Act can do ‘more harm than help’
28 June, 2022, 10:00 am
Foreign investors could be sent to jail for breaking a new investment law.
This, according to prominent Suva law firm Munro Leys.
The company said the “vague and unsatisfactory” new Investment Act could create greater uncertainty for foreign investors.
In a legal alert to its clients, Munro Leys also said aspects of the new law could do “more harm than help” and “poor legal drafting leaves us more confused and slightly alarmed”.
It said serious investors relied on the laws of their target country to give them certainty and transparency.
“The Investment Act, unfortunately, does the opposite. In place of transparency, there is significant potential for confusion and frustration,” the Suva-based law firm said.
“Munro Leys criticises some of the wording of the new law as “vague and almost impossible to legally pin down”.
“If we don’t know who a ‘foreign investor’ is and when they are investing, it is impossible to know which rules apply.”
The firm’s alert also criticised new regulations which required foreign investors to bring into Fiji their total investment amount within three months of “incorporation” and said an investor could be prosecuted for failing to do so.
“The penalty for the offence, for an individual, is a fine not exceeding $10,000 or imprisonment for a term not exceeding five years or both. Bodies corporate can be fined up to $50,000.
“To make matters worse, it’s not clear to whom this three-month rule applies. From a plain reading of the regulations, it applies only to those foreign investors investing in restrictive activities. “However, the authorities appear to have expressed the view that it applies to all foreign investors.
“It is difficult to see the Government prosecuting a foreign investor which does not bring in its money on time. But criminalising delay may create other issues for investors going to the legality of their investment and double down on the uncertainty that has already been created.”
Criticising Section 7 of the Act, Munro Leys said that an investor was required to send an investment proposal to the Government for consent to invest in certain “critical sectors” but it was not clear what those sectors were.
“No one knows what the proposal should say, what criteria the minister will apply in his/her decision and how long the minister will take to approve it.
“It seems that the Government intends for regulations to be made to decide what sectors need ministerial approval. (But) with about a month to go before the new law comes into effect, there are no regulations.
“The problems are not confined to new investors. “Existing investors, including those who complied with the old Foreign Investment Act, are not immune.
“They may now need to apply for permission to make new investments. Some companies who were not previous “foreign investors” may find they are now in that category (and vice versa).”
The Act will come into effect from August.
- Questions sent to Attorney-General Aiyaz Sayed-Khaiyum, Fiji Commerce & Employers Federation (FCEF) and Fiji Chamber of Commerce & Industry remained unanswered when this edition went to press.