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Foreign Investment Laws in the News

November 1, 2016

Foreign investment efforts depend heavily on the complex interaction between international and domestic laws, as well as contracting rights between investors and states. These laws regulate a broad range of factors, including investor registration, taxes, dispute arbitration, and other legal issues. 

Thus, it is highly important for investors to understand how new investment law developments may affect their interests and their access to markets around the world. This can be challenging, as investment laws can change rapidly in response to new market conditions. The following are highlights from recent global investment law changes in the news:

Myanmar — Investment Law

Myanmar’s House of Nationalities and House of Representatives have passed a new Myanmar Investment Law recently. This new law combines provisions from the Foreign Investment Law (2012) and the Citizens’ Investment Law (2013). Among other issues, the new law affects tax privileges, considering factors such as product export abroad. Under the new law, tax breaks will be provided only to investment in sectors which are promoted by the new government. 

Current investment laws in Myanmar are considered “full of holes.” For instance, the current investment law does not provide specific avenues for resolving disputes peacefully prior to arbitration, and requires permission for every proposal from the Myanmar Investment Commission (MIC). It also lacks clear legal descriptions regarding the monetary policy on foreign currency transfers. 

The bill’s prompt approval is recognized as a welcome response to foreign investors who have been eager to invest in Myanmar’s economic sphere. However, some critics fear that the law was passed too quickly and may still contain several inconsistencies that need to be addressed, such as the acquisition of investment permits. The new investment law is expected to go into effect in the near future.

South Africa — International Arbitration Bill

South Africa’s Cabinet endorsed a draft International Arbitration Bill last April. The bill would adopt the U.N.’s Model Law on International Commercial Arbitration. This would provide multinational investors doing business in foreign jurisdictions assurance that they would have independent and accessible international arbitration mechanisms for resolving disputes. The bill is part of larger overall efforts to turn South Africa’s economy around. 

India — Goods and Services Tax Bill

President Pranab Mukherjee signed the Goods and Services Tax (GST) Bill into law last September. The new law aims to simplify, streamline, and unify India’s chaotic patchwork of central and state government sales and excise levies. It seeks to create a “genuine single market” and would encourage and stimulate investment by both Indian companies as well as foreign investors. 

This would largely be accomplished by an increased ease of doing business, especially when it comes to the movement of goods across state lines in India. Currently, many trucks have to stop and have their goods assessed for tax purposes; this leads to stagnation and a waste of perishable goods.

The GST law would free up time and energy for small- to medium-sized businesses to grow and become more competitive. Large companies will benefit from larger tax bases due to the movement of people and resources out of untraceable or untaxable economic activities. A broader tax base would also strengthen India’s public finances over time and would allow the Reserve Bank of India more leeway to lower interest rates.

Zimbabwe — ‘Indigenization’ Amendments

Zimbabwean President Robert Mugabe announced that he plans to amend currently existing “indigenization” legislation, which obliges foreign companies to hand over the bulk of their shares to local Zimbabwean investors. The legislation, passed in 2008, has been blamed for shutting the country off from desperately needed foreign investment. Mugabe has said that the new amendments aim to bring the law into consonance with “enunciated policy.” In addition, a bill easing the registration of new investments is set to be debated during the upcoming parliamentary session. 

New Zealand — SRI Factors for Investors

More than 12,000 people in New Zealand have signed a petition requesting that KiwiSaver drop investments in companies that manufacture bombs and other banned weapons. Current laws are open to interpretation over what defines socially responsible investment in banned weapons.

Petitioners may also be pushing for the New Zealand government to work on legislation which would make arms investment illegal. However, Commerce Minister Paul Goldsmith recently stated that there was no need to change current investment laws, as some providers had already voluntarily switched to more socially responsible investments. Instead, Goldsmith said that the Ministry of Business, Innovation, and Employment would be reviewing KiwiSaver’s schemes to ensure that they were easy and clear for investors to understand. 

Egypt — New Investment Law

Egypt’s cabinet will be reviewing a draft of a new investment law in November, Investment Minister Dalia Khorshid said. The new law aims to rectify various issues, including diversification of incentives and guarantees for investors. 

Some analysts are concerned about possible holes in the investment law, such as a lack of discussion regarding regulation of business in Egypt’s free zones, as well as a lack of clarity regarding which agency will enforce the investment law. The new law has already been in the works for six months.

Summary

Most of the changes we are seeing in foreign investment laws around the world are amendments and revisions of existing laws. Many of these new developments do not directly address foreign investor rights per se; instead, many of them deal with economic and financial factors within the country in attempts to make market conditions more attractive for outside investors.

Staying informed on global investment laws can be challenging in today’s fast-paced markets. At Kessler Topaz, our team of attorneys is dedicated to staying on the forefront of the major legal issues and developments emerging in the global investment landscape. Contact us today if you have any questions, inquiries, or disputes that need to be addressed. Through our global client work, we have developed a deep understanding of foreign procedures and laws. Our team is committed to expanding our resources to best serve investors and shareholders around the world.