the right to subdivide and sublease 100.0 98.2 92.2 (0 = min, 100 = max) land. It is not mandatory that the lease be registered. A lease is considered a contractual right, not a property Access to land information index right, and thus cannot be used as collateral or be mortgaged. There are no restrictions on the amount of the 52.6 40.4 41.3 (0 = min, 100 = max) land that may be leased. Land-related information is available in the land registry and cadastre. Most relevant Availability of land information index (0 = min, 100 = max) 80.0 73.0 70.6 data for investors can be found at these 2 agencies, but this information relates only to land that is registered. Even though the cadastre and registry are not located in the same agency, they are linked to share data and Time to lease private land (days) 40 62 61 coordinated to maintain accurate land-related information. Currently there are efforts to make information at Time to lease public land (days) 111 156 140 these agencies available online. The process of leasing private and public land is relatively efï¬?cient. ARBITRATING COMMERCIAL DISPUTES Strength of laws index There are 4 main decrees that regulate arbitration in Colombia, as well as several other laws and decrees regu- 93.1 87.5 85.2 (0 = min, 100 = max) lating separate issues such as fees for arbitration centers, recognition and enforcement of foreign arbitration Ease of process index awards, and investment arbitration. There are 3 kinds of arbitration in Colombia: (i) arbitration subject to law, 52.3 66.8 70.6 (0 = min, 100 = max) where the arbitrators decide according to Colombian law; (ii) arbitration subject to equity, where the arbitrators Extent of judicial assistance index decide according to common sense and equity; and (iii) technical arbitration, where the arbitrators decide 18.2 51.7 57.9 (0 = min, 100 = max) according to the speciï¬?c knowledge of a determined science, art, or trade. Certain intra-company disputes and those related to administrative acts are not arbitrable. Disputes involving immovable property can only be resolved through domestic arbitration. In domestic arbitration “at law,â€? arbitrators must be Colombian nation- als and lawyers admitted to practice in Colombia, the proceedings must be conducted in Spanish, and parties may only choose Colombian lawyers as counsel. Arbitrators are not legally bound to preserve conï¬?dentiality in international arbitrations taking place in Colombia. There are 3 main arbitral institutions in Bogotá, as well as many institutions throughout the country. The law does not provide for court assistance with orders for interim measures and taking of evidence. Recognition and enforcement of foreign awards is a two-stage process: recognition before the Supreme Court of Justice is followed by enforcement before the Civil Circuit Court of Bogotá. On average, it takes around 60 weeks to enforce an arbitration award rendered in Colombia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 96 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 101 Costa Rica Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Costa Rican legislation provides for equal treatment of domestic and foreign investors with respect to owner- Mining, oil and gas 100.0 91.0 92.0 ship of local companies. Thus, most of the industry sectors covered by the Investing Across Sectors indicators Agriculture and forestry 100.0 96.4 95.9 are fully open to foreign equity ownership. As a notable exception, foreign capital participation in the electricity Light manufacturing 100.0 100.0 96.6 sector is restricted. The electricity transmission and distribution sectors are closed to foreign investment. The Telecommunications 100.0 94.5 88.0 transmission infrastructure and distribution system are currently owned and operated by a publicly owned Electricity 35.0 82.5 87.6 company. In the electricity generation sector, foreign capital participation is allowed up to 49%. The gener- Banking 100.0 96.4 91.0 ated electricity, however, must be sold through the state-owned transmission and distribution companies. Insurance 100.0 96.4 91.2 Furthermore, the ï¬?xed-line telecommunications infrastructure is owned and operated by a publicly owned Transportation 100.0 80.8 78.5 enterprise under monopolistic market conditions, potentially representing an obstacle for foreign investors to Media 100.0 73.1 68.0 engage in these sectors. Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 14 procedures and 63 days to establish a foreign-owned limited liability company (LLC) in Costa Rica 63 74 42 (days) (San José). This is shorter than the regional average for Latin America and the Caribbean, but longer than the Procedures IAB global average. Full foreign ownership is allowed in Costa Rica. However, LLCs need a minimum of 2 share- 14 14 10 (number) holders. In addition to the steps required of a domestic company, a foreign company establishing a subsidiary Ease of establishment index in Costa Rica must provide an authenticated copy of the parent company’s documents. If it wishes to engage in 73.7 62.8 64.5 (0 = min, 100 = max) international trade, it will also need to register with the Ministry of Foreign Relations and Foreign Trade in order to receive an import and export identiï¬?cation number (this can be submitted online). Foreign companies do not need an investment approval and are free to open and maintain a bank account in foreign currency. There is no minimum capital requirement for foreign or domestic LLCs in Costa Rica. However, 20% of the capital stock of the company must be paid in full prior to establishment. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Costa Rica it is not possible to buy public land. Furthermore, the leasing of public land is restricted to conces- 100.0 78.2 82.1 (0 = min, 100 = max) sion agreements, which may only be granted by a municipality and only on coastal shorelines. In order to lease Strength of ownership rights index public land, the company must be owned by at least 51% Costa Rican shareholders. It is possible to lease or 100.0 98.2 92.2 (0 = min, 100 = max) buy private land. The lease contract may be of unlimited duration, but the common lease duration is about 10 Access to land information index years. The lease contract can offer the lessee the right to sublease and/or mortgage the leased land or use the 73.7 40.4 41.3 (0 = min, 100 = max) lease as collateral. The right to subdivide is possible, subject to applicable zoning laws. If land is granted as a Availability of land information index (0 = min, 100 = max) 60.0 73.0 70.6 concession of public land, it cannot be subleased or subdivided. Land-related information may be found in the centralized National Registry that holds the property registry and the cadastre registry. It is possible to get most Time to lease private land (days) 23 62 61 land-related information from the National Registry. Time to lease public land (days) 136 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Alternative dispute resolution (ADR) in Costa Rica is regulated by the Law on Alternate Conflict Resolution and 92.4 87.5 85.2 (0 = min, 100 = max) the Promotion of Social Peace (Law No. 7727/1997). All commercial disputes are arbitrable. Due to public policy Ease of process index considerations, disputes between foreign companies and the state over natural resources cannot be resolved by 59.0 66.8 70.6 (0 = min, 100 = max) arbitration. The law does not differentiate between domestic and international arbitration, but it does between Extent of judicial assistance index arbitration at law and arbitration at equity. In the case of arbitration at law, the arbitrators must be attorneys 50.9 51.7 57.9 (0 = min, 100 = max) licensed to practice in Costa Rica. The law does not allow the arbitration tribunal to order preventive measures. The tribunal must abide by the civil procedural legislation in what is applicable and the number of arbitrators must be at least 3, but always an odd number. Arbitration proceedings in Costa Rica must be conducted in Spanish. Parties must be represented by lawyers who are licensed to practice in Costa Rica. Parties can choose any arbitral institution, even one outside of Costa Rica, except when the dispute concerns immovable property. Under Article 47 of the Code of Civil Procedure, Costa Rican judges have exclusive jurisdiction over immovable or movable assets located in Costa Rica. There are several active ADR centers in Costa Rica that administer arbitrations, conciliations, and mediations. There are no legal provisions mandating courts to assist arbitral tribunals with the taking of evidence, but there are provisions for assistance with orders for interim measures. It can take around 39 weeks to enforce an arbitration award in a San José civil court (with no appeal). Foreign awards must ï¬?rst undergo recognition before the First Chamber of the Supreme Court, which takes roughly 32 weeks. For more information on this country, please go to http://www.investingacrossborders.org 102 INVESTING ACROSS BORDERS 2010 Côte d’Ivoire Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Côte d’Ivoire is one of the most open countries to foreign equity ownership, as measured by the Investing Mining, oil and gas 100.0 95.2 92.0 Across Sectors indicators. All of its business sectors covered by the indicators are fully open to foreign invest- Agriculture and forestry 100.0 97.6 95.9 ment. With the exception of electricity transmission, there are no other sectors with monopolistic or oligopolis- Light manufacturing 100.0 98.6 96.6 tic market structures nor are there any perceived difï¬?culties in obtaining any required operating licenses. Telecommunications 100.0 84.1 88.0 Electricity 100.0 90.5 87.6 Banking 100.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 42 days to establish a foreign-owned limited liability company (LLC) in Côte 42 48 42 (days) d’Ivoire (Abidjan). This is slightly faster than the IAB average for Sub-Saharan Africa and in line with the IAB Procedures global average. In addition to the procedures required of a domestic company, a foreign company engaged 12 10 10 (number) in international trade will need to obtain a trading license from the Ministry of Foreign Trade as well as an Ease of establishment index exchange authorization transfer of capital (importation, payments abroad, and repatriation of proï¬?ts) from 52.6 51.5 64.5 (0 = min, 100 = max) the Central Bank. Companies must register separately with the commercial registry, the tax department of the Ministry of Economy and Finance, and the National Social Security Fund. According to a directive of the Economic Community of West African States (ECOWAS), companies in Côte d’Ivoire are not allowed to open bank accounts in foreign currency unless they get approval from the Côte d’Ivoire Ministry of Finance and the Central Bank of West Africa. This approval must be renewed yearly. The minimum capital requirement of XOF 1,000,000 (~$2,000) is applicable across all OHADA (Organization for the Harmonization of Business Law in Africa) member states. It must be paid in full for the incorporation of an LLC. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Côte d’Ivoire have the option to lease or buy both privately and 86.6 76.6 82.1 (0 = min, 100 = max) publicly held land. There is no outright prohibition of foreign ownership of land. However, the process involved Strength of ownership rights index in leasing or buying public land is complicated and time-consuming. The process involved in leasing public 62.5 77.3 92.2 (0 = min, 100 = max) land is signiï¬?cantly slower than the global or regional average. Lease contracts can be held for a maximum Access to land information index duration of 99 years, but the usual duration is 30 years. The lease contract can offer the lessee the right to 47.4 33.9 41.3 (0 = min, 100 = max) subdivide, sublease, or mortgage the leased land or use it as collateral. There are no restrictions on the amount Availability of land information index (0 = min, 100 = max) 75.0 58.5 70.6 of land that may be leased. Land-related information may be found in the registry or cadastre. Most of the laws relating to the land are old, and need to be updated. There is no land information system (LIS) or geographic Time to lease private land (days) 62 72 61 information system (GIS) in place that centralizes relevant land information. Time to lease public land (days) 276 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Côte d’Ivoire is a party to the OHADA Treaty (Organisation pour l’Harmonisation en Afrique du Droit des 94.9 82.4 85.2 (0 = min, 100 = max) Affaires). Arbitration is therefore governed by the Uniform Act on Arbitration, which is based on the UNCITRAL Ease of process index Model Law. The act was signed on March 11, 1999 and entered into force 90 days later. The Uniform Act super- 82.9 73.8 70.6 (0 = min, 100 = max) sedes the existing national laws on arbitration. The principal arbitral institution under OHADA is the Common Extent of judicial assistance index Court for Justice and Arbitration (CCJA) in Abidjan, Côte d’Ivoire. The Cour d’Arbitrage de Côte d’Ivoire (CACI), 55.8 55.9 57.9 (0 = min, 100 = max) created in 1997, is widely used for domestic arbitration. Even though CACI’s mandate confers jurisdiction for both domestic and international arbitration, the CCJA is generally preferred for international disputes. The courts in Côte d’Ivoire enforce arbitral tribunal decisions in line with the New York Convention and arbitra- tion is now a prominent form of dispute resolution in Côte d’Ivoire. Côte d’Ivoire has ratiï¬?ed the New York Convention and the ICSID Convention. On average, it takes around 21 weeks to enforce an arbitration award rendered in Côte d’Ivoire, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 21 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 103 Croatia Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Compared to other economies in the Eastern Europe and Central Asia region covered by the Investing Across Mining, oil and gas 100.0 96.2 92.0 Sectors indicators, Croatia is one of the more open countries to foreign equity ownership. Overt legal ownership Agriculture and forestry 100.0 97.5 95.9 restrictions are in place only in the transportation sector, where foreign ownership of air transportation compa- Light manufacturing 100.0 98.5 96.6 nies (domestic and international) and airport operators is limited by the Act on Air Trafï¬?c (Ofï¬?cial Gazette No. Telecommunications 100.0 96.2 88.0 132/98, 100/04, 178/04, 46/07) to a maximum of 49%. Thus, foreign ownership in the transportation sector Electricity 100.0 96.4 87.6 group is more restricted than the regional average in Eastern Europe and Central Asia. On the other hand, with Banking 100.0 100.0 91.0 no restrictions in place in the media, electricity, and telecommunication sectors, Croatia is more open in those Insurance 100.0 94.9 91.2 sector groups than its peer countries in the region. Transportation 69.4 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 23 days to establish a foreign-owned limited liability company (LLC) in Croatia 23 22 42 (days) (Zagreb). This is in line with the IAB regional average for Eastern Europe and Central Asia and faster than Procedures the IAB global average. Foreign investors do not need to seek an investment approval. They must, however, 9 8 10 (number) authenticate the documents of the parent company abroad. According to the Foreign Exchange Act, foreign Ease of establishment index investments must also be declared to the Croatian National Bank within 30 days for statistical purposes. There 81.6 76.8 64.5 (0 = min, 100 = max) is a statutory limit of 15 days to process the company registration with the commercial court. According to the new Regulation on Ways of Performing Registrations in the Court Registry, applications to the court registries could be submitted in electronic form by a notary public. Companies in Croatia are free to open and maintain bank accounts in foreign currency. The minimum capital requirement for domestic and foreign companies is HRK 20,000 (~$3,720). At incorporation, investors must pay in a minimum of 25% of their declared capital and no less than HRK 10,000 (~$1,860). ACCESSING INDUSTRIAL LAND Strength of lease rights index In Croatia, foreign companies most commonly buy private land. The purchase of public land is a long and com- 85.7 82.9 82.1 (0 = min, 100 = max) plicated procedure requiring a public auction. It is possible to lease both private and public land, but a lease of Strength of ownership rights index land under Croatian law represents only a contractual relationship between the parties of the lease agreement. 100.0 97.6 92.2 (0 = min, 100 = max) The lessee can acquire only the right to use the land, but not to build on it. In order to obtain the right for Access to land information index future construction, the lessee must enter into a building rights agreement. The maximum duration of a lease 55.0 50.3 41.3 (0 = min, 100 = max) of publicly held land is stipulated in advance in the public bidding criteria. A lessee may sublease, subdivide, or Availability of land information index (0 = min, 100 = max) 75.0 78.9 70.6 mortgage the leased land, or use the lease as collateral, subject to the lease contract. Most land-related infor- mation can be found in the land registry and cadastre as well as online. There are currently efforts underway to Time to lease private land (days) 78 43 61 harmonize the information in the land registry and cadastre. Time to lease public land (days) 107 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Croatian Law on Arbitration (2001) regulates both national and international arbitration proceedings in 93.1 82.5 85.2 (0 = min, 100 = max) Croatia. All commercial disputes are arbitrable except those involving shareholder arrangements. Parties are Ease of process index free to appoint arbitrators of any nationality or professional qualiï¬?cations. Acting judges of the Republic of 71.4 69.7 70.6 (0 = min, 100 = max) Croatia can also act as arbitrators, but only as chairs of the arbitral tribunal or as sole arbitrators. Article 12 of Extent of judicial assistance index the Arbitration Law requires the independence and impartiality of arbitrators. Parties cannot be represented 52.7 64.4 57.9 (0 = min, 100 = max) by foreign lawyers in domestic arbitration proceedings, but this restriction does not apply to international arbitrations taking place in Croatia. Arbitral awards have the power of ï¬?nal court judgments, unless the parties explicitly agree that the award may be challenged before a higher arbitration court. Parties to domestic or international arbitration are free to choose any seat of arbitration, even outside of Croatia. A commercial court has jurisdiction to enforce domestic and foreign awards. On average, it takes around 26 weeks to enforce an arbitration award rendered in Croatia, from ï¬?ling an application to a writ of execution attaching assets (assum- ing there is no appeal), and 48 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 104 INVESTING ACROSS BORDERS 2010 Czech Republic High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) All relevant regulation on foreign ownership of local companies in the Czech Republic is nondiscriminatory to Mining, oil and gas 100.0 100.0 92.0 foreign investors. With the exception of the domestic and international air transportation sectors, all industries Agriculture and forestry 100.0 100.0 95.9 covered by the Investing Across Sectors indicators are fully open to foreign equity ownership. As in the other Light manufacturing 100.0 93.8 96.6 EU member countries, foreign ownership in the air transportation sector is limited to 49% for investors from Telecommunications 100.0 89.9 88.0 outside of the European Economic Area (EEA). Foreign capital participation is not restricted in the electricity Electricity 100.0 88.0 87.6 transmission sector, but the sector is dominated by a publicly owned enterprise and a monopolistic market Banking 100.0 97.1 91.0 structure. This fact, together with a high perceived difï¬?culty of obtaining the required operating license, makes Insurance 100.0 100.0 91.2 it difï¬?cult for foreign companies to engage. Transportation 79.6 69.2 78.5 Media 100.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned subsidiary in the Czech Republic (Prague) is in line with the IAB re- 18 21 42 (days) gional average for high-income OECD countries and faster than the IAB global average. The 2 additional proce- Procedures dures required exclusively of foreign companies add only 3 days to the establishment process. A foreign enter- 11 9 10 (number) prise is required to provide an apostille and a copy of the parent company documents that has been notarized Ease of establishment index abroad (if applicable). In addition, foreign direct investments must be reported to the Czech National Bank for 81.6 77.8 64.5 (0 = min, 100 = max) statistical purposes. This notiï¬?cation usually takes 2 days. No investment approval is required. All documents required for company registration must be submitted in Czech. Business registration forms are downloadable online on the Ministry of Justice’s Web site. To register a newly founded company in the Commercial Register, an application must be submitted to the relevant court administering the registry. Some documents must be submitted to the registry in original hard copies. However, the documents to be ï¬?led with the Collection of Deeds are submitted electronically. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum capital requirement for domestic and foreign limited liability companies (LLCs) in Prague is CZK 200,000 (~$10,688), half of which must be paid in upon registration. In the case of a sole-shareholder LLC, the registered capital must be paid in full prior to registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index In the Czech Republic a foreign company may acquire both publicly and privately held land. The acquisition 85.7 92.2 82.1 (0 = min, 100 = max) of public land, however, takes signiï¬?cantly longer. When acquiring public land, a company may be required to Strength of ownership rights index obtain approvals from the public authority in charge of administering the land. In most cases, a public tender 100.0 100.0 92.2 (0 = min, 100 = max) process will be carried out before completing the lease or purchase of land. The law does not stipulate the Access to land information index maximum duration of a lease, although a lease concluded for 99 years is considered a lease for an undeï¬?ned 75.0 52.5 41.3 (0 = min, 100 = max) period. No lease registration is required in the Czech Republic. Renewal or transfer of a lease is allowed if Availability of land information index (0 = min, 100 = max) 90.0 84.2 70.6 included in the lease contract. Similarly, the leased land may be subleased or subdivided in accordance with the lease contract. Land-related information may be found mostly in the land registry or cadastre. Currently, there Time to lease private land (days) 96 50 61 are efforts to draft a new civil code that would improve the process of land administration in the cadastre. Time to lease public land (days) 131 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Act No. 216/1994 governs both domestic and international arbitrations in the Czech Republic, unlike the UNCITRAL 97.4 94.2 85.2 (0 = min, 100 = max) Model Law. However, there is no speciï¬?c deï¬?nition of either domestic or international arbitration included in the Ease of process index legislation. Other provisions relating to arbitration are found in the Commercial Code and the Civil Procedure 88.5 83.3 70.6 (0 = min, 100 = max) Code. In order for disputes to be arbitrable, they must be capable of settlement, and be considered a property dis- Extent of judicial assistance index pute, according to the act. Certain disputes cannot be submitted to arbitration, including insolvency or bankruptcy 65.8 77.6 57.9 (0 = min, 100 = max) matters. Arbitration agreements cannot be made orally. Parties are free to appoint arbitrators of any nationality, gender, or professional qualiï¬?cations. They can also elect foreign lawyers to represent them in arbitration proceed- ings. The parties are free to choose any arbitral institution of their choice, the most common being the arbitration court attached to the Economic Chamber and the Agricultural Chamber of the Czech Republic. Unlike other arbitral institutions, the arbitration court provides for fast-track arbitration in certain cases. The Czech Republic is also one of the few jurisdictions that provide online arbitration. Assuming that there is no objection to the enforce- ment, the law stipulates that decisions on enforcement be rendered within 15 days. In practice, this takes roughly 18 weeks for a domestic award and 20 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 105 Ecuador Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 28 are fully open to foreign equity owner- Mining, oil and gas 100.0 91.0 92.0 ship in Ecuador. While the manufacturing and primary industries are fully open to foreign investors, the country Agriculture and forestry 100.0 96.4 95.9 imposes ownership restrictions on a number of service sectors. The railway freight transportation sector, for ex- Light manufacturing 100.0 100.0 96.6 ample, is closed to foreign capital participation. Railway transport services in Ecuador are rendered exclusively Telecommunications 100.0 94.5 88.0 by a state-owned railway company. Furthermore, the Law on Radio and Television Broadcasting limits foreign Electricity 85.4 82.5 87.6 ownership of local television channels to a maximum share of 49%. Overt statutory ownership restrictions Banking 100.0 96.4 91.0 also exist in the electricity sector, where private ownership (foreign or domestic) of companies engaged in the Insurance 100.0 96.4 91.2 transmission and distribution of electricity is limited to a less-than-50% stake. In the electricity generation Transportation 69.8 80.8 78.5 sector foreign capital participation in publicly owned companies is limited to 49%. There are no restrictions on Media 74.5 73.1 68.0 foreign ownership in privately owned companies. However, prior consent must be obtained from the Electricity Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Authority. Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 16 procedures and 68 days to start a foreign-owned limited liability company (LLC) in Ecuador (Quito). 68 74 42 (days) The process is slightly shorter than the regional average for Latin America and the Caribbean and longer Procedures than the IAB global average. The law allows 100% foreign ownership, but mandates that at least 80% of the 16 14 10 (number) employees must be Ecuadorian. In addition to the steps required of a domestic company, a foreign company Ease of establishment index establishing a subsidiary in Ecuador must provide notarized and translated documents pertaining to the parent 55.3 62.8 64.5 (0 = min, 100 = max) company, such as a certiï¬?cate of good standing and a list of shareholders. It must also declare its capital with the Central Bank and, if it wants to engage in international trade, register as an importer with the customs ofï¬?ce. There is no investment approval required for foreign companies in Ecuador. Companies are free to open and maintain a bank account in foreign currency—most typically U.S. dollars and euros. The minimum capital requirement for LLCs is $400, 50% of which must be paid in at the time of incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Ecuador have the option to lease or buy privately or publicly held 61.5 78.2 82.1 (0 = min, 100 = max) land. Before public land is available for lease or purchase, it must ï¬?rst be reclassiï¬?ed as private land. The more Strength of ownership rights index common option for companies with long-term plans is to purchase private land. Lease rent rates in Quito are 100.0 98.2 92.2 (0 = min, 100 = max) subject to a maximum ï¬?xed by the law. It is common, however, for such maximum rates not to be applied to Access to land information index lease agreements, as they tend to be considerably lower than the real commercial value of the lease. There 27.8 40.4 41.3 (0 = min, 100 = max) is no limit on the duration of lease contracts in Quito. The lease contract can offer the lessee the right to Availability of land information index (0 = min, 100 = max) 77.5 73.0 70.6 sublease and/or mortgage the leased land. There are no restrictions on the amount of land that may be leased. Information regarding land can be obtained from the land registry and cadastre, which are located in the same Time to lease private land (days) 106 62 61 agency, but are not linked or coordinated to share data. Time to lease public land (days) 151 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Ecuadorian Law on Arbitration and Mediation (1997) differentiates between arbitration at equity and 86.3 87.5 85.2 (0 = min, 100 = max) arbitration at law. The rules for arbitration at equity are much more liberal. The law also differentiates between Ease of process index international and domestic arbitration. In domestic arbitration at law arbitrators must be lawyers licensed to 58.3 66.8 70.6 (0 = min, 100 = max) practice in Ecuador, and arbitral proceedings must be conducted in Spanish. This is not required in international Extent of judicial assistance index arbitrations. Parties may choose between arbitration at law and at equity, unless one of them is a public institu- 59.8 51.7 57.9 (0 = min, 100 = max) tion, in which case the arbitration must be at law. In both domestic and international arbitrations in Ecuador, parties must be represented by lawyers licensed to practice in Ecuador. The law does not require conï¬?dentiality of arbitration proceedings. There are several active alternative dispute resolution (ADR) institutions in Ecuador that administer arbitrations and mediations. There are no legal provisions mandating courts to assist arbitral tribunals with the taking of evidence, but there are provisions for assistance with orders for interim measures. On average, it takes around 12 weeks to enforce an arbitration award rendered in Ecuador, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 31 weeks for a foreign award. A pro-arbitration interpretation of Article 42 of the Arbitration and Mediation Law suggests that foreign awards do not need to go through a recognition stage and should be enforced the same as domestic awards. In practice, however, this issue is not fully resolved and foreign awards may be required to undergo recognition before a chamber of the Provincial Court of Justice. For more information on this country, please go to http://www.investingacrossborders.org 106 INVESTING ACROSS BORDERS 2010 Egypt, Arab Rep. Middle East and North Africa (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 5 countries covered by the Investing Across Sectors indicators in Middle East and North Africa, the Arab Mining, oil and gas 100.0 78.8 92.0 Republic of Egypt is one of the more open economies to foreign equity ownership. The country has opened Agriculture and forestry 100.0 100.0 95.9 up the majority of the sectors of its economy to foreign investors. Overt statutory ownership restrictions are Light manufacturing 100.0 95.0 96.6 imposed on 5 of the 33 sectors measured by the indicators. Publishing daily newspapers, for example, is re- Telecommunications 100.0 84.0 88.0 served for domestic companies. In other sectors, such as construction and air transportation, foreign ownership Electricity 100.0 68.5 87.6 is limited to a minority stake. In addition to these overt statutory ownership restrictions, a comparatively large Banking 50.0 82.0 91.0 number of sectors are dominated by government monopolies, including, but not limited to, those mentioned Insurance 100.0 92.0 91.2 above. Transportation 76.0 63.2 78.5 Media 50.0 70.0 68.0 Sector group 1 (constr., tourism, retail) 83.0 94.9 98.1 Sector group 2 (health care, waste mgt.) 100.0 90.0 96.0 STARTING A FOREIGN BUSINESS Time With 7 procedures and 8 days, the process of establishing a foreign-owned subsidiary in Egypt is the fastest 8 19 42 (days) among the countries surveyed by IAB in the Middle East and North Africa region, and is also faster than the IAB Procedures global average. Limited liability companies (LLCs) require at least 2 shareholders and a maximum of 50. The 7 9 10 (number) only additional procedure required of foreign companies is the requirement for the parent company to provide Ease of establishment index its documentation (articles of association, resolution of the board approving establishment of the subsidiary) 63.2 58.6 64.5 (0 = min, 100 = max) duly authenticated, notarized, and legalized at the Egyptian consulate abroad and the Ministry of Foreign Affairs in Egypt. No investment approval is needed. Approval from the General Authority for Investment (GAFI) is granted in the form of a notiï¬?cation of incorporation issued upon the company’s establishment. Foreign com- panies are allowed to hold foreign currency bank accounts. An amendment to the Companies’ Law Executive Regulations in 2009 abolished the minimum capital requirements for LLCs. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Egypt have the option to lease or buy privately or publicly held 85.7 78.3 82.1 (0 = min, 100 = max) land. The law requires that all leases exceeding 9 years be registered. Leasing publicly owned land may require Strength of ownership rights index participation in a public bidding process. Lease contracts can be of unlimited duration; the usual duration for 75.0 68.8 92.2 (0 = min, 100 = max) most long-term leases, however, is 59 years. The land that may be leased is usually limited to 4,000 square Access to land information index meters. The lease can offer the lessee the right to subdivide or sublease land, subject to the terms of the lease 30.0 46.4 41.3 (0 = min, 100 = max) contract. However, the lease cannot be mortgaged or used as collateral. A foreign company cannot sell the land Availability of land information index (0 = min, 100 = max) 50.0 66.0 70.6 unless it has held it for at least 5 years. In exceptional circumstances, approval to sell the land before the end of the 5-year period can be sought from the relevant minister. Most relevant data for investors in land can be Time to lease private land (days) 45 59 61 found in the land registry and cadastre, but they are not linked to share data. The process of leasing private Time to lease public land (days) .. 123 140 land is more efï¬?cient than in most other countries. The IAB team was unable to determine how long it takes, on average, to lease public land. This information is therefore currently missing. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration in Egypt is regulated by Law No. 27/1994, which is largely based on the UNCITRAL Model Law, 89.9 82.0 85.2 (0 = min, 100 = max) with some deviations. It includes ï¬?xed time limits for rendering an arbitration award (12 months, with a Ease of process index possible 6-month extension). Either party may request an extension from the competent court or ask that the 74.9 65.5 70.6 (0 = min, 100 = max) proceedings be terminated. All commercial disputes are arbitrable, except intra-company disputes and those Extent of judicial assistance index involving immovable property. Labor disputes are also not subject to alternative dispute resolution (ADR). If a 54.2 48.7 57.9 (0 = min, 100 = max) public entity is a party to the arbitration agreement, the agreement must be signed by the competent minister, who cannot delegate this duty. Parties may choose arbitrators of any nationality or professional qualiï¬?cations. Arbitration proceedings in Egypt can be conducted in a foreign language. Only lawyers who are licensed to practice in Egypt can represent parties in arbitrations. The courts in Egypt have stated a pro-arbitration policy in several leading decisions. The president of the Cairo Court of Appeal is competent to issue orders for interim measures or to assist the arbitral tribunal with the taking of evidence at the tribunal’s request. A specialized circuit at the Cairo Court of Appeal is the only competent court to rule on applications for enforcement of international arbitration awards made in Egypt or foreign arbitration awards. Domestic awards are enforced by a commercial court of ï¬?rst instance. Enforcement takes around 48 weeks for a domestic award and 51 weeks for a foreign award. Egyptian arbitration law follows the UNCITRAL grounds to set aside an arbitration award and adds an additional ground by which each party can request setting aside an award if the arbitral tribunal did not apply the law as agreed upon in the arbitration agreement. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 107 Ethiopia Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 21 countries covered by the Investing Across Sectors indicators in the Sub-Saharan Africa region, Mining, oil and gas 100.0 95.2 92.0 Ethiopia presents foreign equity ownership restrictions above average for the region. It imposes restrictions on Agriculture and forestry 100.0 97.6 95.9 foreign equity ownership in many sectors, in particular the service industries. Of the 33 sectors covered by the Light manufacturing 100.0 98.6 96.6 indicators, 13 are closed to foreign capital participation. The list of sectors in which FDI is prohibited includes Telecommunications 0.0 84.1 88.0 the telecommunications industry (including ï¬?xed-line and mobile/wireless services and infrastructure), the Electricity 50.0 90.5 87.6 ï¬?nancial services industry (insurance and banking), the media sectors (TV broadcasting and newspaper publish- Banking 0.0 84.7 91.0 ing), the transportation industry, and the retail sector. In addition, a comparatively large number of sectors are Insurance 0.0 87.3 91.2 dominated by government monopolies, including most of the industries mentioned above. Notable additional Transportation 10.0 86.6 78.5 sectors dominated by publicly owned enterprises include the electricity and waste management industry. Those Media 0.0 69.9 68.0 monopolies, together with a high perceived difï¬?culty of obtaining required operating licenses, make it difï¬?cult Sector group 1 (constr., tourism, retail) 50.0 97.6 98.1 for foreign companies to invest. The government of Ethiopia has announced its intent to privatize additional Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 state-owned companies and relax some of the restrictions on the aforementioned sectors in the near future. STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 28 days to establish a foreign-owned limited liability company (LLC) in Addis Ababa, 28 48 42 (days) Ethiopia. This process is faster than the IAB regional average for Sub-Saharan Africa and the IAB global aver- Procedures age. In addition to the procedures required of domestic companies, the parent company must authenticate its 10 10 10 (number) documents abroad. It must also submit an investment project proposal to the Ethiopian Investment Authority to Ease of establishment index obtain investment approval. Said authority screens the documents on behalf of the Ministry of Trade and clears 21.1 51.5 64.5 (0 = min, 100 = max) them for signature at the Documents Authentication Ofï¬?ce. This investment permit is valid for 1 year and may be renewed annually until the project is completed. The foreign company, if it wants to engage in international trade, must also obtain a trade license. In addition, foreign investors must have their investment capital inflow (either in cash or in kind), external loans, and suppliers’ or foreign partners’ credits registered with the National Bank of Ethiopia (NBE). Ethiopia is one of the few countries surveyed by IAB that does not have its commercial laws and regulations available online. Companies wishing to open a foreign currency bank account must obtain approval from the National Bank of Ethiopia (Central Bank), which can take weeks to process. The minimum capital requirement for a wholly foreign-owned LLC is $100,000, whereas the requirement is $60,000 if the investment is made jointly with a local partner. ACCESSING INDUSTRIAL LAND Strength of lease rights index The Ethiopian Constitution states that all land is owned by the state. The most common option for foreign 74.9 76.6 82.1 (0 = min, 100 = max) companies seeking to acquire land is to lease public land, since private ownership is prohibited. Land may Strength of ownership rights index be leased from the regional authorities where the land is located. The most common means of leasing land n/a 77.3 92.2 (0 = min, 100 = max) is through a public auction. It is also possible to lease land through private negotiations with the lessor. This Access to land information index process is usually bureaucratic, time-consuming, and opaque. Lease contracts are limited to 99 years. The lease 0.0 33.9 41.3 (0 = min, 100 = max) contract can offer the lessee the right to sublease and/or mortgage the leased land. All these transactions are Availability of land information index (0 = min, 100 = max) 2.5 58.5 70.6 subject to the terms of the contract and are limited to the amount of time left on the lease. There are no formal land information agencies such as a national land registry or cadastre. Most land-related information can be Time to lease private land (days) 75 72 61 acquired from the local ofï¬?ce of land leasing in the relevant regional authority. Time to lease public land (days) 142 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Ethiopian Civil Code of Procedure governs arbitrations in Ethiopia. There is no speciï¬?c arbitration act. 49.9 82.4 85.2 (0 = min, 100 = max) The legal provisions governing arbitration are not available online. Arbitration agreements may be concluded Ease of process index orally or in writing or they may be inferred by conduct. Foreign nationals are not allowed to act as arbitrators 74.0 73.8 70.6 (0 = min, 100 = max) in Ethiopia, while local arbitrators must be able speak English, have a business license, and pass a speciï¬?c Extent of judicial assistance index examination at the Ministry of Justice. The Federal High Court in Ethiopia is the competent court for enforce- 34.8 55.9 57.9 (0 = min, 100 = max) ment of arbitration awards. Appeals may be made to the Federal Supreme Court and ultimately to the Federal Court of Cassation. On average, it takes around 54 weeks to enforce an arbitration award rendered in Ethiopia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 55 weeks for a foreign award. Investors can enter into arbitration agreements with the state or a state entity concerning concession agreements, infrastructure contracts, and contracts dealing with natural resources. As a general rule, investors are granted broad party autonomy, including the right to choose international arbitration institution rules. Ethiopia has not signed the New York Convention and has signed, but not ratiï¬?ed, the ICSID Convention. There is very little arbitration practice in Ethiopia. For more information on this country, please go to http://www.investingacrossborders.org 108 INVESTING ACROSS BORDERS 2010 France High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) France does not apply any restrictions on foreign equity ownership in 27 of the 33 sectors measured by the Mining, oil and gas 100.0 100.0 92.0 Investing Across Sectors indicators. Yet, its limits on foreign equity ownership are higher than the average for Agriculture and forestry 100.0 100.0 95.9 the high-income OECD countries covered by the indicators. Like the other European Union countries, France Light manufacturing 80.0 93.8 96.6 imposes restrictions on the air transportation sector, in which foreign equity is limited to 49%. This equity Telecommunications 100.0 89.9 88.0 restriction, however, only applies to investors from countries outside of the European Economic Area (EEA). Electricity 100.0 88.0 87.6 Foreign ownership in the TV broadcasting, newspaper, and publishing sectors is limited to 20% for investors Banking 100.0 97.1 91.0 from non–EU countries. Port operation is closed to foreign capital participation. All port facilities in France are Insurance 100.0 100.0 91.2 currently owned and operated by a publicly owned company. Transportation 59.6 69.2 78.5 Media 20.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time France offers a simple and fast process for starting a foreign business. It takes 9 days and 7 procedures to 9 21 42 (days) establish a foreign-owned subsidiary in Paris. Two of the 7 procedural steps required are speciï¬?c to foreign- Procedures owned businesses. Foreign investors must only declare their investment for statistical purposes. Unless subject 7 9 10 (number) to a speciï¬?c exemption, all companies in France under direct or indirect foreign control must also submit an Ease of establishment index administrative declaration of their investment. As is the case in other high-income OECD countries surveyed 77.5 77.8 64.5 (0 = min, 100 = max) by IAB, foreign companies are allowed to hold commercial foreign currency bank accounts without approval. The minimum authorized paid-in capital for a limited liability company is € 1. There are no restrictions on the composition of the board of directors or the appointment of foreigners as managers. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in France have the option to lease or buy land from both private 99.9 92.2 82.1 (0 = min, 100 = max) and public owners. Public land must be reclassiï¬?ed before it is available for leasing. Leasing of publicly held Strength of ownership rights index land takes place through direct negotiations with the relevant public body and the lessee. No public bidding 100.0 100.0 92.2 (0 = min, 100 = max) process is required. Lease contracts can be of unlimited duration and can offer the lessee the right to subdivide, Access to land information index sublease, mortgage the leased land, or use it as collateral. Registration of leases is uncommon, as it is not 47.4 52.5 41.3 (0 = min, 100 = max) required by law. There are no restrictions on the amount of land that may be leased. Land-related information Availability of land information index (0 = min, 100 = max) 90.0 84.2 70.6 can be found in the land registry and cadastre, which are located in different agencies and are not linked or coordinated to share data. There is no land information system (LIS) or geographic information system (GIS) in Time to lease private land (days) 91 50 61 place that centralizes relevant information at a single point of access. Time to lease public land (days) 142 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Articles 1442 to 1507 of the Code of Civil Procedure and Articles 2059 to 2061 of the Civil Code govern 90.0 94.2 85.2 (0 = min, 100 = max) domestic and international arbitrations in France. Articles 131-1 et. seq. of the Code of Civil Procedure govern Ease of process index mediation. The arbitration provisions are not based on the UNCITRAL Model Law. International arbitration is 86.6 83.3 70.6 (0 = min, 100 = max) deï¬?ned as involving the interests of international trade. Domestic arbitration is governed by stricter rules than Extent of judicial assistance index international arbitration. In domestic arbitrations, for example, the arbitration agreement must be in writing. 94.0 77.6 57.9 (0 = min, 100 = max) There are no speciï¬?c requirements as to the form and content of an international arbitration agreement, and it does not need to be in writing. There are many institutions in France that administer arbitrations, and the country is one of the leading forums for international arbitration. French courts have adopted a liberal attitude toward arbitration and strongly support it, upholding an arbitrator’s jurisdiction wherever possible. On average, it takes around 5 weeks to enforce an arbitration award rendered in France or in a foreign country, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). Appeals may be made to the Cour d’appel de Paris. Generally, the state and public entities do not enter into arbitration. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 109 Georgia Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Georgia is one of the most open countries to foreign equity ownership as measured by the Investing Across Mining, oil and gas 100.0 96.2 92.0 Sectors indicators. All of the 33 sectors covered by the indicators are fully open to foreign investment. There are Agriculture and forestry 100.0 97.5 95.9 neither sectors with monopolistic or oligopolistic market structures nor any perceived difï¬?culties in obtaining Light manufacturing 100.0 98.5 96.6 any required operating licenses. Telecommunications 100.0 96.2 88.0 Electricity 100.0 96.4 87.6 Banking 100.0 100.0 91.0 Insurance 100.0 94.9 91.2 Transportation 100.0 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time With only 4 procedures and 4 days, Georgia (Tbilisi) is among the fastest countries in the world in terms of es- 4 22 42 (days) tablishing a foreign-owned limited liability company (LLC). A foreign company requires no additional procedure Procedures other than the authentication of the parent company’s documents abroad. According to the new order on the 4 8 10 (number) Approval of Instruction on State and/or Tax Registration Procedure of Taxpayers and Branches, a company must Ease of establishment index be registered on the same day of ï¬?ling or the following day. The application is available online. Registering with 84.2 76.8 64.5 (0 = min, 100 = max) the Entrepreneurial Register and obtaining an identiï¬?cation number and a certiï¬?cate of state and tax registra- tion are required in order to commence the company’s activities. Companies in Georgia are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement for foreign or domestic companies. Since 2008, evidence of contribution to the company’s capital is no longer required. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Tbilisi, Georgia’s capital, registration of land-related rights has become a simpler and quicker process due to 86.7 82.9 82.1 (0 = min, 100 = max) a law that was adopted in 2008. Both privately and publicly held land may be leased or bought. Publicly held Strength of ownership rights index land may be leased through direct negotiations with the public authority that owns the land. If there are sev- 100.0 97.6 92.2 (0 = min, 100 = max) eral persons or companies seeking to lease the land, then the relevant public body is obliged to hold a competi- Access to land information index tive bidding process. Different approvals may be required from different state agencies depending on where the 52.6 50.3 41.3 (0 = min, 100 = max) land is located. For example, more approvals may be required to lease land located near cultural monuments. Availability of land information index (0 = min, 100 = max) 80.0 78.9 70.6 Fast-track registration of land is available in Tbilisi, for a higher fee. Lease contracts can be of unlimited dura- tion and can offer the lessee the right to subdivide, sublease, or mortgage the leased land, subject to the terms Time to lease private land (days) 8 43 61 of the lease contract. There are no restrictions on the amount of land that may be leased. Tbilisi has both a land Time to lease public land (days) 50 133 140 registry and a cadastre, which are linked and coordinated to share data. ARBITRATING COMMERCIAL DISPUTES Strength of laws index 85.8 82.5 85.2 When Investing Across Borders (IAB) data was collected in 2009, arbitration in Georgia was governed by the (0 = min, 100 = max) Law on Private Arbitration of 1997. The law requires the existence of a prior written agreement between the Ease of process index parties to an arbitration. It does not specify, however, whether exchange of documents via email or fax could 75.2 69.7 70.6 (0 = min, 100 = max) constitute such written agreement. Parties can demand replacement of an arbitrator in case of reasonable Extent of judicial assistance index doubts about the arbitrator’s impartiality or independence, or if the arbitrator does not know the language of 53.6 64.4 57.9 (0 = min, 100 = max) the proceedings. Parties are free to appoint arbitrators of any nationality or professional qualiï¬?cations. Parties can choose foreign counsel to represent them in arbitration proceedings. Georgian Civil Procedural Code contains a chapter on the participation of courts in arbitration proceedings and on the execution of arbitra- tion awards. The Code grants the courts of Georgia the right to deem an arbitration invalid if a criminal case arises in connection with the dispute being considered and if the court deems that resolution of the case by an arbitral tribunal may have adverse consequences. The National Enforcement Bureau, a public entity under the Ministry of Justice, enforces domestic arbitration awards, which takes around 13 weeks. The Supreme Court of Georgia has jurisdiction to enforce foreign arbitration awards, which takes around 37 weeks. A new arbitration law should have been passed in early 2010. Its content will be reflected in the next IAB report. For more information on this country, please go to http://www.investingacrossborders.org 110 INVESTING ACROSS BORDERS 2010 Ghana Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Ghana is one of the more open economies to foreign equity ownership in the Sub-Saharan Africa region. All of Mining, oil and gas 90.0 95.2 92.0 its major sectors covered by the Investing Across Sectors indicators, with the exception of the primary sectors, Agriculture and forestry 100.0 97.6 95.9 are fully open to foreign capital participation. The equity restrictions in the primary sectors (mining and oil Light manufacturing 100.0 98.6 96.6 and gas) are stipulated in the Minerals and Mining Act (2006, Act 703), and the Petroleum (Exploration and Telecommunications 100.0 84.1 88.0 Production) Law (1994, Act 84). Both acts mandate a compulsory local participation in investment projects; Electricity 100.0 90.5 87.6 the government automatically acquires a minimum equity share of 10% in ventures at no cost. In addition to Banking 100.0 84.7 91.0 these overt legal restrictions on foreign equity ownership, the electricity transmission and distribution sectors Insurance 100.0 87.3 91.2 are dominated by publicly owned companies, representing a further potential obstacle to foreign investors. Transportation 100.0 86.6 78.5 Furthermore, Ghanaian laws specify a minimum investment amount for foreign companies, which is currently Media 100.0 69.9 68.0 set at $50,000 or the equivalent in goods. Portfolio investments and businesses set up solely for export are Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 exempted from this regulation. Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 72 days to establish a foreign-owned limited liability company (LLC) that wants to 72 48 42 (days) engage in international trade, in Accra, Ghana. This is longer than the IAB regional average for Sub-Saharan Procedures Africa. Foreign investors must obtain a certiï¬?cate of capital importation, which can take 14 days. The local 10 10 10 (number) authorized dealer must conï¬?rm the import of capital with the Bank of Ghana, which will then conï¬?rm the Ease of establishment index transaction to the Ghana Investment Promotion Centre (GIPC) for investment registration purposes. According 34.2 51.5 64.5 (0 = min, 100 = max) to the Ghana Investment Promotion Centre Act (1994), all foreign investors must register their investment with GIPC. This registration is only required of foreign companies and takes 11 days to complete. E-copies of Ghana’s commercial laws and regulations can be obtained for a fee from a private ï¬?rm that has computerized all the laws. At least 1 member of the board of directors must be a Ghanaian resident. Foreign companies can hold foreign currency bank accounts. The minimum capital requirement for a wholly foreign-owned LLC is GHs 74,500 (~$52,000). This requirement does not apply to local companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index The process of leasing land in Accra can be lengthy and unpredictable. A foreign company cannot buy publicly 90.0 76.6 82.1 (0 = min, 100 = max) or privately held land. It is, however, possible to lease publicly or privately held land. Industrial or commercial Strength of ownership rights index leases are restricted to a maximum duration of 50 years. Not all privately held land is registered in the land n/a 77.3 92.2 (0 = min, 100 = max) registry, making it difï¬?cult to ascertain who the landowner is. In many cases, the process of leasing private Access to land information index land may be more cumbersome than that for public land. Any disposal of publicly held land requires consent of 30.0 33.9 41.3 (0 = min, 100 = max) the Lands Commission. Lease contracts can offer the lessee the right to subdivide, sublease, or mortgage the Availability of land information index (0 = min, 100 = max) 85.0 58.5 70.6 leased land. In the case of public land, consent is required from the Lands Commission. There are no restrictions on the amount of land that may be leased. Though land-related information is not easy to obtain, there is a Time to lease private land (days) 104 72 61 Land Administration Project currently underway. This project seeks to create a database of decisions from land Time to lease public land (days) 247 151 140 disputes as well as to centralize all relevant land-related information. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act (1961) governs arbitrations in Ghana, but the legislation is not readily available online. The 74.9 82.4 85.2 (0 = min, 100 = max) law distinguishes between domestic and international arbitrations. An international arbitration is deï¬?ned as an Ease of process index award made in Ghana pursuant to an arbitration agreement that is not governed by Ghanaian law. A domestic 88.5 73.8 70.6 (0 = min, 100 = max) arbitration is deï¬?ned as an arbitration agreement governed by the laws of Ghana with an arbitration award Extent of judicial assistance index made in Ghana. Commercial disputes are generally arbitrable in Ghana, although disputes relating to property 40.9 55.9 57.9 (0 = min, 100 = max) interests are not. Arbitration agreements must be in writing, and the law does not allow for severability from the underlying contract. Parties may choose an arbitrator of any nationality, gender, or professional qualiï¬?ca- tions. They may also choose foreign lawyers to represent them in arbitrations. The Ghana Arbitration Centre administers arbitrations in Ghana; arbitrations cannot be conducted online. On average, it takes around 62 weeks to enforce an arbitration award rendered in Ghana or in a foreign country, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). Appeals can be made to the Court of Appeal, which will signiï¬?cantly increase the length of time to enforce an award (an estimated 4 years). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 111 Greece High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Greece presents restrictions on foreign equity ownership greater than the average for the 11 member states Mining, oil and gas 100.0 100.0 92.0 of the European Union covered by the Investing Across Sectors indicators. It imposes restrictions on foreign Agriculture and forestry 100.0 100.0 95.9 equity ownership in select utility sectors, in particular in the electricity industry. Pursuant to Article 22 of Law Light manufacturing 100.0 93.8 96.6 2773/1999 and to Presidential Decree 328/2000, the Hellenic Transmission System Operator S.A. (ΔΕΣΜΗΕ Telecommunications 100.0 89.9 88.0 Α.Ε.) is granted exclusive rights to the transmission and distribution of electricity in Greece. Private capital Electricity 0.0 88.0 87.6 participation, domestic or foreign, in those sectors is, therefore, not possible. The electricity generation sector Banking 100.0 97.1 91.0 is also closed to foreign capital from countries outside of the European Union. Presidential Decree 41/2005 Insurance 100.0 100.0 91.2 imposes the same restriction on the railway freight transportation sector. Like the other EU countries covered Transportation 49.4 69.2 78.5 by the indicators, Greece imposes restrictions on the air transportation sector, in which foreign ownership is lim- Media 100.0 73.3 68.0 ited to 49%. This equity restriction, however, only applies to investors from countries outside of the European Economic Area (EEA). Furthermore, foreign capital participation in the airport operation sector is limited to a Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 less-than-50% share. Currently, all Greek airports are owned and operated by public entities. Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned limited liability company (LLC) in Athens, Greece is in line with the 22 21 42 (days) IAB regional average for high-income OECD countries, but faster than the IAB global average. In addition to Procedures the procedures required of domestic companies, foreign companies must provide an apostille and a notarized 18 9 10 (number) copy of the parent company documents. In addition, the company must register with the Greek Tax Authority Ease of establishment index for Foreigners and obtain a Greek Tax Registration Number. This step takes only 1 day. No investment approval 68.4 77.8 64.5 (0 = min, 100 = max) is required. Any company established in Greece that is involved in international trade must be registered either with the Exporters Registry or the Commercial Agents (imports-exports) Registry. A recent legislative amend- ment (Art. 16 of Law 3661/2008) states that an LLC can begin its operations solely by furnishing a certiï¬?cate from the Printing Ofï¬?ce as proof of the commencement of its operations. The articles of association must be signed before a notary public and in the presence of a local counsel. The Chamber of Commerce and Industry has recently initiated a one-stop shop for LLC incorporation. Foreign companies are free to open and maintain bank accounts in foreign currency. Business registration is not yet possible online. The minimum paid-in capital requirement for domestic and foreign LLCs in Greece is € 4,500. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Greece have the option to lease or buy land from both private 85.7 92.2 82.1 (0 = min, 100 = max) and public owners. The procedures involved in leasing private land require a simple contract, usually written, so Strength of ownership rights index as to keep a record of it, since a lease is typically valid even if orally agreed upon. There is no legal obligation 100.0 100.0 92.2 (0 = min, 100 = max) to register leases. The process of leasing or buying publicly held land is governed by very speciï¬?c regulations. Access to land information index Such land is usually leased through a public tender competition. Lease contracts can be of unlimited duration. 47.4 52.5 41.3 (0 = min, 100 = max) Leases can offer the lessee the right to transfer, sublease, or mortgage the leased land or use it as collateral. Availability of land information index (0 = min, 100 = max) 80.0 84.2 70.6 Subdivision of land is subject to applicable zoning laws. There are no restrictions on the amount of land that may be leased. Land-related information can be found in the land registry and cadastre, which are not linked Time to lease private land (days) 15 50 61 or coordinated to share data. There is currently legislation in place that seeks to improve the operation of the Time to lease public land (days) 20 88 140 cadastre. ARBITRATING COMMERCIAL DISPUTES Strength of laws index There are 2 separate regimes governing arbitration in Greece. Law 2735/1999 regulates international commer- 97.4 94.2 85.2 (0 = min, 100 = max) cial arbitration, and the Code of Civil Procedure (Presidential Decree 503/1985) governs domestic arbitration. Ease of process index There is no statutory deï¬?nition of domestic arbitration. It is considered, by default, to be an arbitration taking 86.1 83.3 70.6 (0 = min, 100 = max) place in Greece that does not fall within the deï¬?nition of international arbitration. Private law disputes are Extent of judicial assistance index generally arbitrable, providing that the parties have the power to dispose of the object in dispute. Parties are 48.6 77.6 57.9 (0 = min, 100 = max) free to appoint arbitrators of any nationality, gender, or professional qualiï¬?cations. The laws require arbitrators to be independent and impartial. The parties may also retain foreign lawyers to represent them in arbitra- tion proceedings. They may select any arbitral institution of their choice. Online arbitration is not an available option. There are several arbitral institutions in Greece; the 2 most commonly used are the Athens Chamber of Commerce and Industry and the Chamber of Engineers. Arbitral tribunals are not generally thought to have the power to rule on their own jurisdiction, although the court will often refer parties who have so agreed to arbitration. On average, it takes around 45 weeks to enforce an arbitration award rendered in Greece, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 43 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 112 INVESTING ACROSS BORDERS 2010 Guatemala Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Guatemala is one of the most open countries to foreign equity ownership, as measured by the Investing Across Mining, oil and gas 100.0 91.0 92.0 Sectors indicators. All of the 33 sectors covered by the indicators are fully open to foreign capital participation. Agriculture and forestry 100.0 96.4 95.9 With the exception of port and airport operation, there are no sectors with monopolistic or oligopolistic market Light manufacturing 100.0 100.0 96.6 structures or any perceived difï¬?culties in obtaining any required operating licenses. Telecommunications 100.0 94.5 88.0 Electricity 100.0 82.5 87.6 Banking 100.0 96.4 91.0 Insurance 100.0 96.4 91.2 Transportation 100.0 80.8 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 30 days to establish a foreign-owned limited liability company (LLC) in Guatemala 30 74 42 (days) (Guatemala City). This process is one of the shortest among the IAB countries in Latin America and the Procedures Caribbean and is shorter than the IAB global average. While foreign ownership is allowed, the law requires at 12 14 10 (number) least 2 shareholders for LLCs. The only additional requirements are the legalization of the parent company’s Ease of establishment index documentation in its country of origin and the registration of a power of attorney for the person responsible 57.9 62.8 64.5 (0 = min, 100 = max) for creating the company in Guatemala. There is no requirement for an investment approval. Companies in Guatemala are free to open and maintain a bank account in foreign currency. The minimum capital requirement for domestic and foreign companies is GTQ 5,000 (~$625), although LLCs are required to pay in their entire capital before the deed of constitution is executed. ACCESSING INDUSTRIAL LAND Strength of lease rights index The most common way for foreign companies to acquire land is to lease or buy private land. Publicly held land 78.6 78.2 82.1 (0 = min, 100 = max) may be leased or bought through a public auction. Only leases held for greater than 3 years require registra- Strength of ownership rights index tion. The maximum duration of private leases may be unlimited. The usual duration is 15 years, however. There 100.0 98.2 92.2 (0 = min, 100 = max) are no restrictions on the amount of private land that may be leased. The lease contract can offer the lessee the Access to land information index right to transfer, sublease, or subdivide the leased land as well as to mortgage it or use it as collateral. On the 27.8 40.4 41.3 (0 = min, 100 = max) other hand, there are restrictions on the amount of publicly held land that may be leased as well as on the right Availability of land information index (0 = min, 100 = max) 70.0 73.0 70.6 to transfer, renew, sublease, or subdivide the lease. Land-related information can be found in the land registry and cadastre. There are currently efforts underway to improve the availability and accessibility of land-related Time to lease private land (days) 34 62 61 information through a newly formed public agency, the Cadastre Information Registry (RIC). Time to lease public land (days) 168 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Guatemalan Arbitration Law (Decree 67-95) adopted in 1995 is largely based on the UNCITRAL Model 91.6 87.5 85.2 (0 = min, 100 = max) Law. Commercial disputes are generally arbitrable, except matters for which the law established a special Ease of process index procedure extensively limiting the scope of arbitrable disputes. Due to public policy considerations, disputes 72.3 66.8 70.6 (0 = min, 100 = max) between foreign companies and the state over natural resources cannot be resolved by arbitration. There are no Extent of judicial assistance index legal restrictions on the parties’ choice of arbitrators, seat of arbitration, or language of proceedings for either 58.4 51.7 57.9 (0 = min, 100 = max) domestic or international arbitration. However, only lawyers who are licensed to practice locally may represent parties in arbitrations in Guatemala. The law requires the impartiality of arbitrators but does not provide for conï¬?dentiality of the proceedings. There are 3 active arbitration centers in Guatemala: Centro de Arbitraje y Conciliación de la Cámara de Comercio de Guatemala (CENAC), Comisión de Resolución de Conflictos de la Cámara de Industria de Guatemala (CRECIG), and Centro Privado de Dictamen, Conciliación y Arbitraje (CDCA). Courts are required to assist arbitrators in the taking of evidence and enforcement of orders for provisional measures. On average, it takes around 30 weeks to enforce an arbitration award rendered in Guatemala or in a foreign country, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 113 Haiti Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Foreign investment in Haiti is subject to a general ownership restriction across all business sectors as stipulated Mining, oil and gas 100.0 91.0 92.0 in the country’s Commercial Code. Any locally incorporated company, regardless of the business sector in Agriculture and forestry 100.0 96.4 95.9 which it is active, must have at least 3 shareholders, one of whom must be a Haitian national. Haitian law Light manufacturing 100.0 100.0 96.6 further stipulates that any foreign investment with a “potential impact on the country’s economyâ€? is subject Telecommunications 100.0 94.5 88.0 to presidential approval, regardless of the business activity concerned. In addition to these general restric- Electricity 100.0 82.5 87.6 tions, the country imposes sector-speciï¬?c limits on foreign equity ownership in 2 of the 33 sectors covered Banking 49.0 96.4 91.0 by the Investing Across Sectors indicators. Foreign capital participation in the banking industry is limited to a Insurance 100.0 96.4 91.2 maximum of 49% and the domestic air transportation sector is closed to foreign equity ownership. In addi- Transportation 80.0 80.8 78.5 tion, several industries, such as port and airport operation and the ï¬?xed-line telecommunications sector are Media 100.0 73.1 68.0 dominated by government monopolies. Those monopolies, together with a high perceived difï¬?culty of obtaining Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 required operating licenses, make it difï¬?cult for foreign companies to invest. Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes on average 212 days to establish a foreign-owned subsidiary in Port-au-Prince, longer than the IAB 212 74 42 (days) regional and global averages. In addition to the steps required of domestic companies, foreign investors must Procedures authenticate the parent’s company documentation abroad, legalize said documents, and obtain the consul’s 13 14 10 (number) signature at the Ministry of Foreign Affairs. No investment approval or trade license are required. Once the Ease of establishment index investor pays the “patente,â€? it is used for import and export. Haiti is the only IAB country where the minimum 63.2 62.8 64.5 (0 = min, 100 = max) capital requirement is more favorable for foreign than domestic companies. If a wholly foreign-owned company is registered, there is no speciï¬?c minimum capital requirement. In the case of joint ventures with one or more Haitian shareholders, the minimum capital requirement is HTG 100,000 (~$2,500) for industrial companies or HTG 25,000 (~$630) for commercial companies. If the subsidiary is wholly foreign-owned, there is no require- ment to have a Haitian shareholder on the board of directors. ACCESSING INDUSTRIAL LAND Strength of lease rights index The process of leasing publicly held land in Port au Prince is unpredictable. All public land is owned by the 71.4 78.2 82.1 (0 = min, 100 = max) municipality. Legally, nothing prevents the municipality from leasing land, but it is uncommon. The process of Strength of ownership rights index leasing public land is not transparent and the amount of time it takes depends on the government interests 87.5 98.2 92.2 (0 = min, 100 = max) involved. Foreign companies seeking to access land also have the option to lease or buy land from private Access to land information index owners or to buy publicly held land. A foreign company can only buy land subject to approval from the Justice 30.0 40.4 41.3 (0 = min, 100 = max) Minister. There are limitations as to the amount of land that can be purchased. Lease contracts can offer the Availability of land information index (0 = min, 100 = max) 40.0 73.0 70.6 lessee the right to sublease, mortgage, or subdivide the land. Subdivision is subject to applicable zoning laws. Land-related information can be found in the land registry. There is no cadastre or land information system (LIS) Time to lease private land (days) 90 62 61 in place that centralizes relevant information at a single point of access. Time to lease public land (days) 219 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration in Haiti is governed by the 2006 addition to the Civil Procedures Code of 1963. All commercial 79.9 87.5 85.2 (0 = min, 100 = max) matters are arbitrable, except for disputes involving the state, government entities, minors, and incompetent Ease of process index adults. The Haitian Arbitration Center was established in 2008 under the leadership of the Haitian Commercial 74.9 66.8 70.6 (0 = min, 100 = max) Chamber, but is not yet fully operational and practice is lacking. Arbitration agreements must be concluded Extent of judicial assistance index in writing; agreements concluded by email, fax, or other electronic methods are not legally binding due to 28.5 51.7 57.9 (0 = min, 100 = max) security considerations (Haiti does not have encryption of emails and parties may change their content in bad faith). There are no restrictions on the identity of arbitrators, but arbitration proceedings must be conducted in French. Parties can only choose an odd number of arbitrators, and no more than 3. There have not been any cases of enforcement of arbitration awards in Haiti to date. Haiti has signed, but not ofï¬?cially ratiï¬?ed, the ICSID Convention. For more information on this country, please go to http://www.investingacrossborders.org 114 INVESTING ACROSS BORDERS 2010 Honduras Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Honduras has opened up the majority of the sectors of its economy to foreign equity ownership. As a notable Mining, oil and gas 100.0 91.0 92.0 exception, overt legal ownership restrictions still exist on the domestic air transportation industry. Foreign capi- Agriculture and forestry 100.0 96.4 95.9 tal participation in a company providing such transportation services is limited to a maximum share of 49%. Light manufacturing 100.0 100.0 96.6 Furthermore, the Constitution of the Republic of Honduras requires that the editorial and management staff Telecommunications 100.0 94.5 88.0 of local media companies, such as newspaper publishing and radio and television broadcasting enterprises, Electricity 100.0 82.5 87.6 be Honduran citizens. This restriction does not, however, affect the ownership structure of such companies, Banking 100.0 96.4 91.0 which may be 100% foreign-owned. Primarily publicly owned enterprises with monopolistic market structures Insurance 100.0 96.4 91.2 represent a further potential obstacle to foreign investors in the railway freight transportation, port operation, Transportation 89.8 80.8 78.5 and electricity transmission and distribution sectors. Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 15 procedures and 35 days to establish a foreign-owned limited liability company (LLC) in Honduras 35 74 42 (days) (Tegucigalpa). This process is one of the shortest among the IAB countries in Latin America and the Caribbean Procedures and is shorter than the IAB global average. In addition to the procedures required of domestic companies, a 15 14 10 (number) foreign company must legalize and authenticate the documents of the parent company in the country of origin. Ease of establishment index If it wants to engage in international trade and import raw material from abroad, the company must also ï¬?le 68.4 62.8 64.5 (0 = min, 100 = max) an application with the Ministry of Finance. This can take up to a month. There is no investment authoriza- tion requirement in Honduras. The tax authority now requires a company’s legal representative to have a residence card in order to issue the tax ID. This process can take up to a year and many companies get around it by naming a Honduran representative and later changing their bylaws to elect the desired representative. Companies in Honduras are free to open and maintain a bank account in foreign currency. The minimum capital requirement for domestic and foreign LLCs is HNL 5,000 (~$265). Only 25% of this, however, must be paid in at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Honduras have the option to lease or buy land from both private 78.6 78.2 82.1 (0 = min, 100 = max) and public owners. There are certain restrictions on the purchase or lease of land along the border or coastline. Strength of ownership rights index There are exceptions to these restrictions for certain tourism projects. About 80% of land is unregistered and a 100.0 98.2 92.2 (0 = min, 100 = max) thorough due diligence process is thus necessary to determine whether land is available for lease or purchase. Access to land information index Registration is not required for lease contracts of less than 3 years. Approval from the National Agrarian 55.6 40.4 41.3 (0 = min, 100 = max) Institute is required for the acquisition of all land parcels greater than 200 hectares. Lease contracts can be Availability of land information index (0 = min, 100 = max) 75.0 73.0 70.6 of unlimited duration and can offer the lessee the right to subdivide or sublease the leased land as well as to mortgage it or use it as collateral. Land-related information may be found in the land registry or cadastre, Time to lease private land (days) 61 62 61 which are not linked or coordinated to share data. Time to lease public land (days) 182 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Honduran Conciliation and Arbitration Law (2000) distinguishes between domestic and international 97.6 87.5 85.2 (0 = min, 100 = max) arbitration, as well as between arbitration at law and arbitration at equity. In domestic arbitrations at law, arbi- Ease of process index trators must be lawyers licensed to practice in Honduras. Arbitration proceedings must be conducted in Spanish. 73.3 66.8 70.6 (0 = min, 100 = max) Representation by foreign lawyers is not permitted in domestic arbitration. The seat of arbitration must be in Extent of judicial assistance index Honduras if the dispute is domestic and between local parties. There are 3 main arbitration and conciliation 59.5 51.7 57.9 (0 = min, 100 = max) centers: the Center for Conciliation and Arbitration of the Chamber of Commerce of Tegucigalpa, the Center for Conciliation and Arbitration of the Chamber of Commerce of Cortés, and the Center for Conciliation and Arbitration of the Honduran Bar Association. There are no legal provisions mandating courts to assist arbitral tribunals with the taking of evidence, but there are provisions for assistance with orders for interim measures. On average, it takes around 21 weeks to enforce an arbitration award rendered in Honduras, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 36 weeks for a foreign award. Foreign awards must ï¬?rst undergo a recognition proceeding before the Supreme Court of Justice. The decision cannot be appealed. The Supreme Court of Justice has jurisdiction to enforce international awards against the state. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 115 India South Asia (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) India’s restrictions on foreign equity ownership are greater than the average of the countries covered by the Mining, oil and gas 100.0 88.0 92.0 Investing Across Sectors indicators in the South Asia region and of the BRIC (Brazil, Russian Federation, India, Agriculture and forestry 50.0 90.0 95.9 and China) countries. India imposes restrictions on foreign equity ownership in many sectors, and in particular Light manufacturing 81.5 96.3 96.6 in the service industries. Sectors such as railway freight transportation and forestry are dominated by public Telecommunications 74.0 94.8 88.0 monopolies and are closed to foreign equity participation. With the exception of certain activities speciï¬?ed by Electricity 100.0 94.3 87.6 law, foreign ownership in the agriculture sector is also not allowed. Foreign ownership of publishing companies Banking 87.0 87.2 91.0 and newspapers is limited to a maximum of 26%. In the ï¬?nancial services sector, foreign capital participation Insurance 26.0 75.4 91.2 in local banks is limited to 87% and in insurance companies to 26%. Furthermore, foreign ownership in the Transportation 59.6 79.8 78.5 telecommunications sector (including ï¬?xed-line and wireless/mobile infrastructure and services) is limited to a Media 63.0 68.0 68.0 less-than-75% stake. Sector group 1 (constr., tourism, retail) 83.7 96.7 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 16 procedures and 46 days to establish a foreign-owned limited liability company (LLC) in India 46 39 42 (days) (Mumbai). This is slightly slower than the average for countries in South Asia and the IAB global average. In Procedures addition to the procedures required of a domestic ï¬?rm, a foreign company must authenticate the documents 16 9 10 (number) of the parent company in its country of origin. A company engaged in international trade must also obtain an Ease of establishment index Importer/Exporter Code issued by the Director General of Foreign Trade. Investment approvals are required for 76.3 62.5 64.5 (0 = min, 100 = max) investments in certain sectors. For manufacturing, however, FDI is permissible under the automatic route with- out prior approval from the government. Foreign companies must comply with reporting requirements mandat- ed by the Foreign Exchange Management Act, notify the regional ofï¬?ce of the Reserve Bank of India within 30 days of receipt of inward remittances, and ï¬?le the required documents with that ofï¬?ce within 30 days of issuing shares to foreign investors. Companies in India are allowed to open and maintain a foreign currency account (Exchange Earners Foreign Currency Account) with an authorized dealer. The minimum capital requirement for foreign and domestic companies is INR 100,000 (~$2,230), which must be paid in upon incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Mumbai, leasing private or public land is the most common means for foreign companies to acquire land. 92.9 87.5 82.1 (0 = min, 100 = max) Leasing public land is a lengthy process that may require several negotiations with the relevant public authori- Strength of ownership rights index ties. Since ownership is easy to ascertain for publicly held land, the process of due diligence is easier. Most 87.5 93.8 92.2 (0 = min, 100 = max) publicly held land is leased or bought through a public auction. Such land may have restrictions on its use and Access to land information index transfer. Foreign companies must have permission from the Reserve Bank of India to lease land for more than 15.8 20.1 41.3 (0 = min, 100 = max) 5 years. Lease contracts can be for a maximum duration of 99 years, and can offer the lessee the right to sub- Availability of land information index (0 = min, 100 = max) 85.0 59.7 70.6 divide, sublease, or mortgage the leased land, subject to the terms of the lease contract. Investors face a major challenge in acquiring land-related information. There are currently efforts underway, however, to implement Time to lease private land (days) 90 99 61 a National Land Records Modernization Program (NLRMP) that includes computerization and digitalization of Time to lease public land (days) 295 205 140 land records and maps. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration and Conciliation Act (1996) governs domestic and international arbitrations in India. Moreover, 88.5 86.4 85.2 (0 = min, 100 = max) certain federal acts and acts enacted by different Indian states have mandatory statutory arbitration provisions. Ease of process index The 1996 Act is based on the UNCITRAL Model Law. Although it does not include a deï¬?nition of domestic ar- 67.6 55.0 70.6 (0 = min, 100 = max) bitration, it states that any award made when the place of arbitration is in India will be considered a domestic Extent of judicial assistance index award. There are no notable differences between domestic and international arbitration. Arbitration agreements 53.4 36.4 57.9 (0 = min, 100 = max) must be in writing. Most commercial disputes can be submitted to arbitration, but there are certain exceptions, such as the nonpayment of admitted debt or income tax, and industrial disputes. Parties are free to select arbitrators of any gender, nationality, or professional qualiï¬?cations in both domestic and international arbitra- tions. However, only licensed practitioners may represent parties as advocates in arbitration proceedings. There are several arbitral institutions in India, including the Indian Council of Arbitration in New Delhi. Institutional arbitrations are slowly gaining momentum, although parties still tend to prefer ad hoc proceedings. Indian courts are able to assist arbitration proceedings with interim relief. Decisions enforcing or denying enforcement of arbitration awards may be appealed to the Mumbai High Court and the Supreme Court of India. On average, it takes around 33 weeks to enforce an arbitration award rendered in India, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 43 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 116 INVESTING ACROSS BORDERS 2010 Indonesia East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The majority of the 33 industry sectors covered by the Investing Across Sectors indicators are subject to overt Mining, oil and gas 97.5 75.7 92.0 statutory ownership restrictions in Indonesia. Presidential Regulations No. 77 and No. 111 of 2007 contain a Agriculture and forestry 72.0 82.9 95.9 list of sectors that are closed to foreign equity and impose further limitations on foreign capital participation in Light manufacturing 68.8 86.8 96.6 additional industries. Sectors such as publishing and newspaper businesses are closed to foreign equity owner- Telecommunications 57.0 64.9 88.0 ship. In several other sectors, including forestry, ï¬?xed-line telecommunications, and transportation, foreign Electricity 95.0 75.8 87.6 ownership is limited to a less-than-50% stake. Further sectors, such as the pharmaceutical industry, ï¬?nancial Banking 99.0 76.1 91.0 services, construction, and health care, are subject to foreign equity limits, but foreign investors are allowed to Insurance 80.0 80.9 91.2 obtain a majority stake. Transportation 49.0 63.7 78.5 Media 5.0 36.1 68.0 Sector group 1 (constr., tourism, retail) 85.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 82.5 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 86 days to establish a foreign-owned limited liability company (LLC) in Jakarta, 86 68 42 (days) Indonesia. This is slower than both the IAB regional average for East Asia and the Paciï¬?c and the IAB global Procedures average. In addition to the procedures required of domestic companies, foreign companies must translate and 12 11 10 (number) notarize the documents of the parent company in its country of origin. Foreign investors must then ï¬?le for a Ease of establishment index foreign investment license from the Investment Coordination Board (BKPM). This license must be obtained 52.6 57.4 64.5 (0 = min, 100 = max) before the company deed is executed, and takes on average 14 days. If declined, the foreign investor can sub- mit an appeal to the State Administrative Court (Pengadilan Tata Usaha Negara or PTUN). In addition, foreign companies must obtain a Limited Importer Registration Number (Angka Pengenal Importir Terbatas or APIT) to engage in international trade. The deed of establishment must be made before a notary public. The company registration process is not yet available online. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement for a domestic LLC is IDR 12,500,000 (~$1,380), whereas for a wholly foreign-owned LLC, it depends on the business sector and the projected sales target. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Indonesia, land ownership is prohibited for non-Indonesian citizens. Foreign companies may lease land under 78.6 84.9 82.1 (0 = min, 100 = max) certain use titles. These include land under the right to use with a 25-year period; land under the right to build Strength of ownership rights index with a 30-year period; and land under the right to cultivate with a 35-year period. These lease periods may be n/a 83.3 92.2 (0 = min, 100 = max) extended for a similar amount of time in most instances. Not all land in Indonesia is registered with the Land Access to land information index Ofï¬?ce and thus a thorough due diligence process is necessary to ascertain the landowner. It is not mandatory 21.4 35.1 41.3 (0 = min, 100 = max) to register leases. Leases can offer the lessee the right to subdivide or sublease the leased land as well as to Availability of land information index 85.0 67.5 70.6 mortgage it or use it as collateral, subject to the terms of the lease contract. There are generally no restrictions (0 = min, 100 = max) on the amount of land that may be leased, though in some cases, especially for industrial activity, location Time to lease private land (days) 35 66 61 permits may limit the land available for lease to 50 hectares. Land-related information may be found in the Time to lease public land (days) 81 151 140 land registry and cadastre. They are not linked or coordinated to share data. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Law No. 30 (1999) covers arbitration and alternative dispute proceedings, although it does not speciï¬?cally refer 95.4 83.8 85.2 (0 = min, 100 = max) to commercial arbitration. The law stipulates that trade disputes can be settled through arbitration. The law Ease of process index makes no distinction between domestic and international arbitration. Indonesian Civil Procedural Law, which 81.8 66.1 70.6 (0 = min, 100 = max) was adopted under Dutch colonial rule, is also still in force and contains measures related to arbitration. An Extent of judicial assistance index arbitration agreement cannot be concluded orally and a record of receipt must accompany it. If the arbitration 41.3 46.6 57.9 (0 = min, 100 = max) agreement is concluded after a dispute has arisen, there are requirements set out in the law that the agree- ment must comply with. If the parties do not specify the language of the arbitration proceedings, the default language is Indonesian. Arbitrators must fulï¬?ll certain requirements, including being at least 35, and having at least 15 years of experience in the ï¬?eld. The parties can designate any arbitral institution or rules, provided that they do not conflict with the mandatory provisions of the arbitration law. Failing this, the law sets out procedural rules that can be used. There is no appeal to a decision enforcing an arbitration award, although a decision denying enforcement may be appealed. The court may only execute a domestic award if it meets the requirements set out in the arbitration law. On average, it takes around 22 weeks to enforce an arbitration award rendered in Indonesia or in a foreign country, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 117 Ireland High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the high-income OECD countries covered by the Investing Across Sectors indicators, Ireland is among Mining, oil and gas 100.0 100.0 92.0 the most open to foreign equity ownership. All major sectors of its economy, with the exception of domestic Agriculture and forestry 100.0 100.0 95.9 and international air transportation, are fully open to foreign capital participation. Like the other member states Light manufacturing 100.0 93.8 96.6 of the European Union, Ireland limits foreign ownership in the air transportation sector to 49% for investors Telecommunications 100.0 89.9 88.0 from outside of the European Economic Area (EEA). Foreign capital participation is not restricted in the electric- Electricity 100.0 88.0 87.6 ity transmission and distribution sectors, but these are primarily publicly owned enterprises with a monopolistic Banking 100.0 97.1 91.0 market structure. This fact, together with a high perceived difï¬?culty of obtaining the required operating license, Insurance 100.0 100.0 91.2 makes it difï¬?cult for foreign companies to engage in these sectors. Transportation 79.6 69.2 78.5 Media 100.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time It takes 5 procedures and 14 days to establish a foreign-owned limited liability company (LLC) in Dublin, 14 21 42 (days) Ireland. This is one of the simplest and shortest processes among the IAB high-income OECD countries. A Procedures foreign company that wants to engage in international trade must obtain a trade license from the Department 5 9 10 (number) of Enterprise, Trade and Employment once the subsidiary has been incorporated. Registering the subsidiary with Ease of establishment index the Companies Registration Ofï¬?ce using their CRO Disk system, an electronic company incorporation scheme, 70.0 77.8 64.5 (0 = min, 100 = max) will reduce this procedure time from 10 days to 5. To access the CRO Disk system, the company founder must apply to the CRO for an access number and have the memorandum and articles of association approved in advance. No investment approval is required. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement in Ireland is a symbolic 1. ACCESSING INDUSTRIAL LAND Strength of lease rights index Leasing privately held land is the most common way that foreign companies acquire land in Ireland. Publicly 92.9 92.2 82.1 (0 = min, 100 = max) held land may be leased through the Industrial Development Authority of Ireland. It is also possible to buy Strength of ownership rights index privately or publicly held land. The process of acquiring land does not differ much for foreign and domestic 100.0 100.0 92.2 (0 = min, 100 = max) companies. The registration of leases is not compulsory. Lease contracts can be of unlimited duration, but the Access to land information index usual duration is about 25 years. The lease contract can offer the lessee the right to subdivide, sublease, or 50.0 52.5 41.3 (0 = min, 100 = max) mortgage the leased land, subject to the terms of the contract. Statutory provisions govern the renewal of Availability of land information index (0 = min, 100 = max) 100.0 84.2 70.6 leases. In Dublin, the land registry and registry of deeds have been combined to form the Property Registration Authority. Most land-related information for land that has been registered can be found here. Currently, there Time to lease private land (days) 70 50 61 are several reforms underway to simplify the process of transferring land and making land-related information Time to lease public land (days) 77 88 140 available to the public. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Acts (1954 and 1988) govern domestic arbitrations in Ireland, and are based on the English 94.9 94.2 85.2 (0 = min, 100 = max) Arbitration Act (1950). The International Commercial Arbitration Act (1998) governs international arbitrations Ease of process index in Ireland. The 1998 act adopts the UNCITRAL Model Law in its entirety and without modiï¬?cation, although 79.6 83.3 70.6 (0 = min, 100 = max) the Irish High Court retains supervisory powers to order security for costs, preservation of property, and the Extent of judicial assistance index examination of witnesses outside the jurisdiction. Accordingly, the rules for domestic and international arbitra- 75.8 77.6 57.9 (0 = min, 100 = max) tion currently diverge greatly. The Arbitration Bill (2008) was not yet law at the time of data collection, but it will adopt the UNCITRAL Model Law and apply it uniformly to all arbitrations taking place in Ireland. Parties are free to appoint arbitrators of any nationality, gender, or professional qualiï¬?cations. Moreover, they are able to use any arbitral institution of their choice. There are several institutions in Ireland, including international institutions such as the ICC. The law provides for courts to assist the arbitration process by granting interim relief, although such assistance, in practice, is rarely sought. On average, it takes around 19 weeks to enforce an arbitration award rendered in Ireland, from ï¬?ling an application to a writ of execution attaching assets (assum- ing there is no appeal), and 18 weeks for a foreign award. Appeals can be made to the High Court or Supreme Court. If the award is over 1,000,000, the parties can apply for the case to be heard by the commercial division of the High Court, which would shorten the process. For more information on this country, please go to http://www.investingacrossborders.org 118 INVESTING ACROSS BORDERS 2010 Japan High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors measured by the Investing Across Sectors indicators, 26 are fully open to foreign capital par- Mining, oil and gas 100.0 100.0 92.0 ticipation in Japan. While the manufacturing and primary industries are fully open to foreign equity ownership, Agriculture and forestry 100.0 100.0 95.9 Japan imposes ownership restrictions on a number of service sectors. For example, the Japanese Radio Law Light manufacturing 100.0 93.8 96.6 limits foreign capital participation in companies providing wireless/mobile telecommunications infrastructure to Telecommunications 83.3 89.9 88.0 a less-than-33% stake. Similarly, foreign ownership in the domestic railway freight transportation sector is re- Electricity 100.0 88.0 87.6 stricted to a maximum of 33%, pursuant to the Cargo Forwarder Service Act. Foreign ownership of nationwide Banking 100.0 97.1 91.0 television channels is limited to a maximum of 20%. The port operation and health care sectors are closed to Insurance 100.0 100.0 91.2 private investment, either foreign or domestic. All port facilities in Japan are owned and operated by publicly Transportation 39.8 69.2 78.5 owned enterprises. Only individuals or nonproï¬?t organizations may operate hospitals and clinics. Media 60.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 50.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 25 days to establish a foreign-owned limited liability company (LLC) in Tokyo, Japan. 25 21 42 (days) This process is in line with the IAB high-income OECD countries average and faster than the IAB global aver- Procedures age. The 3 additional procedures required exclusively of foreign companies add only 3 days to the establish- 10 9 10 (number) ment process. A foreign enterprise must notarize the parent company’s documents (company register and Ease of establishment index signature certiï¬?cate) in its country of origin. In addition, a foreign company must make a post facto investment 81.6 77.8 64.5 (0 = min, 100 = max) declaration to the Bank of Japan for statistical purposes. If the nationality of the parent company does not qualify it for an automatic investment, approval is required before the subsidiary can be established. A prior ï¬?l- ing requirement applies if the foreign investment is made in certain protected industries that are considered key to the economic and national security of Japan, as stipulated in Article 27 of the Foreign Exchange and Foreign Trade Act (Foreign Exchange Act). Foreign investors are subject to a waiting period while the government conducts its review of the investment (30 days, which can be shortened to 14 days, and in certain cases, 5 days according to a recent amendment of the Foreign Exchange Act). Business registration is possible online and submission forms are available for download. Foreign-owned subsidiaries are free to open and maintain bank accounts in foreign currency in Japan. However, they must report to the Bank of Japan if they have overseas deposits of more than JPY 100,000,000 (~ $1,000,000). The minimum paid-in capital requirement in Japan is a symbolic JPY 1. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Japan, foreign companies have the option to lease or buy privately or publicly held land. In order to lease 85.7 92.2 82.1 (0 = min, 100 = max) public land, the prospective lessee must meet certain statutory requirements and the relevant public authority Strength of ownership rights index must agree to lease the land. In most cases, public land is sold through a public auction. There are no restric- 100.0 100.0 92.2 (0 = min, 100 = max) tions on the amount of land that may be leased. The maximum legal duration of lease contracts is unlimited. Access to land information index The usual duration of most leases is 30 years. The lease contract can offer the lessee the right to sublease and/ 30.8 52.5 41.3 (0 = min, 100 = max) or mortgage the leased land, subject to the terms of the contract. Registration of leases is not mandatory. Availability of land information index (0 = min, 100 = max) 75.0 84.2 70.6 Although registration is not required for a lease to be valid, it is enforceable against a third party only if it has been registered. Most land-related information may be obtained from the land registry, geographic information Time to lease private land (days) 17 50 61 system (GIS), or land information system (LIS). Time to lease public land (days) 96 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Law No. 138/2003 governs arbitration in Japan. It is modeled substantially on the UNCITRAL 95.4 94.2 85.2 (0 = min, 100 = max) Model Law, although it does not speciï¬?cally apply to international commercial arbitration. Unlike the Model Ease of process index Law, it allows domestic courts, with the parties’ consent, to attempt a settlement. There is no distinction 77.7 83.3 70.6 (0 = min, 100 = max) between domestic and international arbitration in the law. Rather, it focuses on whether the seat of arbitration Extent of judicial assistance index is in Japan or not. Unless provided otherwise by statute, only civil matters that are capable of being settled may 65.9 77.6 57.9 (0 = min, 100 = max) be submitted to arbitration. Parties are free to appoint arbitrators of any nationality, gender, or professional qualiï¬?cations. Since 1996, a foreign lawyer may represent the parties only if the principal place of business for the disputing party seeking representation is in a foreign country and the lawyer is retained in that country. Arbitration awards in Japan have the same effect as ï¬?nal and conclusive court judgments, and the enforceabil- ity of such awards is guaranteed under the Arbitration Law. On average, it takes around 19 weeks to enforce an arbitration award rendered in Japan, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 21 weeks for a foreign award. This estimate may not be accurate, given the insufï¬?cient practice of arbitration in Japan. Culturally, Japan is more prone to mediation than arbitration. The Japanese government rarely uses arbitration as a dispute resolution mechanism in its contracts. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 119 Kazakhstan Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Kazakhstan’s limits on foreign equity ownership are higher than in most other countries in Eastern Europe Mining, oil and gas 100.0 96.2 92.0 and Central Asia region covered by the Investing Across Sectors indicators. The Mass Media Law limits foreign Agriculture and forestry 100.0 97.5 95.9 ownership of companies in newspaper publishing and television broadcasting to a maximum share of 20%. Light manufacturing 100.0 98.5 96.6 Foreign capital participation in the telecommunications sector (including ï¬?xed-line and wireless/mobile infra- Telecommunications 49.0 96.2 88.0 structure and services) is limited to a less-than-50% stake. In addition to these overt ownership restrictions, Electricity 100.0 96.4 87.6 the law requires prior approval from the Kazakh government of any transaction involving assets in industries Banking 100.0 100.0 91.0 deemed as “strategic objectsâ€?. The Civil Code speciï¬?es that such strategic objects include trunk oil pipelines, Insurance 100.0 94.9 91.2 railway networks, international airports, and entities that directly or indirectly own such assets. An exhaustive Transportation 100.0 84.0 78.5 list is provided in the List of Strategic Objects (June 30, 2008), approved by the government of the Republic of Media 20.0 73.1 68.0 Kazakhstan. This approval is required for both foreign and domestic investors. Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 34 days to establish a foreign-owned limited liability company (LLC) in Kazakhstan 34 22 42 (days) (Almaty). This is a little longer than the IAB regional average for Eastern Europe and Central Asia, but still faster Procedures than the IAB global average. In addition to the procedures required of a domestic enterprise, a foreign company 9 8 10 (number) establishing a subsidiary in Almaty must authenticate the documents of the parent company abroad and reg- Ease of establishment index ister the capital contribution to the charter capital of the new company with the National Bank of Kazakhstan 65.8 76.8 64.5 (0 = min, 100 = max) within 10 business days of registration. A foreign-owned company registered in Kazakhstan is considered a domestic company for Kazakhstan currency regulation purposes. Under the Law on Currency Regulation and Currency Control, residents may open bank accounts in foreign currency in Kazakh banks without any restrictions. However, companies wishing to open a bank account in a foreign bank outside of Kazakhstan must notify the National Bank of Kazakhstan within 30 calendar days of the agreement with the foreign bank. Investors must pay at least 25% of the charter capital prior to state registration with the local branch ofï¬?ces of the Ministry of Justice. The contribution must not be less than the minimal amount of charter capital (100 times the monthly assessment index: KZT 127,300 or ~$850). ACCESSING INDUSTRIAL LAND Strength of lease rights index It is not possible for foreign companies to buy land in Kazakhstan. They can, however, lease both publicly and 86.7 82.9 82.1 (0 = min, 100 = max) privately held land. It is possible to lease land under a long-term lease, with a duration between 5 and 49 Strength of ownership rights index years. The process of leasing publicly held land may be time-consuming and unpredictable. The registration pro- 66.7 97.6 92.2 (0 = min, 100 = max) cess is also lengthy, although a fast-track registration procedure was introduced in 2009, which seeks to reduce Access to land information index the registration period to 2 or 3 days. The maximum duration set by the law for leases of publicly held land is 36.8 50.3 41.3 (0 = min, 100 = max) 49 years; for privately held land there is no limit. Lease contracts can offer the lessee the right to subdivide, Availability of land information index (0 = min, 100 = max) 95.0 78.9 70.6 sublease, mortgage the leased land, or use it as collateral. This, however, does not apply to most publicly held land. Land-related information can be obtained from the land registry and cadastre. These agencies are not Time to lease private land (days) 37 43 61 located in the same agency nor are they linked or coordinated to share data. Time to lease public land (days) 159 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration in Kazakhstan is governed by the 2004 Law on Arbitration Tribunals for domestic arbitration, and 77.5 82.5 85.2 (0 = min, 100 = max) the Law on International Commercial Arbitration (2004). Under the latter law, arbitration is considered inter- Ease of process index national only if at least 1 of the parties is a nonresident of Kazakhstan. The 2 laws are very similar. Commercial 70.4 69.7 70.6 (0 = min, 100 = max) disputes can generally be resolved through arbitration, except for those related to real estate in Kazakhstan, Extent of judicial assistance index disputes involving interests of the state or state enterprises, disputes arising from contracts with monopolistic 78.2 64.4 57.9 (0 = min, 100 = max) entities or those dominating the market, intra-company and shareholder disputes, and those related to trans- portation agreements or bankruptcy. The law requires arbitrators to be at least 25 years old, and to have higher legal education and 2 years of legal work experience. There are no restrictions on the nationality of the arbitra- tors. Parties may appoint foreign lawyers to represent them in arbitration proceedings. Awards issued by foreign arbitral institutions in relation to a dispute between 2 Kazakh companies are not enforceable in Kazakhstan. The Almaty Specialized Interdistrict Economic Court has jurisdiction to enforce arbitration awards. On average, it takes around 5 weeks to enforce an arbitration award rendered in Kazakhstan, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 5 weeks for a foreign award. Foreign arbitration awards are recognized on the basis of reciprocity and courts have authority to review them. For more information on this country, please go to http://www.investingacrossborders.org 120 INVESTING ACROSS BORDERS 2010 Kenya Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the countries in Sub-Saharan Africa covered by the Investing Across Sectors indicators, Kenya restricts Mining, oil and gas 100.0 95.2 92.0 foreign ownership in more sectors than most other economies. Foreign capital participation in telecommunica- Agriculture and forestry 100.0 97.6 95.9 tions is limited to a maximum of 70%. However, the law provides foreign investors with a grace period of 3 Light manufacturing 100.0 98.6 96.6 years to build up the required domestic capital contribution of 30%. In the transportation sector, there are Telecommunications 70.0 84.1 88.0 ownership restrictions in railway freight, port and airport operation, in which foreign investment is allowed only Electricity 92.9 90.5 87.6 up to 50%. On the other hand, unlike in most other countries covered by the Investing Across Sectors indica- Banking 100.0 84.7 91.0 tors, domestic as well as international passenger air transportation is fully open to foreign capital participation. Insurance 66.7 87.3 91.2 The tourism sector, one of the country’s most prosperous industries, is fully open to foreign companies as well, Transportation 70.0 86.6 78.5 as are other manufacturing and primary sectors. Media 75.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time With no additional procedures speciï¬?cally required of foreigners, it takes as long to establish a domestic 34 48 42 (days) enterprise as a foreign-owned limited liability company (LLC) in Kenya (Nairobi). This process (34 days and 12 Procedures procedures) is faster than both the regional average for the IAB countries in Sub-Saharan Africa and the global 12 10 10 (number) IAB average. In addition, obtaining an Investment Certiï¬?cate from the Kenya Investment Authority (for invest- Ease of establishment index ments of $100,000 and more) helps speed up the administrative start-up procedures, including the provision of 57.9 51.5 64.5 (0 = min, 100 = max) various work permits. The Investment Certiï¬?cate is valid for a 12-month period and consolidates the requisite health, safety, and environment licenses into one. During this period, the foreign investor is permitted to begin operations and apply for all the general and sector-speciï¬?c licenses. The Advocates Act requires that an advo- cate of the High Court of Kenya prepare and submit the incorporation documentation. There is no minimum capital requirement and investors are allowed to hold foreign currency bank accounts. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Nairobi, the process of leasing land is governed by several laws that deal with the registration and disposi- 78.6 76.6 82.1 (0 = min, 100 = max) tion of interests in land. Only companies that are 100% domestically owned can acquire land controlled under Strength of ownership rights index the Land Control Act, such as agricultural land. Nonetheless, foreign companies seeking to access land in Kenya 100.0 77.3 92.2 (0 = min, 100 = max) have the option to lease or buy land from private and public landholders. Commercial leases cannot be issued Access to land information index for a period of less than 5 years and lease contracts can be as long as 999 years. Lease contracts can offer the 22.2 33.9 41.3 (0 = min, 100 = max) lessee the right to subdivide, sublease, and mortgage the leased land. Land-related information can be found Availability of land information index (0 = min, 100 = max) 85.0 58.5 70.6 in the land registry and cadastre, which are located in different agencies and are not linked or coordinated to share data. Most of the relevant data related to land is available, in principle, but it may be a time-consuming Time to lease private land (days) 72 72 61 process to obtain the information, as it requires dealing with several different authorities. Time to lease public land (days) 113 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Kenya’s Arbitration Act (1996) is closely based on the UNCITRAL Model Law. The Act applies to domestic and 94.9 82.4 85.2 (0 = min, 100 = max) international arbitration, and there is no difference in treatment between the 2 arbitration regimes. Additional Ease of process index provisions regulating arbitration are found in Chapter 21 of Kenya’s Civil Procedure Act (2009) and in its 77.1 73.8 70.6 (0 = min, 100 = max) Civil Procedure Rules. Kenya has 2 principal arbitral institutions: the Chartered Institute of Arbitrators and the Extent of judicial assistance index Dispute Resolution Centre (Nairobi). There are no legal restrictions on the disputing parties’ ability to organize 56.3 55.9 57.9 (0 = min, 100 = max) the arbitration proceedings as they see ï¬?t. Despite Kenya’s strong legal framework, there are problems with the length of arbitration proceedings and the enforcement of arbitration awards. Arbitration takes one year and 7 months on average, from the ï¬?ling of an application of enforcement to the ï¬?nal writ of execution attach- ing assets. The domestic court process is slow, which can further impede the efï¬?cacy of judicial assistance in arbitrations. On average, it takes around 35 weeks to enforce an arbitration award rendered in Kenya, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 43 weeks for a foreign award. Practitioners state that arbitrations are not common in Kenya. Mediation is starting to be used as a dispute resolution technique, and on average, mediation cases are settled within 30 days. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 121 Korea, Rep. High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 12 high-income OECD countries covered by the Investing Across Sectors indicators, foreign equity Mining, oil and gas 100.0 100.0 92.0 ownership restrictions are relatively stringent in the Republic of Korea. The country imposes restrictions in 10 of Agriculture and forestry 100.0 100.0 95.9 the 33 sectors covered by the indicators, all of which are service sectors. In particular, foreign capital participa- Light manufacturing 100.0 93.8 96.6 tion is limited to a less-than-50% stake in the telecommunications sectors (ï¬?xed-line and wireless/mobile). Telecommunications 49.0 89.9 88.0 Electricity transmission and distribution are also subject to a foreign ownership restriction of a maximum of Electricity 85.4 88.0 87.6 49% and are currently operating under monopolistic market structures with a dominating publicly owned Banking 100.0 97.1 91.0 enterprise. In the media sectors, foreign ownership is limited to a maximum of 30% for companies publishing Insurance 100.0 100.0 91.2 daily newspapers (for weekly papers, the respective threshold is set at 50%) and to a maximum of 49% for Transportation 79.6 69.2 78.5 terrestrial and cable television companies. For television companies broadcasting satellite channels, foreign Media 39.5 73.3 68.0 capital participation is limited to a maximum of 33%. The Korean Aviation Act restricts foreign ownership in the Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 domestic and international air transportation sectors to a less-than-50% stake. Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned subsidiary in Korea (Seoul) is faster than both the IAB regional 17 21 42 (days) average for high-income OECD countries and the IAB global average. In addition to the procedures required of Procedures a domestic enterprise, a foreign company establishing a subsidiary in Seoul must provide an apostille or nota- 11 9 10 (number) rized copy of the incorporation documents of the parent company abroad. Foreign investors must also prepare Ease of establishment index foreign investment reports prior to their investment in Korea, pursuant to the Foreign Investment Promotion 71.1 77.8 64.5 (0 = min, 100 = max) Act of Korea (FIPA). This report is ï¬?led with a foreign exchange bank designated by the Ministry of Finance and Economy or the Korea Trade Investment Promotion Agency (KOTRA), and takes only 1 day. In addition, a foreign investor must report to the Ministry of Commerce, Industry, and Energy in advance, if intending to transfer capi- tal goods. The business registration application with the corporate commercial registry is a simple procedure and should be completed within 1.5 business days. Companies can download business registration documents online. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum capital required at the time of incorporation in order to qualify as foreign direct investment under FIPA is KRW 50,000,000 (~$44,336). ACCESSING INDUSTRIAL LAND Strength of lease rights index It is not common for foreign companies to lease public land. This is due to the relative complexity of the 85.7 92.2 82.1 (0 = min, 100 = max) procedures and legal restrictions under the relevant laws and regulations. Most foreign companies usually Strength of ownership rights index lease or buy private land. Registering leases is not mandatory. However, if the lessee wishes to enforce its 100.0 100.0 92.2 (0 = min, 100 = max) rights against a third party, the lease must be registered. Under the Foreigner’s Land Acquisition Act of Korea, a Access to land information index foreign company must ï¬?le a report with the relevant authority when it acquires land in Korea. Publicly held land 68.4 52.5 41.3 (0 = min, 100 = max) is usually sold through a public auction. The maximum lease duration for private land is unlimited; for publicly Availability of land information index (0 = min, 100 = max) 70.0 84.2 70.6 held land the maximum duration is 50 years. Lease contracts of privately held land can offer the lessee the right to subdivide, sublease, or mortgage the leased land or use it as collateral, subject to the terms of the contract. Time to lease private land (days) 10 50 61 Land-related information can be found in the land registry and cadastre, which are linked and coordinated to Time to lease public land (days) 53 88 140 share data. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act was enacted in 1966, and was subsequently amended by Act No. 6083/1999. The amended 94.9 94.2 85.2 (0 = min, 100 = max) Arbitration Act incorporates the UNCITRAL Model Law and applies to both domestic and international arbitra- Ease of process index tions. There are no deï¬?nitions of domestic or international arbitration in the legislation. The Korea Arbitration 81.9 83.3 70.6 (0 = min, 100 = max) Board, which administers arbitrations, deï¬?nes domestic arbitration as arbitrations where the parties’ permanent Extent of judicial assistance index residency or primary place of business is in Korea. Commercial matters are generally arbitrable, although there 70.2 77.6 57.9 (0 = min, 100 = max) are restrictions on submitting to arbitration disputes that affect third-party rights, insolvency matters, patents and trademarks, or anti-trust law. Arbitration agreements must be in writing. Parties are free to appoint arbitra- tors of any nationality, gender, or professional qualiï¬?cations. Under the Attorney-at-Law Act, a foreign attorney who is not qualiï¬?ed to practice law in Korea may not represent parties in arbitration proceedings, and may face criminal sanctions if he or she does so. Online arbitration is not available in Korea, although the Korean Commercial Arbitration Board is considering it. Korean courts are empowered to assist and support arbitration proceedings, but, in practice, such assistance is not often sought. On average, it takes around 25 weeks to enforce an arbitration award rendered in Korea, from ï¬?ling an application to a writ of execution attaching as- sets (assuming there is no appeal), and 23 weeks for a foreign award. Appeals can be made to the Seoul High Court or Supreme Court. For more information on this country, please go to http://www.investingacrossborders.org 122 INVESTING ACROSS BORDERS 2010 Kosovo Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Kosovo is one of the most open countries to foreign equity ownership in Eastern Europe and Central Asia. The Mining, oil and gas 100.0 96.2 92.0 Law on Foreign Investments grants foreign and domestic investors equal rights to ownership of local compa- Agriculture and forestry 100.0 97.5 95.9 nies, following the principle of national treatment. With the exception of railway freight transportation, all other Light manufacturing 100.0 98.5 96.6 sectors measured by the Investing Across Sectors indicators are fully open to foreign equity ownership. While a Telecommunications 100.0 96.2 88.0 number of sectors are still dominated by publicly owned enterprises, such as electricity transmission and distri- Electricity 100.0 96.4 87.6 bution, waste management, and airport operations, legal provisions have been made to open up these sectors Banking 100.0 100.0 91.0 either to private greenï¬?eld investment or privatization. Insurance 100.0 94.9 91.2 Transportation 90.0 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 54 days and 11 procedures to establish a foreign-owned limited liability company (LLC) that wants to 54 22 42 (days) engage in international trade in Kosovo (Pristina). The Law on Business Organization stipulates that 10 days Procedures from the date of application companies are considered registered with the Kosovo Business Organization 11 8 10 (number) Register unless they hear otherwise. The principle of silent consent for business registration eases the process Ease of establishment index for investors, although automation would further improve the system. The requirement for a municipal license 73.7 76.8 64.5 (0 = min, 100 = max) (30 days), however, is burdensome. Foreign investors do not need an investment approval. There is a minimum capital requirement of €1,000 and the company’s charter capital must be paid in within 14 days of registration. Until the company provides the registry with evidence of payment, it may not engage in business activity in Kosovo. Natural and legal persons are entitled to open bank accounts in a foreign currency. ACCESSING INDUSTRIAL LAND Strength of lease rights index Most foreign companies prefer to lease public land. Other available options include leasing private land and 85.7 82.9 82.1 (0 = min, 100 = max) buying privately and publicly held land. The purchase of private land is relatively expensive compared with Strength of ownership rights index publicly held land and requires a more extensive due-diligence process. Nonetheless, the process of leasing 100.0 97.6 92.2 (0 = min, 100 = max) private land is streamlined and extremely fast compared with the regional or global average. Leases of public Access to land information index municipal land require central government approval only if they are for more than 10 years. Lease contracts 47.4 50.3 41.3 (0 = min, 100 = max) can be of unlimited duration and can offer the lessee the right to subdivide, sublease, and mortgage the leased Availability of land information index (0 = min, 100 = max) 65.0 78.9 70.6 land. There are no restrictions on the amount of land that may be leased. The process of acquiring land-related information is less burdensome than in most countries in the region. Pristina has both a land registry and a Time to lease private land (days) 25 43 61 cadastre located in the same agency. They are not linked or coordinated to share data, however. Reforms are Time to lease public land (days) 59 133 140 currently underway to make them electronic, thus making it easier to obtain land-related information. ARBITRATING COMMERCIAL DISPUTES Strength of laws index In 2008 Kosovo enacted a Law on Arbitration that does not deï¬?ne terms such as “arbitration,â€? “commercial,â€? 74.9 82.5 85.2 (0 = min, 100 = max) “international,â€? and “scope of application of the law.â€? Disputes involving immovable property, privatization- Ease of process index related matters, and creditor’s claims against a corporation are not arbitrable. An arbitration agreement is only 63.9 69.7 70.6 (0 = min, 100 = max) valid if concluded in writing. The law does not establish any speciï¬?c requirements regarding the selection of Extent of judicial assistance index arbitrators, but they must be an odd number. There are no provisions regarding the conï¬?dentiality of arbitration 27.5 64.4 57.9 (0 = min, 100 = max) proceedings. There is not yet an established arbitral institution in Kosovo, and arbitration practice is therefore currently lacking. The law designates the Economic Court of Pristina (higher-level court) to enforce arbitration awards, but there has not yet been any court practice. The country has not yet ratiï¬?ed the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards or the ICSID Convention. Given the lack of practice on the ground, private practitioners were unable to estimate the length of time to enforce an award, whether rendered in Kosovo, or in a foreign country. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 123 Kyrgyz Republic Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Compared with the other economies in Eastern Europe and Central Asia covered by the Investing Across Mining, oil and gas 100.0 96.2 92.0 Sectors indicators, the Kyrgyz Republic is one of the more open countries to foreign capital participation. Agriculture and forestry 100.0 97.5 95.9 With the exception of the domestic and international air transportation sectors, in which foreign ownership is Light manufacturing 100.0 98.5 96.6 limited to a maximum of 49%, all other sectors measured by the indicators are fully open to foreign capital Telecommunications 100.0 96.2 88.0 participation. Kyrgyz legislation provides for equal treatment of domestic and foreign investors with respect to Electricity 100.0 96.4 87.6 ownership of local companies. Banking 100.0 100.0 91.0 Insurance 100.0 94.9 91.2 Transportation 79.6 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 4 procedures and 12 days to establish a foreign-owned limited liability company (LLC) in the Kyrgyz 12 22 42 (days) Republic (Bishkek), making it one of the faster processes in the Eastern Europe and Central Asia countries Procedures covered by Investing Across Borders. An LLC in the Kyrgyz Republic needs a minimum of 2 shareholders. In 4 8 10 (number) addition to the 3 procedures also required of domestic companies, the only additional procedure required of Ease of establishment index foreign companies is to submit a legalized excerpt from the trade registry of its country of origin certifying that 73.7 76.8 64.5 (0 = min, 100 = max) it is duly incorporated and in good standing. The Kyrgyz Republic is not party to the Hague Convention, but since September 2009 the legislative authority is considering a resolution on accession to said convention. Companies are registered at the one-stop shop at the Ministry of Justice. The April 2009 amendments to the Civil Code stipulate that registration must be done in 3 days. The one-stop shop interacts electronically with all agencies. Companies in the Kyrgyz Republic are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement, although the authorized capital stipulated in the constitutive docu- ments must be paid in full within the ï¬?rst year of the company’s operation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to acquire land in the Kyrgyz Republic have the option to lease privately or publicly 91.2 82.9 82.1 (0 = min, 100 = max) held land. The land code prohibits the purchase of land by foreign companies, with the exception of foreign Strength of ownership rights index companies involved in mortgage ï¬?nancing. Publicly held land may be leased only within the boundaries of n/a 97.6 92.2 (0 = min, 100 = max) settlement centers, provided consent has been granted by the relevant public authority. The land may be leased Access to land information index through an auction or tender process or through direct negotiations with the relevant public authority. The 55.6 50.3 41.3 (0 = min, 100 = max) maximum duration of lease contracts is 50 years. The lease contract offers the lessee the right to subdivide, Availability of land information index (0 = min, 100 = max) 82.5 78.9 70.6 sublease, or mortgage the leased land or use it as collateral, subject to the terms of the contract. Land-related information can be found in the land registry and cadastre, which are located in different agencies and are not Time to lease private land (days) 15 43 61 linked or coordinated to share data. There is no land information system (LIS) or geographic information system Time to lease public land (days) 154 133 140 (GIS) in place that centralizes relevant information at a single point of access. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Law on Arbitration Courts in the Kyrgyz Republic (2002) does not distinguish between domestic and 74.9 82.5 85.2 (0 = min, 100 = max) international arbitration. All commercial disputes are generally arbitrable, unless a special law grants exclusive Ease of process index jurisdiction to the courts. There are no nationality restrictions on arbitrators. The law mandates that arbitra- 72.3 69.7 70.6 (0 = min, 100 = max) tors must have certain qualiï¬?cations, however. A sole arbitrator must be a qualiï¬?ed lawyer, and in the event Extent of judicial assistance index of an arbitral tribunal, at least the chairman must be a qualiï¬?ed lawyer. The law requires arbitrators to be 61.7 64.4 57.9 (0 = min, 100 = max) independent and impartial and to preserve the conï¬?dentiality of the proceedings. Parties may choose foreign counsel to represent them in arbitration proceedings in the Kyrgyz Republic. The only local arbitral institution is the International Court of Arbitration in afï¬?liation with the Chamber of Commerce and Industry of the Kyrgyz Republic. There is reportedly no arbitration practice in the court, however. There are no legal provisions that state courts may assist arbitrators with orders of provisional measures or with the taking of evidence, and there is no court practice in that regard. The Interdistrict Court of Bishkek has jurisdiction to enforce arbitration awards. On average, it takes around 15 weeks to enforce an arbitration award rendered in the Kyrgyz Republic, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 16 weeks for a foreign award. Foreign arbitration awards are not enforced if their execution could be detrimental to the sovereignty of the Kyrgyz Republic, or threatens its security. For more information on this country, please go to http://www.investingacrossborders.org 124 INVESTING ACROSS BORDERS 2010 Liberia Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 30 are fully open to foreign equity Mining, oil and gas 100.0 95.2 92.0 ownership in Liberia. The only exceptions are the electricity transmission and distribution industries, which are Agriculture and forestry 100.0 97.6 95.9 closed to foreign capital participation, as is the port operation sector. All port and airport facilities in Liberia are Light manufacturing 100.0 98.6 96.6 currently owned and operated by a publicly owned company. All other sectors, including the primary sectors Telecommunications 100.0 84.1 88.0 and media industry, which are restricted in many countries in Sub-Saharan Africa, are fully open to foreign Electricity 71.4 90.5 87.6 ownership in Liberia. Banking 100.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 90.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 25 days to establish a foreign-owned limited liability company (LLC) in Monrovia, 25 48 42 (days) Liberia. This is faster than both the IAB regional average for Sub-Saharan Africa and the IAB global average. A Procedures foreign company establishing a subsidiary in Monrovia must notarize the documents of the parent company 8 10 10 (number) abroad. Foreign companies must only obtain investment approval if they want to beneï¬?t from investment Ease of establishment index incentives. Otherwise, a mere notiï¬?cation to the National Investment Committee sufï¬?ces. If the subsidiary is 55.3 51.5 64.5 (0 = min, 100 = max) engaged in manufacturing and international trade, it must obtain a trade license; this can take 3 days. Liberia is one of the few countries surveyed by IAB that does not have its commercial laws and regulations publicly avail- able online. Foreign investors must use a local counsel when establishing a subsidiary. There is no minimum paid-in capital requirement, except in regulated industries related to ï¬?nancial institutions, such as insurance and banking. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign ownership of land is prohibited in Liberia. Foreign companies seeking to lease land in Liberia have the 57.7 76.6 82.1 (0 = min, 100 = max) option to lease privately or publicly held land. Publicly held land is not readily available. The best option for Strength of ownership rights index foreign companies seeking to acquire land is thus to lease private land. Publicly held land is usually acquired n/a 77.3 92.2 (0 = min, 100 = max) through direct negotiations with the relevant public authority. Land may be leased for a maximum of 50 years, Access to land information index although the usual duration is about 21 years, with the option to renew. Lease contracts can offer the lessee 28.6 33.9 41.3 (0 = min, 100 = max) the right to subdivide or sublease the land. The leased land cannot be mortgaged or used as collateral, unless Availability of land information index (0 = min, 100 = max) 15.0 58.5 70.6 the land has already been developed. Land-related information can be obtained from the registry. There is no cadastre, land information system (LIS), or geographic information system (GIS) available. The registry does not Time to lease private land (days) 28 72 61 always have sufï¬?cient or current information and in most cases acquiring land-related information is a burden- Time to lease public land (days) 193 151 140 some process involving different sources. ARBITRATING COMMERCIAL DISPUTES Strength of laws index There is no speciï¬?c statute governing arbitration in Liberia. The Liberian Civil Procedure Law governs both do- 44.9 82.4 85.2 (0 = min, 100 = max) mestic and international arbitrations taking place in Liberia. An arbitration agreement is not severable from the Ease of process index main contract; it can, however, be incorporated by reference. An arbitration agreement cannot be concluded by 56.4 73.8 70.6 (0 = min, 100 = max) electronic communication, oral agreement, or conduct by one of the parties. The parties cannot elect to retain Extent of judicial assistance index a foreign lawyer to represent them in either domestic or international arbitrations. The institution administering 42.0 55.9 57.9 (0 = min, 100 = max) commercial arbitration in Liberia is the Liberian Chamber of Commerce. There are no legal provisions providing explicitly for the local courts to assist the arbitration process with the production of documents or the appear- ance of witnesses. The Liberian courts, especially the Supreme Court, have a clear pro-arbitration policy, favor- ing the enforcement of arbitration agreements and awards. It takes roughly 1.4 years to enforce both foreign and domestic arbitration awards, from the ï¬?ling of an application to the court of ï¬?rst instance to obtaining a writ of execution, with provision for an appeal. Enforcement proceedings are undertaken in the Civil Law Court in Liberia, with appeals made directly to the Supreme Court. On average, it takes around 21 weeks to enforce an arbitration award rendered in Liberia, from ï¬?ling an application to a writ of execution attaching assets (as- suming there is no appeal), and 21 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 125 Macedonia, FYR Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The former Yugoslav Republic of Macedonia has opened up the majority of the sectors of its economy to for- Mining, oil and gas 100.0 96.2 92.0 eign investors. As a notable exception, legal ownership restrictions still exist in the domestic and international Agriculture and forestry 100.0 97.5 95.9 air transportation industries. As in most other countries in Eastern Europe and Central Asia, legislation in FYR Light manufacturing 100.0 98.5 96.6 Macedonia limits foreign ownership in these sectors to a maximum of 49%. A number of business sectors, such Telecommunications 100.0 96.2 88.0 as electricity transmission, railway freight transportation, airport operation, and waste management, are still Electricity 100.0 96.4 87.6 dominated by publicly owned enterprises. Those monopolies, together with a high perceived difï¬?culty of obtain- Banking 100.0 100.0 91.0 ing required operating licenses, make it difï¬?cult for foreign companies to engage in these sectors. Insurance 100.0 94.9 91.2 Transportation 79.6 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned limited liability company (LLC) in FYR Macedonia is faster than 8 22 42 (days) both the IAB regional average in the Eastern Europe and Central Asia region and the IAB global average. It Procedures takes only 6 procedures and 8 days. A foreign company establishing a subsidiary in Skopje must authenticate 6 8 10 (number) the documents of the parent company abroad and must register the investment with the foreign direct invest- Ease of establishment index ment registry in the Macedonian Central Registry within a year of registration. The company registration is 76.3 76.8 64.5 (0 = min, 100 = max) done at a one-stop shop within the Central Registry and takes 1 day. Companies in FYR Macedonia are free to open and maintain bank accounts in foreign currency. There is a minimum capital requirement of MKD 310,000 (~$6,800) for foreign and domestic companies. In accordance with the Trade Company Law the amount must be paid in within a year of registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index In FYR Macedonia, foreign companies may buy or lease privately or publicly held land, the latter subject to 85.6 82.9 82.1 (0 = min, 100 = max) the consent of the Justice Minister. The most common way that foreign companies acquire land is through the Strength of ownership rights index lease of publicly held land. This land can be leased only through a public auction. Land can be leased for a 100.0 97.6 92.2 (0 = min, 100 = max) maximum of 99 years. Lease contracts can offer the lessee the right to renew, subdivide, sublease, or mortgage Access to land information index the leased land or use it as collateral, subject to the terms of the contract. These rights may be restricted in the 68.4 50.3 41.3 (0 = min, 100 = max) case of publicly held land. Publicly held land may not be transferred unless approval is sought from the relevant Availability of land information index (0 = min, 100 = max) 90.0 78.9 70.6 authority. Moreover, the land can only be transferred after it has been developed. Land-related information may be found in the registry and cadastre. However, there is no reliable source of information on land claims, since Time to lease private land (days) 13 43 61 not all claims are necessarily registered in the cadastre. The registry and cadastre are not linked or coordinated Time to lease public land (days) 79 133 140 to share data. ARBITRATING COMMERCIAL DISPUTES Strength of laws index FYR Macedonia’s Law on International Commercial Arbitration (2006) applies to both national and inter- 93.1 82.5 85.2 (0 = min, 100 = max) national arbitrations taking place in FYR Macedonia. FYR Macedonia has also enacted a Law on Mediation Ease of process index (2006). All commercial disputes are arbitrable, except those involving rights over immovable property, aviation 74.9 69.7 70.6 (0 = min, 100 = max) and ships, and bankruptcy. Arbitration is not often used as a method of dispute resolution, however. Parties Extent of judicial assistance index are free to appoint arbitrators of any nationality or professional qualiï¬?cations. The law requires the impartiality 69.7 64.4 57.9 (0 = min, 100 = max) and independence of arbitrators and the conï¬?dentiality of the arbitration proceedings. Parties can choose to be represented by foreign lawyers in arbitration proceedings in FYR Macedonia. Parties to arbitration without an international element may only choose FYR Macedonia as the seat of arbitration. The arbitral tribunal or one of the parties can request legal assistance with the taking of evidence or enforcement of provisional measures from an authorized Macedonian court. Such requests are usually granted. Domestic arbitration awards are directly enforced by an enforcement agency (private executors), which takes around 15 weeks. A court of ï¬?rst instance in Skopje has jurisdiction to recognize and enforce foreign arbitration awards, which takes roughly 34 weeks (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org 126 INVESTING ACROSS BORDERS 2010 Madagascar Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The majority of the sectors covered by the Investing Across Sectors indicators are fully open to foreign equity Mining, oil and gas 100.0 95.2 92.0 ownership in Madagascar. However, the country imposes foreign ownership restrictions in a number of service Agriculture and forestry 100.0 97.6 95.9 sectors. Foreign ownership in the telecommunications infrastructure (both ï¬?xed-line and mobile/wireless), for Light manufacturing 100.0 98.6 96.6 example, is limited to a maximum of 66%. Furthermore, foreign capital participation in companies providing Telecommunications 74.5 84.1 88.0 ï¬?xed-line telecommunication services is also limited to 66%. In addition to these restrictions, foreign equity Electricity 92.9 90.5 87.6 ownership is limited in the electricity transmission sector as well as in the port and airport operation sectors. Banking 100.0 84.7 91.0 These industries are currently dominated by large publicly owned enterprises. Insurance 100.0 87.3 91.2 Transportation 80.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 3 procedures and 12 days to establish a foreign-owned limited liability company (LLC) in Madagascar 12 48 42 (days) (Antananarivo). This process is among the shortest in Sub-Saharan Africa and much faster than the IAB global Procedures average. An LLC can be entirely foreign-owned; investment authorizations are no longer required. However, at 3 10 10 (number) least one of its executives must reside in Madagascar. If a newly established company (domestic or foreign) wants Ease of establishment index to engage in international trade, it must register with the Ministry of Commerce and Trade. Companies can obtain 65.0 51.5 64.5 (0 = min, 100 = max) their statistical card, tax registration conï¬?rmation, commercial registration number, and professional card at the one-stop shop. They must also register for social security and health insurance, which can be done through the Economic Development Board of Madagascar (EDBM)’s one-stop shop. Companies in Madagascar are free to open and maintain bank accounts in foreign currency. Minimum capital requirements have been abolished. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Madagascar have the option to lease or buy land from both 84.5 76.6 82.1 (0 = min, 100 = max) private and public owners. Foreign companies must have authorization from the Economic Development Board Strength of ownership rights index of Madagascar before buying land. Such authorization determines the amount of land that the purchaser is 75.0 77.3 92.2 (0 = min, 100 = max) allowed to acquire. If the land exceeds 10,000 ha, further authorization is required from the relevant minister. Access to land information index Lease contracts can be of unlimited duration for privately held land. For publicly held land, lease contracts are 26.3 33.9 41.3 (0 = min, 100 = max) limited to a renewable term of 50 years. Foreign companies may transfer the land, but will need authorization Availability of land information index (0 = min, 100 = max) 85.0 58.5 70.6 to transfer it to another foreign entity. Lease contracts can offer the lessee the right to sublease, subdivide, or mortgage the leased land or use it as collateral. Land-related information can be found in the registry and Time to lease private land (days) 81 72 61 cadastre. However, these are not linked or coordinated to share data. Currently, there are efforts underway to Time to lease public land (days) 132 151 140 modernize the land registry and cadastre. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Act 98-019 of December 15, 1998, and Articles 439 to 464 of the Civil Procedure Code (2003) govern do- 85.0 82.4 85.2 (0 = min, 100 = max) mestic and international arbitrations in Madagascar. The Arbitration Act is based on the UNCITRAL Model Law. Ease of process index Most commercial disputes may be submitted to arbitration. However, domestic disputes involving the state, 74.2 73.8 70.6 (0 = min, 100 = max) public authorities, and public establishments cannot be submitted to arbitration. Arbitration agreements must Extent of judicial assistance index be in writing. The parties are free to select arbitrators of any gender, nationality, or professional qualiï¬?cations 83.3 55.9 57.9 (0 = min, 100 = max) in both domestic and international arbitrations and foreign counsel may represent the parties in arbitration proceedings. Parties are also free to choose any arbitral institution of their choice, including the Arbitration and Mediation Center of Madagascar (CAMM). Arbitration practice is limited in Madagascar, and foreign investors do not appear to have conï¬?dence in CAMM. Domestic courts have the power to declare an arbitral tribunal incompetent to settle a dispute. Enforcement proceedings for domestic awards take place in the competent court of ï¬?rst instance, and for international awards, in the Court of Appeal of Antananarivo. On average, it takes around 10 weeks to enforce an arbitration award rendered in Madagascar, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 12 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 127 Malaysia East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The majority of the 33 industry sectors covered by the Investing Across Sectors indicators are subject to overt Mining, oil and gas 70.0 75.7 92.0 statutory ownership restrictions in Malaysia. While the manufacturing sectors are fully open to foreign equity Agriculture and forestry 85.0 82.9 95.9 ownership, foreign capital participation is limited in the primary sectors and in particular in services sectors Light manufacturing 100.0 86.8 96.6 such as telecommunications and electricity. Foreign ownership in companies owning and operating telecom- Telecommunications 39.5 64.9 88.0 munications infrastructure (ï¬?xed-line and mobile/wireless) is limited to a maximum of 30%. In addition, the Electricity 30.0 75.8 87.6 government may require infrastructure operators to transfer their assets to the state after their operating Banking 49.0 76.1 91.0 license expires. Foreign capital participation in companies providing telecommunications services (ï¬?xed-line and Insurance 49.0 80.9 91.2 mobile/wireless) is limited to a maximum of 61%, with the requirement to reduce the share of foreign equity to Transportation 100.0 63.7 78.5 49% over a period of 5 years. In the electricity sector (generation, transmission, and distribution), foreign equity Media 65.0 36.1 68.0 is generally allowed only up to a 30% stake. Sector group 1 (constr., tourism, retail) 90.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 65.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 11 procedures and 14 days to establish a foreign-owned limited liability company (LLC) in Kuala Lumpur, 14 68 42 (days) Malaysia. This is faster than both the average for IAB countries in East Asia and the Paciï¬?c and the IAB global Procedures average. Two additional procedures are required of a foreign-owned company establishing a subsidiary in 11 11 10 (number) Kuala Lumpur. It must provide a notarized copy of the documents of the parent company abroad. And, if the Ease of establishment index foreign-owned company is engaged in manufacturing and has an initial capital investment of MYR 2,500,000 60.5 57.4 64.5 (0 = min, 100 = max) (~$778,930) or more, or plans on hiring 75 full-time employees, it must obtain a manufacturing license from the Malaysian Industrial Development Authority (MIDA). If the above assumptions do not apply, the foreign-owned company must apply for approval from the Foreign Investment Committee (FIC). Company registration documents are available online, but the submission process is not yet possible online. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement for an LLC is MYR 2 (~ $0.62), unless a foreign company seeks to acquire immovable property, in which case the minimum paid-in capital requirement is MYR 250,000 (~$78,300). ACCESSING INDUSTRIAL LAND Strength of lease rights index In Malaysia, foreign companies may lease or buy privately or publicly held land, subject to certain restrictions. 78.5 84.9 82.1 (0 = min, 100 = max) For example, the guidelines issued by the Foreign Investment Committee (FIC) stipulate that FIC approval is re- Strength of ownership rights index quired for the acquisition of land if it affects native interests or involves a sale of more than MYR 20,000,000. 87.5 83.3 92.2 (0 = min, 100 = max) Approval is not required in cases where the land will be used for industrial purposes. Publicly held land may be Access to land information index leased through direct negotiations with the relevant public authority. In most cases, additional approvals will be 23.1 35.1 41.3 (0 = min, 100 = max) required from other public bodies, making the process relatively long compared with that for acquiring private Availability of land information index (0 = min, 100 = max) 85.0 67.5 70.6 land. Lease contracts can offer the lessee the right to renew, subdivide, sublease, or mortgage the leased land or use it as collateral, subject to the terms of the contract. In the case of publicly held land, approval is required Time to lease private land (days) 96 66 61 from the Foreign Investment Committee (FIC). Land-related information may be found in the registry. Time to lease public land (days) 355 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Malaysia’s Arbitration Act was enacted in 2006 and applies to both international and domestic arbitration. 94.9 83.8 85.2 (0 = min, 100 = max) Although its provisions largely reflect those of the UNCITRAL Model Law, there are some notable differences, Ease of process index such as the requirement that parties in domestic arbitration must choose Malaysian law as the applicable law, 81.8 66.1 70.6 (0 = min, 100 = max) or that the number of arbitrations must be 3 for international arbitrations and 1 for domestic, unless otherwise Extent of judicial assistance index agreed. While an arbitration agreement may be concluded by email or fax, it must be in writing: Malaysia does 66.7 46.6 57.9 (0 = min, 100 = max) not recognize oral agreements or conduct as constituting binding arbitration agreements. The Kuala Lumpur Regional Centre for Arbitration (KLRCA) is the main arbitral institution and uses its own arbitration rules, which are based on the UNCITRAL Arbitration Rules (1976). The KLRCA, in conjunction with the Malaysian Network Information Centre, provides limited online dispute resolution services for Internet domain name disputes. Malaysia has ratiï¬?ed both the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the ICSID Convention. The courts in Malaysia have stated a general policy in favor of enforcing arbitration agreements and arbitration awards for arbitrations conducted in Malaysia. On average, it takes around 24 weeks to enforce an arbitration award, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org 128 INVESTING ACROSS BORDERS 2010 Mali Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 30 are fully open to foreign equity owner- Mining, oil and gas 95.0 95.2 92.0 ship in Mali. The country imposes ownership restrictions on the mining and media sectors. Foreign capital Agriculture and forestry 100.0 97.6 95.9 participation in the mining industry is limited to a maximum of 90% by the Mining Act and foreign ownership Light manufacturing 100.0 98.6 96.6 of media companies (television broadcasting and newspaper publishing) is limited to a less-than-50% stake. Telecommunications 100.0 84.1 88.0 While foreign capital participation in the electricity sector (generation, transmission, and distribution) is a public Electricity 100.0 90.5 87.6 monopoly, thus presenting a potential obstacle for foreign investors to engage. A further public monopoly exists Banking 100.0 84.7 91.0 in the ï¬?xed-line telecommunications sector. Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 49.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 29 days to establish a foreign-owned limited liability company (LLC) in Mali (Bamako). 29 48 42 (days) This is faster than both the IAB average for Sub-Saharan Africa and the IAB global average. In addition to the Procedures procedures required of a domestic company, a foreign company must declare its investment with the Ministry of 8 10 10 (number) Finance. Company registration is done at the one-stop shop and a government decree guarantees a turnaround Ease of establishment index time of a maximum of 3 days. According to a directive of the Economic Community of West African States 42.5 51.5 64.5 (0 = min, 100 = max) (ECOWAS), companies in Mali are not allowed to open bank accounts in foreign currency unless they get approval from the Mali Ministry of Finance and the Central Bank of West Africa. This approval must be renewed yearly. The minimum capital requirement of XOF 1,000,000 (~$2,000) is applicable across all OHADA (Organization for the Harmonization of Business Law in Africa) member states. It must be paid in full for the incorporation of an LLC. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Mali have the option to lease or buy land from private or public 80.0 76.6 82.1 (0 = min, 100 = max) owners. The process of leasing publicly held land can be lengthy and unpredictable. Publicly held land is leased Strength of ownership rights index through a public auction. Since the length of the auction process is not deï¬?nite, it may take from one month 50.0 77.3 92.2 (0 = min, 100 = max) to close to a year to lease publicly held land. The maximum duration of the contract can be unlimited and can Access to land information index offer the lessee the right to sublease, subdivide, and/or mortgage the leased land. There are no restrictions on 28.6 33.9 41.3 (0 = min, 100 = max) the amount of land that may be leased. Most land-related information can be acquired from the registry. There Availability of land information index (0 = min, 100 = max) 5.0 58.5 70.6 is no cadastre, land information system (LIS), or geographic information system (GIS) in place that centralizes relevant information at a single point of access. Time to lease private land (days) .. 72 61 Time to lease public land (days) 63 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Mali is a party to the OHADA Treaty (Organisation pour l’Harmonisation en Afrique du Droit des Affaires). 80.0 82.4 85.2 (0 = min, 100 = max) Arbitration is therefore governed by the Uniform Act on Arbitration, which is based on the UNCITRAL Model Ease of process index Law. The act was signed on March 11, 1999 and entered into force 90 days later. The Uniform Act supersedes 67.5 73.8 70.6 (0 = min, 100 = max) the existing national laws on arbitration. The principal arbitral institution under OHADA is the Common Court Extent of judicial assistance index for Justice and Arbitration (CCJA) in Abidjan, Côte d’Ivoire. Mali has ratiï¬?ed the New York Convention of 8.3 55.9 57.9 (0 = min, 100 = max) 1958 on the Recognition and Enforcement of Foreign Arbitral Awards and the Washington Convention for the Settlement of Investment Disputes (ICSID). Due to the lack of practice, local legal practitioners were not able to estimate the time periods for enforcing an arbitration award, whether rendered in Mali, or in a foreign country. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 129 Mauritius Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 32 are fully open to foreign capital Mining, oil and gas 100.0 95.2 92.0 participation in Mauritius. The only exception is the TV broadcasting industry. According to the Independent Agriculture and forestry 100.0 97.6 95.9 Broadcasting Authority Act, foreign capital participation in TV broadcasting companies must be less than 20%. Light manufacturing 100.0 98.6 96.6 Moreover, the share of foreign members of the board of directors must not exceed 20%. In addition to these Telecommunications 100.0 84.1 88.0 overt legal restrictions, sectors such as electricity transmission and distribution, waste management and recy- Electricity 100.0 90.5 87.6 cling, and port and airport operation are characterized by monopolistic market structures, with one dominating Banking 100.0 84.7 91.0 publicly owned enterprise, making it difï¬?cult for foreign companies to invest. Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 60.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 11 days to establish a foreign-owned limited liability company (LLC) in Port Louis, 11 48 42 (days) Mauritius, faster than the IAB regional average for Sub-Saharan Africa and the IAB global average. In addition to Procedures the procedures required of domestic companies, the parent company must legalize and apostille its documents in 9 10 10 (number) the country of origin. If the capital invested is $10,000,000 or more (the investment is considered a “qualifying Ease of establishment index investmentâ€? under the Investment Promotion Act), the foreign company must apply to the Board of Investment for 68.4 51.5 64.5 (0 = min, 100 = max) an investment certiï¬?cate. This takes 3 days. A minimum projected annual turnover of more than MUR 3,000,000 (~ $99,330) is a prerequisite for the investment certiï¬?cate. If a company wants to engage in international trade, it must register with customs authorities as an importer/exporter and get a trade license from the municipal council of Port Louis. Forms and information on company registration are downloadable online. The registration applica- tion can also be completed online. Companies are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement to establish foreign or domestic LLCs in Mauritius. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Mauritius may lease or buy privately or publicly held land. If the 90.0 76.6 82.1 (0 = min, 100 = max) company seeks to hold the land for more than 20 years, it will require approval from the Board of Investment Strength of ownership rights index or the relevant minister. The sale of publicly held land is not common. Publicly held land is leased through a 87.5 77.3 92.2 (0 = min, 100 = max) public auction. Land may be leased for a maximum of 99 years. Public leases granted for industrial or com- Access to land information index mercial purposes have a maximum duration of 60 years. The lease contract can offer the lessee the right to 31.3 33.9 41.3 (0 = min, 100 = max) sublease, subdivide, and/or mortgage the leased land. If the lessee seeks to transfer the land to another foreign Availability of land information index (0 = min, 100 = max) 95.0 58.5 70.6 entity, consent is required from the relevant minister or the Board of Investment. Land-related information may be found at the Conservator of Mortgages’ Ofï¬?ce. The Board of Investment has created a Property Acquisition Time to lease private land (days) 19 72 61 and Management System that allows online submission and processing of applications to acquire property for Time to lease public land (days) 100 151 140 business purposes. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Mauritius’s International Arbitration Act (2008) regulates only international arbitrations taking place within the 84.9 82.4 85.2 (0 = min, 100 = max) country. Domestic arbitrations are governed by the Code de Procédure Civile. The arbitration law is available Ease of process index online. Most commercial disputes are arbitrable, except those involving bills of exchange. The law does not 71.2 73.8 70.6 (0 = min, 100 = max) speciï¬?cally stipulate that an arbitration agreement may be severable from the main contract. In practice, how- Extent of judicial assistance index ever, domestic courts have recognized this principle. Arbitration agreements must be in writing. The parties may 77.1 55.9 57.9 (0 = min, 100 = max) appoint arbitrators of any nationality, gender, or professional qualiï¬?cations for both domestic and international arbitrations. Only Mauritian lawyers, however, may represent parties in domestic arbitrations. The law does not require arbitrators to preserve conï¬?dentiality of arbitration proceedings in either domestic or international arbitrations. Arbitration awards are enforced in the Supreme Court, and decisions regarding enforcement can be appealed to the Judicial Committee of the Privy Council. On average, it takes around 16 weeks to enforce an arbitration award rendered in Mauritius, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 11 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 130 INVESTING ACROSS BORDERS 2010 Mexico Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 14 countries covered by the Investing Across Sectors indicators in the Latin America and the Mining, oil and gas 50.0 91.0 92.0 Caribbean region, Mexico’s foreign equity ownership restrictions are stricter than the regional average. The Agriculture and forestry 49.0 96.4 95.9 Foreign Investment Law sets out a list of strategic sectors that are either closed to foreign capital participation Light manufacturing 100.0 100.0 96.6 or in which foreign ownership is limited. Unlike most other countries in the region, Mexico imposes restrictions Telecommunications 74.5 94.5 88.0 on foreign equity ownership not only in the service, but also in the primary sectors. The oil and gas industry, for Electricity 0.0 82.5 87.6 example, is closed to foreign ownership, and foreign capital participation in the agriculture and forestry sectors Banking 100.0 96.4 91.0 is limited to a maximum share of 49%. In the service industries, foreign investors are not allowed to engage in Insurance 49.0 96.4 91.2 electricity transmission and distribution. Foreign ownership in electricity generation companies is possible under Transportation 54.4 80.8 78.5 certain circumstances as deï¬?ned by the Regulations of the Foreign Investment Law and the Electric Energy Media 24.5 73.1 68.0 Public Service Law. Foreign capital participation is also limited to a less-than-50% stake in ï¬?xed-line telecom- Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 munications, railway freight transportation, port and airport operation, and newspaper publishing. Foreign Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 ownership of nationwide television channels is not allowed. STARTING A FOREIGN BUSINESS Time It takes 11 procedures and 31 days to establish a foreign-owned limited liability company (LLC) in Mexico (Mexico 31 74 42 (days) City). This process is among the shortest of the IAB countries in Latin America and the Caribbean and is shorter Procedures than the IAB global average. All companies in Mexico require at least 2 partners, regardless of the amount of their 11 14 10 (number) participation. In addition to the procedures required of a domestic company, a foreign company must legalize any Ease of establishment index of the parent company’s documents that were issued abroad. A company engaging in international trade must 65.8 62.8 64.5 (0 = min, 100 = max) also register with the Importer’s Registry (padrón de importadores). There is no required investment approval. However, a foreign company must register with the National Registry of Foreign Investments (Registro Nacional de Inversiones Extranjeras) within 40 business days of incorporation. Regulations of the Public Registry of Commerce mandate that registration of the bylaws and articles of incorporation be completed within 2 business days when the ï¬?ling is made through the electronic system (SIGER). Companies in Mexico are free to open and maintain a bank account in foreign currency. The minimum capital requirement for LLCs is MXN 3,000 (~$240), 50% of which must be subscribed and paid in at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Mexico, a foreign company may lease or buy both privately and publicly held land. The purchase of land is 81.3 78.2 82.1 (0 = min, 100 = max) subject to certain restrictions. Foreign companies may not purchase land that is located within 100 kilometers Strength of ownership rights index of the border and 50 kilometers of the coasts. The lease or purchase of public land requires a reclassiï¬?cation 100.0 98.2 92.2 (0 = min, 100 = max) of the land to the private domain. A foreign company must obtain authorization from the relevant minister Access to land information index before acquiring any land. The maximum duration for lease contracts is a renewable term of 20 years. The lease 33.3 40.4 41.3 (0 = min, 100 = max) contract can offer the lessee the right to sublease, subdivide, or mortgage the leased land. The transfer of leases Availability of land information index (0 = min, 100 = max) 90.0 73.0 70.6 of publicly held land is restricted. Registration of leases is not mandatory. If a company decides to register the land, there is a fast-track registration process available for a higher fee. Land-related information may be found Time to lease private land (days) 83 62 61 in the registry and cadastre. Time to lease public land (days) 151 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration is governed by a chapter in the Federal Commerce Code, which is largely based on the UNCITRAL 79.1 87.5 85.2 (0 = min, 100 = max) Model Law. Mexican courts have exclusive competence to resolve disputes over land and water within Mexican Ease of process index territory. Disputes involving immovable property matters, such as rights in rem, the use and exploitation of con- 84.7 66.8 70.6 (0 = min, 100 = max) cession rights, and lease agreements over such assets, cannot be resolved through arbitration. Parties are free Extent of judicial assistance index to choose any arbitrators and the language of the proceedings in both domestic and international arbitrations. 52.7 51.7 57.9 (0 = min, 100 = max) The law requires arbitrators to disclose any circumstances likely to give rise to justiï¬?able doubts regarding their impartiality or independence. Parties can choose foreign lawyers to represent them in arbitrations in Mexico. There is a pilot program for implementing an online arbitration center at the Federal Consumer’s Protection Agency. Mexican courts have stated a pro-arbitration policy in multiple decisions. Arbitration awards are enforced through a summary proceeding that may not be appealed to a higher court. The decision enforcing the award, however, may be challenged by a constitutional trial—“Amparo Indirecto.â€? This is a two-stage con- stitutional procedure that includes a summary federal proceeding and a federal appeal, which are ï¬?led before a federal district court and before a collegiate circuit court, respectively. Such proceedings delay enforcement and can possibly frustrate the arbitration. On average, it takes around 51 weeks to enforce an arbitration award rendered in Mexico, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 46 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 131 Moldova Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Most of the industry sectors covered by the Investing Across Sectors indicators are fully open to foreign equity Mining, oil and gas 100.0 96.2 92.0 ownership in Moldova. As a notable exception, the Law on the Press (No. 243/1994) requires foreign natural Agriculture and forestry 100.0 97.5 95.9 and legal persons who wish to own newspaper companies to co-found them with a domestic partner. Foreign Light manufacturing 100.0 98.5 96.6 investors are not allowed to hold more than 49% of the share capital. The Audiovisual Code (Law No. 260-XVI, Telecommunications 100.0 96.2 88.0 dated July 27, 2006) stipulates that foreign investors (as well as domestic ones) may not hold the majority Electricity 100.0 96.4 87.6 (50% plus 1 share) in the equity capital of more than 2 TV broadcasting companies in Moldova. While foreign Banking 100.0 100.0 91.0 ownership in the health care sector is not limited per se, the Law on Entrepreneurship and Enterprises (No. Insurance 100.0 94.9 91.2 845/1992) prohibits private companies (foreign and domestic) from providing certain services, such as the Transportation 100.0 84.0 78.5 supervision and treatment of pregnant women, drug addicts, or persons with cancer, dangerous contagious Media 74.5 73.1 68.0 diseases, or aggressive mental diseases. Monopolistic market structures in certain strategic sectors such as Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 electricity transmission, ï¬?xed-line telecommunications infrastructure, airport operation, and forestry present Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 further obstacles to potential foreign investors. STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 10 days to establish a foreign-owned limited liability company (LLC) in Moldova 10 22 42 (days) (Chisinau). This process is faster than the average of IAB countries in the Eastern Europe and Central Asia region Procedures and one of the fastest globally. The only additional requirement for a foreign company is to provide a notarized 9 8 10 (number) and translated copy of the articles of incorporation and commercial registration of the parent company abroad. Ease of establishment index A foreign company does not need an investment approval. The term provided by law for registration at the State 70.0 76.8 64.5 (0 = min, 100 = max) Registration Chamber is 5 days. This step can be expedited with an additional fee and completed within 24 hours. Companies in Moldova are free to open and maintain bank accounts in foreign currency once authorization is received by the local bank from the Moldovan State Fiscal Service. The minimum capital requirement for domestic and foreign companies is MDL 5,400 (~$434). In the case of a sole shareholder, the share capital must be paid in full before registration. If there are more shareholders, only 40% of the capital must be contributed before registration and the remaining 60% within 6 months of registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Moldova, most foreign companies prefer to buy private land. Other available options include leasing privately 79.9 82.9 82.1 (0 = min, 100 = max) or publicly held land or buying publicly held land. Public land may be bought, but requires a lengthy procedure Strength of ownership rights index of reclassiï¬?cation and a public auction. Public land is leased subject to the authorization of the relevant govern- 100.0 97.6 92.2 (0 = min, 100 = max) ment authority. Both privately and publicly held land may be leased for a maximum renewable term of 99 years. Access to land information index Lease contracts can offer the lessee the right to subdivide, sublease, or mortgage the leased land. There may be 52.6 50.3 41.3 (0 = min, 100 = max) restrictions on the use of publicly held land. There are no restrictions on the amount of land that may be leased. Availability of land information index (0 = min, 100 = max) 70.0 78.9 70.6 Registration of land may be completed in 10 days, but it is possible to fast track the procedure and complete registration in 1 day, for a higher fee. Land-related information may be obtained from the land registry and Time to lease private land (days) 19 43 61 cadastre, which are linked. The land registry is based on a cadastre-title system. Time to lease public land (days) 75 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Alternative dispute resolution (ADR) in Moldova is regulated by the Law on Arbitration No. 2 (2008), the Law 84.0 82.5 85.2 (0 = min, 100 = max) on International Commercial Arbitration No. 24 (2008), and the Law on Mediation No. 134 (2007). The Law Ease of process index on Arbitration regulates domestic arbitration (disputes without an international element). The following com- 81.8 69.7 70.6 (0 = min, 100 = max) mercial disputes are not arbitrable: those arising from rental contracts of residential premises; disputes over Extent of judicial assistance index property rights relating to housing; disputes arising from insurance contracts, if the insured asset is situated 60.9 64.4 57.9 (0 = min, 100 = max) or the insured risk took place in Moldova; disputes arising from transport contracts, if the carrier or departure, or arrival points are situated in Moldova; disputes involving seagoing ships or aircrafts registered in Moldova; and insolvency disputes. Parties are free to appoint arbitrators of any nationality or professional qualiï¬?cations. Foreign counsel may represent parties in arbitration proceedings in Moldova. The Law on Arbitration requires that arbitrators preserve the conï¬?dentiality of the proceedings. Such provision is omitted from the Law on International Commercial Arbitration. In domestic arbitration, parties may only choose arbitral institutions in Moldova that are registered with the Supreme Court of Justice. A general ï¬?rst instance court has jurisdiction to assist arbitration proceedings and enforce awards in domestic arbitrations. The Economic Court of Appeals has jurisdiction to assist international arbitration proceedings and enforce both international awards rendered in Moldova and foreign awards. On average, it takes around 13 weeks to enforce an arbitration award rendered in Moldova, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 21 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 132 INVESTING ACROSS BORDERS 2010 Montenegro Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Without any legal ownership restrictions on the 33 sectors covered by the Investing Across Sectors indicators, Mining, oil and gas 100.0 96.2 92.0 Montenegro is one of the most open countries to foreign equity ownership. In practice, though, a comparatively Agriculture and forestry 100.0 97.5 95.9 large number of sectors are characterized by monopolistic or oligopolistic market structures. In particular the Light manufacturing 100.0 98.5 96.6 electricity and transportation sectors as well as the health care, forestry, and mining industries, are operated by Telecommunications 100.0 96.2 88.0 monopolies. However, the processes of structural reforms and of privatization are ongoing. Electricity 100.0 96.4 87.6 Banking 100.0 100.0 91.0 Insurance 100.0 94.9 91.2 Transportation 100.0 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 14 procedures and 15 days to establish a foreign-owned limited liability company (LLC) in Montenegro 15 22 42 (days) (Podgorica). This process is slightly faster than the regional average for Eastern Europe and Central Asia, but much Procedures faster than the IAB global average. A foreign company establishing a subsidiary in Montenegro does not need an 14 8 10 (number) investment approval. It must, however, authenticate and translate the parent company’s documentation abroad. If Ease of establishment index a company (domestic or foreign) wants to engage in international trade, it must register with the customs author- 79.0 76.8 64.5 (0 = min, 100 = max) ity. The company registry is in Podgorica in the Commercial Court building and applications can be downloaded online. The legal time limit for registration is 4 days, but, in practice, it usually takes only 2 days. Companies in Montenegro are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement is a symbolic 1. ACCESSING INDUSTRIAL LAND Strength of lease rights index Although legally possible, leasing land is not common in Montenegro. The most common option for foreign 69.2 82.9 82.1 (0 = min, 100 = max) companies seeking to acquire land is to buy private land. It is possible to buy publicly held land, but the Strength of ownership rights index procedure takes a relatively longer time. The publicly held land that is available for lease or purchase is typically 100.0 97.6 92.2 (0 = min, 100 = max) owned by the municipality. Land may be leased through direct negotiations with that municipality. However, Access to land information index the law stipulates that land be sold by a public tender procedure. The maximum duration of leases can be un- 78.9 50.3 41.3 (0 = min, 100 = max) limited; consent from the municipality is required for leases of a period greater than 30 years. For leases longer Availability of land information index (0 = min, 100 = max) 65.0 78.9 70.6 than 90 years, consent is required from parliament. Lease contracts can offer the lessee the right to subdivide, sublease, or mortgage the leased land, subject to the terms of the lease contract. Land-related information can Time to lease private land (days) 40 43 61 be found in the land registry and cadastre. Time to lease public land (days) 185 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index There is no speciï¬?c law on commercial arbitration in Montenegro and arbitration of commercial disputes is 63.5 82.5 85.2 (0 = min, 100 = max) uncommon. There are some provisions on arbitration in the Law on Civil Procedure (2004) and the Law on the Ease of process index Chamber of Commerce (2009), but they are not very detailed and do not contain deï¬?nitions of main arbitration 60.0 69.7 70.6 (0 = min, 100 = max) concepts. According to that law, disputes over immovable property and intra-company disputes are resolved by Extent of judicial assistance index the courts and cannot be submitted to arbitration. Acting judges can be appointed only as presiding or sole ar- 46.5 64.4 57.9 (0 = min, 100 = max) bitrators. Since most issues related to arbitration are not regulated by law, and there is no practice, it is unclear if parties to an arbitration have enough autonomy to determine their arbitration procedures and whether courts would assist arbitrators during the proceedings. There is no functioning arbitral institution in Montenegro, although the Chamber of Commerce has adopted rules on arbitration. The country has ratiï¬?ed the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, but not the ICSID Convention. Montenegro has enacted a Mediation Law (2005), which is based on the UNCITRAL Model Law, and the country has an active Centre for Mediation. Under the Mediation Law, courts may refer litigating parties to mediation. On average, it takes around 45 weeks to enforce an arbitration award rendered in Montenegro, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 45 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 133 Morocco Middle East and North Africa (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) While Morocco has opened up the majority of the sectors of its economy to foreign investors, overt statutory Mining, oil and gas 93.8 78.8 92.0 ownership restrictions still exist in a number of sectors, predominantly in services. Airport and port operation as Agriculture and forestry 100.0 100.0 95.9 well as the electricity transmission and distribution sectors are closed to foreign capital participation. Foreign Light manufacturing 100.0 95.0 96.6 ownership in companies providing domestic or international air transportation services is limited to a maximum Telecommunications 100.0 84.0 88.0 of 49%. In the oil and gas sector, the National Agency for Hydrocarbons and Mines retains a compulsory share Electricity 0.0 68.5 87.6 of 25% of any recognition license or exploitation permit. In addition to these restrictions, a number of sectors Banking 100.0 82.0 91.0 are dominated by government monopolies, including, but not limited to, those mentioned above. Those mo- Insurance 100.0 92.0 91.2 nopolies, together with a high perceived difï¬?culty of obtaining required operating licenses, represent a potential Transportation 39.8 63.2 78.5 obstacle for foreign companies to engage. Media 100.0 70.0 68.0 Sector group 1 (constr., tourism, retail) 100.0 94.9 98.1 Sector group 2 (health care, waste mgt.) 100.0 90.0 96.0 STARTING A FOREIGN BUSINESS Time With 8 procedures and 18 days, the process of establishing a foreign-owned subsidiary in Morocco is faster 18 19 42 (days) than both the IAB regional average for the Middle East and North Africa and the IAB global average. Only 2 Procedures additional procedures are required of foreign companies. Except for French enterprises, which are exempt from 8 9 10 (number) this requirement, any foreign company wishing to establish a subsidiary in Morocco must provide an apostille, a Ease of establishment index translated copy of its articles of association, and an extract of the registry of commerce in its country of origin. 55.3 58.6 64.5 (0 = min, 100 = max) There is no investment approval requirement. Instead, foreign companies must report the incorporation of the subsidiary a posteriori to the Foreign Exchange Board (Ofï¬?ce National de Change) to facilitate repatriation of funds abroad (such as proï¬?ts, dividends). This step usually takes 5 days to complete. Registration docu- ments are available online and registration is made at a one-stop shop—Centre Regional d’Investissement (CRI)—that also serves for tax, social security, and VAT registration. Foreign companies in Morocco are not allowed to hold foreign currency bank accounts. Instead, they can hold Convertible Export Promotion Accounts (CCPEX), which allow them to receive and transfer foreign currencies. The foreign currency credited in CCPEX accounts is converted into Moroccan dirham (MAD) and re-converted to foreign currency as needed for repa- triation purposes. Morocco has a minimum capital requirement of MAD 10,000 (~$1,200) for domestic and foreign companies, 25% of which must be paid in at registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land may lease or buy privately or publicly held land, with the exception 86.8 78.3 82.1 (0 = min, 100 = max) of agricultural land, which foreign entities are prohibited from owning. Publicly held land may be leased or Strength of ownership rights index bought with approval from the relevant authority. Foreign companies seeking to lease publicly held land must n/a 68.8 92.2 (0 = min, 100 = max) ï¬?rst obtain approval from the Regional Center for Investment. There is no clearly deï¬?ned procedure for leasing Access to land information index publicly held land and the process can take up to a year. Registration of all land transactions is mandatory. The 73.7 46.4 41.3 (0 = min, 100 = max) maximum duration for a lease contract is 15 years. There are no restrictions on the amount of land that may be Availability of land information index (0 = min, 100 = max) 65.0 66.0 70.6 leased. The lease contract offers the lessee the right to sublease, subdivide, and/or mortgage the leased land, subject to the terms of the contract. Most land-related information can be found in the national registry and Time to lease private land (days) 101 59 61 cadastre. Time to lease public land (days) 296 123 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration and mediation in Morocco are regulated by the Code of Civil Procedure (2007). The new law is 97.6 82.0 85.2 (0 = min, 100 = max) based on French law and the UNCITRAL Model Law, but lacks provisions regarding interim measures and pre- Ease of process index liminary orders, the conduct of arbitral proceedings, and the grounds for refusing recognition or enforcement of 69.5 65.5 70.6 (0 = min, 100 = max) arbitral awards. All commercial matters are arbitrable. Under the Civil Procedure Code, arbitrators must declare Extent of judicial assistance index themselves to the general prosecutor of their local Court of Appeal. The prosecutor includes the registered arbi- 64.7 48.7 57.9 (0 = min, 100 = max) trators on an arbitrators’ list of the relevant Court of Appeal. Parties to arbitration proceedings in Morocco may only be represented by lawyers who are registered at the relevant Court of Appeal. The law expressly states that arbitrators must be impartial and independent, and must preserve the conï¬?dentiality of the proceedings. Domestic arbitration awards must be enforced within 15 days of rendering, which is not required of foreign arbitration awards. A commercial court of ï¬?rst instance is responsible for enforcement of arbitration awards (domestic and international). On average, it takes around 12 weeks to enforce an arbitration award rendered in Morocco, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 16 weeks for a foreign award. Court decisions enforcing an arbitration award can only be appealed for foreign arbitration awards. For more information on this country, please go to http://www.investingacrossborders.org 134 INVESTING ACROSS BORDERS 2010 Mozambique Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Most of the industries covered by the Investing Across Sectors indicators are open to foreign equity ownership Mining, oil and gas 100.0 95.2 92.0 in Mozambique. The Media Law (No. 18/91), however, stipulates that only Mozambique citizens may own me- Agriculture and forestry 100.0 97.6 95.9 dia enterprises, including television channels and newspapers. Foreign capital participation in such companies Light manufacturing 100.0 98.6 96.6 is only permitted up to a maximum of 20%. Furthermore, ï¬?xed-line telecommunications is one of the sectors Telecommunications 75.0 84.1 88.0 reserved for public investment. The right to establish and operate ï¬?xed-line telecommunication services is Electricity 100.0 90.5 87.6 granted exclusively to one Mozambican company, Telecommunications of Mozambique S.A.R.L., which is a joint Banking 100.0 84.7 91.0 stock/public limited company. Its current license expires in 2028 and is renewable. Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 20.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 34 days to establish a foreign-owned limited liability company (LLC) in Maputo, 34 48 42 (days) Mozambique, faster than the IAB regional average for Sub-Saharan Africa and the IAB global average. A Procedures foreign company establishing itself in Maputo is not required to seek an investment approval unless it wants 12 10 10 (number) to avail itself of investment incentives offered by the Investment Promotion Centre (CPI). It will, however, need Ease of establishment index to authenticate the parent company’s documentation in the Mozambican embassy or consulate in its country 65.8 51.5 64.5 (0 = min, 100 = max) of origin. In addition, foreign companies that engage in retail and wholesale trade qualify as foreign-trade operators and must obtain a foreign-trade operator card from the Ministry of Trade and Industry. This card takes 7 days to obtain. Registration with the Legal Entities Registrar Ofï¬?ce of Maputo takes 1 to 2 days. The required documents are available online, but cannot be submitted online. Any company in Mozambique may freely open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement of MZM 20,000 (~$740) was abolished by Law No. 2/2009 of April 24, 2009 (DL2/09). Instead, said law stipulates that shareholders may now decide on the proper capital of the company. The minimum investment value necessary to take advantage of any guarantees and ï¬?scal beneï¬?ts is $50,000 for foreign investments. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Mozambique, all land is considered property of the state and therefore cannot be sold. The available option 53.1 76.6 82.1 (0 = min, 100 = max) for foreign companies seeking to acquire land in Maputo is the lease of publicly held land. Foreign companies Strength of ownership rights index may lease land provided they have an authorized investment project as provided by Mozambique’s invest- n/a 77.3 92.2 (0 = min, 100 = max) ment law and the company is established or registered in Mozambique. The process of leasing land requires Access to land information index negotiations with the relevant public authority and members of the surrounding community in which the land is 33.3 33.9 41.3 (0 = min, 100 = max) located and consequent approval from both the public authority and community members. Land may be leased Availability of land information index (0 = min, 100 = max) 62.5 58.5 70.6 for a maximum of 99 years. Approval is required from the provincial government to lease land of up to 10,000 ha. For greater amounts of land, approval must be sought from the relevant minister. Lease contracts offer the Time to lease private land (days) 148 72 61 lessee the right to subdivide or sublease the leased land, subject to approval by the relevant authority. Most Time to lease public land (days) 175 151 140 land-related information can be found in the cadastre. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Law No. 11/99 governs mediations and arbitration in Mozambique. The same rules apply to both domestic and 95.4 82.4 85.2 (0 = min, 100 = max) international arbitrations. Unless there are speciï¬?c laws providing otherwise, commercial disputes can generally Ease of process index be submitted to arbitration. There are also restrictions on disputes involving state entities that can be submitted 80.9 73.8 70.6 (0 = min, 100 = max) to arbitration. Parties are free to select arbitrators of any nationality, gender, or professional qualiï¬?cations Extent of judicial assistance index in both domestic and international arbitrations. The law stipulates that arbitrators must be impartial and 22.2 55.9 57.9 (0 = min, 100 = max) independent. Parties are also free to have foreign lawyers represent them in domestic arbitration proceed- ings. There is no online arbitration in Mozambique, but the Center for Arbitration, Conciliation, and Mediation (CACM) administers domestic and international arbitrations. It takes less than 30 days from ï¬?ling the request for arbitration to the constitution of the arbitration tribunal. Domestic courts do not have a clear pro-arbitration policy, and the law does not require courts to assist the arbitration process by ordering the production of docu- ments or the appearance of witnesses. Arbitration awards are enforced in the Judicial Court of Maputo, and decisions regarding enforcement can be appealed to the Supreme Court. On average, it takes around 46 weeks to enforce an arbitration award rendered in Mozambique, from ï¬?ling an application to a writ of execution at- taching assets (assuming there is no appeal), and 121 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 135 Nicaragua Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) According to the Foreign Investments Promotion Law of Nicaragua, foreign investors have the same rights and Mining, oil and gas 100.0 91.0 92.0 obligations as domestic investors with respect to ownership of local companies. The majority of the sectors Agriculture and forestry 100.0 96.4 95.9 covered by the Investing Across Sectors indicators are thus open to foreign equity ownership. As a notable Light manufacturing 100.0 100.0 96.6 exception, overt legal ownership restrictions still exist on the domestic air transportation and television broad- Telecommunications 100.0 94.5 88.0 casting sectors. In both industries, foreign capital participation is limited to a less-than-50% stake. In addition Electricity 100.0 82.5 87.6 to those overt legal restrictions, a number of business sectors, such as electricity transmission and port and Banking 100.0 96.4 91.0 airport operation, are still dominated by publicly owned enterprises. Those monopolies, together with a high Insurance 100.0 96.4 91.2 perceived difï¬?culty of obtaining required operating licenses, make it difï¬?cult for foreign companies to engage in Transportation 89.8 80.8 78.5 these sectors. Media 74.5 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 42 days to establish a foreign-owned limited liability company (LLC) in Nicaragua 42 74 42 (days) (Managua), faster than the regional average for Latin America and the Caribbean and in line with the IAB global Procedures average. Although foreign ownership is allowed, an LLC needs a minimum of 2 shareholders (one being a natural 8 14 10 (number) person). The legal representative of the company must be a resident of Nicaragua—getting a residency permit Ease of establishment index can take up to 3 months. In addition to the procedures required of a domestic company, a foreign company must 57.9 62.8 64.5 (0 = min, 100 = max) legalize and translate the parent company’s documents in its country of origin. In addition, a company engaged in international trade must obtain an importer/exporter ID from the customs authority (Dirección General de Servicios Aduaneros) for imports and from CETREX (Centro de Exportaciones) for exports. A company in Nicaragua can hold a commercial bank account in U.S. dollars, euros, or córdoba. There is no minimum capital requirement for foreign or domestic companies in Nicaragua. ACCESSING INDUSTRIAL LAND Strength of lease rights index The most common means by which foreign companies acquire land in Nicaragua is to lease or buy privately 72.1 78.2 82.1 (0 = min, 100 = max) owned land. Although not prohibited, leasing or buying public land is not common. It requires the enacting Strength of ownership rights index of speciï¬?c laws as well as special terms and conditions governing the corresponding public auction. There is 100.0 98.2 92.2 (0 = min, 100 = max) no limit on the amount of land that may be leased. Lease contracts offer the lessee the right to subdivide or Access to land information index sublease the leased land or use it as collateral, subject to the terms of the contract. Only the owner of the land 31.6 40.4 41.3 (0 = min, 100 = max) is allowed to mortgage it. Lease contracts for durations of 4 or more years must be executed by a notary public Availability of land information index (0 = min, 100 = max) 75.0 73.0 70.6 as a public deed and registered in the land registry. Land-related information may be found in the land registry and cadastre, which are linked and coordinated to share data. It is possible to ï¬?nd electronic data for most land Time to lease private land (days) 149 62 61 parcels in Managua. Time to lease public land (days) 267 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Alternative dispute resolution (ADR) in Nicaragua is governed by the Mediation and Arbitration Law (2005), 95.4 87.5 85.2 (0 = min, 100 = max) which is largely based on the UNCITRAL Model Law. The law recognizes the kompetenz-kompetenz principle Ease of process index and provides for Supreme Court revision of the arbitration tribunal’s ruling on its own jurisdiction, if and when 73.3 66.8 70.6 (0 = min, 100 = max) the arbitration tribunal decides upon it as a previous matter, and not of the award itself. The law distinguishes Extent of judicial assistance index between arbitration at equity and arbitration at law. In arbitrations at law, all members of the arbitration 40.3 51.7 57.9 (0 = min, 100 = max) tribunal must be lawyers. Parties can choose foreign lawyers to represent them in arbitrations in Nicaragua. Parties domiciled in Nicaragua are free to choose any arbitral institution, even one outside of Nicaragua. There are around 13 arbitral institutions in Nicaragua. The most commonly used for commercial disputes is the Nicaraguan Chamber of Commerce Mediation and Arbitration Center Antonio Leiva Pérez. Nicaraguan arbitra- tion law is relatively new and not many arbitration agreements, requests, or awards have been presented to local courts for assistance with the proceedings or enforcement. There are no legal provisions mandating courts to assist arbitral tribunals with the taking of evidence, but there are provisions for assistance with orders for interim measures. The Civil District Court is responsible for enforcement of arbitration awards. On average, it takes around 31 weeks to enforce an arbitration award rendered in Nigeria, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 104 weeks for a foreign award. It is not clear, under the current Nicaraguan legal framework, whether appeal of this court’s decisions is possible, and there is no such precedent yet. For more information on this country, please go to http://www.investingacrossborders.org 136 INVESTING ACROSS BORDERS 2010 Nigeria Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Compared with other economies in the Sub-Saharan Africa region covered by the Investing Across Sectors in- Mining, oil and gas 100.0 95.2 92.0 dicators, Nigeria is one of the most open countries to foreign equity ownership. All of its major industry sectors Agriculture and forestry 100.0 97.6 95.9 are fully open to foreign capital participation. The only exception is the banking industry, in which foreign inves- Light manufacturing 100.0 98.6 96.6 tors are not allowed to acquire more than 40% of an already existing Nigerian bank. There are no restrictions, Telecommunications 100.0 84.1 88.0 however, for investors setting up a new bank in Nigeria. Electricity 100.0 90.5 87.6 Banking 70.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 44 days to establish a foreign-owned limited liability company (LLC) in Nigeria (Lagos), 44 48 42 (days) slightly faster than the regional average for Sub-Saharan Africa and slightly slower than the IAB global average. Procedures The law permits wholly foreign-owned subsidiaries, but they must have at least 2 shareholders and the share capi- 12 10 10 (number) tal must be denominated in naira. Only a local counsel accredited by the Corporate Affairs Commission can incor- Ease of establishment index porate companies in Nigeria. In addition to the procedures required of a domestic company, a foreign-owned LLC 47.5 51.5 64.5 (0 = min, 100 = max) is encouraged to register the investment with the Nigerian Investment Promotion Commission (NIPC) to ease the process of repatriation of funds (dividends, equity upon divestment). According to the Nigerian Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, foreign capital invested in the LLC must be imported through an authorized dealer, which will issue a Certiï¬?cate of Capital Importation. This certiï¬?cate entitles the foreign investor to open a bank account in foreign currency. Finally, a company engaging in international trade must get an import- export license from the Nigerian customs service. The minimum capital requirement is higher for companies with foreign equity than for domestic ones (NGN 10,000,000 [~$66,500] and NGN 10,000 [~$66], respectively). The law requires at least 25% of the shares to be issued at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Lagos, all land is vested in the state governor. It is impossible to obtain an absolute interest in land. When 78.5 76.6 82.1 (0 = min, 100 = max) leasing or buying land one obtains a “right of occupancy,â€? which is usually for 99 years or less. Foreign com- Strength of ownership rights index panies may lease land or buy land interests from private landowners who have already been granted rights of n/a 77.3 92.2 (0 = min, 100 = max) occupancy by the state. The interest transferred is the unexpired term of the right of occupancy. Leases may also Access to land information index be obtained from government-owned property development corporations. Leases for more than 3 years require 50.0 33.9 41.3 (0 = min, 100 = max) the governor’s consent. Lease contracts offer the lessee the right to transfer, subdivide, sublease, or mortgage Availability of land information index (0 = min, 100 = max) 67.5 58.5 70.6 the leased land, subject to the terms of the contract and approval from the governor. There are no restrictions on the amount of land that may be leased. Land-related information is found primarily in the land registry. Time to lease private land (days) 123 72 61 There are reforms underway to consolidate the registration of titles, provide for compulsory registration of all Time to lease public land (days) 254 151 140 properties, and create electronic geographic information systems (GIS). ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration and Conciliation Act (1988), reenacted as the Arbitration and Conciliation Act (2004), governs 95.4 82.4 85.2 (0 = min, 100 = max) arbitrations in Nigeria and gives effect to the 1958 New York Convention. The Act governs both domestic Ease of process index and international arbitrations. It is based on UNCITRAL’s Model Law, with several differences. For example, it 82.3 73.8 70.6 (0 = min, 100 = max) does not permit parties to a domestic arbitration to choose the procedural rules, but stipulates that domestic Extent of judicial assistance index arbitration proceedings in Nigeria must be conducted in accordance with the arbitration rules contained in the 71.5 55.9 57.9 (0 = min, 100 = max) act. The act has no deï¬?nition of domestic arbitration. Rather, arbitration that does not fall under the deï¬?nition of international arbitration is considered as domestic. Parties are free to select arbitrators of any nationality, gender, or professional qualiï¬?cations in both domestic and international arbitrations. Online arbitration is not available in Nigeria. There are, however, several arbitral institutions from which parties can choose. The law provides for domestic courts to assist arbitral tribunals by ordering the production of documents or the appear- ance of witnesses. In practice, however, the courts are not very supportive of arbitration, and have on several occasions disregarded arbitration agreements. On average, it takes around 20 weeks to enforce an arbitration award rendered in Nigeria, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 21 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 137 Pakistan South Asia (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 27 are fully open to foreign capital partici- Mining, oil and gas 100.0 88.0 92.0 pation in Pakistan. While the manufacturing and primary industries are fully open to foreign equity ownership, Agriculture and forestry 100.0 90.0 95.9 the country imposes ownership restrictions on a number of service sectors. In the media industry, for example, Light manufacturing 100.0 96.3 96.6 the Press, Newspapers, News Agencies, and Books Registration Ordinance (2002), stipulates that only Pakistani Telecommunications 100.0 94.8 88.0 citizens may own local newspaper companies. Foreign capital participation in such companies is permitted only Electricity 100.0 94.3 87.6 up to a maximum of 25% and is further subject to government approval. Foreign ownership in nationwide Banking 49.0 87.2 91.0 television channels is limited to a less-than-50% stake. In the ï¬?nancial services sector, the Banking Companies Insurance 51.0 75.4 91.2 Ordinance allows a maximum of 49% foreign ownership of Pakistani banks, while foreign capital participa- Transportation 79.6 79.8 78.5 tion in local insurance companies is allowed up to a 51% share. In the agriculture sector, foreign investment is Media 37.0 68.0 68.0 subject to a minimum investment amount of $300,000. Sector group 1 (constr., tourism, retail) 100.0 96.7 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 11 procedures and 21 days to establish a foreign-owned limited liability company (LLC) in Pakistan 21 39 42 (days) (Karachi), faster than both the average for IAB countries in South Asia and the IAB global average. In addition Procedures to the procedures required of a domestic ï¬?rm, a foreign company must authenticate the documents of the 11 9 10 (number) parent company in its country of origin. Foreign investors can hold 100% equity of industrial projects without Ease of establishment index obtaining permission from the government, except for the following sectors: arms and ammunitions, high 64.7 62.5 64.5 (0 = min, 100 = max) explosives, radioactive substances, security printing, currency, and mint. Companies may open and maintain foreign currency accounts with approval from the State Bank of Pakistan. Foreign currency accounts are subject to the condition that they are only fed with: (i) investment from abroad; (ii) proï¬?ts/dividends from such invest- ment; or (iii) proï¬?ts from reinvestment of proï¬?ts from such investment. There is no minimum capital require- ment for domestic or foreign companies in Pakistan. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Karachi have the option to lease or buy privately or publicly held 85.7 87.5 82.1 (0 = min, 100 = max) land. Foreign companies require authorization from the government in order to acquire land. The sale of public Strength of ownership rights index land for commercial purposes may only be by open auction at a price not less than market value. The process 100.0 93.8 92.2 (0 = min, 100 = max) of obtaining land leases from the government is relatively lengthy. Lease contracts offer the lessee the right Access to land information index to transfer, subdivide, sublease, or mortgage the leased land, subject to the terms of the contract as well as to 10.5 20.1 41.3 (0 = min, 100 = max) local bylaws and regulations governing the land. In the case of publicly owned land, transfers are restricted to Availability of land information index (0 = min, 100 = max) 65.0 59.7 70.6 another company engaged in or intending to engage in a similar type of industry. When the government grants land for any industrial purpose it may be mortgaged or used as collateral, subject to the government’s prior Time to lease private land (days) 59 99 61 permission. Most land-related information in Karachi may be found in the registry. Time to lease public land (days) 96 205 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act (1940) governs domestic arbitration in Pakistan. This legislation was passed before 94.9 86.4 85.2 (0 = min, 100 = max) Pakistan’s independence, but continues to be in effect. The act applies to 3 types of arbitration: (i) arbitration Ease of process index without court intervention; (ii) arbitration where there is no suit pending with court intervention; and iii) arbi- 68.5 55.0 70.6 (0 = min, 100 = max) tration “in suitâ€? with court intervention. The Recognition and Enforcement (Arbitration Agreements and Foreign Extent of judicial assistance index Arbitral Awards) Ordinance (2007) provides mechanisms for the enforcement of foreign arbitral awards. At the 35.5 36.4 57.9 (0 = min, 100 = max) time of data collection, a new Arbitration Act was anticipated, which would repeal the 1940 legislation. Given that the 1940 statute does not regulate international arbitration, it is primarily the courts that have established whether to treat arbitrations as domestic or international. All commercial matters are arbitrable, although the Supreme Court has ruled that matters of “grave public and national importanceâ€? cannot be arbitrated. Parties are free to select arbitrators of any gender, nationality, or professional qualiï¬?cations. An overburdened court system has made the enforcement of arbitral awards difï¬?cult. On average, it takes around 115 weeks to enforce an arbitration award, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org 138 INVESTING ACROSS BORDERS 2010 Papua New Guinea East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Data not available. Mining, oil and gas .. 75.7 92.0 Agriculture and forestry .. 82.9 95.9 Light manufacturing .. 86.8 96.6 Telecommunications .. 64.9 88.0 Electricity .. 75.8 87.6 Banking .. 76.1 91.0 Insurance .. 80.9 91.2 Transportation .. 63.7 78.5 Media .. 36.1 68.0 Sector group 1 (constr., tourism, retail) .. 91.6 98.1 Sector group 2 (health care, waste mgt.) .. 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 108 days to establish a foreign-owned limited liability company (LLC) in Port 108 68 42 (days) Moresby, Papua New Guinea, slower than both the average for IAB countries in East Asia and the Paciï¬?c and Procedures the IAB global average. In addition to the procedures required of domestic companies, foreign companies must 10 11 10 (number) authenticate the documents of the parent company abroad. They must also apply for a certiï¬?cate of foreign Ease of establishment index investment to carry on business in the country. This certiï¬?cate is granted by the Investment Promotion Authority 48.9 57.4 64.5 (0 = min, 100 = max) and usually takes 22 days. A foreign company must also obtain a certiï¬?cate of capital importation from the Bank of Papua New Guinea (central bank), which takes on average 30 days. Company registration docu- ments are available online on the Investment Promotion Agency’s Web site and ï¬?ling can be done through the Electronic Filing Facility on the same Web site. Foreign companies wishing to open and maintain bank accounts in foreign currency must obtain approval from the Bank of Papua New Guinea. This approval is granted within 11 days. There is no minimum capital requirement to establish an LLC. ACCESSING INDUSTRIAL LAND Strength of lease rights index Data not available. .. 84.9 82.1 (0 = min, 100 = max) Strength of ownership rights index .. 83.3 92.2 (0 = min, 100 = max) Access to land information index .. 35.1 41.0 (0 = min, 100 = max) Availability of land information index .. 67.5 70.6 (0 = min, 100 = max) Time to lease private land (days) .. 66 61 Time to lease public land (days) .. 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Papua New Guinea’s Arbitration Act was passed in 1951, well before the UNCITRAL Model Law, and makes 59.9 83.8 85.2 (0 = min, 100 = max) no distinction between domestic and international arbitration. The Supreme Court of Papua New Guinea has Ease of process index held that arbitration clauses are not severable from the main contract. There is no arbitral institution in Papua 55.6 66.1 70.6 (0 = min, 100 = max) New Guinea and so most arbitrations are conducted on an ad hoc basis. Courts in Papua New Guinea seem Extent of judicial assistance index to decline jurisdiction when there is an arbitration clause in all or nearly all cases and there are speciï¬?c provi- 26.2 46.6 57.9 (0 = min, 100 = max) sions in the national law to allow domestic court to order the production of documents or the appearance of witnesses. Judgments enforcing or denying enforcement of an award may be appealed to the Supreme Court. Whilst Papua New Guinea has not ratiï¬?ed the New York Convention, it is a signatory of the ICSID Convention. The IAB team understands from local counsel that there is very little arbitration practice on the ground, and they were unable to estimate the length of time to enforce arbitration awards, whether rendered in Papua New Guinea, or a foreign country. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 139 Peru Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Peru has opened up the majority of the sectors of its economy to foreign investors. Of the 33 sectors covered Mining, oil and gas 100.0 91.0 92.0 by the Investing Across Sectors indicators, 32 are fully open to foreign equity ownership. As the only notable ex- Agriculture and forestry 100.0 96.4 95.9 ception, foreign capital participation in the domestic air transportation industry is limited to a maximum share Light manufacturing 100.0 100.0 96.6 of 49%. Foreign companies wishing to provide international passenger air transportation services must have a Telecommunications 100.0 94.5 88.0 domicile and a legal representative with broad powers with permanent residence in Peru. This restriction does Electricity 100.0 82.5 87.6 not affect the ownership structure of such companies, however, which may be 100% foreign-owned. Banking 100.0 96.4 91.0 Insurance 100.0 96.4 91.2 Transportation 89.8 80.8 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 STARTING A FOREIGN BUSINESS Time It takes 11 procedures and 43 days to establish a foreign-owned limited liability company (LLC) in Peru (Lima), 43 74 42 (days) faster than the regional average for Latin America and the Caribbean and in line with the IAB global average. Procedures Although foreign ownership is allowed, a company needs a minimum of 2 shareholders and its legal representa- 11 14 10 (number) tive must be a resident of Peru. In addition to the procedures required of a domestic company, a foreign company Ease of establishment index must translate and authenticate the parent company’s documents abroad. Foreign companies investing in Peru do 72.5 62.8 64.5 (0 = min, 100 = max) not need an investment approval. However, it is mandatory to register a foreign investment with Peru’s investment promotion agency, Proinversion, in order to be able to repatriate funds at a later date. Companies in Peru are free to open and maintain a bank account in foreign currency. There is no minimum capital requirement for companies in Peru. However, 25% of the declared capital must be paid in at the time of establishment. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Peru may lease or buy privately or publicly held land. The Peruvian 79.3 78.2 82.1 (0 = min, 100 = max) Constitution states that foreigners cannot own mines, woods, waters, hydrocarbons, or power sources within Strength of ownership rights index 50 kilometers of the border, unless allowed by a supreme decree. There are no further restrictions on foreign 100.0 98.2 92.2 (0 = min, 100 = max) ownership of land. If the land is publicly owned, it must be sold or leased at public auction. In exceptional Access to land information index circumstances, a party seeking to lease public land may negotiate directly with the relevant public authority. 44.4 40.4 41.3 (0 = min, 100 = max) Generally, the duration of lease contracts is a renewable term of 10 years, 6 years for publicly held land. Lease Availability of land information index (0 = min, 100 = max) 75.0 73.0 70.6 contracts offer the lessee the right to sublease, subdivide, or mortgage the leased land, subject to the terms of the contract. Land registration is not mandatory unless a company seeks to enforce its rights against a third Time to lease private land (days) 20 62 61 party. Land-related information may be found in the public registry and cadastre. Time to lease public land (days) 112 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The most recent Peruvian Arbitration Law was enacted in 2008 (Decree No. 1071) and is largely based on the 97.4 87.5 85.2 (0 = min, 100 = max) UNCITRAL Model Law, with some exceptions. Under Peruvian law, parties can request the exclusion from the Ease of process index award of aspects of fact and law, which the tribunal has decided should not have been part of the decision. 83.3 66.8 70.6 (0 = min, 100 = max) The basis for setting aside arbitration awards under Peruvian law is more restrictive than that established by the Extent of judicial assistance index UNCITRAL Model Law and it must be invoked during the arbitration proceedings. Peruvian law allows foreign 62.6 51.7 57.9 (0 = min, 100 = max) parties to renounce their right to set aside an arbitration award. All commercial matters are arbitrable. The law distinguishes between arbitration at law and arbitration at equity. In arbitration at law, the arbitrators must be attorneys, unless the parties agree otherwise. The law establishes that arbitrators can be challenged on grounds concerning their impartiality and/or independence, and requires preserving the conï¬?dentiality of arbitration proceedings. Peruvian law establishes strict time frames for conducting arbitration proceedings: the period from the ï¬?ling of the request to the constitution of the arbitration tribunal is 30 to 40 business days. The law requires courts to assist arbitrators in the taking of evidence and ordering provisional measures. By Ofï¬?cial Letter 005-2005-P-CS-PJ of July 4, 2005, the Supreme Court of Peru urges lower courts to respect arbitration as an alternative method of dispute resolution, freely agreed upon by the parties and based on its own principles and rules. On average, it takes around 20 weeks to enforce an arbitration award rendered in Peru, from ï¬?ling an ap- plication to a writ of execution attaching assets (assuming there is no appeal), and 41 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 140 INVESTING ACROSS BORDERS 2010 Philippines East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 87 countries covered by the Investing Across Sectors indicators, the Philippines imposes foreign Mining, oil and gas 40.0 75.7 92.0 equity ownership restrictions on more sectors than most other countries. The country imposes ownership Agriculture and forestry 40.0 82.9 95.9 limitations on many industries, in particular on the primary and service sectors. Foreign capital participation Light manufacturing 75.0 86.8 96.6 in the mining and oil and gas industries, for example, is limited to a maximum share of 40% by the Philippine Telecommunications 40.0 64.9 88.0 Constitution. Foreign ownership in those sectors, however, may be allowed up to 100% if the investor enters Electricity 65.7 75.8 87.6 into a ï¬?nancial or technical assistance agreement (FTAA) with the government. Such agreements are granted Banking 60.0 76.1 91.0 for a 25-year term and require a minimum investment of $50,000,000. In the service sectors, the Constitution Insurance 100.0 80.9 91.2 limits foreign capital participation in public utilities (telecommunications, electricity, and transportation) to a Transportation 40.0 63.7 78.5 maximum of 40%. The media industries (newspaper publishing and television broadcasting) and publishing Media 0.0 36.1 68.0 sector are closed to foreign equity ownership. Sector group 1 (constr., tourism, retail) 100.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 17 procedures and 80 days to establish a foreign-owned limited liability company (LLC) in Manila, 80 68 42 (days) the Philippines, slower than both the average for IAB countries in East Asia and the Paciï¬?c and the IAB Procedures global average. Two additional procedures are required exclusively of a foreign-owned company establishing 17 11 10 (number) a subsidiary in Manila. It must provide an authenticated and legalized copy of the documents of the parent Ease of establishment index company abroad. Also, if the foreign-owned company plans to engage in international trade, it must register 57.9 57.4 64.5 (0 = min, 100 = max) with the Bureau of Customs (BOC) as a regular importer. This registration usually takes 27 days. Investment ap- proval is only required if the company wants to beneï¬?t from the investment incentives granted by the Board of Investment. Company registration documents are available online at the Securities and Exchange Commission (SEC) Web site, although the online submission process is not yet fully operational. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement for a domestic LLC is PHP 5,000 (~$112), whereas the minimum paid-in capital requirement for an LLC with foreign equity of 40% or more is PHP 9,000,000 (~$200,000). ACCESSING INDUSTRIAL LAND Strength of lease rights index The Philippine Constitution prohibits foreign companies from buying land. The best option available is to lease 68.8 84.9 82.1 (0 = min, 100 = max) private land. Foreign companies must get approval from the Board of Investment for long-term leases. Land Strength of ownership rights index may be leased for an initial term of 50 years, renewable for another 25 years. There are restrictions on the n/a 83.3 92.2 (0 = min, 100 = max) amount of land that may be leased. A foreign company’s exercise of rights over the land such as subleasing, Access to land information index subdivision, or making improvements is limited by the terms of the lease contract. Only absolute owners of 23.5 35.1 41.3 (0 = min, 100 = max) the land may mortgage it. The transfer of the lease to other foreign entities is restricted. Registration of leases Availability of land information index (0 = min, 100 = max) 87.5 67.5 70.6 is not mandatory. It is recommended that the lease be registered with the local register of deeds to ensure that lease rights are enforceable against third parties. Most land-related information can be found in the land Time to lease private land (days) 16 66 61 registry and cadastre. Time to lease public land (days) n/a 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration in the Philippines is governed by both the Republic Act (RA) 876 (otherwise known as the 95.4 83.8 85.2 (0 = min, 100 = max) Arbitration Law [1953]), and RA 9285 (otherwise known as the Alternative Dispute Resolution Act [2004]). Ease of process index The latter is based to a large degree on the UNCITRAL Model Law, with a few exceptions limited to situations 87.0 66.1 70.6 (0 = min, 100 = max) in which the parties fail to come to an agreement. These acts apply to both international and domestic arbitra- Extent of judicial assistance index tions, which are treated substantially the same under Philippine law. While an arbitration agreement may be 33.7 46.6 57.9 (0 = min, 100 = max) concluded by email or fax, it must be in writing: the Philippines does not recognize oral agreements or conduct as constituting binding arbitration agreements. The main arbitral institution is the Philippine Dispute Resolution Center, Inc. (PDRCI), which uses its own rules based on the UNCITRAL Arbitration Rules (1976). The general pro-arbitration stance of the Philippines is reflected both in the 2004 Act and in a string of recent case laws enacted by both the Supreme Court and the lower courts. The Philippines has ratiï¬?ed both the 1958 New York Convention and the ICSID Convention. On average, it takes around 135 weeks to enforce an arbitration award rendered in the Philippines, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 126 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 141 Poland Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Foreign ownership of companies in Poland is limited in 5 of the 33 industry sectors measured by the indicators. Mining, oil and gas 100.0 96.2 92.0 In particular, as in other EU countries, Polish laws impose a maximum share of 49% for foreign capital in air Agriculture and forestry 100.0 97.5 95.9 transportation companies. In addition, foreign capital participation is limited to 49% in the airport and port op- Light manufacturing 100.0 98.5 96.6 eration sectors. The perceived difï¬?culty of obtaining required operating licenses further inhibits FDI in the port Telecommunications 100.0 96.2 88.0 operations sector, which is currently dominated by publicly owned operators. The media sector is also subject Electricity 100.0 96.4 87.6 to foreign equity ownership restrictions. Pursuant to the Broadcasting Law, the required license to operate a TV Banking 100.0 100.0 91.0 broadcasting company may only be granted if the voting share of foreign owners does not exceed 49% and the Insurance 100.0 94.9 91.2 majority of the members of the management and supervisory boards are of Polish nationality, with permanent Transportation 59.2 84.0 78.5 residence in Poland. Media 74.5 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 7 procedures and 33 days to establish a foreign-owned limited liability company (LLC) in Poland 33 22 42 (days) (Warsaw), slower than the other IAB countries in Europe and Central Asia but faster than the IAB global Procedures average. Polish regulations, applicable to both domestic and foreign investors, prohibit a sole shareholder LLC 7 8 10 (number) to be the sole founder and shareholder of another LLC. In addition to the procedures required of domestic com- Ease of establishment index panies, a foreign company must provide apostiled and translated documents from the parent company abroad. 85.0 76.8 64.5 (0 = min, 100 = max) Since March 31, 2009, new provisions of the Act on the National Court Register have been in force, which allow applicants to obtain a statistical number (REGON), tax identiï¬?cation number (NIP), and entry in the Social n Insurance Ofï¬?ce (ZakÅ‚ad Ubezpiecze´ SpoÅ‚ecznych) when they register with the National Court Registry. This takes about a month. Companies in Poland are free to open and maintain bank accounts in foreign currency. The minimum capital requirement for domestic and foreign companies is PLN 5,000 (~$1,700). Registered share capital for LLCs must be paid in full at registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Poland, foreign companies have the option to lease or buy privately or publicly held land. Publicly held land 78.6 82.9 82.1 (0 = min, 100 = max) in Poland is divided into state property and communal property, which are held by different entities. Polish Strength of ownership rights index law provides for an institution called a “perpetual usufruct,â€? which resembles a long-term lease. This form of 100.0 97.6 92.2 (0 = min, 100 = max) landholding relates only to lands that belong to the treasury or to units of local self-government. The duration Access to land information index of the lease is between 40 and 99 years and is renewable. A foreign company seeking to acquire this form of 35.0 50.3 41.3 (0 = min, 100 = max) lease must require a permit from the relevant ministry. Publicly held land is leased by a public tender procedure. Availability of land information index (0 = min, 100 = max) 65.0 78.9 70.6 Lease contracts offer the lessee the right to transfer, subdivide, or sublease the land, subject to the terms of the contract and local planning laws. There are no restrictions on the amount of land that may be leased for com- Time to lease private land (days) 146 43 61 mercial or industrial use. Land-related information can be found in the land registry and cadastre. Time to lease public land (days) 162 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Poland does not have a law on arbitration, but there are some provisions in the Polish Code of Civil Procedure 74.2 82.5 85.2 (0 = min, 100 = max) of 1964 (amended in 2005). There are also separate regulations on arbitration for consumer disputes, banking Ease of process index disputes, telecom disputes, and disputes relating to hunting law, employment, sports, and electronic payment 82.8 69.7 70.6 (0 = min, 100 = max) instruments. There is no statutory deï¬?nition of domestic arbitration and no distinction in the law between Extent of judicial assistance index domestic and international arbitration. The law only distinguishes between foreign and domestic arbitral 77.3 64.4 57.9 (0 = min, 100 = max) awards for the purpose of their recognition and enforcement. Under the Code of Civil Procedure, the arbitration agreement must be in writing. However, a declaration of intent made electronically and provided with a safe electronic signature veriï¬?ed by a valid qualiï¬?ed certiï¬?cate is recognized as a written agreement. Parties are free to appoint any arbitrators except for acting state judges. Arbitrators are not expressly bound by law to preserve the conï¬?dentiality of arbitration proceedings, but Polish court decisions have recognized that such an obligation exists, based on the arbitrator’s function. There are about 40 arbitral institutions in Poland, most of them small and local. A Warsaw District Court has jurisdiction to enforce arbitral awards. On average, it takes around 13 weeks to enforce an arbitration award rendered in Poland, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 15 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 142 INVESTING ACROSS BORDERS 2010 Romania Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Romanian law (Government Emergency Order No. 92/1997) provides for national treatment of foreign investors Mining, oil and gas 100.0 96.2 92.0 with regard to the establishment rights of companies. Foreign investors are generally allowed to invest in any Agriculture and forestry 100.0 97.5 95.9 sector open to private domestic companies. Thus, with the exception of the domestic and international air Light manufacturing 100.0 98.5 96.6 transportation industries, all sectors covered by the Investing Across Sectors indicators are fully open to foreign Telecommunications 100.0 96.2 88.0 equity ownership. Foreign capital participation in the 2 aforementioned sectors is limited to a maximum of Electricity 100.0 96.4 87.6 49%, as is the case in other European Union countries. This restriction does not apply to investors from coun- Banking 100.0 100.0 91.0 tries of the European Economic Area (EEA). Insurance 100.0 94.9 91.2 Transportation 79.6 84.0 78.5 Media 100.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 7 procedures and 11 days to establish a foreign-owned limited liability company (LLC) in Romania 11 22 42 (days) (Bucharest), slightly faster than the regional average for Europe and Central Asia but much faster than the IAB Procedures global average. In addition to the procedures required of a domestic company, the parent company establish- 7 8 10 (number) ing a subsidiary in Romania must authenticate and translate its documents abroad. Foreign companies do not Ease of establishment index need to seek an investment approval. Romanian legislation, applicable to both domestic and foreign investors, 89.5 76.8 64.5 (0 = min, 100 = max) prohibits a sole shareholder LLC to be the sole founder and shareholder of another LLC. The Trade Registry judge must hold a public hearing on the company’s application for registration within 5 days of submission of the required documentation. The registration documents can be submitted, and the status of the registration request monitored, online. Companies in Romania are free to open and maintain bank accounts in foreign currency, although, in practice, Romanian banks offer services only in certain currencies (including euros, U.S. dollars, and Swiss francs). The minimum capital requirement for domestic and foreign LLCs is RON 200 (~$65). ACCESSING INDUSTRIAL LAND Strength of lease rights index In Romania, leasing land is not an option for companies seeking to build on the land. Romanian building 86.7 82.9 82.1 (0 = min, 100 = max) regulations require any person who ï¬?les for a building permit to have a real property interest as opposed to Strength of ownership rights index a personal right, such as a lease, over the designated land. Foreign companies, therefore, most commonly 100.0 97.6 92.2 (0 = min, 100 = max) buy land. Publicly held land may be leased, or it may be sold after reclassiï¬?cation as private land. The lease or Access to land information index sale of public land takes place through a public tender procedure. The Romanian Civil Code does not provide 33.3 50.3 41.3 (0 = min, 100 = max) for a maximum duration of a lease. In practice, the duration of leases does not exceed 10 to 15 years. Lease Availability of land information index (0 = min, 100 = max) 85.0 78.9 70.6 contracts offer the lessee the right to subdivide, sublease, or mortgage the leased land, subject to the terms of the lease contract. Land-related information can be found mostly in the cadastre and the National Agency for Time to lease private land (days) 57 43 61 Cadastre and Real Estate Publicity. Time to lease public land (days) 65 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Romanian Civil Procedure Code (enacted 1865, amended 2000) contains a detailed arbitration chapter 84.8 82.5 85.2 (0 = min, 100 = max) (Book IV: About Arbitration). The Civil Procedure Code provides strict time limits for duration of arbitration Ease of process index proceedings: 5 months for domestic arbitrations and between 10 to 12 months for international arbitrations, 75.2 69.7 70.6 (0 = min, 100 = max) with a maximum extension of 2 months at the request of the parties. There are also strict time limits on the Extent of judicial assistance index submission of evidence during arbitration. Under the law, an arbitration award must in all cases stipulate 93.2 64.4 57.9 (0 = min, 100 = max) the grounds for the arbitrators’ ruling. The following disputes are not arbitrable: those involving immovable property, intracompany and bankruptcy disputes, disputes related to the privatization process, and conces- sion agreements. Only Romanian citizens may act as arbitrators in domestic arbitrations. The arbitrator must speak and understand Romanian. These restrictions do not apply to international arbitrations conducted in Romania. Foreign lawyers can be retained only in international arbitration proceedings, except for lawyers from the European Union member states that beneï¬?t from reciprocal recognition, subject to certain authorization procedures. There are around 43 arbitral institutions in Romania. The District Court has jurisdiction to enforce arbitral awards and its decision cannot be appealed unless enforcement is denied. On average, it takes around 10 weeks to enforce an arbitration award rendered in Romania, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 11 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 143 Russian Federation Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The Russian Federation has opened up the majority of the sectors of its economy to foreign investors. While the Mining, oil and gas 100.0 96.2 92.0 manufacturing and primary sectors are open to foreign capital participation, the country imposes ownership Agriculture and forestry 100.0 97.5 95.9 restrictions on a number of service sectors. For example, foreign ownership in the domestic and international Light manufacturing 100.0 98.5 96.6 air transportation sectors is limited to a maximum of 49%. In addition to these capital restrictions, the Air Code Telecommunications 100.0 96.2 88.0 of the Russian Federation speciï¬?es that the director of an airline company as well as at least two-thirds of the Electricity 100.0 96.4 87.6 members of the management board must be Russian citizens. Foreign ownership restrictions also exist in the Banking 100.0 100.0 91.0 ï¬?nancial services sector, in which foreign capital participation in life insurance companies is limited to a maxi- Insurance 49.0 94.9 91.2 mum share of 49%. The insurance industry is also subject to a sector-wide limit, whereby the share of assets Transportation 79.6 84.0 78.5 owned by foreign investors must not exceed 25% of the total assets. Currently this limit has not yet been met, Media 75.0 73.1 68.0 and foreign companies should therefore be allowed to invest. The federal Law On Banks and Banking Activity Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 proposes the establishment of a similar sector-wide quota for the banking sector, which, however, has not yet Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 been established. STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 31 days to establish a foreign-owned limited liability company (LLC) in the Russian 31 22 42 (days) Federation (Moscow), slower than the other IAB countries in Europe and Central Asia, but faster than the IAB Procedures global average. All documents needed for registration, and originating abroad (the updated extract from the 10 8 10 (number) trade register, for example), must be notarized and legalized in the parent company’s country of incorporation Ease of establishment index and translated into Russian. The state registration is conducted at the uniï¬?ed registry of the Federal Tax Service, 68.4 76.8 64.5 (0 = min, 100 = max) where companies also obtain their tax ID number and register with the State Pension Fund, the State Fund of Social Insurance, and the State Fund of Compulsory Medical Insurance. Generally, the state and tax registrations take 5 days. Companies established under Russian laws are considered resident and therefore free to open and maintain accounts in foreign currency in authorized banks. The minimum capital requirement for domestic and foreign LLCs is RUB 10,000 (~$337), half of which must be paid prior to registration and the rest within 1 year. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to acquire land have the option to lease or buy both privately and publicly held 85.7 82.9 82.1 (0 = min, 100 = max) land. Most land in Moscow, however, is publicly held. There are restrictions for foreign companies on buying Strength of ownership rights index land for agricultural purposes, mining, or forestry, or land that is near the continental shelf. It is difï¬?cult to buy 100.0 97.6 92.2 (0 = min, 100 = max) public land for construction purposes. Public land may be leased either by a tender process or in compliance Access to land information index with procedures for granting public land for the construction of a manufacturing facility. There are no limits on 44.4 50.3 41.3 (0 = min, 100 = max) the lease term for privately owned land. Publicly held land may be leased for up to 49 years. Lease contracts Availability of land information index (0 = min, 100 = max) 90.0 78.9 70.6 offer the lessee the right to transfer, subdivide, sublease, or mortgage the leased land, subject to the terms of the contract and local planning laws. Registration is mandatory for leases longer than a year. Most land-related Time to lease private land (days) 62 43 61 information may be found in the Uniï¬?ed State Register of Rights to Immovable Property and Transactions. Time to lease public land (days) 231 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Law on International Commercial Arbitration (1993) regulates international arbitration, in which at least 71.6 82.5 85.2 (0 = min, 100 = max) one party must be an entity with foreign investment. The Law on Arbitration Courts in the Russian Federation Ease of process index (2002) regulates domestic arbitration. Under both laws, arbitrators cannot decide ex aequo et bono (at equity), 76.1 69.7 70.6 (0 = min, 100 = max) and arbitral awards must always contain the reasons for the decision. The following disputes are not arbitrable: Extent of judicial assistance index those involving immovable property; shareholders’ agreements; bankruptcy disputes; and disputes involving 76.6 64.4 57.9 (0 = min, 100 = max) rights over state or municipal property, patents, or trademarks. Disputes about the registration of patents or trademarks cannot be submitted to foreign arbitration. Sole arbitrators must have higher legal education. In arbitral tribunals, only the presiding arbitrator must have higher legal education. The Domestic Arbitration Law, unlike the International Arbitration Law, allows parties to waive their right to appeal the arbitral award in court. Under both laws, parties are free to choose the language of the proceedings and can be represented by foreign lawyers. There are more than 200 arbitral institutions in the Russian Federation. The Arbitration Procedural Code of the Russian Federation (2002) regulates the recognition and enforcement of foreign arbitral awards. Russian courts often refuse to recognize or enforce arbitral awards on public policy grounds. The courts have not devel- oped a consistent pro-arbitration policy. State arbitration courts have jurisdiction to enforce arbitration awards, which takes roughly 6 weeks (assuming there is no appeal). Russia has not ratiï¬?ed the ICSID Convention. For more information on this country, please go to http://www.investingacrossborders.org 144 INVESTING ACROSS BORDERS 2010 Rwanda Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Without any legal ownership restrictions on the 33 sectors covered by the Investing Across Sectors indicators, Mining, oil and gas 100.0 95.2 92.0 Rwanda is one of the most open countries to foreign equity ownership. In practice, though, a number of sectors Agriculture and forestry 100.0 97.6 95.9 are characterized by monopolistic or oligopolistic market structures dominated by publicly owned enterprises, Light manufacturing 100.0 98.6 96.6 making it difï¬?cult for foreign investors to enter. The electricity and transportation sector groups, as well as the Telecommunications 100.0 84.1 88.0 media industry, in particular, are dominated by monopolies. Electricity 100.0 90.5 87.6 Banking 100.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time With only 3 procedures and 4 days, the process of establishing a foreign-owned limited liability company (LLC) 4 48 42 (days) in Rwanda (Kigali) is among the fastest of the countries surveyed by IAB globally. A foreign company requires Procedures no additional procedure other than obtaining a trade license if it wishes to engage in international trade, which 3 10 10 (number) takes only 1 day. Applying for an investment approval is optional for foreign investors unless they wish to ben- Ease of establishment index eï¬?t from the various investment incentives provided by the law. Rwanda offers an efï¬?cient “one-stop shop,â€? 60.5 51.5 64.5 (0 = min, 100 = max) the Rwanda Development Board, which centralizes start-up procedures and handles company registrations. The business registration process is not yet available online. Of the 21 Sub-Sahara African countries surveyed by IAB only Mauritius allows electronic registration. Foreign investors can open and maintain commercial foreign- currency bank accounts in Rwanda. Rwanda does not impose a minimum capital requirement on investors, nor does it impose any restrictions on the composition of the boards of directors of wholly foreign-owned companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index All land in Rwanda belongs to the government. It is possible, however, to lease land. If the land is developed 89.2 76.6 82.1 (0 = min, 100 = max) in accordance with statutory requirements, the lessee may then have the option to buy the land. Both privately Strength of ownership rights index and publicly held land may be leased. The lease of publicly held land requires approval from the relevant public 87.5 77.3 92.2 (0 = min, 100 = max) authority. Government bureaucracy may delay this process. The process of leasing public land is faster if a Access to land information index foreign company accesses land through the Rwanda Development Board. Land can be leased for a maximum 38.5 33.9 41.3 (0 = min, 100 = max) duration of 49 years. There are no restrictions on the amount of land that may be leased. Lease contracts offer Availability of land information index (0 = min, 100 = max) 50.0 58.5 70.6 the lessee the right to transfer, subdivide, or sublease the land, subject to the terms of the contract. Most land- related information in Kigali may be found in the Registrar of Lands. Time to lease private land (days) 10 72 61 Time to lease public land (days) 99 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Law No. 005/2008 on Arbitration and Conciliation in Commercial Matters regulates both domestic and 93.1 82.4 85.2 (0 = min, 100 = max) international arbitrations in Rwanda. It is based on the UNCITRAL Model Law. Commercial matters can gener- Ease of process index ally be submitted to arbitration. Parties are free to select arbitrators of any gender, nationality, or professional 80.1 73.8 70.6 (0 = min, 100 = max) qualiï¬?cations in both domestic and international arbitrations, and foreign counsel may represent the parties in Extent of judicial assistance index arbitration proceedings. Online arbitration is not available in Rwanda. Moreover, although there is an arbitral 73.3 55.9 57.9 (0 = min, 100 = max) institution in Rwanda, the Rwandan Arbitration and Expertise Centre, it does not currently administer arbitra- tions. A new arbitration center is planned for the Private Sector Federation. Practitioners report that the lack of a domestic arbitral institution is a major impediment to domestic and international arbitration. Rwandan courts generally uphold arbitration agreements and support arbitration. Arbitration awards are enforced in the High Court, and decisions that uphold or deny enforcement can be appealed to the Supreme Court. On average, it takes around 15 weeks to enforce an arbitration award rendered in Rwanda, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 15 weeks for a foreign award. Domestic litigation is the preferred technique for resolving disputes involving the state. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 145 Saudi Arabia Middle East and North Africa (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Saudi Arabia has opened up many sectors of its economy to foreign investors, with overt statutory owner- Mining, oil and gas 0.0 78.8 92.0 ship restrictions, however, on a number of industries, as speciï¬?ed by a “negative listâ€? published by the Saudi Agriculture and forestry 100.0 100.0 95.9 Arabian General Investment Authority (SAGIA). In particular, sectors such as mining, oil and gas, air transporta- Light manufacturing 75.0 95.0 96.6 tion (domestic and international), railway freight transportation, health care, publishing, and media (television Telecommunications 70.0 84.0 88.0 broadcasting and newspaper publishing) are closed to foreign equity ownership. The mining and oil and gas Electricity 100.0 68.5 87.6 industries operate under a monopolistic market structure dominated by a publicly owned company. In accor- Banking 60.0 82.0 91.0 dance with the country’s commitments to the WTO, foreign capital participation in the ï¬?nancial services sectors Insurance 60.0 92.0 91.2 is allowed up to a maximum share of 60%. Unlike most other countries in the Middle East and North Africa Transportation 40.0 63.2 78.5 region, Saudi Arabia does not impose any legal ownership restrictions on the electricity sector (including the Media 0.0 70.0 68.0 generation, transmission, and distribution of electric energy). Sector group 1 (constr., tourism, retail) 91.7 94.9 98.1 Sector group 2 (health care, waste mgt.) 50.0 90.0 96.0 STARTING A FOREIGN BUSINESS Time With 6 procedures and 21 days, the process of establishing a foreign-owned subsidiary in Riyadh, Saudi Arabia, 21 19 42 (days) is in line with the IAB regional average for the Middle East and North Africa region and the IAB global average. Procedures Limited liability companies (LLCs) require at least 2 shareholders and a maximum of 50. In addition to the 6 9 10 (number) procedures required of domestic companies, foreign companies must authenticate and legalize the parent Ease of establishment index company’s documentation in the Saudi consulate in its country of origin and in the Ministry of Foreign Affairs 35.0 58.6 64.5 (0 = min, 100 = max) and Ministry of Justice in Saudi Arabia. In addition, foreign companies must ï¬?le for a foreign investment license with the Saudi Arabian General Investment Authority (SAGIA). The license usually takes 15 days to obtain. SAGIA requires foreign companies to hire a local counsel or law ï¬?rm throughout the establishment process. The “golden package,â€? an expedited incorporation process, is offered to companies for an additional fee. This service, offered by SAGIA, reduces incorporation time by 50%. Business registration applications are download- able online. Foreign companies are allowed to open and maintain foreign currency bank accounts. Minimum capital requirements for LLCs have been abolished. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign ownership of land is not a general right and must be linked to a particular project. Before buying land, 64.3 78.3 82.1 (0 = min, 100 = max) a foreign company must obtain a license from the investment authority. The sale of public land is rare and a Strength of ownership rights index private owner seeking to sell land needs approval from the industrial property authority. Foreign companies 50.0 68.8 92.2 (0 = min, 100 = max) seeking to acquire land for industrial purposes may ï¬?nd it cheaper to lease publicly held land. Publicly held land Access to land information index may be leased for a renewable period of 25 years. Lease contracts offer the lessee the right to subdivide and 33.3 46.4 41.3 (0 = min, 100 = max) sublease the land. It is not possible to mortgage a leasehold interest. There is no central registration system for Availability of land information index (0 = min, 100 = max) 50.0 66.0 70.6 land rights. A notary public marks the title deeds, which are held by the landowner. There is little land-related information available, apart from what one can get from the seller. Time to lease private land (days) 25 59 61 Time to lease public land (days) 60 123 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration in Saudi Arabia is regulated by Royal Decree No. M/46-12 Rajab 1403/1982. The law is brief (25 ar- 70.0 82.0 85.2 (0 = min, 100 = max) ticles) and not very comprehensive: it does not provide deï¬?nitions of basic arbitration terms (such as arbitration Ease of process index award and enforcement) nor does it regulate the legal regime of the arbitration agreement, interim measures, 30.4 65.5 70.6 (0 = min, 100 = max) and preliminary orders. The law does not distinguish between domestic and international, or between com- Extent of judicial assistance index mercial and other types of arbitration. Generally, all commercial matters are arbitrable. Public entities are not 28.6 48.7 57.9 (0 = min, 100 = max) entitled to resort to arbitration unless expressly authorized by the Prime Minister. The arbitration law mandates that the arbitrator must be a Saudi national or a Muslim foreigner (IRLA Art. 3). The law does not explicitly state whether or not a woman can be selected as an arbitrator; the general practice, however, follows the Hanbali school of thought, which believes that arbitrators must be male. Parties may only choose from a list of arbitrators prepared by agreement between the Ministers of Justice and Commerce and the head of the Board of Grievances (Art. 5 of ILRA). Arbitration hearings must be public, unless one of the arbitrators requests other- wise, and be conducted in Arabic. Arbitral proceedings must be conducted in accordance with Islamic law and any applicable regulations (Article 39 of the Implementing Rules). No legal provisions allow for court assistance with interim measures and evidence taking during arbitration proceedings. Both domestic and foreign awards are enforced by the Board of Grievances, Commercial Section, which can take 56 weeks. For more information on this country, please go to http://www.investingacrossborders.org 146 INVESTING ACROSS BORDERS 2010 Senegal Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Senegal is one of the most open countries to foreign equity ownership, as measured by the Investing Across Mining, oil and gas 100.0 95.2 92.0 Sectors indicators. All of the 33 sectors covered by the indicators are fully open to capital participation. The Agriculture and forestry 100.0 97.6 95.9 electricity transmission and distribution sectors are dominated by monopolistic market structures of publicly Light manufacturing 100.0 98.6 96.6 owned enterprises, potentially representing an obstacle to foreign investors. Telecommunications 100.0 84.1 88.0 Electricity 100.0 90.5 87.6 Banking 100.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 5 procedures and 10 days to establish a foreign-owned limited liability company (LLC) in Senegal 10 48 42 (days) (Dakar). This process is among the fastest in Sub-Saharan Africa and much faster than the IAB global average. Procedures In addition to the procedures required of a domestic company, a foreign company that wants to engage in 5 10 10 (number) international trade must obtain an import-export card for trading purposes from the investment promotion Ease of establishment index agency (APIX) or a business court. Entrepreneurs register their company at the one-stop shop and obtain a tax 45.0 51.5 64.5 (0 = min, 100 = max) registration; commercial registration; company identiï¬?cation number; and labor, social security, and pension fund registrations. This takes only 2 days. According to a directive of the Economic Community of West African States (ECOWAS), companies in Senegal are not allowed to open bank accounts in foreign currency unless they get approval from the Senegal Ministry of Finance and the Central Bank of West Africa. This approval must be renewed yearly. The minimum capital requirement of XOF 1,000,000 (~$2,000) is applicable for all OHADA (Organization for the Harmonization of Business Law in Africa) member states. It must be paid in full for the incorporation of an LLC. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies have the option to lease or buy privately or publicly held land. The most common option 85.6 76.6 82.1 (0 = min, 100 = max) for foreign companies seeking to acquire land in Dakar is the lease of public land. Most land is publicly held Strength of ownership rights index and the sale of public land, though legally possible, is extremely rare in practice. Before public land can be 87.5 77.3 92.2 (0 = min, 100 = max) acquired, it must be reclassiï¬?ed as private. Land in the public domain can only be subject to a use permit issued Access to land information index by the relevant administrative authority. The process of leasing public land can be quite lengthy. Land may be 50.0 33.9 41.3 (0 = min, 100 = max) leased for a maximum duration of 99 years. Lease contracts offer the lessee the right to subdivide, sublease, or Availability of land information index (0 = min, 100 = max) 75.0 58.5 70.6 mortgage the leased land, subject to the terms of the lease contract. Government approval may be required for the lease of publicly held land. There are no restrictions on the amount of land that may be leased. Most land- Time to lease private land (days) 33 72 61 related information in Dakar can be found in the cadastre. Time to lease public land (days) 101 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Senegal is a party to the OHADA Treaty (Organisation pour l’Harmonisation en Afrique du Droit des Affaires) 89.9 82.4 85.2 (0 = min, 100 = max) and arbitration is therefore governed by the Uniform Act on Arbitration. The act was signed on March 11, 1999 Ease of process index and entered into force 90 days later. The Uniform Act supersedes the existing national laws on arbitration. The 85.1 73.8 70.6 (0 = min, 100 = max) act is supplemented by the New Civil Procedure Code, which also regulates the courts’ capacity to provide Extent of judicial assistance index assistance to arbitral proceedings. The principal arbitral institution under OHADA is the Common Court for 98.8 55.9 57.9 (0 = min, 100 = max) Justice and Arbitration (CCJA) in Abidjan, Côte d’Ivoire. Senegal has also adopted various laws and provisions to develop arbitration in line with the OHADA Uniform Act. Senegal’s main arbitral institution is the Center for Arbitration, Mediation, and Conciliation (CAMC) at the Chamber of Commerce, Industry, and Agriculture of Dakar (CCIAD), established in 1998. Senegal has ratiï¬?ed the 1958 New York Convention and the ICSID Convention. On average, it takes around 11 weeks to enforce an arbitration award rendered in Senegal, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 11 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 147 Serbia Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 32 are fully open to foreign capital par- Mining, oil and gas 100.0 96.2 92.0 ticipation in Serbia. The only exception is the TV broadcasting industry. According to the Law on Broadcasting Agriculture and forestry 100.0 97.5 95.9 (Zakon o radio difuziji), foreign ownership in private TV broadcasting companies is limited to a maximum of Light manufacturing 100.0 98.5 96.6 49% and participation in public media companies is prohibited. Telecommunications 100.0 96.2 88.0 Electricity 100.0 96.4 87.6 Banking 100.0 100.0 91.0 Insurance 100.0 94.9 91.2 Transportation 100.0 84.0 78.5 Media 74.5 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 14 days to establish a foreign-owned limited liability company (LLC) in Serbia 14 22 42 (days) (Belgrade), faster than the IAB average for Europe and Central Asia, and much faster than the IAB global aver- Procedures age. In addition to the procedures required of a domestic company, a parent company establishing a subsidiary 8 8 10 (number) in Serbia must authenticate and translate its documents abroad. Under the Business Registration Law, company Ease of establishment index registration is transferred from the commercial courts to the Serbian Business Registers Agency (SBRA). The 84.2 76.8 64.5 (0 = min, 100 = max) SBRA now issues the registration number, statistical code, registration certiï¬?cate, tax identiï¬?cation number, pension fund registration, health fund certiï¬?cates, and employment registration. The law requires registration to be completed within 5 business days, but it usually takes only 3. Companies in Serbia are free to open and maintain bank accounts in foreign currency, although they must also have an account in RSD. The minimum capital requirement is RSD 50,000 (~$670), although only 50% of that must be paid before registration. The rest is payable within 2 years of incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Companies seeking to access land have the option to lease or buy private land. Since the recent adoption 78.6 82.9 82.1 (0 = min, 100 = max) of a new Constitution, the purchase of public land is no longer legally prohibited. In practice, however, it is Strength of ownership rights index extremely rare. Publicly owned land can be leased by auction. It is not possible to obtain a construction permit 100.0 97.6 92.2 (0 = min, 100 = max) for leased land—a foreign company must have a real property interest in the land. The maximum duration for Access to land information index leases is 99 years. Lease contracts offer the lessee the right to transfer, subdivide, sublease, or mortgage the 45.0 50.3 41.3 (0 = min, 100 = max) leased land, subject to the terms of the contract and local planning laws. Leases for publicly held land cannot Availability of land information index (0 = min, 100 = max) 75.0 78.9 70.6 be transferred. Establishing a mortgage over the lease of publicly held land is not permitted. Most land-related information may be found in the land registry and cadastre. The land registry and cadastre are currently being Time to lease private land (days) 67 43 61 consolidated electronically. Time to lease public land (days) 177 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Serbian Law on Arbitration (2006) applies to both international and domestic arbitration. The law contains 95.4 82.5 85.2 (0 = min, 100 = max) mandatory provisions on arbitration costs. All commercial disputes are arbitrable except those involving im- Ease of process index movable property located in Serbia and those involving ownership or other property rights over aircrafts and 71.4 69.7 70.6 (0 = min, 100 = max) ships. Under Serbian law, even if the parties have not previously concluded an arbitration agreement, one party Extent of judicial assistance index could, by written request, initiate an arbitration procedure whereby the other party must approve such action 90.2 64.4 57.9 (0 = min, 100 = max) or just engage itself in the process. The law stipulates that until the parties determine the language of the proceedings, statements of claim and defense and other written submissions may be made in the language of the main contract or in Serbian (Article 35). The law expressly states that arbitrators must be independent and impartial. Foreign parties in an arbitration procedure under the Rules of the Foreign Trade Arbitration Court organized within the Serbian Chamber of Commerce may be represented by foreign counsel. The law does not prohibit local parties from retaining foreign counsel. There are 2 arbitral institutions, one for domestic and another for international arbitrations. The Serbian Law on Enforcement Procedure (2004) requires the courts to assist arbitrators with provisional measures and the taking of evidence. On average, it takes around 6 weeks to enforce an arbitration award rendered in Serbia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 11 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 148 INVESTING ACROSS BORDERS 2010 Sierra Leone Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) In Sierra Leone, the Investment Promotion Act (2004) provides for equal treatment of foreign and domestic Mining, oil and gas 100.0 95.2 92.0 investors with respect to ownership of local companies. Most business sectors covered by the Investing Across Agriculture and forestry 75.0 97.6 95.9 Sectors indicators are fully open to foreign equity ownership. Overt statutory ownership restrictions are imposed Light manufacturing 100.0 98.6 96.6 on only a small number of industries. Foreign capital participation is prohibited in the airport and port opera- Telecommunications 100.0 84.1 88.0 tion sectors, in particular, as these facilities are owned and operated directly by the government through the Electricity 100.0 90.5 87.6 Ministry of Transport. Banking 100.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 80.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 43 days to establish a foreign-owned limited liability company (LLC) in Freetown, 43 48 42 (days) Sierra Leone, in line with the IAB global average and slightly faster than the IAB regional average for Sub- Procedures Saharan Africa. In addition to the procedures required of domestic companies, a foreign company establishing a 8 10 10 (number) subsidiary in Freetown must authenticate the documents of the parent company abroad. It must also, if it wants Ease of establishment index to engage in international trade, obtain a trade license from the Ministry of Trade and Industry, which takes 65.0 51.5 64.5 (0 = min, 100 = max) about 30 days if all documents are in place. No investment approval is required. The business registration pro- cess is not yet available online. Of the 21 Sub-Sahara African countries surveyed by IAB only Mauritius allows electronic registration. Foreign investors may open and maintain commercial foreign currency bank accounts in Sierra Leone. Sierra Leone does not impose a minimum capital requirement on investors, except for investments made in speciï¬?c sectors such as banking and telecommunications. Sierra Leone does not have any restrictions on the composition of the boards of directors of wholly foreign-owned companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index The law in Sierra Leone prohibits the ownership of land by foreign entities. Foreign companies seeking to ac- 44.4 76.6 82.1 (0 = min, 100 = max) quire land may lease privately or publicly held land. The process of leasing private land is lengthy due to a bur- Strength of ownership rights index densome process of acquiring land-related information for due diligence purposes. Public land is leased subject n/a 77.3 92.2 (0 = min, 100 = max) to approval by the relevant public authority. The approval process may take a number of months to complete. Access to land information index The maximum duration of leases is a renewable term of 21 years. Lease contracts offer the lessee the right to 26.3 33.9 41.3 (0 = min, 100 = max) transfer, subdivide, or sublease the leased land, subject to approval from the Ministry of Lands. Mortgaging the Availability of land information index (0 = min, 100 = max) 30.0 58.5 70.6 leased land and/or using it as collateral requires approval from the relevant ministry. There are no restrictions on the amount of land that may be leased. Land-related information can be obtained from either the Ofï¬?ce of Time to lease private land (days) 210 72 61 the Registra General or from the Ministry of Lands, Country Planning, and Environment Direction of Surveys and Time to lease public land (days) 277 151 140 Mapping. Much of the information is out of date and in some cases inconsistent. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Sierra Leone’s Arbitration Act was enacted in 1960 and was based on the English Arbitration Act of 1950 rather 65.0 82.4 85.2 (0 = min, 100 = max) than on the UNCITRAL Model Law. It makes no distinction between international and domestic arbitration. Ease of process index Although Sierra Leone has ratiï¬?ed the ICSID Convention, it is not a party to the 1958 New York Convention 70.5 73.8 70.6 (0 = min, 100 = max) on the Recognition and Enforcement of Foreign Arbitral Awards. As a consequence, foreign arbitration awards Extent of judicial assistance index are not, as a general rule, entitled to recognition and enforcement by the courts of Sierra Leone. Arbitration 20.5 55.9 57.9 (0 = min, 100 = max) in Sierra Leone is conducted on an ad hoc basis, as there is no arbitral institution. The courts have adopted a general policy in favor of enforcing arbitration agreements and awards in Sierra Leone. There is no express limit to the grounds for refusing recognition and enforcement of awards in the act. This suggests that the courts in Sierra Leone could rely on further grounds than those contained in the UNCITRAL Model Law, including, for example, error of law or a lack of substantial evidence. Given the lack of practice, private practitioners found it difï¬?cult to estimate the length of time for enforcement proceedings, but suggested it would take a minimum of 6 months for awards rendered in Sierra Leone or in a foreign country. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 149 Singapore East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 28 are fully open to foreign equity owner- Mining, oil and gas 100.0 75.7 92.0 ship in Singapore, including manufacturing and primary industries. The country imposes ownership restrictions Agriculture and forestry 100.0 82.9 95.9 on a number of service sectors. The acquisition of shares in a port and airport operation company, in particular, Light manufacturing 100.0 86.8 96.6 is limited to a maximum of 5%. The Broadcasting Act of Singapore stipulates that foreign capital participation Telecommunications 100.0 64.9 88.0 in television broadcasting channels is limited to a less-than-50% stake. Private ownership (domestic or foreign) Electricity 100.0 75.8 87.6 of newspapers is limited to 5%. Furthermore, the Newspaper and Printing Presses Act requires the directors of Banking 100.0 76.1 91.0 newspaper companies to be Singaporean citizens. Although the law does not restrict foreign capital participa- Insurance 100.0 80.9 91.2 tion in the electricity transmission and distribution sectors, their monopolistic market structures dominated by Transportation 47.4 63.7 78.5 publicly owned enterprises, make it difï¬?cult for foreign companies to engage. Media 27.0 36.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time With only 4 procedures and 9 days, the process of establishing a foreign-owned limited liability company (LLC) 9 68 42 (days) in Singapore is among the fastest of the countries surveyed by IAB and the fastest among IAB countries in the Procedures East Asia and the Paciï¬?c region. A foreign company that wants to engage in international trade requires no 4 11 10 (number) additional procedure other than registering with Singapore customs as a manufacturer to obtain an ordinary or Ease of establishment index preferential certiï¬?cate of origin. Investment approval is not required unless the foreign company applies to the 79.0 57.4 64.5 (0 = min, 100 = max) Economic Development Board for ï¬?nancial assistance. Application for business registration with the Singapore Accounting and Corporate Regulatory Authority (ACRA) can be ï¬?led and monitored online. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum paid-in capital require- ment, but at least 1 subscriber share must be issued for valid consideration at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies may lease or buy privately or publicly held land in Singapore. There are some restrictions on 100.0 84.9 82.1 (0 = min, 100 = max) foreign ownership of property. Land is scarce in Singapore. Privately held industrial land is thus uncommon in Strength of ownership rights index Singapore. A foreign company wishing to lease land from a private owner may have to apply for a change of 100.0 83.3 92.2 (0 = min, 100 = max) use of the land from residential to industrial. Most of the industrial public land in Singapore is held by Jurong Access to land information index Town Corporation, a statutory board of the Singapore government. Leases for durations greater than 7 years 55.0 35.1 41.3 (0 = min, 100 = max) must be registered. Lease contracts can be held for a maximum duration of 90 years. Lease contracts offer the Availability of land information index (0 = min, 100 = max) 80.0 67.5 70.6 lessee the right to subdivide, sublease, or mortgage the leased land, subject to the terms of the contract. In the case of publicly held land, approval may be required from the relevant authority. Generally, industrial land Time to lease private land (days) 56 66 61 may not be transferred until it has been developed. Most land-related information can be obtained from the Time to lease public land (days) 98 151 140 Singapore Land Authority. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The International Arbitration Act (1994) regulates international arbitration in Singapore. Domestic arbitration 94.9 83.8 85.2 (0 = min, 100 = max) is regulated by the Arbitration Act (2001). Although the international arbitration act is heavily based on the Ease of process index UNCITRAL Model Law, there are a few signiï¬?cant differences between the 2: the act adopts a broader deï¬?ni- 81.8 66.1 70.6 (0 = min, 100 = max) tion of international arbitration, while the Model Law makes it mandatory for the court to stay legal proceed- Extent of judicial assistance index ings pending arbitration. The default number of arbitrators mandated by the act is 1; the Model Law requires 93.5 46.6 57.9 (0 = min, 100 = max) 3. Finally, the International Arbitration Act allows for an appeal on any question of law arising from an award made in the proceedings, a provision that is absent in the Model Law. Arbitration agreements must be in writ- ing. Oral agreements and arbitration agreements that can be inferred through conduct are not enforceable. The Singapore International Arbitration Centre is the major arbitral institution and its increasing caseload reflects Singapore’s policy of encouraging the use of alternative modes of dispute resolution, including arbitration. On average, it takes around 8 weeks to enforce an arbitration award rendered in Singapore, from ï¬?ling an applica- tion to a writ of execution attaching assets (assuming there is no appeal), and 7 weeks for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 150 INVESTING ACROSS BORDERS 2010 Slovak Republic High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The Slovak Republic has opened the majority of the sectors of its economy to foreign ownership. As a notable Mining, oil and gas 100.0 100.0 92.0 exception, ownership restrictions still exist on the domestic and international air transportation industries. Agriculture and forestry 100.0 100.0 95.9 As in the other European Union member countries, foreign ownership in these sectors is limited to 49% for Light manufacturing 100.0 93.8 96.6 investors from outside of the European Economic Area (EEA). Foreign capital participation is not restricted by Telecommunications 100.0 89.9 88.0 law in the electricity transmission sector, but its monopolistic market structure, predominantly publicly owned, Electricity 100.0 88.0 87.6 together with a high perceived difï¬?culty of obtaining the required operating license make it difï¬?cult for foreign Banking 100.0 97.1 91.0 companies to engage. Insurance 100.0 100.0 91.2 Transportation 79.6 69.2 78.5 Media 100.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 18 days to establish a foreign-owned limited liability company (LLC) in Bratislava, 18 21 42 (days) Slovak Republic, faster than the regional IAB average for high-income OECD countries and much faster than Procedures the IAB global average. In addition to the procedures required of a domestic company, a foreign-owned 8 9 10 (number) company establishing a subsidiary must provide a translated and legalized copy of the incorporation documents Ease of establishment index of the parent company abroad. Legalization is not a requirement if the country of the parent company has 92.0 77.8 64.5 (0 = min, 100 = max) entered into a bilateral agreement on legal aid with the Slovak Republic, or if the country is a party to the Hague Apostille Convention. In the latter case, an apostille of the translated documents sufï¬?ces. In addition, the foreign company must report any foreign direct investment that exceeds 700,000 to the National Bank of Slovakia. Registration forms for the County Registry Court may be downloaded and submitted online. The legal time limit for registration is 5 business days. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement in the Slovak Republic is 5,000, of which 50% must be paid in cash upon formation of the company. If the company is established by a sole partner, the registered capital must be paid in full prior to registration in the Commercial Register. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies have the option to lease or buy privately or publicly held land. It is not possible to construct 84.6 92.2 82.1 (0 = min, 100 = max) buildings on state-owned land that is leased, except in exceptional circumstances. The purchase of public land Strength of ownership rights index is typically associated with large investment projects supported by the government. The purchase of state- 100.0 100.0 92.2 (0 = min, 100 = max) owned land is subject to various conditions stipulated by the Act on Administration of State-owned Property. Access to land information index The maximum statutory duration of a lease is not regulated by law. However, the cadastre only registers lease 61.1 52.5 41.3 (0 = min, 100 = max) contracts of durations greater than 5 years. The registration of the lease has only a declaratory effect and does Availability of land information index (0 = min, 100 = max) 75.0 84.2 70.6 not affect the validity and effectiveness of the contract. There is a fast-track option for land registration, which takes 15 days and is commonly used. Lease contracts offer the lessee the right to sublease and/or mortgage Time to lease private land (days) 73 50 61 the leased land, subject to the terms of the contract. Most land-related information can be found in the general Time to lease public land (days) 85 88 140 cadastre of immovables. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Act no. 244/2002 governs arbitrations taking place in the Slovak Republic. It adopts many of the provisions 93.1 94.2 85.2 (0 = min, 100 = max) in the UNCITRAL Model Law. However, it governs both domestic and international arbitrations, which are Ease of process index treated in the same manner. Furthermore, it covers not only commercial arbitration, but also extends to civil 85.7 83.3 70.6 (0 = min, 100 = max) law. Arbitration agreements must be in writing. Many types of commercial disputes are arbitrable except those Extent of judicial assistance index relating to legal title over real estate, bankruptcy, or the enforcement of judgments. Parties are free to select 88.5 77.6 57.9 (0 = min, 100 = max) arbitrators of any gender, nationality, or professional qualiï¬?cations. The Act grants arbitral tribunals the power to issue interim measures during arbitration proceedings, and states that interim relief can only be sought in court prior to arbitration. Although the Arbitration Act does not impose any restrictions on the appointment of foreign counsel, local advocacy laws generally require lawyers to be admitted to the Slovak Bar or be registered as European Union attorneys in order to represent parties in domestic arbitrations. Several institutions admin- ister arbitration in the Slovak Republic, including the Court of Arbitration of the Slovak Chamber of Commerce and Industry. The only difference between domestic and international arbitrations is in the recognition and enforcement of arbitral awards. If an arbitration award is rendered in a foreign language, it must be translated into Slovak prior to the enforcement proceedings. On average, it takes around 6 weeks to enforce an arbitration award, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 151 Solomon Islands East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) In terms of overt statutory ownership restrictions on foreign capital as measured by the Investing Across Sectors Mining, oil and gas 100.0 75.7 92.0 indicators, Solomon Islands is one of the most open countries to foreign direct investment (FDI). All of the 33 Agriculture and forestry 100.0 82.9 95.9 industry sectors covered by the indicators are fully open to foreign capital participation. The country is thus Light manufacturing 100.0 86.8 96.6 an example of the fact that openness of sectors to foreign equity ownership is a necessary, but not sufï¬?cient Telecommunications 100.0 64.9 88.0 condition for attracting FDI. Several determinants are at play simultaneously, including market size, quality of Electricity 100.0 75.8 87.6 infrastructure, political stability, and economic growth potential, with openness to foreign ownership being only Banking 100.0 76.1 91.0 one among those factors. Insurance 100.0 80.9 91.2 Transportation 100.0 63.7 78.5 Media 100.0 36.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 10 procedures and 66 days to establish a foreign-owned limited liability company (LLC) in Honiara, 66 68 42 (days) Solomon Islands, about average for IAB countries in East Asia and the Paciï¬?c and the IAB global average. A Procedures foreign company establishing a subsidiary in Honiara must authenticate the documents of the parent company 10 11 10 (number) abroad. In addition, it must obtain a foreign investment registration certiï¬?cate from the foreign investment Ease of establishment index department, which takes on average 7 days and can be done online. If said certiï¬?cate is not granted, the 48.0 57.4 64.5 (0 = min, 100 = max) foreign investor can appeal to the Facilitation Committee under the Ministry of Commerce or to the Minister of Commerce directly. There are no electronic services for company registration. Foreign companies are not allowed to open bank accounts in foreign currency without approval from the Central Bank of Solomon Islands, which takes 7 days to obtain, if granted. There is no minimum paid-in capital requirement for establishing an LLC in Honiara. ACCESSING INDUSTRIAL LAND Strength of lease rights index It is not possible for foreign companies to own land in the Solomon Islands. They can, however, lease both 91.1 84.9 82.1 (0 = min, 100 = max) publicly and privately held land. Land is scarce. Foreign companies seeking to acquire land may, therefore, only Strength of ownership rights index be able to acquire customarily held land. The process of acquiring customarily held land may be lengthy, as it n/a 83.3 92.2 (0 = min, 100 = max) requires identifying who is responsible for the land and involves extensive community consultations. Land may Access to land information index be leased for a maximum duration of 75 years. There are no restrictions on the amount of land that may be 15.8 35.1 41.3 (0 = min, 100 = max) leased. Lease contracts offer the lessee the right to subdivide, sublease, or mortgage the leased land or use it Availability of land information index (0 = min, 100 = max) 2.5 67.5 70.6 as collateral, subject to the terms of the contract. Approval from the Commissioner of Lands is required to lease publicly held land. It is extremely difï¬?cult to ï¬?nd land-related information in Honiara. Although a land registry Time to lease private land (days) 138 66 61 exists, most land-related information is not available to the public and it is unclear where the information may Time to lease public land (days) 168 151 140 be obtained. ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Solomon Islands enacted an Arbitration Act on 1 December 1987, broadly modeled on English arbitration 40.0 83.8 85.2 (0 = min, 100 = max) legislation. The Arbitration Act includes detailed provisions regarding the appointment of arbitrators. The role Ease of process index of the courts in supporting the arbitral process is expressly provided for, requiring parties to sue arising out of 0.0 66.1 70.6 (0 = min, 100 = max) a writ of subpoena to obtain documents. The Solomon Islands is not party to the New York Convention and so Extent of judicial assistance index enforcement is left to the discretion of the High Court and, if this is challenged, to the Court of Appeal. It has, 0.0 46.6 57.9 (0 = min, 100 = max) however, ratiï¬?ed the ICSID Convention. In practice, the Arbitration Act is rarely used, as there are no arbitrators on the ground. Consequently, parties tend to resort to court litigation or outside-court settlement. Although the Law Commission has been pushing for new legislation which would be favorable to arbitration, this has not yet come to fruition. Due to the lack of practice, local legal practitioners were not able to estimate the time periods for enforcing an arbitration award, whether rendered in the Solomon Islands, or in a foreign country. For more information on this country, please go to http://www.investingacrossborders.org 152 INVESTING ACROSS BORDERS 2010 South Africa Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Several industry sectors covered by the Investing Across Sectors indicators are subject to statutory foreign eq- Mining, oil and gas 74.0 95.2 92.0 uity ownership restrictions in South Africa. Most notably, foreign capital participation in the mining as well as in Agriculture and forestry 100.0 97.6 95.9 the oil and gas industry is limited to a maximum of 74% by the Mineral and Petroleum Resources Development Light manufacturing 100.0 98.6 96.6 Act 28 of 2002. Furthermore, the share of foreign capital in companies owning or operating telecommunica- Telecommunications 70.0 84.1 88.0 tions infrastructure or providing telecommunications services must not exceed 30% in order to obtain the Electricity 100.0 90.5 87.6 required operating licenses. In the media industry, foreign ownership of nationwide TV channels is limited to Banking 100.0 84.7 91.0 20%. In addition to these overt statutory ownership restrictions, monopolistic market structures dominated by Insurance 100.0 87.3 91.2 publicly owned enterprises further inhibit FDI in the electricity industry and in the port operation and railway Transportation 100.0 86.6 78.5 freight transportation sectors. Media 60.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 65 days to establish a foreign-owned limited liability company (LLC) in Johannesburg, 65 48 42 (days) South Africa, slower than both IAB regional average for Sub-Saharan Africa and the IAB global average. In Procedures addition to the procedures required of domestic companies, a foreign company establishing a subsidiary and 8 10 10 (number) wishing to engage in international trade must obtain a trade license from the Department of Trade and Industry, Ease of establishment index which usually takes 38 days. An authorized dealer (one of the 4 biggest commercial banks in South Africa) 79.0 51.5 64.5 (0 = min, 100 = max) must endorse as “nonresidentâ€? the parent company’s share certiï¬?cate for shares held in the subsidiary. This process takes 5 days. The business registration documents are available online, but the application process is not yet available online. In South Africa, there are no regulatory restrictions on the composition of the boards of the directors or on the appointment of managers. The Broad-Based Black Economic Empowerment (BBBEE) initiative, while not enforceable, affects the type of business a company may be entitled to engage in. BBBEE urges companies to have meaningful representation of previously disadvantaged groups. If a foreign company is involved in import and export transactions as well as services, it is allowed to hold a Customer Foreign Currency (CFC) account. Only authorized dealers may initiate transactions on a CFC account. Foreign currency accruals from exports may be held in the CFC account for a maximum of 180 days, during which the amount can be set off against an import transaction. At the end of the 180-day period, any unutilized balance must be converted to rand. There is no minimum capital requirement for South African companies, only a nominal fee of $1. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to acquire land In Johannesburg have the option to lease or buy privately or publicly 84.5 76.6 82.1 (0 = min, 100 = max) held land. Private land can be bought through negotiations with the owner. Buying public land is a more com- Strength of ownership rights index plex process. It requires negotiating with the public body holding the land, obtaining approval from the relevant 100.0 77.3 92.2 (0 = min, 100 = max) authority, and complying with a number of statutes limitations on the power of public authorities to lease land. Access to land information index Lease contracts of privately held land offer the lessee the right to subdivide, sublease, or mortgage the leased 47.4 33.9 41.3 (0 = min, 100 = max) land or use it as collateral, subject to the terms of the contract. There are no restrictions on the amount of land Availability of land information index (0 = min, 100 = max) 85.0 58.5 70.6 that may be leased. There is no statutory maximum duration for leases. Land-related information can be found in the land registry and cadastre, which are linked and coordinated to share data. Johannesburg has a land Time to lease private land (days) 42 72 61 information system (LIS) and geographic information system (GIS) in place. Time to lease public land (days) 304 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act No. 42 of 1965 regulates arbitration in South Africa. The legislation makes no distinction 82.4 82.4 85.2 (0 = min, 100 = max) between domestic and international arbitration. The Arbitration Act is not based on the UNCITRAL Model Ease of process index Law, although many of the provisions are similar. The Arbitration Act is less prescriptive than the Model Law. 79.0 73.8 70.6 (0 = min, 100 = max) For example, the Arbitration Act provides arbitrators with more powers to rule on issues of procedure, and the Extent of judicial assistance index grounds and procedures for challenging the appointment of an arbitrator are not speciï¬?ed in the Arbitration 94.5 55.9 57.9 (0 = min, 100 = max) Act to the same degree as in the Model Law. All commercial matters may be resolved by way of arbitration. The law does not provide for severability of the arbitration agreement, although the parties may agree to this separately. Arbitration agreements must be in writing. Faxes or other electronic forms of communication do not necessarily constitute a “written agreement.â€? Parties are free to elect arbitrators of any nationality, gender, or professional qualiï¬?cations, and they may also select foreign counsel to represent them in arbitration proceed- ings. Online arbitration is not yet an option. There are at least 2 active arbitral institutions in South Africa, including the Arbitration Foundation of Southern Africa. There is an extensive arbitration practice in South Africa. Domestic courts are empowered to assist arbitral tribunals with interim measures or the production of documents. Arbitration awards are enforced in the High Court of South Africa. On average, it takes around 8 weeks to enforce an arbitration award rendered in South Africa, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal) or 6 weeks in a foreign country. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 153 Spain High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 28 are fully open to foreign equity owner- Mining, oil and gas 100.0 100.0 92.0 ship in Spain, including manufacturing and primary industries. The country imposes ownership restrictions on Agriculture and forestry 100.0 100.0 95.9 a number of service sectors. Like the other European Union countries covered by the indicators, Spain imposes Light manufacturing 100.0 93.8 96.6 restrictions on the air transportation sector, in which foreign capital participation is limited to 49%. This equity Telecommunications 100.0 89.9 88.0 restriction, however, only applies to investors from countries outside of the European Economic Area (EEA). Electricity 100.0 88.0 87.6 Airport and port operation are closed to foreign capital participation. All commercial airport facilities in Spain Banking 100.0 97.1 91.0 are currently owned and operated by the publicly owned company AENA and the major ports are controlled Insurance 100.0 100.0 91.2 and managed by the Spanish port authorities. Foreign capital participation is not allowed in terrestrial television Transportation 39.6 69.2 78.5 broadcasting companies. This restriction does not apply to cable and satellite television channels. Media 50.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time It takes 13 procedures and 61 days to establish a foreign-owned limited liability company (LLC) in Madrid, 61 21 42 (days) Spain. This process is the longest among IAB countries in the high-income OECD group and longer than the Procedures IAB global average. In addition to the procedures required of a domestic company, a foreign-owned company 13 9 10 (number) establishing a subsidiary in Spain must provide authenticated and legalized powers of attorney, a certiï¬?cate Ease of establishment index of good standing, or a commercial excerpt from the country of the parent company ascertaining its existence. 71.0 77.8 64.5 (0 = min, 100 = max) These documents must be reviewed and notarized in Spain. A company engaged in international trade must also obtain a trade license, which usually takes 10 days. All foreign investments subject to the rules of Royal Decree 664/1999 must be reported after incorporation to the Foreign Investment Registry at the Ministry of Economy. Only investments from tax havens must be reported prior to incorporation. Registration forms may be downloaded online, but the registration process itself is not yet available online. The legal time limit for registra- tion is 15 business days. Foreign companies are free to open and maintain bank accounts in foreign currency. The minimum paid-in capital requirement to establish an LLC in Spain is 3,005, which must be paid in full at incorporation. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to acquire land have the option to lease or buy privately or publicly held land. 100.0 92.2 82.1 (0 = min, 100 = max) Private land may be bought by preparing a notarized public deed. Public land must be reclassiï¬?ed as private Strength of ownership rights index before it can be leased or sold. The procedure must also involve a public competition either through tender or 100.0 100.0 92.2 (0 = min, 100 = max) auction. Pursuant to investment rules, a foreign company must declare the acquisition of land if the investment Access to land information index exceeds a certain statutorily prescribed limit. Registration of leases is not mandatory. Information on land is 61.1 52.5 41.3 (0 = min, 100 = max) available only if the land is registered. There are no restrictions on the amount of land that may be leased. Availability of land information index (0 = min, 100 = max) 90.0 84.2 70.6 There is also no maximum duration for lease contracts. Lease contracts offer the lessee the right to subdivide, sublease, mortgage the leased land or use it as collateral, subject to the terms of the contract. Land-related Time to lease private land (days) 32 50 61 information can be found in the land registry and cadastre. Time to lease public land (days) 90 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act (2003) governs arbitrations in Spain and applies to both domestic and international arbitra- 97.4 94.2 85.2 (0 = min, 100 = max) tions. It is substantively based on the UNCITRAL Model Law. The act deï¬?nes international, but not domestic Ease of process index arbitration. Commercial matters may be resolved by arbitration. Arbitration agreements must be in writing. 76.1 83.3 70.6 (0 = min, 100 = max) Parties are restricted in electing arbitrators in domestic arbitrations, who must have a law degree and be Extent of judicial assistance index licensed to practice in Spain. In international arbitrations, these restrictions do not apply. Moreover, parties are 75.3 77.6 57.9 (0 = min, 100 = max) free to choose foreign lawyers to represent them in arbitration proceedings. There is currently no online arbitra- tion in Spain, although new initiatives are being discussed. The Spanish Arbitration Act stipulates that, unless the parties have agreed otherwise, the arbitral tribunal should render its award within 6 months of submission of the statement of defense. The arbitrators may extend this period by 2 months. Although the law provides for judicial assistance during arbitration proceedings, in practice this is rarely sought. On average, it takes around 18 weeks to enforce an arbitration award rendered in Spain, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and the same for a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 154 INVESTING ACROSS BORDERS 2010 Sri Lanka South Asia (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Within the South Asia region, Sri Lanka imposes more stringent restrictions on foreign equity ownership than Mining, oil and gas 40.0 88.0 92.0 most other countries measured by the indicators. Select strategic sectors, such as railway freight transportation Agriculture and forestry 100.0 90.0 95.9 and electricity transmission and distribution are closed to foreign capital participation. Foreign ownership in Light manufacturing 100.0 96.3 96.6 the primary sector (mining, oil and gas) is limited to a maximum of 40%. In the media industry, foreign capital Telecommunications 100.0 94.8 88.0 participation in local television channels and newspaper companies must be less than 40%. Foreign equity Electricity 71.4 94.3 87.6 participation in the retail distribution sector is only allowed if it exceeds $1,000,000. Banking 100.0 87.2 91.0 Insurance 100.0 75.4 91.2 Transportation 60.0 79.8 78.5 Media 40.0 68.0 68.0 Sector group 1 (constr., tourism, retail) 100.0 96.7 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 6 procedures and 65 days to establish a foreign-owned limited liability company (LLC) in Sri Lanka 65 39 42 (days) (Colombo). This is slower than both the regional IAB average for South Asia and the global average of IAB Procedures countries. In addition to the procedures required of a domestic company, a foreign company establishing a 6 9 10 (number) subsidiary in Sri Lanka must authenticate the parent company’s documents in its country of origin. It must also Ease of establishment index obtain an investment approval from the Sri Lankan Board of Investment (BOI). Companies incorporated under 47.9 62.5 64.5 (0 = min, 100 = max) the Companies Act are treated equally, regardless of whether shareholders are nationals or non-nationals. Registration at the Companies Registry takes, on average, 3 days. Online registration was recently introduced, but, in practice, the system is not widely used. Companies in Sri Lanka may open and maintain foreign currency accounts. There is no minimum capital requirement for domestic or foreign companies. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Sri Lanka have the option to lease or buy both privately and 85.7 87.5 82.1 (0 = min, 100 = max) publicly held land. However, the purchase of land by foreign companies is subject to a 100% value of the land Strength of ownership rights index transfer tax. A foreign company may lease publicly held land with approval from the relevant public authority. 87.5 93.8 92.2 (0 = min, 100 = max) There is no clearly deï¬?ned process for the lease or purchase of publicly held land. The maximum duration for Access to land information index leases is 50 years, although they are commonly held for 30 years. Foreign entities are limited to 50 acres when 31.6 20.1 41.3 (0 = min, 100 = max) buying land. Lease contracts offer the lessee the right to transfer, sublease, or mortgage the leased land or use Availability of land information index (0 = min, 100 = max) 75.0 59.7 70.6 it as collateral, subject to the terms of the contract. Subdivision is subject to the applicable zoning laws. There are no restrictions on the amount of land that may be leased. Most land-related information can be found in Time to lease private land (days) 68 99 61 the land registry. There are efforts underway to digitize the land registry. Time to lease public land (days) 91 205 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act No. 11 of 1995 regulates both domestic and international arbitrations in Sri Lanka, and is 95.4 86.4 85.2 (0 = min, 100 = max) based on the UNCITRAL Model Law. Other provisions regulating arbitration can be found in the Civil Procedure Ease of process index Code (1889). The High Court of Provinces (Special Provisions) Act (1996) governs the enforcement of arbitral 71.3 55.0 70.6 (0 = min, 100 = max) awards. There is no deï¬?nition of domestic or international arbitration in the legislation. Most commercial Extent of judicial assistance index matters may be submitted to arbitration, and parties are free to select arbitrators of any nationality, gender, or 38.0 36.4 57.9 (0 = min, 100 = max) professional qualiï¬?cations. Only attorneys licensed to practice in Sri Lanka may represent parties in arbitration proceedings taking place in Sri Lanka. There are several arbitral institutions, including the Arbitration Centre of the Institute for the Development of Commercial Law and Practice and the Sri Lanka National Arbitration Centre. Online arbitration is not yet an available option. The efï¬?ciency of arbitration is hindered by its interac- tion with overburdened domestic courts, and there are signiï¬?cant delays in enforcing arbitration awards. Enforcement proceedings are commenced in the High Court. On average, it takes around 103 weeks to enforce an arbitration award, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). Unlike in many countries, the longest part of the enforcement proceedings is the time it takes from the ï¬?rst hearing in enforcement proceedings to the ï¬?rst instance court decision (1 year). For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 155 Sudan Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) While Sudan has gradually opened up many sectors of its economy to foreign investors, its restrictions on Mining, oil and gas 75.0 95.2 92.0 foreign equity ownership are still more stringent than in most countries in Sub-Saharan Africa covered by this Agriculture and forestry 75.0 97.6 95.9 report. Overt statutory ownership restrictions as measured by the Investing Across Sectors indicators exist Light manufacturing 87.5 98.6 96.6 primarily in the service industries. Sectors such as railway freight transportation, airport operation, television Telecommunications 50.0 84.1 88.0 broadcasting, and newspaper publishing are closed to foreign capital participation. Foreign ownership is also Electricity 50.0 90.5 87.6 restricted in the telecommunications, electricity, and ï¬?nancial services sectors. In addition to those overt statu- Banking 50.0 84.7 91.0 tory ownership restrictions, a comparatively large number of sectors are dominated by government monopolies, Insurance 50.0 87.3 91.2 including, but not limited to, those mentioned above. Those monopolies, together with a high perceived dif- Transportation 60.0 86.6 78.5 ï¬?culty of obtaining required operating licenses, make it more difï¬?cult for foreign companies to invest. Media 0.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 13 procedures and 55 days to establish a foreign-owned limited liability company (LLC) in Sudan 55 48 42 (days) (Khartoum). This is slower than both the IAB regional and global averages. In addition to the procedures Procedures required of domestic companies, a foreign company establishing a subsidiary must authenticate its docu- 13 10 10 (number) ments abroad. It must also obtain an investment approval from the State or Federal Ministry of Investment, as Ease of establishment index stipulated in the Investment Encouragement Act (1999), which takes, on average, 17 days. Preliminary approval 40.0 51.5 64.5 (0 = min, 100 = max) from the Ministry to establish a project must be obtained prior to registering the company with the Commercial Registrar General’s ofï¬?ce at the Ministry of Investment. Registration must be made within 3 months or the preliminary approval will be cancelled. After the required steps for business registration have been completed, the ï¬?nal license will be issued. A feasibility study must be submitted along with the other documents to obtain ï¬?nal approval. If the license request is declined, an appeal can be made to the federal Council of Ministers. Sudan does not impose a minimum capital requirement on investors. Foreign companies must obtain approval from the Central Bank in order to open and maintain a foreign currency bank account in Sudan, which takes about 4 days. ACCESSING INDUSTRIAL LAND Strength of lease rights index The purchase of either privately or publicly held land is rare in Sudan, although there are no legal restrictions 71.4 76.6 82.1 (0 = min, 100 = max) on it. The law stipulates that foreign companies may buy privately or publicly held land, subject to the consent Strength of ownership rights index of the Justice Minister. Foreign companies may lease privately or publicly held land. Publicly held land may be n/a 77.3 92.2 (0 = min, 100 = max) leased with approval from the public body holding the land. There are no restrictions on the amount of land Access to land information index that may be leased. There is no maximum duration for lease contracts. Lease contracts offer the lessee the right 30.8 33.9 41.3 (0 = min, 100 = max) to renew, subdivide, sublease, or mortgage the leased land or use it as collateral, subject to the terms of the Availability of land information index (0 = min, 100 = max) 30.0 58.5 70.6 contract. These rights may be restricted for publicly held land. The lease may not be transferred to another legal entity, for example, unless approval is sought from the relevant authority. Land-related information may be Time to lease private land (days) 12 72 61 found in the registry. Time to lease public land (days) 60 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration Act (2005) governs arbitration in Sudan. This act is not based on the UNCITRAL Model Law. 77.4 82.4 85.2 (0 = min, 100 = max) Article 7 of the Act deï¬?nes arbitration as international if the headquarters of the parties to the arbitration are Ease of process index located in 2 different states or if the subject of arbitration is connected to more than 1 state. All commercial 73.3 73.8 70.6 (0 = min, 100 = max) civil matters are considered arbitrable by law. Parties may appoint arbitrators of any nationality or professional Extent of judicial assistance index qualiï¬?cations. Sudan faces a challenge in complying with international trends that contravene Islamic Sharia 67.8 55.9 57.9 (0 = min, 100 = max) principles. Online arbitration is not available, but the Khartoum Center for Commercial Arbitration administers arbitrations. Most arbitrations in Sudan, up until now, have been ad hoc, or international arbitral institutions have been used. The Arbitration Act stipulates that arbitration awards are binding and automatically enforced. When an award is not automatically enforced, written requests are sent to the District Court, and its decision can be appealed at the Court of Appeal. On average, it takes around 25 weeks to enforce an arbitration award rendered in Sudan, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 19 weeks for a foreign award. Sudan has not signed the 1958 New York Convention, but it has ratiï¬?ed the ICSID Convention. For more information on this country, please go to http://www.investingacrossborders.org 156 INVESTING ACROSS BORDERS 2010 Tanzania Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 26 are fully open to foreign equity owner- Mining, oil and gas 100.0 95.2 92.0 ship in Tanzania, including manufacturing and primary industries. The country imposes foreign equity ownership Agriculture and forestry 100.0 97.6 95.9 restrictions on a number of service sectors. For example, foreign capital participation in the telecommunications Light manufacturing 100.0 98.6 96.6 sector is limited to a maximum of 65%. Furthermore, Tanzanian laws specify that at least one-third of the share Telecommunications 65.0 84.1 88.0 capital of insurance companies must be owned by Tanzanian citizens. The media industry is subject to limits on Electricity 100.0 90.5 87.6 foreign ownership as well. While the Broadcasting Services Act allows a maximum of 49% foreign ownership of Banking 100.0 84.7 91.0 Tanzanian TV stations, foreign capital participation in local nationwide newspapers is prohibited. Insurance 66.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 24.5 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 14 procedures and 38 days to establish a foreign-owned limited liability company (LLC) in Dar es 38 48 42 (days) Salaam, Tanzania. This is slower than both the IAB regional average for Sub-Saharan Africa and the IAB Procedures global average. Domestic as well as foreign-owned LLCs must have at least 2 shareholders. In addition to the 14 10 10 (number) procedures required of domestic companies, a foreign-owned LLC must authenticate the parent company’s Ease of establishment index documents abroad. If the company wants to engage in international trade, it must obtain a trade license from 62.5 51.5 64.5 (0 = min, 100 = max) the Ministry of Industry and Trade. The Tanzania Investment Centre (TIC) offers fast-track service to establish a business in Tanzania. A foreign company is not required to obtain an investment approval in Tanzania, unless it decides to apply for TIC’s incentive certiï¬?cate to beneï¬?t from tax incentives. The business registration documents are available online. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement for foreign-owned LLCs unless the project is registered with TIC, in which case the minimum capital is $300,000. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Tanzania, all land is publicly held, and the president acts as trustee. Foreign entities are prohibited from 81.2 76.6 82.1 (0 = min, 100 = max) owning land, except in the following circumstances: as a right of occupancy for purposes of investment ap- Strength of ownership rights index proved under the Tanzania Investment Act; as a derivative right for purposes of investment approved under the n/a 77.3 92.2 (0 = min, 100 = max) Investment Act; or as an interest in land under a partial transfer of interest by a citizen for purposes of invest- Access to land information index ment approved under the Investment Act in a joint venture. Land may be leased for a maximum duration of 99 36.8 33.9 41.3 (0 = min, 100 = max) years. Lease contracts offer the lessee the right to sublease, subdivide, or mortgage the leased land or use it as Availability of land information index (0 = min, 100 = max) 62.5 58.5 70.6 collateral, subject to the terms of the contract. In the case of publicly held land, approval may be required from the Commissioner of Lands. There are regulations that govern the amount of land that may be leased. Most Time to lease private land (days) 73 72 61 land-related information can be found in the registry. Time to lease public land (days) 82 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Tanzania’s Arbitration Act (2002) governs domestic arbitral proceedings and enforcement of foreign arbitral 82.4 82.4 85.2 (0 = min, 100 = max) awards. It is available online. The act contains certain mandatory provisions. The courts have the power to Ease of process index extend the time for beginning arbitral proceedings, as well as to impose other time limits. If a dispute is related 74.7 73.8 70.6 (0 = min, 100 = max) to ownership of immoveable property, it cannot be arbitrated. The law provides for arbitrators to act fairly and Extent of judicial assistance index impartially, but not independently, unlike the UNCITRAL Model Law. The law does not recognize severability of 39.1 55.9 57.9 (0 = min, 100 = max) the arbitration agreement from the underlying contract, although this is accepted in practice. Arbitration agree- ments can be concluded in any form, as long as they are in writing. It is not possible to conduct arbitrations online in Tanzania. The National Construction Council (NCC) and the Tanzania Institute of Arbitrators administer arbitrations in Tanzania. The Arbitration Act stipulates that arbitration awards are enforceable. On average, it takes around 61 weeks to enforce an arbitration award, from ï¬?ling an application to a writ of execution attach- ing assets (assuming there is no appeal). If an appeal is made during the enforcement process, proceedings are likely to be extremely lengthy. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 157 Thailand East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 87 countries covered by the Investing Across Sectors indicators, Thailand’s restrictions on foreign Mining, oil and gas 49.0 75.7 92.0 equity ownership are among the most stringent. The majority of the 33 industry sectors measured by the indica- Agriculture and forestry 49.0 82.9 95.9 tors are subject to restrictions on foreign equity participation. The Foreign Business Act B.E.2542/1999 sets out Light manufacturing 87.3 86.8 96.6 a comprehensive list of sectors and business activities in which foreign capital is limited to a less-than-50% Telecommunications 49.0 64.9 88.0 stake. For some of these sectors, the law offers the option to increase the foreign capital share with prior Electricity 49.0 75.8 87.6 governmental approval. In addition to this general “negative list,â€? certain sector-speciï¬?c laws impose additional Banking 49.0 76.1 91.0 restrictions. For example, foreign ownership in the telecommunications sectors (ï¬?xed-line and mobile/wireless Insurance 49.0 80.9 91.2 infrastructure and services) is restricted to a maximum of 49% by the Telecommunication Act B.E. 2544/2001. Transportation 49.0 63.7 78.5 Sectors that are fully open to foreign capital participation in Thailand include light manufacturing, pharmaceuti- Media 27.5 36.1 68.0 cal products, and food products. Sector group 1 (constr., tourism, retail) 66.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 49.0 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 34 days to establish a foreign-owned limited liability company (LLC) in Bangkok, 34 68 42 (days) Thailand. This is faster than both the average for IAB countries in East Asia and the Paciï¬?c and the IAB global Procedures average. In addition to the procedures required of domestic companies, a foreign company must notarize and 9 11 10 (number) legalize the parent company’s documents with the Thai consulate in its country of origin. If it wants to engage Ease of establishment index in international trade, the foreign company must register with the customs department. This takes only 1 day. 60.5 57.4 64.5 (0 = min, 100 = max) Foreign-owned companies (per the deï¬?nition of “foreignerâ€? under the Foreign Business Act B.E. 2542 of 1999 [FBA]) are prohibited from conducting business in certain sectors listed in the aforementioned act. They are re- quired to obtain a foreign investment license (which takes 75 days on average) in other less-restricted sectors. Foreign companies are allowed to invest in the remaining liberalized sectors, but must have a minimum capital of BHT 2,000,000 (~$61,900). Company registration with the Department of Business Development takes only 2 days and applications can be downloaded and monitored online. Foreign companies are free to open and maintain bank accounts in foreign currency. Foreign companies operating in sectors that are not listed in the FBA are subject to a minimum capital requirement of BHT 2,000,000 (~$61,900). In order to obtain a foreign business license, when required, the minimum capital depends on the company’s estimated investment as presented to the Ministry of Commerce, but must not be less than THB 3,000,000 (~$92,860). ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign-owned companies may buy land subject to approval from the Board of Investment. They may also 80.7 84.9 82.1 (0 = min, 100 = max) buy land located on an industrial estate with investment incentives. It is possible to lease both publicly and Strength of ownership rights index privately held land, but the lease of publicly held land is not common. A foreign company may be required to 62.5 83.3 92.2 (0 = min, 100 = max) provide evidence of its ability to fund a leasehold acquisition before a lease can be registered. Generally, lease Access to land information index agreements are concluded for a maximum period of 30 years, with the option to renew. Lease contracts offer 27.8 35.1 41.3 (0 = min, 100 = max) the lessee the right to renew, subdivide, sublease, or mortgage the leased land or use it as collateral, subject to Availability of land information index (0 = min, 100 = max) 70.0 67.5 70.6 the terms of the contract. Approval from the Board of Investment is required to transfer land to another foreign entity. Most land-related information can be obtained from the land registry, although a power of attorney from Time to lease private land (days) 30 66 61 the landowner is required before documentation relating to particular land may be inspected. Time to lease public land (days) 128 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Thai Arbitration Act (2002) applies to both domestic and international arbitrations taking place in Thailand, 84.9 83.8 85.2 (0 = min, 100 = max) and is based on the UNCITRAL Model Law. There are no differences between the regulation of domestic and Ease of process index international arbitrations. There are no restrictions on subject-matter arbitrability. Moreover, there are no restric- 81.8 66.1 70.6 (0 = min, 100 = max) tions on the parties’ ability to appoint an arbitrator of any nationality, gender, or professional qualiï¬?cations, Extent of judicial assistance index and arbitration proceedings can take place in any language. There are legal restrictions for foreign lawyers 40.8 46.6 57.9 (0 = min, 100 = max) acting as counsel in arbitration proceedings, however. Unlike other countries in the East Asia and Paciï¬?c region, Thailand does not offer online arbitration. There are several arbitral institutions in the country that administer both domestic and international arbitrations, such as the Thai Arbitration Institute. Although the law requires courts to assist arbitral tribunals with providing interim orders, counsel has noted that, in practice, parties to an arbitration rarely submit such motions to the courts, and that the discovery process is amicable. Arbitration awards are enforced in the court of ï¬?rst instance, the Bangkok Civil Court, but decisions relating to enforce- ment can be appealed to the Supreme Court. On average, it takes around 54 weeks to enforce an arbitration award rendered in Thailand, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and the same for a foreign award. Thailand has ratiï¬?ed the 1958 New York Convention. For more information on this country, please go to http://www.investingacrossborders.org 158 INVESTING ACROSS BORDERS 2010 Tunisia Middle East and North Africa (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 5 countries covered by the Investing Across Sectors indicators in Middle East and North Africa, Tunisia Mining, oil and gas 100.0 78.8 92.0 has the fewest limits on foreign equity ownership. The country has opened up the majority of the sectors of Agriculture and forestry 100.0 100.0 95.9 its economy to foreign capital participation. As a notable exception, the electricity transmission and distribu- Light manufacturing 100.0 95.0 96.6 tion sectors are closed to foreign ownership. Furthermore, these industries operate under monopolistic market Telecommunications 100.0 84.0 88.0 structures with the publicly owned company STEG as the only provider. While foreign capital participation is not Electricity 71.4 68.5 87.6 restricted by law in electricity generation, the public monopoly of STEG together with a high perceived difï¬?culty Banking 100.0 82.0 91.0 of obtaining the required operating license make it difï¬?cult for foreign investors to engage. Insurance 100.0 92.0 91.2 Transportation 100.0 63.2 78.5 Media 100.0 70.0 68.0 Sector group 1 (constr., tourism, retail) 100.0 94.9 98.1 Sector group 2 (health care, waste mgt.) 100.0 90.0 96.0 STARTING A FOREIGN BUSINESS Time Foreign investors who want to set up a subsidiary in Tunisia (Tunis) will have to allow 19 days and go through 19 19 42 (days) 14 different procedural steps, a process that is more complex than the IAB regional and global averages. 4 pro- Procedures cedures are speciï¬?c to foreign-owned businesses. All documents of the parent company must be translated into 14 9 10 (number) either Arabic or French. An investment declaration that provides basic information on the prospective project Ease of establishment index must be ï¬?led with the Guichet Unique Agency for Promotion of Investment (API). Investment in manufactur- 71.1 58.6 64.5 (0 = min, 100 = max) ing industries, agriculture, agribusiness, public works, and certain services requires only a simple declaration of intent to invest. In addition a trade license must be obtained from customs if the company wants to engage in international trade. The company must also obtain a certiï¬?cate of capital importation from the Central Bank of Tunisia. There are certain exchange control and currency regulations limiting foreign currency bank accounts (also called “professional accounts in convertible dinarsâ€?) to subsidiaries that will be exporting all of their production Professional accounts in convertible dinars may be opened, upon authorization from the Central Bank of Tunisia, by any resident individual or legal entity having foreign currency. There is no minimum paid-in capital requirement for setting up a local or foreign LLC. However, any capital investment agreed upon in the articles of association must be paid in full. There are no restrictions on the composition of the board of directors or appointment of ofï¬?cers in a foreign-owned subsidiary. ACCESSING INDUSTRIAL LAND Strength of lease rights index Tunisian law states that, in Tunis, foreign companies may lease privately held land for 2 years (renewable) 85.7 78.3 82.1 (0 = min, 100 = max) without authorization. If the lease contract is for longer than 2 years, the governor’s authorization is required, Strength of ownership rights index unless the land is located in an industrial zone that is speciï¬?cally designated for industrial activities. Foreign 87.5 68.8 92.2 (0 = min, 100 = max) companies seeking to access land in Tunisia also have the option to lease publicly held land and buy privately Access to land information index held land. It is not possible to purchase publicly owned land. The process of leasing private land is efï¬?cient and 36.8 46.4 41.3 (0 = min, 100 = max) streamlined compared with the regional and global average. Lease contracts can be of unlimited duration and Availability of land information index (0 = min, 100 = max) 80.0 66.0 70.6 offer the lessee the right to subdivide, sublease, and mortgage the leased land. There are no restrictions on the amount of land that may be leased. Land-related information can be found in the land registry and cadastre, Time to lease private land (days) 69 59 61 which are located in the same agency, but are not linked or coordinated to share data. Currently there is no Time to lease public land (days) 84 123 140 centralized land information system (LIS) or geographic information system (GIS) in place. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Tunisia’s Arbitration Code (1993) is largely based on the UNCITRAL Model Law. The main difference is the 77.5 82.0 85.2 (0 = min, 100 = max) addition of Article 44, which stipulates that when an arbitration award is totally or partially annulled, the court Ease of process index shall, upon request by all parties, decide on the merits of the dispute. This solution allows for both proceed- 71.4 65.5 70.6 (0 = min, 100 = max) ings to take place before the same court (Tunis Court of Appeal) without ï¬?ling separate claims. All commercial Extent of judicial assistance index disputes are arbitrable except those concerning the state and public companies. Arbitration agreements inferred 52.3 48.7 57.9 (0 = min, 100 = max) by conduct are legally enforceable. Parties can only choose an odd number of arbitrators. Judges and public agents can be appointed as arbitrators after obtaining prior authorization from the competent authority. Foreign lawyers can represent parties in both domestic and international arbitration proceedings taking place in Tunisia. The Supreme Court has issued several decisions that interim measures ordered by arbitrators are not subject to annulment by the court and that recognition and enforcement of arbitral awards may only be denied in very limited circumstances. The law provides for judicial assistance with orders of interim measures and taking of evidence issued by arbitrators. The Court of Appeal of Tunis is designated to enforce foreign arbitral awards. On average, it takes around 47 weeks to enforce an arbitration award rendered in Tunisia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 51 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 159 Turkey Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The Turkish Law on Foreign Direct Investment provides equal treatment for foreign and domestic investors, Mining, oil and gas 100.0 96.2 92.0 unless otherwise stipulated by special statutory provisions. The principle of equal treatment can be restricted on Agriculture and forestry 100.0 97.5 95.9 the grounds of public order, public health, or public security, in which case speciï¬?c shareholding structures may be required or foreign ownership restricted. In Turkey, foreign capital participation is limited in the air trans- Light manufacturing 100.0 98.5 96.6 portation sectors to a maximum of 49%. The Law on Establishment and Broadcasting of Radio and Television Telecommunications 100.0 96.2 88.0 Channels (Law No. 3984) stipulates that foreign ownership in a private radio or television channel cannot ex- Electricity 78.6 96.4 87.6 ceed 25% of the paid-in capital. A foreign investor who is already a shareholder in a private radio or television Banking 100.0 100.0 91.0 channel cannot become a shareholder of another radio or television channel. Foreign capital participation in Insurance 100.0 94.9 91.2 the electricity transmission sector is prohibited. The Electricity Market Law stipulates that only the state-owned Transportation 69.4 84.0 78.5 Turkish Electricity Transmission Company may carry out electric power transmission. Foreign and domestic Media 62.5 73.1 68.0 investors are not allowed to establish new electricity distribution companies. It is, however, possible to acquire Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 shares in existing distribution companies through privatization, provided that the investor does not acquire a dominant market position in the sector. Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 8 procedures and 8 days to establish a foreign-owned limited liability company (LLC) in Turkey 8 22 42 (days) (Istanbul). This is much faster than both the IAB average for Europe and Central Asia and the IAB global aver- Procedures age. In addition to the procedures required of a domestic company, a foreign company establishing a subsidiary 8 8 10 (number) in Turkey must authenticate and translate the parent company’s documents abroad. Foreign companies do not Ease of establishment index need to get an investment approval; within 1 month of establishment, however, they must notify the General 65.8 76.8 64.5 (0 = min, 100 = max) Directorate of Foreign Direct Investment of the investment and provide information on the shareholding structure of the company. Companies in Turkey are free to open and maintain bank accounts in foreign currency. The minimum capital requirement for domestic and foreign LLCs is TRY 5,000 (~$3,250), but investors do not need to pay it in full at registration. The articles of association must set forth that the capital committed by the shareholders is free from any encumbrances and that either (i) ¼of the capital has been already paid, or (ii) will be paid within 3 months of the date of establishment, with the remaining portion paid within 3 years. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Turkey may lease or buy privately or publicly held land. Approval 85.7 82.9 82.1 (0 = min, 100 = max) is required from the relevant governor to purchase land. Leasing or buying public land is common only if the Strength of ownership rights index land is part of an industrial zone. Public land is usually sold through a public tender process. Public land may 87.5 97.6 92.2 (0 = min, 100 = max) be bought through direct sale, however, if the investment on the land is at least $10,00,000 and the number Access to land information index of personnel employed at least 50. There are no restrictions on the amount of land that may be leased. The 63.2 50.3 41.3 (0 = min, 100 = max) maximum duration of a lease contract is a renewable term of 10 years. Lease contracts offer the lessee the right Availability of land information index (0 = min, 100 = max) 90.0 78.9 70.6 to sublease, subdivide, and/or mortgage the leased land. There are some restrictions on the transfer of the lease or land to another foreign entity. Most land-related information can be obtained from the Directorate of Land Time to lease private land (days) 15 43 61 Registry and Cadastre. There are efforts underway to make this information available electronically. Time to lease public land (days) 72 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Two laws govern arbitration in Turkey. The Law on Civil Procedure (1927) applies to domestic arbitration and 89.9 82.5 85.2 (0 = min, 100 = max) the Law on International Arbitration (enacted in 2001 and entered into force in 2009) applies to international Ease of process index arbitration. There are big differences between the 2 types of arbitration, but foreign-owned and locally incor- 69.5 69.7 70.6 (0 = min, 100 = max) porated companies can arbitrate under the Law on International Arbitration, which is more flexible. In domestic Extent of judicial assistance index arbitration, the arbitrators are not authorized to rule on their own jurisdiction; the courts must decide on the ar- 68.6 64.4 57.9 (0 = min, 100 = max) bitral tribunal’s jurisdiction. Both laws set strict time limits on rendering an arbitral award. If the tribunal fails to render its award within the required time frame, the arbitration is terminated and the disputes referred to the courts. In international arbitration, where the domiciles or habitual residence of both parties are outside Turkey, parties are entitled to waive their right to an annulment completely or partially by either inserting a clause in the arbitration agreement or by later entering into a written agreement to that effect. Disputes involving immovable property and intracompany disputes are under the exclusive jurisdiction of the Turkish courts and cannot be arbitrated. Parties may freely choose their arbitrators. In domestic arbitration, parties must be rep- resented by lawyers who are licensed to practice in Turkey. This does not apply to international arbitrations. In domestic arbitration, disputes are resolved in accordance with Turkish laws or the principle of equity and can- not be submitted to arbitration outside Turkey. There are more than 4 active arbitral institutions in Turkey. The Commercial Court of First Instance has jurisdiction to enforce arbitration awards. On average, it takes around 16 weeks to enforce an arbitration award rendered in Turkey, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 23 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 160 INVESTING ACROSS BORDERS 2010 Uganda Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 30 are fully open to foreign equity owner- Mining, oil and gas 100.0 95.2 92.0 ship in Uganda, including manufacturing and primary industries. The country imposes foreign equity ownership Agriculture and forestry 100.0 97.6 95.9 restrictions on a small number of service sectors. The electricity transmission and distribution sectors are closed to foreign capital participation and characterized by monopolies. In the banking sector, Ugandan law speciï¬?es Light manufacturing 100.0 98.6 96.6 that a single shareholder, foreign or domestic, cannot hold more than 49% of the shares of a local bank. Telecommunications 100.0 84.1 88.0 Electricity 71.4 90.5 87.6 Banking 49.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 21 procedures and 39 days to establish a foreign-owned limited liability company (LLC) in Kampala, 39 48 42 (days) Uganda. This is faster than both the IAB regional average for Sub-Saharan Africa and the IAB global average. Procedures In addition to the procedures required of domestic companies, a foreign-owned LLC must submit a project pro- 21 10 10 (number) posal through a local counsel to obtain an investment approval from the Uganda Investment Authority (UIA). Ease of establishment index This approval usually takes 7 days. An appeal can be made to the Minister of State for Finance if said approval 47.4 51.5 64.5 (0 = min, 100 = max) is not granted. An appeal is rarely necessary, however, as the foreign investor is usually asked to provide ad- ditional information or clariï¬?cations if need be. In addition, the company, if it wants to engage in international trade, must obtain a trade license from the Ministry of Tourism, Trade, and Industry. The business registration process is not yet available online. Foreign companies are free to open and maintain foreign currency bank accounts. There is a minimum capital requirement of UGX 200,000,000 (~$100,000) to obtain an investment license from the UIA. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in Uganda may lease privately or publicly held land. The Land Act in 71.4 76.6 82.1 (0 = min, 100 = max) Uganda prohibits the ownership of land by foreign companies. Private land available for lease may include cus- Strength of ownership rights index tomary and communally owned land, which cannot be leased without community consultations. The procedures n/a 77.3 92.2 (0 = min, 100 = max) for leasing both private and public land are similar, but one must negotiate with the relevant public authority Access to land information index for the lease of public land. Land may be leased for a maximum duration of 99 years. There is no restriction on 25.0 33.9 41.3 (0 = min, 100 = max) the amount of land that may be leased. Lease contracts offer the lessee the right to sublease, subdivide, and/ Availability of land information index (0 = min, 100 = max) 77.5 58.5 70.6 or mortgage the leased land, subject to the terms of the contract. Not all land rights require registration. A thorough due diligence process is, therefore, required before leasing land. Most land-related information can be Time to lease private land (days) 60 72 61 found in the land registry. Time to lease public land (days) 80 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Arbitration and Conciliation Act (2000) applies to both domestic and international arbitrations and is not 86.3 82.4 85.2 (0 = min, 100 = max) based on the UNCITRAL Model Law. Unlike in many countries in Sub-Saharan Africa, arbitration agreements Ease of process index cannot be concluded electronically. Although the law allows parties to use the language of their choice, with 62.9 73.8 70.6 (0 = min, 100 = max) the default language being English, in practice, arbitration proceedings always take place in English. Foreign Extent of judicial assistance index lawyers cannot represent parties in arbitration proceedings, unless they appear jointly with qualiï¬?ed Ugandan 39.3 55.9 57.9 (0 = min, 100 = max) lawyers. Arbitration awards are enforced in the Commercial Division of the High Court in Uganda, and appeals can be made to the Court of Appeal. The courts usually enforce domestic and international arbitration awards. On average, it takes around 26 weeks to enforce an arbitration award rendered in Uganda, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 52 weeks to enforce a foreign award. If an appeal is made during this process, enforcement proceedings become extremely lengthy. Mediation is used frequently in Uganda to resolve disputes, and a special section has been added to the Arbitration and Conciliation Act (2000) to provide speciï¬?cally for conciliation. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 161 Ukraine Eastern Europe and Central Asia (20 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 20 countries covered by the Investing Across Sectors indicators in Eastern Europe and Central Asia, Mining, oil and gas 100.0 96.2 92.0 Ukraine imposes restrictions on foreign equity ownership that are more severe than in most other countries. Agriculture and forestry 100.0 97.5 95.9 While most of the primary and manufacturing sectors are fully open to foreign capital participation, Ukraine imposes ownership restrictions in a number of service sectors. In particular, the Law of Ukraine on Television Light manufacturing 82.5 98.5 96.6 and Radio Broadcasting prohibits foreign investors from establishing TV broadcasting companies. Furthermore, Telecommunications 100.0 96.2 88.0 private ownership (both domestic and foreign) of nationwide newspaper media is restricted by law. The Law on Electricity 100.0 96.4 87.6 Publishing Businesses limits foreign ownership of publishing houses to a maximum of 30%. This limit will likely Banking 100.0 100.0 91.0 be abolished soon in accordance with the country’s commitments with the World Trade Organization (WTO). Insurance 100.0 94.9 91.2 Foreign capital participation in the domestic and international air transportation sectors is limited to 49%. Transportation 79.6 84.0 78.5 Media 15.0 73.1 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 11 procedures and 28 days to establish a foreign-owned limited liability company (LLC) in Ukraine 28 22 42 (days) (Kiev). This is slower than the average of IAB countries in Europe and Central Asia, but still faster than the IAB Procedures global average. In addition to the procedures required of a domestic company, a foreign company establishing 11 8 10 (number) a subsidiary in Ukraine must legalize and translate the parent company’s documents abroad. Registration of Ease of establishment index a foreign investment is optional, although, in practice, foreign investors usually prefer to register their invest- 80.0 76.8 64.5 (0 = min, 100 = max) ments. The State Registrar should make all registrations with the State Committee of Statistics of Ukraine, the state social funds (the State Pension Fund, the Employment Insurance Fund, the Social Security Fund, and the Fund for Social Insurance), and the tax authorities for the newly registered company. However, in practice, the State Registrar does not register with the State Committee of Statistics, and that registration is usually made by the company itself. Companies in Ukraine are free to open and maintain bank accounts in foreign currency. The minimum capital requirement is pegged to the minimum monthly salary and is currently UAH 63,000 (~$7,950). Half must be paid in at registration, the other half within a year. ACCESSING INDUSTRIAL LAND Strength of lease rights index The land law in Ukraine allows foreign companies to buy nonagricultural land within city limits for construction 88.5 82.9 82.1 (0 = min, 100 = max) purposes or commercial activities. Most foreign companies seeking to access land, therefore, prefer to buy pri- Strength of ownership rights index vate land. It is possible to buy publicly held land, but this is a generally more complicated procedure requiring 100.0 97.6 92.2 (0 = min, 100 = max) the consent of the relevant minister or of parliament. Public land can only be sold through public auction. Land Access to land information index can be leased for a maximum duration of 50 years. Lease contracts offer the lessee the right to transfer, subdi- 36.8 50.3 41.3 (0 = min, 100 = max) vide, or sublease the land, subject to the terms of the contract. There are restrictions on these rights for publicly Availability of land information index (0 = min, 100 = max) 55.0 78.9 70.6 held land. Land-related information can be found in the land registry. The registry was established in the last 10 years. Not all titles and deeds that existed before the registry was created have been recorded. The information Time to lease private land (days) 50 43 61 it contains may, therefore, not be reliable. A cadastre has been legislated, but has not yet been established. Time to lease public land (days) 209 133 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The International Commercial Arbitration Law (ICAL, 1994) applies to international arbitration and the Law on 86.6 82.5 85.2 (0 = min, 100 = max) Courts of Arbitration (2004) applies to domestic arbitration. A distinctive feature of ICAL is that it incorporates Ease of process index the regulations of 2 arbitral institutions. The Statutes of the International Commercial Arbitration Court and the 78.1 69.7 70.6 (0 = min, 100 = max) Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry are annexed to ICAL. Extent of judicial assistance index ICAL distributes the functions of arbitration assistance and supervision between the district courts and the 72.6 64.4 57.9 (0 = min, 100 = max) President of the Chamber of Commerce and Industry of Ukraine for both ad hoc and institutional arbitrations. The following commercial disputes cannot be resolved by domestic arbitration: disputes based on commercial contracts, those connected with fulï¬?llment of state demands, disputes involving state secrets, bankruptcy disputes, disputes involving a party exercising state power, disputes over immovable property, intracompany disputes, disputes involving a nonresident party, and disputes in which a judgment of the arbitration court would require the execution of state power by an authorized body. ICAL limits the jurisdiction of international arbitration tribunals to civil law disputes arising from international economic operations (provided that the commercial enterprise of at least 1 party exists outside of Ukraine), disputes between international organiza- tions and enterprises with foreign investments in Ukraine, and intracompany disputes of these enterprises. Arbitrators in domestic arbitrations must have a higher legal education, which is not required in international arbitrations. On average, it takes around 7 weeks to enforce an arbitration award rendered in Ukraine, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 13 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 162 INVESTING ACROSS BORDERS 2010 United Kingdom High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) The United Kingdom offers a welcoming environment to foreign investors, with foreign equity ownership Mining, oil and gas 100.0 100.0 92.0 restrictions in only a limited number of sectors covered by the Investing Across Sectors indicators. As in all other Agriculture and forestry 100.0 100.0 95.9 European Union member countries, foreign equity ownership in the air transportation sector is limited to 49% for investors from outside of the European Economic Area (EEA). Furthermore, the Industry Act (1975) enables Light manufacturing 65.0 93.8 96.6 the U.K. government to prohibit transfer to foreign owners of 30% or more of important U.K. manufacturing Telecommunications 100.0 89.9 88.0 businesses, if such a transfer would be contrary to the interests of the country. While these provisions have Electricity 100.0 88.0 87.6 never been used in practice, they are still accounted for in the Investing Across Sectors indicators, as these Banking 100.0 97.1 91.0 strictly measure ownership restrictions deï¬?ned in the laws. Insurance 100.0 100.0 91.2 Transportation 79.6 69.2 78.5 Media 100.0 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned subsidiary in the United Kingdom (London) is faster than the IAB 14 21 42 (days) regional average and similar to the one applicable to local companies. The 1 additional step required exclusively Procedures of foreign investors is the double taxation treaty clearance in respect of any payments potentially subject to 7 9 10 (number) withholding, including payments such as dividends, royalties, and interest. In London, Companies House offers Ease of establishment index a same-day incorporation service for an additional fee, as opposed to the usual registration service, which takes 85.0 77.8 64.5 (0 = min, 100 = max) 8 to 10 days. In addition, Companies House’s forms G10 and G12 can be downloaded and submitted online. Alternatively, a ready-formed “shelfâ€? company can be acquired from local law ï¬?rms and formation agents. The majority of goods can be imported into the United Kingdom without the need to apply for an import license, although an export license may be required, depending on the nature of the goods to be exported, their ultimate end use, and the destination concerned. In the United Kingdom, there are no exchange control or currency regulations affecting inward or outward investment, the holding of foreign currency bank accounts, or the settlement of currency trading transactions. The only exception is in relation to money laundering, which requires banks to undertake certain veriï¬?cations of new clients. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in the United Kingdom have the option to lease or buy land from 100.0 92.2 82.1 (0 = min, 100 = max) both private and public owners. Procedures involved in leasing privately and publicly held land are the same Strength of ownership rights index except that the public authority seeking to lease land needs to comply with its own internal requirements for 100.0 100.0 92.2 (0 = min, 100 = max) entering into land transactions. Lease contracts can be of unlimited duration and offer the lessee the right to Access to land information index subdivide and sublease the leased land as well as to mortgage it or use it as collateral. There are no restrictions 50.0 52.5 41.3 (0 = min, 100 = max) on the amount land that may be leased. Not all land in the United Kingdom is registered. Land rights for reg- Availability of land information index istered land are recorded in the title deeds registry. However, some rights affecting land may also exist without 80.0 84.2 70.6 (0 = min, 100 = max) it being registered or recorded in the registry. Currently there is no centralized land information system (LIS) or Time to lease private land (days) 53 50 61 geographic information system (GIS) in place that centralizes relevant information at a single point of access. Time to lease public land (days) 62 88 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The United Kingdom has a long history of alternative dispute resolution (ADR), although it lacks a statute gov- 99.9 94.2 85.2 (0 = min, 100 = max) erning commercial mediations. The primary arbitration legislation is the Arbitration Act (1996), which governs Ease of process index all arbitration agreements made in writing. All types of commercial disputes are arbitrable. Oral arbitration 87.5 83.3 70.6 (0 = min, 100 = max) agreements or those inferred by conduct are enforceable. Domestic and international arbitrations are equally Extent of judicial assistance index liberal. There are no explicit provisions for conï¬?dentiality of the proceedings in the Arbitration Act. The United 94.5 77.6 57.9 (0 = min, 100 = max) Kingdom has a variety of arbitration institutions administering domestic, international, and online disputes. The domestic courts are generally supportive of arbitration. An arbitration award can only be challenged on 3 grounds: lack of substantive jurisdiction, serious irregularity, and appeal on a point of law. Enforcement is also fairly straightforward: the court will normally enter a judgment or issue an order on the terms of the award. On average, it takes around 8 weeks to enforce an arbitration award rendered in the United Kingdom, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal), and 6 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 163 United States High-income OECD (12 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 31 are fully open to foreign equity Mining, oil and gas 100.0 100.0 92.0 ownership in the United States. The only exceptions are the domestic air transportation and TV broadcasting Agriculture and forestry 100.0 100.0 95.9 industries. According to the Federal Aviation Act of 1958, foreign investors can only hold a maximum of 25% of the shares of a company providing domestic air transportation services in the United States. Furthermore, the Light manufacturing 100.0 93.8 96.6 president and at least two-thirds of the board of directors and other managing ofï¬?cers of such a company must Telecommunications 100.0 89.9 88.0 be U.S. citizens. The aforementioned restrictions do not apply to the provision of international air transportation Electricity 100.0 88.0 87.6 services, which are fully open to foreign capital participation. The Communications Act of 1934 speciï¬?es that Banking 100.0 97.1 91.0 foreign ownership in the TV broadcasting sector is limited to a maximum of 25%. However, the FCC has the Insurance 100.0 100.0 91.2 discretion to allow higher levels of indirect foreign ownership (up to 100%) if consistent with the public inter- Transportation 85.0 69.2 78.5 est. Cable television providers are exempted from this restriction. Media 62.5 73.3 68.0 Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 Sector group 2 (health care, waste mgt.) 100.0 91.7 96.0 STARTING A FOREIGN BUSINESS Time The process of establishing a foreign-owned subsidiary in the United States (New York) takes a foreign inves- 11 21 42 (days) tor on average 11 days and requires 8 procedures, shorter than the IAB regional and global average. While Procedures it is possible to use New York state law governing limited liability companies (LLCs), the majority of foreign 8 9 10 (number) investors choose to set up their companies in Delaware due to this state’s simple corporate and case law. Ease of establishment index A foreign company wishing to set up a subsidiary in New York must obtain authorization to do business in 80.0 77.8 64.5 (0 = min, 100 = max) that state prior to operations. Although the regular establishment process is already fairly quick, the United States offers expedited processing of formation documents. For an additional, nonrefundable fee, the Division of Corporations will ensure that the documentation is processed within an even shorter time frame. Foreign investments must be reported to the U.S. Department of Commerce, Bureau of Economic Analysis, by ï¬?ling form BE 605. There is no paid-in capital requirement for setting up a foreign-owned subsidiary under New York LLC law. In addition, there are no applicable statutory provisions that would restrict the composition of the board of directors or appointment of managers based on nationality, ethnicity, race, or gender. ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to access land in the United States have the option to lease or buy land from both 100.0 92.2 82.1 (0 = min, 100 = max) private and public owners. It is not common for either domestic or foreign entities to buy government property, Strength of ownership rights index as the approval process is time-consuming. If several lessees are interested in leasing a particular parcel of pub- 100.0 100.0 92.2 (0 = min, 100 = max) licly held land, a “request for proposalâ€? process is conducted requiring all interested parties to compete for the Access to land information index land. In certain circumstances, it is possible to negotiate the lease or sale of publicly owned land without such 50.0 52.5 41.3 (0 = min, 100 = max) a process. A foreign-owned company would typically not be legally required to perform environmental or social Availability of land information index (0 = min, 100 = max) 95.0 84.2 70.6 impact assessments in order to lease land already zoned for industrial use. However, certain public agencies may impose this obligation in accordance with the Department of Environmental Conservation before conclud- Time to lease private land (days) 44 50 61 ing a lease. Lease contracts offer the lessee the right to sublease, mortgage, or subdivide the land. Subdivision Time to lease public land (days) 92 88 140 is subject to applicable zoning laws. ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration of disputes and enforcement of arbitral awards are governed by the 1925 Federal Arbitration Act 85.0 94.2 85.2 (0 = min, 100 = max) (FAA) and arbitration statutes enacted by the states. Many states have also adopted the Uniform Arbitration Ease of process index Act (1956). Federal arbitration law trumps state arbitration law where interstate transactions are involved. The 81.8 83.3 70.6 (0 = min, 100 = max) FAA does not address several issues expressly considered in the UNICTRAL Model Law, such as separability, Extent of judicial assistance index challenging arbitrators, provisional relief, and the like. The FAA states that an arbitral award may be vacated 75.3 77.6 57.9 (0 = min, 100 = max) where there is “evident partialityâ€? on the part of an arbitrator. Nonetheless, party-appointed arbitrators have historically been presumed (absent contrary agreement) to have a measure of partiality toward the party that appointed them, especially in domestic arbitrations. In addition, there may be more disclosure requirements for domestic, than for international arbitrations. The American Arbitration Association (AAA) and the International Center for Dispute Resolution administer online arbitrations, including disputes between suppliers and manu- facturers. Domestic courts are generally supportive of arbitration, and have adopted pro-arbitration policies. On average, it takes around 19 weeks to enforce an arbitration award rendered in the United States, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 18 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 164 INVESTING ACROSS BORDERS 2010 Venezuela, RB Latin America and the Caribbean (14 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Among the 14 countries in Latin America and the Caribbean covered by the Investing Across Sectors indicators, Mining, oil and gas 74.5 91.0 92.0 República Bolivariana de Venezuela’s restrictions on foreign equity ownership are relatively stringent. The Agriculture and forestry 100.0 96.4 95.9 National Constitution authorizes the government to reserve for itself those industries and services that are in the public interest and of a strategic nature. The most prominent example is the oil and gas sector, in which Light manufacturing 100.0 100.0 96.6 foreign capital participation is restricted by the Hydrocarbons Organic Law. Several service industry sectors are Telecommunications 100.0 94.5 88.0 closed to foreign ownership, including railway freight transportation, domestic air transportation, and airport Electricity 85.7 82.5 87.6 and port operation. Foreign capital participation in the media sector (television broadcasting and newspaper Banking 100.0 96.4 91.0 publishing) is limited to a maximum of 20%. In addition to these overt legal restrictions on foreign investment, Insurance 100.0 96.4 91.2 a comparatively large number of sectors is dominated by government monopolies, including, but not limited to, those mentioned above. Notable additional sectors dominated by publicly owned enterprises include the elec- Transportation 20.0 80.8 78.5 tricity and ï¬?xed-line telecommunications sectors. Those monopolies, together with a high perceived difï¬?culty of Media 20.0 73.1 68.0 obtaining required operating licenses, make it more difï¬?cult for foreign companies to invest. In addition the cur- Sector group 1 (constr., tourism, retail) 100.0 100.0 98.1 rent government has recently nationalized several foreign companies including hotels, banks and retail chains Sector group 2 (health care, waste mgt.) 100.0 96.4 96.0 further suggesting that República Bolivariana de Venezuela is less open to FDI than its laws suggest. STARTING A FOREIGN BUSINESS Time It takes 19 procedures and 179 days to establish a foreign-owned limited liability company (LLC) that wants 179 74 42 (days) to engage in international trade in República Bolivariana de Venezuela (Caracas). This process is slower than Procedures the averages in both Latin America and the Caribbean and the IAB countries globally. Companies in República 19 14 10 (number) Bolivariana de Venezuela must be incorporated with a minimum of 2 shareholders (although, once incorpo- Ease of establishment index rated, the law does not prohibit the shares being owned by 1 shareholder). República Bolivariana de Venezuela 42.5 62.8 64.5 (0 = min, 100 = max) has limitations on hiring foreign personnel: only 10% of a company’s staff can be foreign and payments to foreign workers cannot exceed 20% of total payroll, unless the Ministry of Labor authorizes a temporary exception. In addition to the procedures required of a domestic ï¬?rm, a foreign company establishing itself in República Bolivariana de Venezuela must authenticate the parent company’s documents in its country of origin. A foreign company does not need an investment approval. However, the investment must be registered with SIEX (Superintendencia de Inversiones Extranjeras) in order to be authorized to purchase foreign currency at the ofï¬?cial exchange rate and repatriate capital and dividends. A company can purchase foreign currency from the central bank at the ofï¬?cial exchange rate, if (i) it has registered with RUSAD (Registro de Usuarios del Sistema de Administración de Divisas), and (ii) it has received foreign-exchange approvals from the currency administra- tion CADIVI (Comisión de Administración de Divisas) for each transaction. The issuance of the approvals is sub- ject to the discretion of CADIVI and the availability of foreign currency. Companies in República Bolivariana de Venezuela cannot hold a bank account in foreign currency. There is no minimum capital requirement, although 20% of the subscribed capital must be paid in at registration. ACCESSING INDUSTRIAL LAND Strength of lease rights index In República Bolivariana de Venezuela, foreign companies have the option to lease or buy private land. It is 72.5 78.2 82.1 (0 = min, 100 = max) legally possible to lease or buy publicly held land, but this is not common, as several restrictions apply. There Strength of ownership rights index are no clearly deï¬?ned procedures for leasing public land. Procedures thus vary from municipality to municipality. 100.0 98.2 92.2 (0 = min, 100 = max) The proceedings may be lengthy and cumbersome, especially at the negotiation stage. Land may be leased for Access to land information index a maximum duration of 15 years. Leases for durations of less than 6 years need not be registered or notarized. 44.4 40.4 41.3 (0 = min, 100 = max) Lease contracts offer the lessee the right to transfer, subdivide, or sublease the land, subject to the terms of the Availability of land information index contract and local planning laws. There are restrictions on the amount of publicly held land that may be leased. 75.0 73.0 70.6 (0 = min, 100 = max) Land-related information can be found in the land registry and cadastre. The registry and cadastre are not yet Time to lease private land (days) 87 62 61 linked or coordinated to share data, but there are currently plans in place to do so. Time to lease public land (days) 138 156 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Venezuelan Commercial Arbitration Act of 1998 is based on the UNCITRAL Model Law, but applies to 89.1 87.5 85.2 (0 = min, 100 = max) both domestic and international arbitrations in República Bolivariana de Venezuela and distinguishes between Ease of process index arbitration at law and arbitration at equity. There is no speciï¬?c mediation law, but mediation is largely used for 57.1 66.8 70.6 (0 = min, 100 = max) the resolution of labor disputes. All commercial matters are arbitrable, except for disputes involving immovable Extent of judicial assistance index property in República Bolivariana de Venezuela. In addition, foreign companies cannot enter into arbitration 52.2 51.7 57.9 (0 = min, 100 = max) agreements with the state regarding disputes over natural resources. For other disputes involving public com- panies, previous consent is required from the Attorney General. In arbitrations at law, parties are required to choose lawyers who are licensed to practice locally as arbitrators and counsel. Tribunals must consist of an odd number of arbitrators. When a public entity or company is party to the arbitration, the tribunal must be com- posed of at least 3 arbitrators. Two recent decisions by the Constitutional Chamber of the Venezuelan Supreme Court have reinforced and expanded the pro-arbitration policy of courts in commercial arbitrations, expressly provided in Article 258 of the Venezuelan Constitution. On average, it takes around 43 weeks to enforce an arbitration award rendered in República Bolivariana de Venezuela, from ï¬?ling an application to a writ of execu- tion attaching assets (assuming there is no appeal). It also takes roughly 43 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 165 Vietnam East Asia and the Paciï¬?c (10 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 18 are fully open to foreign equity owner- Mining, oil and gas 50.0 75.7 92.0 ship in Vietnam, including manufacturing industries. Overt statutory ownership restrictions exist primarily in Agriculture and forestry 100.0 82.9 95.9 strategic services sectors, such as telecommunications (ï¬?xed-line and wireless/mobile), electricity transmission and distribution, and select transportation sectors. In accordance with Vietnam’s WTO commitment, the govern- Light manufacturing 75.0 86.8 96.6 ment decree 121/2008/ND-CP imposes a limit of 49% on foreign capital participation in companies providing Telecommunications 50.0 64.9 88.0 telecommunications infrastructure. The respective limit for foreign ownership in the telecommunications Electricity 71.4 75.8 87.6 service providers is 51%. The electricity transmission and distribution sectors operate under direct government Banking 65.0 76.1 91.0 control and are closed to foreign companies. Foreign capital participation in the domestic and international air Insurance 100.0 80.9 91.2 transportation industries is limited to a maximum share of 49%. Under the Law on Press, private investment Transportation 69.4 63.7 78.5 (domestic or foreign) in the media sectors, including television broadcasting and newspaper publishing, is Media 0.0 36.1 68.0 prohibited. Sector group 1 (constr., tourism, retail) 100.0 91.6 98.1 Sector group 2 (health care, waste mgt.) 75.5 84.1 96.0 STARTING A FOREIGN BUSINESS Time It takes 12 procedures and 94 days to establish a foreign-owned limited liability company (LLC) in Ho Chi Minh 94 68 42 (days) City, Vietnam. This is slower than both the average for IAB countries in East Asia and the Paciï¬?c and the IAB Procedures global average. In addition to the procedures required of domestic companies, a foreign company must trans- 12 11 10 (number) late the documents of the parent company into Vietnamese, have a licensing authority or a notary public certify Ease of establishment index them as a “true copyâ€? in its country of origin, and legalize said documents with the embassy or consulate of 57.9 57.4 64.5 (0 = min, 100 = max) the country of origin in Vietnam and with the Vietnamese Department of Foreign Affairs. In addition, the foreign company must apply for foreign investment approval from the Department of Planning and Investment (DPI) in the form of an investment certiï¬?cate. The certiï¬?cate takes on average 57 days to obtain and is in lieu of the business registration certiï¬?cate required of domestic LLCs. The application is available online and should include a speciï¬?c business project, including a feasibility study and an environmental assessment. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum capital requirement for foreign or domestic companies in Vietnam. ACCESSING INDUSTRIAL LAND Strength of lease rights index In Vietnam, the land is owned by the state and cannot be bought. The most common way to acquire land is 77.3 84.9 82.1 (0 = min, 100 = max) to lease publicly held land. A foreign company may only lease private land from the developer of an industrial Strength of ownership rights index zone. The process of leasing land from the state involves obtaining clearance from the state and negotiating n/a 83.3 92.2 (0 = min, 100 = max) with the holder of the land to relinquish it to the state. The state can then lease the land to the foreign Access to land information index company. This process can take a few months or several years to complete. Land may be leased for a maximum 57.9 35.1 41.3 (0 = min, 100 = max) duration of between 50 and 70 years. Lease contracts offer the lessee the right to subdivide, sublease, or mort- Availability of land information index (0 = min, 100 = max) 92.5 67.5 70.6 gage the leased land, subject to the terms of the contract and approval from the relevant government authority. Land-related information can be found in the registry and cadastre. Time to lease private land (days) 120 66 61 Time to lease public land (days) 133 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index Arbitration in Vietnam is governed by the Ordinance on Commercial Arbitration (2002). Decree No. 25 (2004) 84.9 83.8 85.2 (0 = min, 100 = max) and Resolution No. 05 (2003) provide guidelines on implementing certain provisions of the ordinance. These Ease of process index guidelines have contradictory provisions, which make the arbitration regime less efï¬?cient. All commercial mat- 61.8 66.1 70.6 (0 = min, 100 = max) ters can be resolved by arbitration, providing that the respective parties are registered business entities. There Extent of judicial assistance index are restrictions on parties’ autonomy to select an arbitrator. The law stipulates, for example, that the arbitrator 57.2 46.6 57.9 (0 = min, 100 = max) must be a Vietnamese citizen and have at least 5 years of experience in his or her ï¬?eld. There are several arbi- tral institutions in Vietnam. The number of arbitrations undertaken in Vietnam, however, is still relatively small. Vietnam’s inefï¬?cient arbitration regime makes arbitration a less popular option. For example, awards rendered by Vietnamese arbitrators have only been enforceable since 2003. There are also numerous grounds for setting aside an arbitral award. Courts do not enforce arbitration awards, but the provincial enforcement authority, which is administered by the Ministry of Justice, does. Foreign awards are enforced in court, and this is an easier process because Vietnam is a signatory to the 1958 New York Convention. On average, it takes around 13 weeks to enforce an arbitration award rendered in Vietnam, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 17 weeks to enforce a foreign award. For more information on this country, please go to http://www.investingacrossborders.org 166 INVESTING ACROSS BORDERS 2010 Yemen, Rep. Middle East and North Africa (87 COUNTRIES) IAB REGIONAL (5 COUNTRIES) IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Of the 33 sectors covered by the Investing Across Sectors indicators, 26 are fully open to foreign equity owner- Mining, oil and gas 100.0 78.8 92.0 ship in the Republic of Yemen, including manufacturing and primary industries. The country imposes ownership Agriculture and forestry 100.0 100.0 95.9 restrictions in a number of service sectors. Foreign ownership in electricity transmission and wind power, for example, is limited to a maximum of 49%. Furthermore, the ï¬?xed-line telecommunications (infrastructure and Light manufacturing 100.0 95.0 96.6 services), electricity distribution, and airport and port operation sectors are closed to foreign capital participa- Telecommunications 50.0 84.0 88.0 tion. In addition, a number of sectors are dominated by government monopolies, including, but not limited to, Electricity 71.1 68.5 87.6 those mentioned above. Those monopolies represent an additional obstacle for foreign companies wishing to Banking 100.0 82.0 91.0 enter the market. Insurance 100.0 92.0 91.2 Transportation 60.0 63.2 78.5 Media 100.0 70.0 68.0 Sector group 1 (constr., tourism, retail) 100.0 94.9 98.1 Sector group 2 (health care, waste mgt.) 100.0 90.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 29 days to establish a foreign-owned limited liability company (LLC) in Sana’a, the 29 19 42 (days) Republic of Yemen. This is slower than the IAB regional average for the Middle East and North Africa but faster Procedures than the IAB global average. An LLC in the Republic of Yemen needs at least 2 shareholders. In addition to the 9 9 10 (number) procedures required of a domestic enterprise, a foreign company establishing a subsidiary must authenticate Ease of establishment index the documents of the parent company abroad. It must also acquire an investment approval from the General 68.4 58.6 64.5 (0 = min, 100 = max) Investment Authority (GIA) before starting its establishment process. This approval usually takes 15 days to ob- tain. If the investment approval is not granted, foreign investors may appeal the decision by applying in writing either to the GIA or its president within 30 days of notiï¬?cation of the decision. The foreign company must also deposit the share of required capital in a recognized local bank, which takes only 1 day. Samples of registration documents are available online. Any company in the Republic of Yemen may freely open and maintain bank accounts in foreign currency. At incorporation, shareholders’ subscription to capital must be no less than 20%, according to the Investment Act of the Republic of Yemen (2002). ACCESSING INDUSTRIAL LAND Strength of lease rights index Foreign companies seeking to acquire land in the Republic of Yemen have the option to lease or buy privately 69.2 78.3 82.1 (0 = min, 100 = max) or publicly held land. The most common option for foreign companies seeking to acquire land is to lease or Strength of ownership rights index buy private land. Leasing or buying publicly held land requires approval from the General Investment Authority. 62.5 68.8 92.2 (0 = min, 100 = max) There is no maximum duration for the lease of either private or publicly held land. Lease contracts offer the les- Access to land information index see the right to transfer, subdivide, sublease, or mortgage the leased land, subject to the terms of the contract 57.9 46.4 41.3 (0 = min, 100 = max) and approval from the relevant authorities. There are no restrictions on the amount of land that may be leased, Availability of land information index (0 = min, 100 = max) 85.0 66.0 70.6 but land is scarce and therefore it is difï¬?cult to acquire large parcels. Most land-related information can be found in the survey and land registration authority. There is no land information system (LIS) or geographic Time to lease private land (days) 53 59 61 information system (GIS) in place that centralizes relevant information. Time to lease public land (days) 52 123 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Yemeni Law of Arbitration No. 22 of 1992 is based largely on the UNCITRAL Model Law, but offers more 74.9 82.0 85.2 (0 = min, 100 = max) comprehensive provisions dealing with ï¬?xed time limits to appoint arbitrators, conflicts of law and the choice Ease of process index of substantive laws, and the issuance of arbitration awards. All commercial disputes are arbitrable, including 81.4 65.5 70.6 (0 = min, 100 = max) those involving public entities. Parties in private arbitrations may appoint foreign counsel to represent them. Extent of judicial assistance index Parties may select arbitrators of any nationality, gender, or professional qualiï¬?cations. Active judges can also act 44.0 48.7 57.9 (0 = min, 100 = max) as arbitrators, except in cases pending before their court and cases that have been referred to them by another judge. Arbitrators are required by law to be independent and impartial and to preserve the conï¬?dentiality of the proceedings. There is 1 main arbitral institution, the Yemen Center for Conciliation and Arbitration (YCCA), which is associated with the Arabic Conciliation and Arbitration Institution in Cairo and the Arab Countries Council. On request of one of the parties, the arbitral tribunal may order the other party to make any provision- al or conservatory measure it deems necessary. Articles 43, 24, 22, and 18 of the Arbitration Law require courts to assist arbitral tribunals with the taking of evidence and orders of provisional measures. On average, it takes around 43 weeks to enforce an arbitration award rendered in the Republic of Yemen, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 41 weeks to enforce a foreign award. The Republic of Yemen has not ratiï¬?ed the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. For more information on this country, please go to http://www.investingacrossborders.org PROFILES OF ECONOMIES 167 Zambia Sub-Saharan Africa (21 COUNTRIES) (87 COUNTRIES) IAB REGIONAL IAB GLOBAL COUNTRY AVERAGE AVERAGE SCORE INDICATORS HIGHLIGHTS INVESTING ACROSS SECTORS Foreign equity ownership indexes (100 = full foreign ownership allowed) Zambia is one of the most open countries to foreign equity ownership, as measured by the Investing Across Mining, oil and gas 100.0 95.2 92.0 Sectors indicators. All of the 33 sectors covered by the indicators are fully open to foreign equity ownership. Agriculture and forestry 100.0 97.6 95.9 Monopolistic market structures characterize the electricity transmission and distribution sectors, though, repre- senting a potential obstacle to foreign investors. Light manufacturing 100.0 98.6 96.6 Telecommunications 100.0 84.1 88.0 Electricity 100.0 90.5 87.6 Banking 100.0 84.7 91.0 Insurance 100.0 87.3 91.2 Transportation 100.0 86.6 78.5 Media 100.0 69.9 68.0 Sector group 1 (constr., tourism, retail) 100.0 97.6 98.1 Sector group 2 (health care, waste mgt.) 100.0 100.0 96.0 STARTING A FOREIGN BUSINESS Time It takes 9 procedures and 58 days to establish a foreign-owned limited liability company (LLC) in Lusaka, 58 48 42 (days) Zambia. The process is less complex than the IAB regional and global averages, but takes longer to complete. Procedures In addition to the procedures required of a domestic company, a foreign company establishing a subsidiary in 9 10 10 (number) Zambia must authenticate its documents abroad. A foreign company must also obtain a trade license if it plans Ease of establishment index to engage in international trade. This license takes 38 days to obtain. A foreign company is not required to 47.4 51.5 64.5 (0 = min, 100 = max) obtain an investment license from the Zambia Development Agency (ZDA), unless it wants to beneï¬?t from as- sociated tax exemptions and incentives and to acquire land. Documentation related to the registration process is available online, but must be submitted in person to the Patents and Companies Registration Ofï¬?ce (PACRO). Foreign companies are free to open and maintain foreign currency bank accounts. The minimum paid-in capital requirement is different for foreign and domestic companies: a private foreign-owned company is subject to ZMK 5,000,000 (~$1,000), while a domestic company is subject to ZMK 50,000 (~$10). Note that if the foreign-owned company is a public one, the paid-in capital requirement is ZMK 50,000,000 (~$10,000). ACCESSING INDUSTRIAL LAND Strength of lease rights index In Zambia, all land is vested in the state, with the president as trustee. Land is usually acquired from the state 71.4 76.6 82.1 (0 = min, 100 = max) on a leasehold basis for up to 99 years, on condition that it is developed. Foreign companies seeking to acquire Strength of ownership rights index land may lease publicly held land or land that has already been acquired by private parties from the state. In n/a 77.3 92.2 (0 = min, 100 = max) order for a foreign company that has no local shareholders to acquire land, it must be registered as an investor Access to land information index with the Zambia Development Agency. Leasing publicly held land requires approval from the relevant public 37.5 33.9 41.3 (0 = min, 100 = max) authority. It is unclear how long the process of leasing public land takes. Generally, it may take a few weeks to Availability of land information index (0 = min, 100 = max) 75.0 58.5 70.6 several months. Lease contracts offer the lessee the right to subdivide, sublease, or mortgage the leased land, subject to the terms of the contract. Subdivision of the lease requires approval from the local planning authori- Time to lease private land (days) 104 72 61 ties. Land-related information can be found in the land deeds registry. Time to lease public land (days) 122 151 140 ARBITRATING COMMERCIAL DISPUTES Strength of laws index The Zambia Arbitration Act No. 19 of 2000 applies to both domestic and international arbitrations, and is based 97.4 82.4 85.2 (0 = min, 100 = max) on the UNCITRAL Model Law. Arbitration agreements must be in writing. Parties may appoint an arbitrator of Ease of process index any nationality, gender, or professional qualiï¬?cations. The act does not specify that arbitrators must be indepen- 65.7 73.8 70.6 (0 = min, 100 = max) dent and impartial, nor are there express provisions for arbitrators to keep arbitration proceedings conï¬?dential. Extent of judicial assistance index Foreign lawyers cannot be used to represent parties in domestic or international arbitrations taking place in 77.3 55.9 57.9 (0 = min, 100 = max) Zambia. There are no facilities that provide online arbitration in Zambia, although there is an arbitral institution, the Zambia Institute of Arbitrators. Arbitration awards are enforced in the High Court of Zambia, and judgments of that court enforcing or denying enforcement of an award can be appealed to the Supreme Court. However, arbitration awards cannot be reviewed on the merits of the case. On average, it takes around 14 weeks to en- force an arbitration award rendered in Zambia, from ï¬?ling an application to a writ of execution attaching assets (assuming there is no appeal). It takes slightly longer to enforce a foreign award, around 18 weeks. Contracts involving state entities commonly rely upon arbitration as a dispute resolution tool. For more information on this country, please go to http://www.investingacrossborders.org 168 INVESTING ACROSS BORDERS 2010 Acknowledgments Investing Across Borders 2010 was prepared by a team comprising International Trade Law), Theodore Moran (Georgetown University), Tania Ghossein, Kusi Hornberger, Harald Jedlicka, Márton Kerkápoly, Hanri Mostert (Faculty of Law, University of Cape Town), Mark Napier Antonia Menezes, Nina Mocheva, Ife Osaga, Tanya Primiani, and (Urban LandMark Trust), Anthony O’Sullivan (Organisation for Economic Swarnim Wagle. The team was led by Peter Kusek under the general Co-operation and Development), Steve Pollard (Asian Development direction of Michael Klein (through May 2009), Janamitra Devan (from Bank), Joseph Profaizer (Paul, Hastings, Janofsky & Walker LLP), October 2009), Pierre Guislain, Cecilia Sager, and Robert Whyte. Borzu Sabahi (Georgetown University), Jolyne Sanjak (Millennium Joseph Battat and Penelope Brook advised the project. Challenge Corporation), Renaud Sorieul (United Nations Commission on International Trade Law), Stephen Thompson (Organisation for The project was made possible by the ï¬?nancial support of the Federal Economic Co-operation and Development), Don Wallace (International Ministry of Finance of Austria through its contribution to the FIAS trust Law Institute), Louis Wells (Harvard Business School), Jason Yackee fund supporting the activities of the World Bank Group’s Investment (University of Wisconsin Law School) and others. Climate Advisory Services. The team would also like to thank our many colleagues at the World Bank The International Bar Association was IAB’s main partner for collecting Group—including the World Bank, International Finance Corporation, data in many high-income OECD economies. The team is grateful to Multilateral Investment Guarantee Agency, and International Centre Mark Ellis and his associates Erin Callahan and Annie Dunster for this for Settlement of Investment Disputes—who have contributed to IAB, collaboration. The American Bar Association (ABA) and the World including Svetlana Bagaudinova, Karim Belayachi, Keith Bell, Ingo Services Group (WSG) also contributed to the project. The team thanks Borchert, Lada Busevac, Frederic Bustelo, Sarah Cuttaree, Klaus Melida Hodgson (ABA), Daniel Marín Moreno (ABA), and Steven Deininger, Stephan Dreyhaupt, Jocelyn Dytang, Penelope Fidas, McKinney (WSG) for managing these partnerships. Gonzalo Flores, Xavier Forneris, Carolin Geginat, Batshur (Shuree) The team is also grateful to the following individuals for feedback and Gootiiz, Lars Grava, Neil Gregory, Zenaida Hernandez Uriz, Sabine guidance at various stages of IAB’s development: Aykhan Asadov Hertveldt, Melissa Johns, Palarp Jumpasut, Dahlia Khalifa, Oliver (Baker & McKenzie), Frédéric Bachand (McGill University), Markham Lorenz, Thomas Mahaffey, Jana Malinska, Aaditya Mattoo, Ivan Ball (University of Pennsylvania Law School), Yas Banifatemi (Shearman Nimac, Dana Omran, Ucheora Onwuamaegbu, Vincent Palmade, & Sterling LLP), Kim Bettcher (Center for International Private Enterprise), Srilal Perera, Paul Scott Prettitore, Rita Ramalho, Yara Salem, Francoise Sveinbjorn Blondal (Organisation for Economic Co-operation and Schorosch, Xiaofang Shen, Sylvia Solf, Patricia Sulser. We are also Development), Tony Burns (Land Equity International), Stephen Butler grateful for the guidance of the World Bank Group’s Executive Directors (University of Chicago), Jonathan Conning (City University of New York), and their staff. Paul de Wit (Food and Agriculture Organization), Timothy Dickinson The team is indebted to Georgetown University Law Center, in (Paul, Hastings, Janofsky & Walker LLP), Sean Dougherty (Organisation particular Molly Jackson and Dorothy Mayer for organizing an for Economic Co-operation and Development), Stig Enemark (Aalborg externship program for LL.M. students to conduct legal research and University), Ivan Ford (University of New Brunswick), Bill Seabrooke analysis for IAB. Students in the program included Assel Aldabergen, Frics (Cambridge University), Jason Fry (International Chamber of Dominic Boucsein, Idil Cagal, Matthieu Gregoire, Akvile Gropper, Eun Commerce’s International Court of Arbitration), Emmanuel Gaillard Sang Hwang, Steven Kolias, Anna Kouyate, Aleksandra Krzeminska, (Shearman & Sterling LLP), Rainer Geiger (Organisation for Economic Po Ching (Cristine) Lam, Erland Leonhardsen, Benjamin Mackinnon, Co-operation and Development), Stephen Golub (Swarthmore Mahwush Malik, Laura Medina, Chigozie Odediran, Galav Sharma, College), Yu-Hung Hong (Massachusetts Institute of Technology), Mohamed Sidiki Sylla, Giorgos Soumalevris, Yihong Wang, and Lakshmi Iyer (Harvard University Business School), Emmanuel Jolivet Sylvia Wibabara. (International Chamber of Commerce’s International Court of Arbitration), Mark Kantor (independent arbitrator), Susan Karamanian The online IAB database is managed by Preeti Endlaw, Graeme (George Washington University Law School), Stuart Kerr (Millennium Littler, and Kunal Patel. The report’s media and dissemination plan Challenge Corporation), Annamaria Kokeny (International Monetary was managed by Nadine Ghannam. All knowledge management Fund), Gerald Korngold (New York University Law School), Ian Laird and outreach activities are under the general direction of Suzanne (Crowell & Moring LLP), Lahra Liberti (Organisation for Economic Smith. Grace Morsberger edited the main text of the report. Paul Holtz Co-operation and Development), Patrick McAuslan (Birkbeck University edited the Introduction and Overview. Doriana Basamakova and of London), Anne Miroux (United Nations Conference on Trade and Yulia Felender edited IAB’s Web site. Corporate Visions designed the Development), Haï¬?z Mirza (United Nations Conference on Trade and report. Development), Corinne Montineri (United Nations Commission on ACKNOWLEDGMENTS 169 This page intentionally left blank. 170 INVESTING ACROSS BORDERS 2010 Project contributors Global and regional contributors and coordinating partners: This report was made possible by the generous participation of more than 2,350 lawyers, accountants, law professors, ALLEN & OVERY INTERNATIONAL BAR ASSOCIATION (IBA) and public ofï¬?cials in 87 economies. Global and regional Mark Ellis, Annie Dunster, Erin ALLENS ARTHUR ROBINSON Callahan contributors are ï¬?rms that have completed multiple surveys in AMERICAN BAR ASSOCIATION (ABA) KPMG their ofï¬?ces around the world. Mélida Hodgson, Daniel Marín Moreno PRICEWATERHOUSECOOPERS (PWC) The names of those contributors wishing to be acknowledged BAKER & MCKENZIE SCHÖNHERR individually are listed below. The list also includes individuals CLIFFORD CHANCE TALAL ABU-GHAZALEH LEGAL (TAG-LEGAL) who contributed to the project during its pilots in 2008. Christine Bou Khater, Yazan Quandour DELOITTE WHITE & CASE DLA PIPER Contact details and up-to-date list of contributors are posted WOLF THEISS ERNST & YOUNG on the IAB Web site at WORLD SERVICES GROUP HERBERT SMITH http://www.investingacrossborders.org. Steven McKinney Country-speciï¬?c contributors: AFGHANISTAN Jordan Daci Enkelejd Seitllari Marcela Anchava Hector Mairal DACI LAW FIRM KALO & ASSOCIATES CÃ?RDENAS, DI CIÓ, ROMERO, MARVAL, O’FARRELL & MAIRAL Naseem Akbar TARSITANO & LUCERO AFGHANISTAN INVESTMENT SUPPORT Eniana Dupi Isuf Shehu Marina Martí AGENCY (AISA) AECO CONSULTING 2WIN PARTNERS AND ASSOCIATES Ignacio Aramburu MARVAL, O’FARRELL & MAIRAL SHPK RATTAGAN, MACCHIAVELO, AROCENA Hushang Haï¬?zi Sokol Elmazaj Pedro Mazer & PEÑA ROBIROSA SOLE PRACTITIONER BOGA & ASSOCIATES (LAW FIRM) Elda Shuraja ALFARO ABOGADOS HOXHA, MEMI & HOXHA (HM&H) Luis Arana Tagle M. Wisal Khan Gjergji Gjika Carlos Melham NEGRI & TEIJEIRO ABOGADOS S.C. MANDVIWALLA & ZAFAR ADVOCATES DRAKOPOULOS LAW FIRM Sabina Shytaj ALLENDE & BREA AND LEGAL CONSULTANTS BUSINESS CONCERN, FISCAL AND Jorge Bacher Shpati Hoxha Cristian H. Miguens FINANCIAL CONSULTANT PRICEWATERHOUSECOOPERS Stephan Lombardo HOXHA, MEMI & HOXHA (HM&H) PROSPERAR - ARGENTINA´S EMERGING MARKETS GROUP Olti Skrame Ricardo Barreiro Deymonnaz INVESTMENT DEVELOPMENT AGENCY (USAID/LTERA IMPLEMENTING Oltjan Hoxholli KALO & ASSOCIATES RATTAGAN, MACCHIAVELO, AROCENA CONTRACTOR) KALO & ASSOCIATES Rafael Monsegur & PEÑA ROBIROSA Oltion Spiro CÃ?RDENAS, DI CIÓ, ROMERO, Mariam Atash Nawabi Naim Isuï¬? LOLOCI & ASSOCIATES Damian F Beccar Varela TARSITANO & LUCERO AMDI, INC. ISUFI LAW ESTUDIO BECCAR VARELA Denata Stoja Mariana Morelli Thomas Rosenstock Evis Jani DRAKOPOULOS LAW FIRM Jorge Colla ALFARO ABOGADOS LAWYER (USA/AFGHANISTAN) DRAKOPOULOS LAW FIRM ERNST & YOUNG WOLF THEISS SH.P.K. Gotardo Pedemonte Said Mubin Shah Taulant Jorgji José Carlos Cueva HOPE, DUGGAN & SILVA AFGHANISTAN INVESTMENT SUPPORT IKRP ROKAS & PARTNERS ALBANIA ESTUDIO BECCAR VARELA AGENCY (AISA) ANGOLA Julio César Rivera Dorian Kashuri Teodoro Almeida Pedro Luis de la Fuente JULIO CESAR RIVERA ABOGADOS SRL Michael Sinclair KALO & ASSOCIATES RGT ADVOGADOS RATTAGAN, MACCHIAVELO, AROCENA USAID/LTERA Damián Rodríguez Peluffo Fatos Lazimi & PEÑA ROBIROSA Manuela Cunha NEGRI & TEIJEIRO ABOGADOS S.C. KALO & ASSOCIATES MMMC, ADVOGADOS Juan De Luca ALBANIA Juan Carlos Sanguinetti Georgios Lemonis RATTAGAN, MACCHIAVELO, AROCENA NEGRI & TEIJEIRO ABOGADOS S.C. Erjola Aliaj IKRP ROKAS & PARTNERS ALBANIA N’Zinga Jasse & PEÑA ROBIROSA IKRP ROKAS & PARTNERS ALBANIA AG&LP - ADELAIDE GODINHO E LUÃ?S María Lorena Schiariti Ekflodia Leskaj PIZARRO, ESCRITÓRIO DE ADVOGADOS Santiago Deane MARVAL, O’FARRELL & MAIRAL Alban Bala DRAKOPOULOS LAW FIRM HOPE, DUGGAN & SILVA COMPORT SHPK Rui Passos Luis Secco Brunilda Lilo MMMC, ADVOGADOS Agustín Estévez de la Fuente DELOITTE Vera Batalli LOLOCI & ASSOCIATES NEGRI & TEIJEIRO ABOGADOS S.C. LOLOCI & ASSOCIATES Luís Pizarro Fernando Sedano Krenar Loloci AG&LP - ADELAIDE GODINHO E LUÃ?S Gonzalo García Delatour PROSPERAR - ARGENTINA´S Alban Bello LOLOCI & ASSOCIATES PIZARRO, ESCRITÓRIO DE ADVOGADOS ESTUDIO BECCAR VARELA INVESTMENT DEVELOPMENT AGENCY IKRP ROKAS & PARTNERS ALBANIA Arkadiusz Mierzejewski Gustavo Garrido Maria Augusta Rodrigues Ricardo V. Seeber Jonida Beqiri KPMG ALBANIA SH.P.K. MMMC, ADVOGADOS ESTUDIO GARRIDO ABOGADOS ESTUDIO BECCAR VARELA DRAKOPOULOS LAW FIRM Ejvis Ndoni Luciana Giudice Hernán Verly Jona Bica RAIFFEISEN BANK SH.A. ARGENTINA RATTAGAN, MACCHIAVELO, AROCENA ALFARO ABOGADOS KALO & ASSOCIATES & PEÑA ROBIROSA Anisa Rrumbullaku Oscar Aguilar Valdez Emilio Nicolás Vogelius Jonida Cepani KALO & ASSOCIATES ESTUDIO BECCAR VARELA Lucas Granillo Ocampo ESTUDIO BECCAR VARELA SCHÖNHERR RECHTSANWÄLTE GMBH ESTUDIO GARRIDO ABOGADOS Alban Ruli Carlos Enrique Alfaro DRAKOPOULOS LAW FIRM ALFARO ABOGADOS CONTRIBUTORS 171 ARMENIA Florian Haugeneder Natavan Baghirova Adeeb Khan Anna Rusetskaya WOLF THEISS ATTORNEYS-AT-LAW BM INTERBATIONAL LLC LAW FIRM RAHMAN RAHMAN HUQ (A MEMBER MAGISTERS LAW FIRM Lianna Abelyan FIRM OF KPMG INTERNATIONAL) ARMENIAN DEVELOPMENT AGENCY Christian Herbst Alum Bati Maksim Salahub SCHÖNHERR RECHTSANWÄLTE GMBH WICKLOW COPORATE SERVICES Mohammad Lutfullah SORAINEN (MINSK OFFICE) Karen Andreasyan BOARD OF INVESTMENT DEFENSE LLC, LAW FIRM Günther Horvath Zaur Fati-zadeh Victar Sazonau FRESHFIELDS BRUCKHAUS DERINGER LLP MINISTRY OF TAXES Harun Mahmoud LAW COMPANY RYBAKOV AND Sedrak Asatryan M.J. ABEDIN & CO., CHARTERED SAZONOV LTD. CONCERN-DIALOG LAW FIRM Richard Jerabek Farhad Hacizade ACCOUNTANTS PRICEWATERHOUSECOOPERS AUSTRIA GRATA LAW FIRM Cyril Shoda Hermine Aslanyan Parimal Nakti MAGISTERS LAW FIRM ARMENIAN DEVELOPMENT AGENCY Annette Köll Javid Hajiyev RAHMAN RAHMAN HUQ (A MEMBER BINDER GROESSWANG FINA LLP LAW FIRM Roman Shpakovskiy Ara Balian FIRM OF KPMG INTERNATIONAL) RECHTSANWÄLTE OG BRAGINETS & PARTNERS LAW FIRM PARADIGMA ARMENIA CJSC Delara Israï¬?lova Shakur Nasir Rainer Kornfeld BM INTERBATIONAL LLC LAW FIRM Viktar Strachuk Vahe Ghavalyan UNICONSULT INTERNATIONAL LTD. SCHMIDT/KORNFELD/WUKOSCHITZ/ DELOITTE & TOUCHE FE PARADIGMA ARMENIA CJSC Vagif Karimli WINDHAGER Ataur Rahman BAKER & MCKENZIE - CIS, LIMITED Dennis Turovets Sargis Grigoryan INTERNATIONAL CHAMBER OF Michael Kutschera MAGISTERS LAW FIRM GRIGORYAN & PARTNERS LAW FIRM Gunduz Karimov COMMERCE - BANGLADESH BINDER GROESSWANG (GPARTNERS) BAKER & MCKENZIE - CIS, LIMITED Ann Valchok RECHTSANWÄLTE OG Saï¬?ur Rahman SORAINEN (MINSK OFFICE) Davit Harutyunyan Javanshir Mammadov UNICONSULT INTERNATIONAL LTD. Ulrike Langwallner PRICEWATERHOUSECOOPERS CENTRAL GRATA LAW FIRM Igor Verkhovodko SCHÖNHERR RECHTSANWÄLTE GMBH Golam Rasul ASIA & CAUCASUS B.V. ARMENIAN BUSINESSCONSULT Aliya Movsumova AF KABIR & ASSOCIATES BRANCH Michael Lind BAKER & MCKENZIE - CIS, LIMITED Vasiliy Volozhinets BINDER GROESSWANG Farzana Shila Davit Hunanyan VLASOVA MIKHEL & PARTNERS LAW RECHTSANWÄLTE OG Natig Mustafayev AF KABIR & ASSOCIATES DEFENSE LLC, LAW FIRM FIRM INTERJURSERVICE LTD LAW FIRM Lukas Ludwiger Syed Afzal Hasan Uddin Gohar Karyan Igor Yatskovsky BINDER GROESSWANG Nariman Ramazanov SYED ISHTIAQ AHMED & ASSOCIATES ARAX CONSULTING GROUP, LLC MAGISTERS LAW FIRM RECHTSANWÄLTE OG FINA LLP LAW FIRM Tigran Khachatryan Victoria Yurasova Christian Marth Mahmud Yusifli BELARUS ARMENIAN DEVELOPMENT AGENCY MAGISTERS LAW FIRM DORDA BRUGGER JORDIS BAKER & MCKENZIE - CIS, LIMITED Kiryl Apanasevich Nerses Nersisyan RECHTSANWÄLTE GMBH SORAINEN (MINSK OFFICE) Evgenia Zakharyants PRICEWATERHOUSECOOPERS CENTRAL Ibrahim Zeynalov VASHKEVICH, SAPEGO & KHRAPOUTSKY Bernhard Müller INTERJURSERVICE LTD LAW FIRM ASIA & CAUCASUS B.V. ARMENIAN Kira Bondareva DORDA BRUGGER JORDIS VLASOVA MIKHEL & PARTNERS LAW Alexander Zheshko BRANCH RECHTSANWÄLTE GMBH FIRM MAGISTERS LAW FIRM Martun Panosyan BANGLADESH Hannes Pachler Andrei Zhuk CONCERN-DIALOG LAW FIRM M.J. Abedin Irina Butko BINDER GROESSWANG MAGISTERS LAW FIRM KPMG M.J. ABEDIN & CO., CHARTERED Vahe Petrosyan RECHTSANWÄLTE OG ACCOUNTANTS LOGICON DEVELOPMENT LLC Alexander Buzo Maria Th. Pfluegl MAGISTERS LAW FIRM BOLIVIA Shah Md. Abu Raihan Alberuni Gagik Poghossian FRESHFIELDS BRUCKHAUS DERINGER LLP MINISTRY OF LAND Ignacio Aguirre ASSOCIATION FOR FOREIGN Maxim Chernyak Markus Pinggera BUFETE AGUIRRE SOC. CIV. INVESTMENT AND COOPERATION Manzoor Alam LEGAL GROUP “VERDICT BYâ€? LTD. BINDER GROESSWANG (AFIC) HODA VASI CHOWDHURY & CO - Fernando Aguirre RECHTSANWÄLTE OG Sergey Chistyakov CHARTERED ACCOUNTANTS BUFETE AGUIRRE SOC. CIV. VASHKEVICH, SAPEGO & KHRAPOUTSKY Nikolaus Pitkowitz AUSTRIA Sharif Bhuiyan Christian Amestegui Villafani GRAF & PITKOWITZ RECHTSANWÄLTE Aliaksandr Danilevich Stefan Artner DR. KAMAL HOSSAIN & ASSOCIATES ASESORES LEGALES CP GMBH DANILEVICH DORDA BRUGGER JORDIS Zubi Bin Moosa Miguel Apt RECHTSANWÄLTE GMBH Michael Podesser Tatiana Emelianova DR. KAMAL HOSSAIN & ASSOCIATES ESTUDIO JURIDICO APT (APT LAW FIRM) PRICEWATERHOUSECOOPERS AUSTRIA VLASOVA MIKHEL & PARTNERS LAW Anton Baier Abul Khair Chowdhury FIRM Adrián Barrenechea BAIER BÖHM RECHTSANWÄLTE Michael Riegler HODA VASI CHOWDHURY & CO - CRIALES, URCULLO & ANTEZANA DORDA BRUGGER JORDIS Andrei Ermolenko Johannes Barbist CHARTERED ACCOUNTANTS RECHTSANWÄLTE GMBH VLASOVA MIKHEL & PARTNERS LAW Manuela Bustillos BINDER GROESSWANG Badrud Doulah FIRM RIGOBERTO PAREDED & ASOCIADOS RECHTSANWÄLTE OG Lorena Skiljan DOULAH & DOULAH WOLF THEISS ATTORNEYS-AT-LAW Elena Kagarlitskaya Gabriela Colomo Costas Eva Baumgartner Nasirud Doulah MAGISTERS LAW FIRM RIGOBERTO PAREDED & ASOCIADOS SCHÖNHERR RECHTSANWÄLTE GMBH Dieter Spranz DOULAH & DOULAH WOLF THEISS ATTORNEYS-AT-LAW Marina Khliaba José Criales Marcus Benes Shamsud Doulah DELOITTE & TOUCHE FE CRIALES, URCULLO & ANTEZANA WOLF THEISS ATTORNEYS-AT-LAW Melanie Tischlinger DOULAH & DOULAH ABOGADOS GREITER PEGGER KOFLER & PARTNERS Alexandre Khrapoutsky Thomas Christ Ashraful Hadi VASHKEVICH, SAPEGO & KHRAPOUTSKY Carlos Ferreira WOLF THEISS ATTORNEYS-AT-LAW Reinhard Uhl DR. KAMAL HOSSAIN & ASSOCIATES C.R. & F. ROJAS BINDER GROESSWANG Tatsiana Klimovich Armin Dallmann RECHTSANWÄLTE OG Rezaul Hasan SORAINEN (MINSK OFFICE) Carlos Fossati CMS REICH-ROHRWIG HAINZ SUPREME COURT (APPELLATE DIVISION ASESORES LEGALES CP Martin Wagner Nina Knyazeva Ivo Deskovic & HIGH COURT DIVISION) KPMG BUSINESSCONSULT Rodrigo Garron Bozo DLA PIPER WEISS-TESSBACH Amir Hossain GARRON BOZO ABOGADOS RECHTSANWÄLTE GMBH Michael Walbert Nick Liakhouski UNICONSULT INTERNATIONAL LTD. SCHÖNHERR RECHTSANWÄLTE GMBH LEGAL GROUP “VERDICT BYâ€? LTD. Ramiro Moreno Baldivieso Christian Dorda Anamul Kabir MORENO BALDIVIESO ESTUDIO DE DORDA BRUGGER JORDIS Larissa Winds Yulia Lyashenka AF KABIR & ASSOCIATES ABOGADOS RECHTSANWÄLTE GMBH WOLF THEISS ATTORNEYS-AT-LAW SORAINEN (MINSK OFFICE) Farzana Kabir Andres Moreno Gutierrez Gabriele Etzl Evelyn Zach Sergei Makarchuk AF KABIR & ASSOCIATES MORENO BALDIVIESO ESTUDIO DE WOLF THEISS ATTORNEYS-AT-LAW WOLF THEISS ATTORNEYS-AT-LAW CERHA HEMPEL SPIEGELFELD HLAWATI ABOGADOS Nihad Kabir FLLC Martin Foerster Dieter Zandler SYED ISHTIAQ AHMED & ASSOCIATES Carlos Mostajo GRAF & PITKOWITZ RECHTSANWÄLTE CMS REICH-ROHRWIG HAINZ Mikalai Markounik MOSTAJO SOCIEDAD CIVIL - FIRMA GMBH Reazul Karim VLASOVA MIKHEL & PARTNERS LAW Thomas Zottl LEGAL SYED ISHTIAQ AHMED & ASSOCIATES FIRM Ferdinand Graf FRESHFIELDS BRUCKHAUS DERINGER LLP Santiago Nishizawa GRAF & PITKOWITZ RECHTSANWÄLTE Maherin Islam Khan Sergey Medvedev QUINTANILLA, SORIA & NISHIZAWA GMBH DR. KAMAL HOSSAIN & ASSOCIATES BRAGINETS & PARTNERS LAW FIRM AZERBAIJAN SOC. CIV. Guenther Hanslik Narita Navin Khan Iryna Mitsianiova Aykhan Asadov Rigoberto Paredes CMS REICH-ROHRWIG HAINZ DR. KAMAL HOSSAIN & ASSOCIATES SORAINEN (MINSK OFFICE) BAKER & MCKENZIE - CIS, LIMITED RIGOBERTO PAREDED & ASOCIADOS 172 INVESTING ACROSS BORDERS 2010 Alejandro Pelaez Mirjana Å arkinovic´ Carlo de Lima Verona Augusto César Rodrigues Bozhko Poryazov INDACOCHEA & ASOCIADOS, JOINT LAW OFFICE OF ATTORNEYS MATTOS FILHO, VEIGA FILHO, MARREY LEVY & SALOMAO ADVOGADOS DELCHEV & PARTNERS LAW FIRM ABOGADOS ´ ´ AMILA KUNOSIC-FERIZOVIC AND JR. E QUIROGA ADVOGADOS ´ Alexei Santana Bonamin Polina Rabcheva MIRJANA Å ARKINOVIC Mariana Pereira Fábiola Augusta de Oliveira Bello MATTOS FILHO, VEIGA FILHO, MARREY DELOITTE BULGARIA OOD INDACOCHEA & ASOCIADOS, Dzana Smailagic-Hromic Cavalcanti JR. E QUIROGA ADVOGADOS ´ Nevena Radlova ABOGADOS MARIC LAW OFFICE BARBOSA, MÃœSSNICH & ARAGÃO Juliana Scalzo PETKOVA & SIRLESHTOV LAW OFFICE ADVOGADOS Eduardo Quintanilla Boris Stojanovic SOUZA, CESCON AVEDISSIAN, IN COOPERATION WITH CMS QUINTANILLA, SORIA & NISHIZAWA LAW FIRM “SAJICâ€? Ana Lúcia Pinke R. de Paiva BARRIEU E FLESCH - ADVOGADOS CAMERON MCKENNA SOC. CIV. LOBO & DE RIZZO ADVOGADOS Andrea Zubovic Carlos Roberto Siqueira Castro Yassen Spassov Julio Quintanilla WOLF THEISS Caio de Queiroz SIQUEIRA CASTRO ADVOGADOS TSVETKOVA BEBOV & PARTNERS, QUINTANILLA, SORIA & NISHIZAWA LOBO & DE RIZZO ADVOGADOS ATTORNEYS-AT-LAW (LANDWELL André Stocche SOC. CIV. BULGARIA) BRAZIL Oswaldo Noce Dela Torre SOUZA, CESCON AVEDISSIAN, Gabriel Ribera Marcelo Gandelmos MATTOS FILHO, VEIGA FILHO, MARREY BARRIEU E FLESCH - ADVOGADOS Pavlin Stoyanoff QUINTANILLA, SORIA & NISHIZAWA BARBOSA, MÃœSSNICH & ARAGÃO JR. E QUIROGA ADVOGADOS PETKOVA & SIRLESHTOV LAW OFFICE IN Ivandro Trevelim SOC. CIV. 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CONSULTORES, LDA BANWO & IGHODALO KENNA & ASSOCIATES CONSORTIUM TABOADA Y ASOCIADOS Badaruddin Vellani Pedro Couto Taye Awoï¬?ranye Bukola Olabiyi Rodrigo Ibarra Rodney VELLANI & VELLANI H. GAMITO, COUTO, GONÇALVES GIWA-OSAGIE & CO. ODUJINRIN & ADEFULU BARRISTERS, PEREIRA, CASTELO BRANCO & ARIAS & MUÑOZ, NICARAGUA SOLICITORS & NOTARIES PUBLIC Adetola Bakare ASSOCIADOS Emiliano Jarquin PAPUA NEW GUINEA KENNA & ASSOCIATES Ajibola Olomola Antonio de Vasconselos Porto JARQUIN - GARCIA KPMG PROFESSIONAL SERVICES Antonio Bernabe Seyi Bickersteth DELOITTE VASCONCELOS PORTO & Yali Molina Palacios KPMG PROFESSIONAL SERVICES Olatorera Oloyede ASSOCIADOS MOLINA Y ASOCIADOS David A. Conn Afolabi Caxton-Martins ADEPETUN, CAXTON-MARTINS, Rita Furtado AGBOR & SEGUN PORT MORESBY CHAMBER OF Haroldo Montealegre ADEPETUN, CAXTON-MARTINS, MGA - ADVOGADOS COMMERCE & INDUSTRY E ARIAS & MUÑOZ, NICARAGUA AGBOR & SEGUN Jennifer Eghosasere Omozuwa CONSULTORES, LDA. 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LAW CHAMBERS OF LASANTHA Grant Edmundson JAUSAS ASYLA ATTORNEYS HETTIARACHCHI EVERSHEDS CONTRIBUTORS 183 THAILAND TURKEY Robert Kirunda Natalia Sorokina David Vaughan JN KIRKLAND AND ASSOCIATES, BNT & PARTNERS WRAGGE & CO LLP Bundit Atthakor Özgür Tayga Ak CORPORATE LAWYERS & ATTORNEYS DFDL MEKONG (THAILAND) CO., CURTIS, MALLET - PREVOST, COLT & Tomasz Stasiak David Williams LTD. MOSLE LLP David F.K. Mpanga CLIFFORD CHANCE LLC ALLEN & OVERY LLP A.F. MPANGA, ADOVCATES Timothy Breier Mine Alten Yelena Stasyk Jonathan Wood BAKER & MCKENZIE LTD., BANGKOK YÃœKSELKARKINKÜÇÜK LAW FIRM Jackie Naluyima Katende GIDE LOYRETTE NOUEL CLYDE & CO JN KIRKLAND AND ASSOCIATES, Niraporn Chaiyaraj Ozge Altinok Lokmanhekim Serhii Sviriba CORPORATE LAWYERS & ATTORNEYS DFDL MEKONG (THAILAND) CO., ELIG ATTORNEYS-AT-LAW MAGISTERS UNITED STATES LTD. Diana Ninsiima Kibuuka Akın Volkan Arıkan Denys Sytnyk Guillermo Aguilar-Alvarez MMAKS ADVOCATES WEIL GOTSHAL & MANGES Athitaya Chanthasirichot CURTIS, MALLET - PREVOST, COLT & SCHÖNHERR UKRAINE LLC LORENZ & PARTNERS CO., LTD. MOSLE LLP Deogratius Odokel Opolot Illya Tkachuk Oliver Armas ODOKEL OPOLOT& COMPANY CHADBOURNE & PARKE LLP Pinprapus Chartikavanich Canan Arslan GIDE LOYRETTE NOUEL ADVOCATES,SOLICITORS & LEGAL MCEVILY & COLLINS LAW OFFICES ELIG ATTORNEYS-AT-LAW CONSULTANTS Gleb Tsvyetkov Jose Astigarraga Daniel Chernov Birtürk Aydın LAW FIRM AS CONSULTING, LLC ASTIGARRAGA DAVIS Charles Semakula Muganwa DFDL MEKONG (THAILAND) CO., ESIN LAW FIRM MUGANWA NANTEZA & CO Andriy Tsvyetkov William Baker LTD. Arzu Basmac ADVOCATES LAW FIRM AS CONSULTING, LLC ALSTON & BIRD LLP Fabian Doppler MEHMET GÃœN & PARTNERS Olexander Tytov Donald Batterson MCEVILY & COLLINS LAW OFFICES Nazim Bükülmer UKRAINE SCHÖNHERR UKRAINE LLC JENNER & BLOCK LLP Somboon Kitiyansub TCCD TURKISH STATE RAILWAYS Roman Badalis Antonina Yaholnyk Neal Beaton NORTON ROSE (THAILAND) LIMITED BNT & PARTNERS Özge Dumlupınar BAKER & MCKENZIE - CIS, LIMITED HOLLAND & KNIGHT LLP Ampika Kumar UNDERSECRETARIAT OF TREASURY Anna Bondar Ilona Zekely Mitchell Berg BAKER & MCKENZIE LTD., BANGKOK ´ PETERKA & PARTNERS Ismail Gökhan Esin SCHÖNHERR UKRAINE LLC PAUL, WEISS, RIFKIND, WHARTON & Till Morstadt ESIN LAW FIRM GARRISON LLP Peter Danis LORENZ & PARTNERS CO., LTD. PETERKA & PARTNERS ehnaz Güngör UNITED KINGDOM Ted Castell Stefan Riedl CURTIS, MALLET - PREVOST, COLT & CHADBOURNE & PARKE LLP Sergii Gan Vicki Abberton LORENZ & PARTNERS CO., LTD MOSLE LLP GIDE LOYRETTE NOUEL CLYDE & CO Ness Cohen Walanchathas Sanguanwong Murat Hardalaç CLIFFORD CHANCE US LLP Olga Gavrylyuk Matthew Cartwright DFDL MEKONG (THAILAND) CO., ENERJI VE TABII KAYNAKLAR BAKANLIGI ˇ BAKER & MCKENZIE - CIS, LIMITED JONES DAY Thomas E. Crocker LTD. Serkan Ictem ALSTON & BIRD LLP Olga Glukhovska Andrew Chen Nipaporn Supha-utchaichan ELIG ATTORNEYS-AT-LAW MAGISTERS JONES DAY Stephanie Denkowicz DFDL MEKONG (THAILAND) CO., Sebnem Isik ALSTON & BIRD LLP LTD. Andrii Grebonkin Lee Coffey MEHMET GÃœN & PARTNERS CLIFFORD CHANCE LLC JONES DAY Mary Devine William T. Nophakoon Ozan Karaduman PAUL, WEISS, RIFKIND, WHARTON & BAKER & MCKENZIE LTD., BANGKOK Karl Hepp de Sevelinges John Cooper MEHMET GÃœN & PARTNERS GARRISON LLP GIDE LOYRETTE NOUEL WRAGGE & CO LLP HERBERT SMITH (THAILAND) LTD. Murat Karkın Samuel Feder Victoria Ischenko Ian Cox YÃœKSELKARKINKÜÇÜK LAW FIRM JENNER & BLOCK LLP BAKER & MCKENZIE - CIS, LIMITED HERBERT SMITH LLP TUNISIA Muharrem Küçük Joseph Forte Yana Kartseva Andrea Dahlberg Mouï¬?da Abbes YÃœKSELKARKINKÜÇÜK LAW FIRM ALSTON & BIRD LLP PETERKA & PARTNERS ALLEN & OVERY LLP ZAANOUNI LAW FIRM Ozlem Ozgur Meric Sergio Galvis Inna Kilovata Jamie Drinnan Sami Aouani TALAL ABU-GHAZALEH ORGANIZATION SULLIVAN & CROMWELL LLP GIDE LOYRETTE NOUEL WRAGGE & CO LLP ILC Seteney Oner Jessica Garascia Nataliya Klyuk Stina Ekblad Meriem Belajouza YÃœKSELKARKINKÜÇÜK LAW FIRM JENNER & BLOCK LLP CLIFFORD CHANCE LLC ALLEN & OVERY LLP CABINET MAÃŽTRE DONIA HEDDA ELLOUZE Ay egül Önol Jonathan Greenblatt Olexiy Kostromov Duncan Gillespie YÃœKSELKARKINKÜÇÜK LAW FIRM SHEARMAN & STERLING LLP CLIFFORD CHANCE LLC DLA PIPER UK LLP Hichem Ben Hmida ERNST & YOUNG Naz Tamer Robert Harmon Jr. Oleg Krykavskiy Clare Grayston MEHMET GÃœN & PARTNERS PAUL, WEISS, RIFKIND, WHARTON & GIDE LOYRETTE NOUEL NABARRO LLP Amin Ben Lakhal GARRISON LLP BEN LAKHAL INTERNATIONAL Selecen Yalcin Anna Makedonska Michael Hales CONSULTING MEHMET GÃœN & PARTNERS BAKER & MCKENZIE - CIS, LIMITED Brian Hoffmann NABARRO LLP ´ CLIFFORD CHANCE US LLP Maryem Blidi g Ibrahim Yamakoˇ lu Maksym Makhynia Jane McMenemy AGIP YÃœKSELKARKINKÜÇÜK LAW FIRM LAW AND PATENT OFFICES W Hunter Holliday HERBERT SMITH LLP ALSTON & BIRD LLP Begüm Yavuzdoˇ an g GRISCHENKO & PARTNERS Imed Chorï¬? James McWilliam ERNST & YOUNG MEHMET GÃœN & PARTNERS Oleg Matiusha Donald Horvath ALLEN & OVERY LLP JENNER & BLOCK LLP Cüneyt Yüksel BAKER & MCKENZIE - CIS, LIMITED Hichem Dammak Eric Moffat DR.HICHEM DAMMAK LAW OFFICE YÃœKSELKARKINKÜÇÜK LAW FIRM Yuliya Mokhnatova James Hosking ALLEN & OVERY LLP CLIFFORD CHANCE US LLP ENERGY MARKET REGULATORY CLIFFORD CHANCE LLC Slim Gargouri Christopher Papanicolaou ATA AUTHORITY OF TURKEY Andriy Nikiforov William H. Hughes Jr JONES DAY ALSTON & BIRD LLP BAKER & MCKENZIE - CIS, LIMITED Karim Hammami Rhodri Pazzi-Axworthy BEN LAKHAL INTERNATIONAL UGANDA Carter Klein Dmitriy Orendarets NABARRO LLP CONSULTING JENNER & BLOCK LLP Sylla Aissata CLIFFORD CHANCE LLC A.F. MPANGA, ADOVCATES David Pettingale Donia Hedda Ellouze Alan Klein Alexander Poels WRAGGE & CO LLP CABINET MAÃŽTRE DONIA HEDDA SIMPSON THACHER & BARTLETT LLP Enoch Barata PETERKA & PARTNERS ELLOUZE BIRUNGYI, BARATA & ASSOCIATES Andrew Platt George Kleinfeld Svitlana Romanova WRAGGE & CO LLP Mohamed Ridha Jenayah CLIFFORD CHANCE US LLP Cephas Birungyi BAKER & MCKENZIE - CIS, LIMITED BIRUNGYI, BARATA & William Saunders Fehmi Laourin ASSOCIATES Daniel C. Kolb Gennadii Roschepii JONES DAY ERNST & YOUNG ROPES & GRAY LLP David Ceng P’Okot Auma CLIFFORD CHANCE LLC MUGANWA NANTEZA & CO Sean Scanlon Mohamed Zaanouni Ruth Lansner Dmitry Shemelin DLA PIPER UK LLP ADVOCATES HOLLAND & KNIGHT LLP ZAANOUNI LAW FIRM GRISCHENKO & PARTNERS Oscar KIhika Carol Shutkever David Lewis Darya Shypko HERBERT SMITH LLP BYENKYA, KIHIKA & CO ADVOCATES DLA PIPER LLP (US) GIDE LOYRETTE NOUEL 184 INVESTING ACROSS BORDERS 2010 Christopher L. Mann David Wolber Alvaro Hardy Dang Trong Hieu Han Tran Ngoc SULLIVAN & CROMWELL LLP PAUL, WEISS, RIFKIND, WHARTON & D’EMPAIRE REYNA ABOGADOS VISION AND ASSOCIATES LEGAL RUSSIN & VECCHI GARRISON LLP Marisa Marinelli Fulvio Italiani Andrew Hilton Kien Trinh HOLLAND & KNIGHT LLP ALSTON & BIRD LLP D’EMPAIRE REYNA ABOGADOS ALLENS ARTHUR ROBINSON TILLEKE & GIBBINS CONSULTANTS LTD. Dawn Marie Matlock José Tadeo Martínez Long Ho Vinh Luong Ngoc Trinh ALSTON & BIRD LLP VENEZUELA, RB INTER-AMERICAN DEVELOPMENT BANK FRESHFIELDS BRUCKHAUS DERINGER LLP VIETNAM INTERNATIONAL LAW FIRM Gerald L Mize Luisa Acedo de Lepervanche Jaime Martínez John King My Ly Truong ALSTON & BIRD LLP MENDOZA, PALACIOS, ACEDO, RODNER, MARTÃ?NEZ & ASOCIADOS TILLEKE & GIBBINS CONSULTANTS LTD. PHUOC & PARTNERS LAW FIRM BORJAS, PÃ?EZ PUMAR & CÃ?A. Robert D Mowrey Pedro Planchart Quynh Anh Lam Duyen Vo Ha ALSTON & BIRD LLP Luis Araque ARAQUE, REYNA, SOSA, VISO & FRESHFIELDS BRUCKHAUS DERINGER LLP VIETNAM INTERNATIONAL LAW FIRM ARAQUE, REYNA, SOSA, VISO & PITTIER Trevor W Nagel PITTIER Milton Lawson Trung Vu Le ALSTON & BIRD LLP Eduardo Porcarelli FRESHFIELDS BRUCKHAUS DERINGER LLP FRESHFIELDS BRUCKHAUS DERINGER LLP Tomás Arias CONAPRI Charles O’Neill RAFFALLI DE LEMOS HALVORSSEN Chung Ba Thanh Le CHADBOURNE & PARKE LLP ORTEGA Y ORTIZ Melissa Puga ALLENS ARTHUR ROBINSON YEMEN, REP. CONAPRI Hamzah Al-Anesi Lawrence Plotkin Lorena Avila López Veera Maenpaa CHADBOURNE & PARKE LLP RODNER, MARTÃ?NEZ & ASOCIADOS Carolina Puppio ALLENS ARTHUR ROBINSON Ibrahim Al-Basha ARAQUE, REYNA, SOSA, VISO & GENERAL INVESTMENT AUTHORITY Gilbert Porter Dailyng Ayestarán Thi Phuong Anh Mai PITTIER HAYNES AND BOONE, LLP MENDOZA, PALACIOS, ACEDO, ALLENS ARTHUR ROBINSON Khaled Al-Buraihi BORJAS, PÃ?EZ PUMAR & CÃ?A. James Otis Rodner LAW OFFICE(KAB) KHALED AL-BURAIHI David W. Rivkin Anh Ngoc Mai RODNER, MARTÃ?NEZ & ASOCIADOS FOR ADVOCACY AND LEGAL SERVICE DEBEVOISE & PLIMPTON LLP Ramon Azpurua LUAVIET - ADVOCATES AND SOLICITORS SQUIRE SANDERS & DEMPSEY, S.C. Andrea Rondon Ahmed Al-Hababi Marianne Roach Casserly Tung Ngo RAFFALLI DE LEMOS HALVORSSEN GENERAL INVESTMENT AUTHORITY ALSTON & BIRD LLP Tatiana B. de Maekelt VIETNAM INTERNATIONAL LAW FIRM ORTEGA Y ORTIZ Gabriel Rottman VALERA, MAEKELT Y ASOCIADOS LAW Thi Mai Loan Nguyen Ali Al-Hebshi FIRM AND UNIVERSIDAD CENTRAL DE Rafael Saggese ADVOCACY AND LEGAL SIMPSON THACHER & BARTLETT LLP ALLENS ARTHUR ROBINSON VENEZUELA. SQUIRE SANDERS & DEMPSEY, S.C. CONSULTATIONS OFFICE (ALCO) Lawrence Schaner Lang Nguyen Andrés Carrasquero Eulalia Salas de Egoavil Abdulla Almutareb JENNER & BLOCK LLP FRESHFIELDS BRUCKHAUS DERINGER LLP UNIVERSIDAD CATOLICA ANDRES RODNER, MARTÃ?NEZ & ASOCIADOS TAHSEEN CONSULTING Marc J Scheinson BELLO AND UNIVERSIDAD CENTRAL Phuoc Nguyen Ana Carolina Serpa Khaled Al-Rainee ALSTON & BIRD LLP DE VENEZUELA / ESCOVAR LEÓN PHUOC & PARTNERS LAW FIRM ARAQUE, REYNA, SOSA, VISO & GENERAL INVESTMENT AUTHORITY Eileen M.G. Scoï¬?eld ABOGADOS PITTIER Chuong G.H. Nguyen ALSTON & BIRD LLP Adolfo Castejon PHUOC & PARTNERS LAW FIRM Belquis Al-Shaibah Juan Suarez GENERAL INVESTMENT AUTHORITY Moses Silverman CONAPRI ESCOVAR LEÓN ABOGADOS S.C. Dinh Cuong Nguyen PAUL, WEISS, RIFKIND, WHARTON & Juan Croes RUSSIN & VECCHI Laila Shihab Ira Vergani LAILA M. SHIHAB GARRISON LLP UNIVERSIDAD CATOLICA ANDRES D’EMPAIRE REYNA ABOGADOS Nam Nguyen Robert Smit BELLO AND UNIVERSIDAD CENTRAL ALLENS ARTHUR ROBINSON Saeed Sohbi DE VENEZUELA / ESCOVAR LEÓN S.H.SOHBI, BARRISTER-AT-LAW SIMPSON THACHER & BARTLETT LLP ABOGADOS VIETNAM Vu Nguyen Quang Chris Smith Hoan Bui Khuong Diem FRESHFIELDS BRUCKHAUS DERINGER LLP SHEARMAN & STERLING LLP María Clara Curé ZAMBIA RODNER, MARTÃ?NEZ & ASOCIADOS FRASERS LAW COMPANY Tuan Pham Dwight C. Smith, III PHUOC & PARTNERS LAW FIRM David Chakoleka Hector D´Armas Vinh Dang CORPUS LEGAL PRACTITIONERS ALSTON & BIRD LLP ALLENS ARTHUR ROBINSON CONAPRI Huong Pham Dinh Eliza Swann LUAVIET - ADVOCATES AND SOLICITORS Twaambo Kalenga-Chirwa Hernando Diaz-Candia Xuan Hop Dang MNB, LEGAL PRACTITIONERS SHEARMAN & STERLING LLP ALLENS ARTHUR ROBINSON SQUIRE SANDERS & DEMPSEY, S.C. Thao Phung Thi Thanh Christopher Taylor FRASERS LAW COMPANY Ngosa Mulenga-Simachela Ramón Escovar Nhu Thanh Dinh Thi MNB, LEGAL PRACTITIONERS CLIFFORD CHANCE US LLP TILLEKE & GIBBINS CONSULTANTS LTD. UNIVERSIDAD CATOLICA ANDRES Hoang Kim Thi Tran Sebastian Tiller BELLO AND UNIVERSIDAD CENTRAL TILLEKE & GIBBINS CONSULTANTS LTD. Josephine Mwale Cong Do Thanh MNB, LEGAL PRACTITIONERS SIMPSON THACHER & BARTLETT LLP DE VENEZUELA / ESCOVAR LEÓN RUSSIN & VECCHI Cuong Tong Cong ABOGADOS Kafula Mwiche John Toriello Hoang Nam Dong RUSSIN & VECCHI HOLLAND & KNIGHT LLP José Humberto Frias LAWRENCE SIKUTWA & ASSOCIATES RUSSIN & VECCHI Van Hoai Tran LIMITED D’EMPAIRE REYNA ABOGADOS Kenneth G. Weigel Mark Fraser ALLENS ARTHUR ROBINSON, HO CHI ALSTON & BIRD LLP Alvaro Guerrero MINH CITY BRANCH Sashi Nchito FRASERS LAW COMPANY MNB, LEGAL PRACTITIONERS D’EMPAIRE REYNA ABOGADOS Rick Werner Quang Ha Dang Hoang Tran HAYNES AND BOONE, LLP Andrés Halvorssen TILLEKE & GIBBINS CONSULTANTS LTD. Arthur Sike RUSSIN & VECCHI CORPUS LEGAL PRACTITIONERS RAFFALLI DE LEMOS HALVORSSEN ORTEGA Y ORTIZ CONTRIBUTORS 185 This page left blank intentionally. 186 INVESTING ACROSS BORDERS 2010 Abbreviations and Glossary Abbreviations AAA American Arbitration Association KOTRA Korea Trade-Investment Promotion Agency (Korea) ADR Alternative Dispute Resolution LCIA London Court of International Arbitration AGCHO Afghan Geodesy and Cartography Ofï¬?ce LGAF Land Governance Assessment Framework (Afghanistan) LIS Land Information System ANIP National Agency for Private Investment (Angola) LLC limited liability company APEC Asia-Paciï¬?c Economic Cooperation M&A mergers and acquisitions ASEAN Association of Southeast Asian Nations M&E monitoring and evaluation BEAC Bank of Central African States MIGA Multilateral Investment Guarantee Agency DB Doing Business NGO Nongovernmental Organization ECOWAS Economic Community Of West African States OCR Ofï¬?ce of Company Registration EPZ export processing zone OECD Organisation for Economic Co-operation and EIU Economist Intelligence Unit Development EU European Union OHADA Organisation for the Harmonization of Business Law in FDI foreign direct investment Africa FIAS FIAS, The Investment Climate Advisory Service OPIC Overseas Private Investment Corporation FYR Former Yugoslav Republic (Macedonia) PLC public limited company GATS General Agreement on Trade in Services PPP purchasing power parity GCC Gulf Cooperation Council RADAR Registro e Rastreamento da Atuação dos Intervenientes Aduaneiros (Brazil) GDP gross domestic product R&D research and development GILD Global Investment Locations Database SAARC South Asian Association for Regional Cooperation GIS Geographic Information System SAGIA Saudi Arabian General Investment Authority (Saudi GNI gross national income Arabia) IAB Investing Across Borders project SADC Southern African Development Community IBA International Bar Association SEZ special economic zone ICC International Chamber of Commerce SME small and medium enterprise ICSID International Centre for Settlement of Investment TNC transnational corporation Disputes UEMOA Monetary Union of West Africa IEG Independent Evaluation Group UNCITRAL United National Commission on International Trade IFC International Finance Corporation Law ILI International Law Institute UNCTAD United Nations Conference on Trade and IMD Institute for Management Development Development IMF International Monetary Fund UNDP United Nations Development Program IPI investment promotion institution USAID U.S. Agency for International Development IPA investment promotion agency WBG World Bank Group IT information technology WGI Worldwide Governance Indicators ABBREVIATIONS AND GLOSSARY 187 Glossary of terms Ad hoc arbitrations. Arbitrations that are not conducted under the Deed. A legal document laying out the conditions under which land auspices or supervision of an arbitration institution. Instead, is transferred. parties simply agree to arbitrate, without designating any Enforcement of an arbitration award. The conversion of the award institution to administer their arbitration. The parties will into a court judgment with all the sanctions that a court sometimes select a pre-existing set of procedural rules judgment entails, such as the right to have the debtor’s designed to govern ad hoc arbitrations, for example, the assets seized. UNCITRAL has published such rules. FDI. According to the International Monetary Fund, FDI is a category Agency. The person, agency, or other type of organization with of cross-border investment that involves residents of one which the foreign company or its legal representatives are economy obtaining a lasting interest in an enterprise required to interact in order to set up and run the company. located in another economy. A lasting interest is It can include government agencies, municipal authorities, commonly understood to involve at least 10% of ordinary professional associations, auditors, notaries, and courts. shareholding or voting power. In effect, FDI need not entail Alternative dispute resolution. The procedure for settling disputes by much transfer of funds and can involve a ï¬?rm bringing its means other than court litigation. These methods include brand, technology, management, and marketing strengths among others mediation, conciliation and arbitration. to bear on its local interest. Arbitrability. Whether the claim is capable of being resolved by Freehold. Ownership of land distinct from leasehold, in which the arbitration. Certain categories of claims are considered owner has the maximum rights permissible within the tenure in different countries as being incapable of resolution system. by arbitration. Such claims are deemed “non-arbitrableâ€? Geographic information system (GIS). A system for capturing, because of their perceived public importance. storing, checking, integrating, analyzing, and displaying Arbitration. A means by which disputes can be deï¬?nitively resolved, data about the Earth that is spatially referenced. It is pursuant to the parties’ agreement, by independent, non- normally taken to include a spatially referenced database governmental decision-makers. and appropriate applications software. Arbitration agreement. An agreement by the parties to submit to ICC Amicable Dispute Resolution Rules. These rules permit the arbitration all or certain disputes which have arisen or parties to settle their disputes or differences amicably which may arise between them in respect of a deï¬?ned with the assistance of a third party, the Neutral, within an legal relationship. institutional framework. The Rules do not include arbitration, but only proceedings which do not result in a decision or Authority. See deï¬?nition for Agency. award of the Neutral which can be enforced at law. Cadastre. A cadastre is normally a parcel-based and up-to-date land ICSID Convention. The Convention on the Settlement of Investment information system containing a record of interests in land Disputes between States and Nationals of Other States, (rights, restrictions and responsibilities). It usually includes which entered into force in October 1966 and was a geometric description of land parcels linked to other established by ICSID. records describing the nature of the interests, ownership or control of those interests, and often the value of the parcel Institutional arbitrations. Arbitrations undertaken within a particular and its improvements. (Please note that the cadastre is organization providing institutional arbitration services. more common in civil law jurisdictions than in common law Some of the best-known international arbitration institutions jurisdictions.) are the International Chamber of Commerce (ICC), the American Arbitration Association (AAA), and the London Calendar days. As opposed to business days, calendar days include Court of International Arbitration (LCIA). every day of the week (working and nonworking days). For example, 1 week has 7 calendar days but fewer business Land information system (LIS). A parcel-based GIS, used as a days (5 or 6, typically). system for acquiring, processing, storing, and distributing information about land. It also can be a tool for legal, Commercial. Has the meaning ascribed to it in the 1985 UNCITRAL administrative, and economic decision making and an aid Model Law on International Commercial Arbitration for planning and development. Concession agreement. A right granted by the government to a Land registry. The deï¬?nitive record of all registered properties, private company. It speciï¬?es the rules under which the comprising the registered details for each property. company can operate locally. Land registration. The process of recording rights in land in the form Conï¬?rmation of an arbitration award. The parties may apply to of either registration of deeds or registration of title to land. court for an order “conï¬?rmingâ€? the arbitration award. The court will normally conï¬?rm the award unless it has grounds Land tenure. Tenure is the relationship, whether legally or customarily for refusal or denial of enforcement. deï¬?ned, among people as individuals or groups, with respect to land and associated natural resources. Rules Conveyance. A method whereby rights in land are transferred from of tenure deï¬?ne how property rights in land are to be one owner to another. The rights may be full ownership or allocated and transferred within societies. Land-tenure a mortgage, charge, or lease. systems determine who can use what resources, for how Customary tenure. The holding of land in accordance with long, and under what conditions. customary law. That is, the right to enjoy some use of land Land title (or Title). The evidence of a person’s right to property or that arises through customary, unwritten practice rather than land or the right itself. through written or codiï¬?ed law. 188 INVESTING ACROSS BORDERS 2010 Lease. A lease is a contractual agreement between a landlord and Registration of deeds. A system of proof of property ownership a tenant for the tenancy of land. The period of the lease and interests based on the registration of transfer and is known as the “termâ€? of the lease. The lease should be other deeds. In an ofï¬?cial deeds registration system, a for a deï¬?nite period, or for a period that is capable of copy of the relevant deed, for example, a transfer deed, deï¬?nition. The date of commencement should be ï¬?xed, and is deposited in the deed registry. An appropriate entry the date of termination either ï¬?xed, or capable of being is then made into the register of the time, date, parties, ï¬?xed. The lease should offer the tenant the right to exclusive and transaction, as may be required by the particular possession of the land, thus giving the lessee the right to jurisdiction. exclude others, including the landlord, from the land. Registration of title. A system for improving the quality of ownership Leasehold. Land held under a lease, which is a contract by which and proof of title. There are 2 parts in the register. The the right of exclusive possession of land is granted by a ï¬?rst is a map on which each parcel is demarcated and landlord (the lessor) to a tenant (the lessee) for an agreed identiï¬?ed by a unique parcel identiï¬?er. The second is a amount of money and an agreed period of time. text that records details about the title, the owner, and any Legally required. A procedure is said to be legally required when rights or restrictions associated with the parcel’s ownership the laws or regulations of the country speciï¬?cally mandate such as restrictive covenants or mortgages. Under a title it as a requirement. registration system, a transfer of the property simply results in a change in the name registered. Mergers & Acquisitions. The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate Seat of arbitration. The location of the arbitration forum. The seat strategy, corporate ï¬?nance and management dealing with of arbitration has a number of signiï¬?cant effects upon the buying, selling and combining of different companies the arbitration, including the potential of national court that can aid, ï¬?nance, or help a growing company in interference with arbitration proceedings, national court’s a given industry grow rapidly without having to create assistance with arbitration proceedings, the law applicable another business entity. to the arbitration agreement if the parties have not agreed otherwise, and national court’s enforcement of arbitration Mortgage. The transfer of a property by a debtor (called the awards. mortgagor) to a creditor (called the mortgagee) as security for a ï¬?nancial loan with the provision that the property be Setting aside of an arbitration award. The parties may commence returned when the loan is paid off. In some legal systems an action to legally nullify the award so that it cannot be there is a provision that the mortgagee has the power to enforced locally, and in general will only be enforceable sell the concerned property when the interest is not paid outside the seat of arbitration with great difï¬?culty. in time and the loan is not paid off by a certain date in Severable. The severability or separability doctrine provides that an accordance with the agreed upon stipulations. arbitration agreement, even though included in and related N/A. Not applicable. closely to an underlying commercial contract, is a separate and autonomous agreement. National law. This term includes statutes, regulations and rules established by court decisions in a country, as well as Subnational. Subnational laws and regulations refer to laws of any mandatory regulatory or administrative requirements. the local, municipal, provincial, or state governments. In If the country is a federation of states (or similar entities), contrast, national laws and regulations refer to laws of the “national lawâ€? also includes the law of the state in which central government. the largest business city is located, to the extent such state Subsidiary. A business that is owned by a parent company and law may be applicable. managed under its direction. New York Convention. 1958 Convention on the Recognition and Time in practice. Time required to complete a procedure in the Enforcement of Foreign Arbitral Awards, which entered experience of the survey respondent, as opposed to the into force in June 1959. The Convention requires national time frame given in the laws and regulations. courts to recognize and enforce foreign arbitral awards, UNCITRAL Model Law on International Commercial Arbitration. subject to speciï¬?ed exceptions; requires national courts to This was adopted by the UNCITRAL in June 1985, and recognize the validity of arbitration agreements, subject to amended in 2006. This “Model Lawâ€? aims at resolving speciï¬?c exceptions; and requires national courts to refer disparities in different national laws dealing with parties to arbitration when they have entered into a valid international commercial arbitration. It is not binding, but agreement to arbitrate that is subject to the Convention. states may incorporate it into their domestic legislation. Portfolio investment. Portfolio investment, in contrast to foreign direct Vacating of an arbitration award. This is similar to an action that the investment, represents passive holdings of securities such as parties commence to set aside an arbitration award. foreign stocks, bonds, or other �nancial assets and does not convey signi�cant control over the management or operations of the foreign �rm. Real property. Land and any things attached to the land, including buildings, apartments, other constructions, and natural objects, such as trees. ABBREVIATIONS AND GLOSSARY 189 This page intentionally left blank. 190 INVESTING ACROSS BORDERS 2010 Investing Across Borders is a new World Bank Group initiative comparing regulation of foreign direct investment around the world. It presents indicators on countries’ laws, regulations, and practices affecting how foreign companies invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes. www.investingacrossborders.org