When thinking of the Dominican Republic, what first comes to mind for many is its beautiful beaches, warm climate and welcoming people. Indeed, the country is renowned for its tourism industry and agro-industrial exports. However, during the past decade, the Dominican Republic’s reputation as an investment destination with ample opportunities for growth in these and other areas has continued to grow.
Open for business
The Dominican Republic has a stable legal system that is primarily based on the French civil code system, although it is increasingly influenced by the United States and other international actors. With respect to foreign investment, Law No. 16-95 on Foreign Investment was the primary driver in the elimination of many barriers and disincentives to foreign investment. The same served as a catalyst to orienting the Dominican Government ́s view on foreign investment towards an international vision that champions legal security and welcomes investment. There are also a number of laws and regulations currently in force to promote and facilitate investment, such as laws establishing industrial free zones, promoting development of tourism projects, creating the Center for Export and Investment of the Dominican Republic, as well as modern laws protecting intellectual property, regulating the debt and equity markets, the financial system, the telecommunications market and E-commerce.
The Dominican Republic has an active local securities market, which has experienced exponential growth during the last decade. As of December 19, 2017, the new Securities Market Law was enacted, substantially overhauling and improving the existing legal framework. The law substantially modified the manner in which the regulator supervises the market, establishing clear lines of authority and regulation. Likewise, the new law includes the acknowledgement of different types of market transactions, such as the inclusion of OTC transactions, regulation of public offering of shares, broader scope as to who are considered institutional investors, among other provisions. The new law also includes provisions and rules regarding contracts and operations in the secondary market (not addressed in detail under the previous law) and also expressly recognises repo transactions.
Investing in energy and infrastructure
With respect to the energy and infrastructure sectors, most contracts and investments are governed by the country’s general laws. However, there are a number of specific laws and regulations, such as Law No. 125-01 on the power sector, Law No. 57-07 on tax incentives for renewable energy and Law No. 100-13 on the creation of the Ministry of Energy and Mines, which impact the energy sector. Investments in the energy production sector are typically backed by long-term power purchase agreements, and in many cases by state guarantees (which require congressional approval). Concessions for private toll roads and the like also require congressional approval.
Restructuring and insolvency reform
As of February 7, 2017, insolvency proceedings in the Dominican Republic are governed by Law No. 141-15, Restructuring and Liquidation of Companies and Businesspersons. Law No. 141-15 and its regulation for application repeal and substitute an obsolete framework from the Napoleonic codes which dated to 1956 and did not contemplate the possibility for reorganisation of the debtor. Law No. 141-15, provides for the possibility for the debtor to reorganise prior to the commencement of involuntary liquidation proceedings, although the verifier (an officer entrusted with verifying the financial situation of the debtor) may recommend the immediate liquidation. This insolvency law contemplates two different proceedings: the reorganisation of entities or businesspersons experiencing temporary financial difficulties, and the liquidation of insolvent entities incapable of carrying on business.
Arbitration: An accepted form of dispute resolution
In terms of ensuring arbitration is a valid means of dispute resolution – which is of particular importance and interest to foreign investors – it is critical to note that the right to participate in arbitration as a means for dispute resolution is constitutionally recognised. In addition, Law No. 498-08 on arbitration reinforced these principles regarding the power of parties to enter into and enforce arbitration provisions in contracts. In fact, the same law specifically provides that the Dominican state may agree to arbitration provisions, and such provisions are binding on the state. Finally, the country is party to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.
The Dominican Republic’s economy has grown continually for more than a decade, and it is not hard to see why. The country’s location in the heart of the Caribbean Sea make it well positioned for freight shipping to and from North and South America, and its political stability and friendly, modern legal framework make it a compelling opportunity for any investor.