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HR DECISION ON THE LAW ON THE POLICY OF FOREIGN DIRECT INVESTMENT

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HR DECISION ON THE LAW ON THE POLICY OF FOREIGN DIRECT INVESTMENT

    LAW ON THE POLICY OF FOREIGN DIRECT

    INVESTMENT IN BOSNIA AND HERZEGOVINA

    “Official Gazette” of Bosnia and Herzegovina, 17/98 and 13/03

NOTE:

    ? On the day of entry into force of this Law, the Law on Foreign Investment, published in the Official

    Gazette of Republic of Bosnia and Herzegovina 20/95, shall cease to be effective. ? This law has been adopted by BH Parliamentary Assembly and published in the Official Gazette of

    Bosnia and Herzegovina 17/98.

    -unofficial translation-

    The High Representative's Decision on the Law on Policy of Foreign Direct Investment in Bosnia

    and Herzegovina

    11 March 1998

    In accordance with my authority under Annex 10 of the General Framework Peace Agreement in Bosnia and Herzegovina and Article XI of the Bonn Document, I do hereby decide that the Law on the Policy of Foreign Direct Investment in Bosnia and Herzegovina shall enter into force on an interim basis until the Parliamentary Assembly of Bosnia and Herzegovina adopt the final text of the Law on the Policy of Foreign Direct Investment in Bosnia and Herzegovina in due form. No. 02/98

    11 March 1998 High Representative

    Sarajevo Carlos Westendorp

    LAW ON THE POLICY OF FOREIGN DIRECT INVESTMENT

    IN BOSNIA AND HERZEGOVINA

    PREAMBLE

    Whereas, Bosnia and Herzegovina has entered a new era of peace and stability; Whereas, Bosnia and Herzegovina has adopted an open, free market-led economic policy; Whereas, Bosnia and Herzegovina is determined to promote, facilitate and safeguard private sector investments;

    Whereas, investments should be encouraged by a conducive investment environment; Whereas, the Constitutions of Bosnia and Herzegovina, the Federation of Bosnia and Herzegovina and the Republika Srpska create conditions to encourage foreign investment; Whereas, Bosnia and Herzegovina is a member of the Multilateral Investment Guarantee Agency and is party to the International Convention for the Settlement of Investment Disputes; Now, therefore, the Council of Ministers of Bosnia and Herzegovina deems it necessary and appropriate to establish a clear, transparent, predictable and stable policy and legal framework to secure rights and benefits of and protection for foreign investors.

I. BASIC PROVISIONS

    Article 1

    The Law on the Policy of Foreign Direct Investment (hereinafter referred to as the Law) shall regulate the basic policies and principles of the participation of foreign investors in the economy of Bosnia and Herzegovina.

    Article 2

    For the purposes of this Law, the following terms shall have the following meanings: "Foreign investor": means a natural person, who is not resident of Bosnia and Herzegovina and does not have his or her principal place of business in Bosnia and Herzegovina or legal persons formed in accordance with a foreign law and having their registered office, central administration or principal place of business in a foreign country;

    "Foreign direct investment" or "Foreign investment": means acquisition, creation or extension of any business enterprise, or any other activity which, alone or with others, concurrently or consequently, has the effect of permitting one or several foreign natural or legal persons to acquire or increase control over a company carrying out industrial, agricultural, commercial, financial, real estate, service or other activity, or to ensure expansion of such company already under their control. Such investments may include any tangible or intangible property including, but not necessarily limited to, freely convertible currency or local currency, loans, advances, receivables, licenses, leases and conventional rights, including concessions, machinery, equipment, spare parts, raw materials, industrial or intellectual property rights or any financial facilities granted by a foreign natural or legal person under foreign control, except between parent companies and their subsidiaries if this does not result in increase of the foreign control over the domestic enterprises;

    "Foreign control": means any participation with more than 10% of the capital and/or the voting rights held directly by foreign investors or by a domestic legal entity under such control; "Resident of Bosnia and Herzegovina": means a natural person who has a home or principal abode, carry out employment or independent service or has his or her center of economic interest in Bosnia and Herzegovina, or a legal person constituted under the laws of Bosnia and Herzegovina or the Entities and having its registered office, central administration or principal place of business in Bosnia and Herzegovina;

    "Equity": means the ownership interest held by an investor in an enterprise;

    "Freely convertible currency": means any currency determined as such by the International Monetary Fund;

    "Entities": means Federation of Bosnia and Herzegovina and the Republika Srpska; and “Public information”: means information contained in radio, television (excluding cable), electronic media (excluding the Internet), newspapers and other publications produced primarily for the local market.

II. FDI ENTRY PROCESS

    Article 3

    Subject to the provisions of this Law, foreign investors shall be entitled to invest, and to reinvest profits of such investments into any and all sectors of the economy of Bosnia and Herzegovina, and in the same form and under the same conditions as defined for the residents of Bosnia and Herzegovina under the applicable laws and regulations of Bosnia and Herzegovina and the Entities.

    Article 4

    (a) Notwithstanding the policy of free admission of foreign direct investment into Bosnia and

    Herzegovina set forth in Article 3 of this Law, foreign equity ownership of an enterprise

    engaged in the production and sale of arms, ammunition, explosives for the military use,

    military equipment and public information shall not exceed 49% of the equity of the

    enterprise.

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    (b) In case of investments in sectors subject to the restrictions referred to in paragraph (a) of this

    Article, foreign investors must receive prior approval from the competent body of the

    respective Entity.

    (c) Within 30 days from the date of submission of the request for approval referred to in (b) of

    this Article, the competent body of the respective Entity shall inform the applicant on its

    decision. If the decision is not made within the mentioned deadline, the foreign direct

    investment shall be considered approved, unless such a body has advised the applicant in

    writing of its decision to postpone the decision beyond the 30 day deadline.

    (d) If the competent body of the respective Entity has an intention to postpone making a decision

    on the request for a foreign investment beyond this time limit, it shall inform the applicant

    within the same deadline of 30 days. The final decision on foreign investment with an

    explanation shall be delivered to the applicant within 90 days from the date of receipt of

    the request. If such a decision is not made within the mentioned deadline, the foreign

    direct investment shall be considered approved.

    (e) The foreign direct investment approval referred to in this Article shall be valid without

    limitation as to duration.

    (f) The conditions under which a foreign investor must submit its application for approval shall

    be defined in the implementing regulations referred to in Article 21 of this Law and

    published simultaneously in the Official Gazette of Bosnia and Herzegovina and the

    Official Gazettes of the Entities.

    Article 5

    (a) Foreign investors in Bosnia and Herzegovina shall register their respective investment with

    the competent body of the State.

    With the purpose of acquisition of information about registered companies with foreign investments, the competent registration courts are obligated to notify, at least once in three months, the competent body of the State and Entities about such registrations.

(b) To limit the burden on the foreign investor:

    (i) The State shall ensure in their implementing regulations referred to in Article 21 of this

    Law that their registration formats are alike and conform to international standards.

    No additional information shall be required for the purpose of registration.

    (ii) The competent bodies of the State shall confirm to foreign investors within 10

    working days of their action according to paragraph (a) of this Article that their

    respective investment has been registered. If a registration format has not been

    fully complied with, the respective competent body shall advise foreign investors

    within 10 working days of their action according to paragraph (a) of this Article

    which specific item or items of the registration format have not been complied

    with.

    (iii) Registration by the competent body of the State shall be deemed to have been

    confirmed if such competent body has failed to act according to, and within the

    time limit set by, incision (ii) of this paragraph.

    (c) Bosnia and Herzegovina and the Entities may publish foreign investment data of general

    nature. In so doing, they shall respect the legitimate interest of enterprises concerned and

    shall ensure that their business secrets are not revealed.

    (d) The procedures for registration and publication of investment data set forth in this Article

    shall be stipulated in the implementing regulations referred to in Article 21 of this Law.

    Article 6

    (a) To promote and facilitate foreign direct investment into Bosnia and Herzegovina, the Council

    of Ministers of Bosnia and Herzegovina shall establish an institution for such purposes.

    (b) Entities may also establish such promotional and facilitation institutions in their respective

    territories.

    Article 7

    If established, the institutions referred to in Article 6 of this Law shall cooperate and exchange any necessary information to achieve the objectives of promoting foreign direct investment in Bosnia and Herzegovina and to ensure fulfillment of the objectives of this Law. III. RIGHTS, BENEFITS AND OBLIGATIONS OF FOREIGN INVESTORS

    Article 8

    (a) Subject to the provisions of this Law, and subject to other laws and treaties of Bosnia and

    Herzegovina and laws of the Entities, foreign investors shall have the same rights and

    obligations as the residents of Bosnia and Herzegovina.

    (b) Bosnia and Herzegovina and the Entities shall not discriminate with respect to foreign

    investors in any form, including but not limited to their citizenship, residency, religion, or

    the state of origin of investment.

    Article 9

    (a) Taxation of foreign investors and foreign direct investment shall be carried out in accordance

    with the tax legislation of the Entities.

    (b) To encourage foreign direct investment, the Entities shall ensure that tax legislation referred

    to in paragraph (a) of this Article contains attractive features and rates. The Entities shall

    jointly review, from time to time, such tax legislation to ensure that attractiveness has

    been maintained.

    (c) The tax regimes in the two Entities shall be governed by the following principles:

    (i) corporate tax regimes should not discriminate between foreign and domestic

    investments; and

    (ii) the Entities recognize that competition in granting incentives is undesirable and that

    they are committed to avoiding such competition.

    Article 10

    Subject to the provisions of the Customs Policy Law, or any future Law replacing the Customs Policy Law, a foreign investment shall be exempted from customs and customs duties, except for customs registration.

    Article 11

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    (a) Foreign investors shall have right, for the purposes of their investments, to open on the

    territory of Bosnia and Herzegovina accounts in any commercial bank denominated in the

    national or any freely convertible currency.

    (b) Foreign investors, with respect to all payments related to their investments in Bosnia and

    Herzegovina, shall have the right to freely convert the national currency of Bosnia and

    Herzegovina into any other freely convertible currency.

    (c) Foreign investors shall have the right to transfer abroad, freely and without delay, in freely

    convertible currency, proceeds resulting from their investment in Bosnia and Herzegovina,

    including, but not limited to:

    (i) income from investments received in the form of profit, dividends, interest, and other

    forms of profit;

    (ii) funds received by investors after partial or full liquidation of their investments in

    Bosnia and Herzegovina, or disposal of invested property or proprietary rights;

    and

    (iii) compensation referred to in Article 16 of this Law.

    (d) All transactions will be carried out in accordance with the laws of Bosnia and Herzegovina

    and the Entities.

    Article 12

    Foreign investors shall have the same property rights in respect to real estate as the citizens and legal entities of Bosnia and Herzegovina. Foreign investors, who are citizens of one of the successor states to the former Socialist Federal Republic of Yugoslavia, shall have such rights subject to investors of Bosnian and Herzegovinian citizenship and legal entity status having like rights in the respective successor state.

    Article 13

    Foreign investors shall maintain books and file reports in accordance with internationally accepted accounting and auditing standards and principles and the laws of the Entities.

    Article 14

    Subject to the labor and immigration laws in Bosnia and Herzegovina, foreign investors shall have the right to freely employ foreign employees.

    Article 15

    (a) Foreign investors shall observe the laws and regulations of Bosnia and Herzegovina and the

    Entities.

(b) Restrictions applicable to domestic investment on account of public policy (l’ordre public),

    public health and the protection of the environment shall equally apply to foreign

    investment.

    Article 16

    (a) Foreign investment shall not be subject to any act of nationalization, expropriation, requisition

    or measures which have similar effects, except in the public interest in accordance with

    applicable laws and regulations, without any type of discrimination and against the

    payment of appropriate compensation.

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    (b) Such compensation will be deemed appropriate if it is adequate, effective and prompt.

    (c) The details of the standards for compensation in event of nationalization, expropriation,

    requisition or such similar acts referred to in paragraph (a) of this Article shall meet

    international standards and shall be spelled out in the implementing regulations referred to

    in Article 21 of this Law.

IV. SETTLEMENT OF DISPUTES

    Article 17

    Foreign investment disputes shall be settled by the relevant courts in Bosnia and Herzegovina, unless the parties concerned agree on another procedure for the settlement of disputes, including but not limited to domestic or international conciliation or arbitration.

    V. TRANSITIONAL AND FINAL PROVISIONS

    Article 18

    (a) The Law shall enter into force on the eighth day from the date of its publication in the Official

    Gazette of Bosnia and Herzegovina.

    (b) The Official Gazettes of the Entities shall simultaneously publish the Law.

    Article 19

    (a) On the date of entry into force of this Law, the provisions of laws and regulations concerning

    foreign investment in Bosnia and Herzegovina that are contrary to or inconsistent with

    this Law shall become null and void without the prejudice to the rights and benefits

    granted and the obligations imposed upon the existing foreign investors under the

    previous laws and regulations.

    (b) Notwithstanding this provision, an existing foreign investor may elect in writing to the

    competent body of the respective Entity within 120 days of the coming into force of this

    Law, to become subject to the terms of this Law.

    Article 20

    The rights and benefits of foreign investors granted and obligations imposed, by this Law cannot be terminated or eliminated by the subsequently passed laws and regulations. If such subsequently passed laws and regulations shall have been more favorable to foreign investors, they shall have the right to choose under which regime the respective foreign investment will be governed.

    Article 21

    Bosnia and Herzegovina and the Entities shall, in the areas of their respective competence, issue implementing regulations to this Law within 60 days from the day of the entry into force of this Law. Such regulations shall be published in the Official Gazette of Bosnia and Herzegovina and the Official Gazettes of the Entities, respectively, and shall enter into force on the eighth day from the date of their publication in such Gazettes.

    Article 22

    The Entities shall be responsible in their respective territories for the implementation of this Law. 7

    Article 23

    Bosnia and Herzegovina and the Entities shall cooperate fully to achieve the policy objectives set by this Law and shall take all steps to ensure fulfillment of the obligations arising out of the Law.

    Article 24

    In case of conflict, provisions of international agreements and treaties to which Bosnia and Herzegovina is a party shall prevail over the provisions of this Law.

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