Part V of the Investment Promotion Act 1992 contains the protections a foreign investor receives in return for the regulation imposed by Parts IV and IVA.
Section 37(1) — who the guarantees protect
The provisions of this section apply to a foreign investor except where treatment more favourable to the foreign investor is accorded under any bilateral or multilateral agreement to which the State is a party.
Section 37 sets a minimum standard. Where a bilateral investment treaty or a multilateral agreement gives the investor more favourable treatment, that treatment prevails.
Note who is protected: a foreign investor, defined in section 3 as any person, corporation, body or association of persons that is not a citizen which makes or proposes to make an investment in the country. The guarantees are not confined to certified enterprises.
Section 37(2) — nationalisation and expropriation
There shall be no nationalisation or expropriation of the property of a foreign investor except —
(a) in accordance with law; and
(b) for a public purpose defined by law; and
(c) in payment of compensation as defined by law.
The paragraphs are joined by “and”. All three must be satisfied. An expropriation lawful in form but for no public purpose, or without compensation, is outside the exception.
The guarantee works alongside section 53 of the Constitution, which protects against unjust deprivation of property and requires just compensation on just terms — a protection available to any person, citizen or not.
What is protected is property. Read with the wide definition of investment in section 3 — movable and immovable property, shares and debentures, choses in action, intellectual and industrial property rights and goodwill, and business and analogous concessions conferred by law including concessions to search for, cultivate, extract or exploit natural resources — the reach extends to resource concessions and licences.
Sections 37(3) and (4) — remittance and repatriation
Subject to any laws relating to taxation and exchange control, a foreign investor shall be allowed the right —
(a) to remit overseas earnings and repatriate capital; and
(b) to remit amounts necessary to meet payments of (i) principal, interest and service charges; (ii) similar liabilities on foreign loans; and (iii) the costs of other foreign obligations approved by the State,
at the exchange rate prevailing under the law at the time of remission or repatriation.
(4) Subject only to the exchange rate prevailing under any law at the time, a foreign investor shall be allowed the right to remit overseas all compensation received under subsection (2)(c).
Subsection (3) is subject to any laws relating to taxation and exchange control. That is a substantial carve-out: the guarantee does not override the tax law, nor any exchange control regime administered under the banking and central banking legislation.
Note the contrast with subsection (4), which is “subject only to the exchange rate”. Compensation for expropriation is more strongly protected than ordinary earnings: it is not made subject to exchange control.
In practice an investor should confirm the current exchange control position with its bank before committing to a remittance schedule, and should structure foreign loan obligations so that they fall within subsection (3)(b).
Section 37(5) — non-discrimination
Subject to any existing laws and to any agreement between the State and a foreign investor, no rate, tax, rent, charge, due, duty, tariff or other levy, and no related procedure or practice, shall discriminate against a foreign investor or its investment on the grounds of its origin.
The prohibition is on discrimination on the grounds of origin. It does not prohibit differential treatment of foreign investors as a class where the distinction rests on something else.
So the reserved activities regime in section 27 is not inconsistent with section 37(5): it distinguishes by ownership and control, not by national origin, and it is in any event an existing law of the kind the opening words preserve.
Note also that the subsection covers “related procedure or practice” as well as the levy itself — so discriminatory administration of a facially neutral charge is within it.
Section 38 — MIGA guarantees
Certification of an enterprise under Part IV shall constitute approval by the Government of Papua New Guinea within the meaning of Article 15 of the Convention Establishing the Multilateral Investment Guarantee Agency for the issue by the Agency of guarantees in respect of investment.
MIGA, part of the World Bank Group, issues political risk guarantees covering expropriation, currency transfer restriction, breach of contract and war and civil disturbance. Article 15 of the Convention requires host country approval before a guarantee is issued.
Section 38 supplies that approval automatically on Part IV certification. A certified investor need not seek a separate government consent.
Note the limit: the section refers to certification under Part IV. It does not mention Part IVA.
Section 39 — investment disputes
The Investment Disputes Convention Act (Chapter 346), implementing the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States, applies, according to its terms, to disputes arising out of foreign investment.
The Investment Disputes Convention Act (Chapter 346) is not currently available on PacLII, so no link is given here.
ICSID arbitration provides a forum outside the domestic courts for disputes between a foreign investor and the State. Whether it is available in a particular case depends on the terms of the Convention and on the consent of the parties — commonly given in an investment agreement, a resource development agreement, or a bilateral investment treaty. Section 39 does not itself constitute consent to arbitrate.
For domestic disputes about the Authority’s own decisions, the route is the section 40 appeal to the Minister, and thereafter judicial review in the National Court.
Sources
- Investment Promotion Act 1992 — ss 3, 27, 28, 37, 38, 39, 40
- Constitution — s 53; Investment Disputes Convention Act (Chapter 346)
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.