Legal Regulation of Foreign Investments

 

Law on Foreign Investments


Protection of foreign investments is secured by the Law on Foreign Investments adopted in 1994, which provides investors with guarantees against nationalization and seizure of the invested resources. In addition, this law envisages that in case of any change in the legislation investors may at their discretion either be subjected to a new law or continue following the law actually in force at the date of investment for 5 year period maximum. Generally, the government encourages foreign investments and often compromises especially when big foreign investments are concerned.

 

Making investment does not require any preliminary authorization. The investment is suggested to be in any form of property, including financial assets, rights to monetary claims and intellectual property, which is invested by a foreign investor directly in the territory of Armenia through the establishment of companies (including fully foreign-owned companies, representations and branches), the purchase of existing companies and securities, or the establishment of joint ventures. Moreover, some property listed in the RA Government Decision No. 720 (07.08.2001) to be contributed by a foreign investor to the capital fund of an Armenian entity may be imported free of customs duty, but will still be subject to VAT.

 

The legal regime applied to foreign investments and its application itself cannot be less favourable than the regime of property of the RA citizens and legal entities, proprietary rights and investing activity regime. A foreign investor has even a number of additional privileges.

 

In case of any disagreement between a foreign investor and the Republic of Armenia, the disputes shall be resolved in the RA courts. In case if the Republic of Armenia is not a party of the dispute, the latter shall be resolved in the RA courts or any other bodies resolving economic disputes or, upon the agreement of the parties, in arbitration tribunals unless otherwise provided by international treaties or parties’ preliminary agreement.

 

Concurrently, it is worth noting that beginning from October 16, 1992 Armenia has become a member of the International Centre for the Settlement of Investment Disputes (ICSID) and signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington, 1992) providing facilities for the resolution of legal disputes between eligible parties, through conciliation or arbitration procedures. The headquarter of the Centre created in accordance with this Convention is situated in the headquarter of International Bank for Reconstruction and Development (IBRD). Recourse to the ICSID facilities is always subject to the parties' consent. Today, ICSID is considered to be the leading international arbitration institution devoted to investor-state dispute settlement.

 

 

Ownership right

 

Ownership right is established by the Constitution and is regulated by the Land Code (Chapters 13-15) and the Civil Code (Chapters 10-14). The ownership right of the RA citizens is not somehow limited. Foreign citizens (physical persons) may enjoy any type of ownership right, except for the ownership right to land. If these citizens own any property under ownership right, then they can enjoy only the right to land plot usage, but never an ownership right. Nevertheless, the legal entities registered in the RA State Register, as well as aliens having a special residence permit in the Republic of Armenia (10-year passport, residence card, issued in particular circumstances by the aliens’ registration body – passport and visa inspection of the RA Police) may be granted the ownership right to land.

 

Land alienation for public and state needs can be made only in some exceptional cases for the support of high interests of public in the manner established by the law. 15% more of the market value of the alienated property will be considered adequate. An owner can also be deprived of his lands, upon decision of the Court, in case of violation of the Land Code (Articles 102 - 105).