Transparency of the Regulatory System
Regulatory and legal transparency continue to pose significant challenges for foreign investors in Burma. Most regulations relevant to foreign businesses are developed at the national level by the following ministries: Commerce; Planning, Finance, and Industry; Investment and Foreign Economic Relations; and Agriculture, Livestock, and Irrigation.
In the past, all regulations were subject to change with no advance or written notice, and without opportunity for public comment. Ministries are not legally obligated to share regulatory development plans with the public or conduct public consultations, though some ministries now hold limited public consultation before finalizing bills for parliamentary consideration or issuing new regulations. For instance, the government solicited public comments on the 2016 Investment Law, including the drafting of the rules and regulations, which went through three rounds of public consultations. In another example, the government conducted public consultations on the Gemstone Policy.
The Burmese government does publish new regulations and laws in government-run newspapers and “The State Gazette.” The Burmese government also publishes information online and has established websites through which businesses can access trade information and also sometimes posts new regulations on government ministry’s official Facebook page.
Foreign investors can appeal adverse regulatory decisions. The relevant ministry drafting the regulation has the mandate to appoint a regulatory body to manage a grievance system to resolve legal disputes and/or establish enforcement mechanisms. For instance, under the Myanmar Investment Law, the Myanmar Investment Commission (MIC) serves as the regulatory body and has the authority to impose penalties on any investor who violates or fails to comply with the law. Investors have the right to appeal any decision made by the MIC to the government within 60 days from the date of decision.
Public finance and debt obligations, exclusive of contingent liabilities are public and transparent. Budget reports are published on the Ministry of Planning, Finance, and Industry (MOPFI) website (https://www.mopfi.gov.mm/en/content/budget-news ). Burma has issued the annual Citizen Budget in the Burmese language since FY 2015-16. The Ministry of Planning, Finance, and Industry has published quarterly budget execution reports, six-month-overview-of-budget-execution reports, and annual budget execution reports on its website since FY 2015-16. However, details regarding the budget allocations for defense expenditures are not transparent. The Burmese government also publishes its debt obligation report on the Treasury Department’s Facebook page. (See: https://www.facebook.com/pages/biz/Treasury-Department-of-Myanmar-777018172438019/ ).
For more information on Burma’s regulatory transparency see: http://rulemaking.worldbank.org/en/data/explorecountries/myanmar
International Regulatory Considerations
Burma has been a member of the Association of South East Asian Nations (ASEAN) since July 1997. As an ASEAN member state, Burma’s regulatory systems are expected to conform to harmonization principles established in the ASEAN Trade in Goods Agreement (ATIGA) to support regional economic integration. Such principles include the removal of unnecessary technical barriers to trade; addressing relevant non-tariff measures among ASEAN member states; facilitation of trade; and upgrading of regulation to ensure safety, consumer health, environmental protection, consumer protection and meeting other social objectives. In an example of ASEAN regulatory harmonization, Burma officially joined the ASEAN Single Window in March 2020 with the launch of the National Single Window Routing Platform, which streamlines the import process by adopting the ASEAN Certificate of Origin Form D.
The Ministry of Commerce’s National Trade Portal and Repository contains all of Burma’s laws, processes, forms, and points of contact for trade. This portal increases transparency in Burma and also meets Burma’s requirements under Articles 12 and 13 of the ATIGA. The Trade Portal can be found at: http://www.myanmartradeportal.gov.mm/index.php .
While Burma is not currently in compliance with WTO notification requirements, the government has developed a WTO notification strategy that could increase the number and quality of notifications.
Legal System and Judicial Independence
Burma’s legal system is a unique combination of customary law, English common law, statutes introduced through the pre-independence India Code, and post-independence Burmese legislation. Where there is no statute regulating a particular matter, courts are to apply Burma’s general law, which is based on English common law as adopted and modified by Burmese case law. Every state and region has a High Court, with lower courts in each district and township. High Court judges are appointed by the President while district and township judges are appointed by the Chief Justice through the Office of the Supreme Court of the Union. The Union Attorney General’s Office law officers (prosecutors) operate sub-national offices in each state, region, district, and township.
The Attorney General enforces standards of due process in the criminal justice system and provides the government’s law officers with a mandate to act as an independent check in the criminal justice system. The Ministry of Home Affairs, led by a minister appointed by the Commander-in-Chief but reporting to the President, retains oversight of the Myanmar Police Force, which files cases directly with the courts. While foreign companies have the right to bring cases to and defend themselves in local courts, there are general concerns about the impartiality and lack of independence of the courts.
In order to address the concerns of foreign investors regarding dispute settlement, the government acceded in 2013 to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). In 2016, Burma’s parliament enacted the much-anticipated Arbitration Law, putting the New York Convention into effect and replacing arbitration legislation that was more than 70 years old. Since April 2016, foreign companies can pursue arbitration in a third country. However, the Arbitration Law does not eliminate all risks. There is still a limited track record of enforcing foreign awards in Burma and inherent jurisdictional risks remain in any recourse to the local legal system. The Arbitration Law, however, brings Burma’s legislation more in line with internationally accepted standards in arbitration.
Certain regulatory actions are appealable and are adjudicated with the respective ministry. For instance, according to the Myanmar Investment Law, investment disputes that cannot be settled amicably are “settled in the competent court or the arbitral tribunal in accord with the applicable laws.” An investor dissatisfied with any enforcement action made by the regulatory body has the right to appeal to the government within 60 days from the date of administrative decision. The government may amend, revoke, or approve any decision made by the regulatory body. This decision is considered final and conclusive.
Laws and Regulations on Foreign Direct Investment
The Myanmar Investment Commission (MIC) plays a leading role in the regulation of foreign investment and approves all investment projects receiving incentives outside of the special economic zones, which are handled by the SEZ’s Central Working Body. Regulation of joint ventures between foreign investors and SOEs is the responsibility of the relevant line ministries.
The Myanmar Investment Law outlines the procedures the Myanmar Investment Commission must take when considering foreign investments. The MIC evaluates foreign investment proposals and stipulates the terms and conditions of investment permits. The MIC does not record foreign investments that do not require MIC approval. Many smaller investments may go unrecorded. Foreign companies may register locally without an MIC license, in which case they are not entitled to receive the benefits and incentives provided for in the Myanmar Investment Law. More information on the MIC can be found at: http://www.dica.gov.mm/en/apply-mic-permit .
There is no “one-stop-shop” for investors with the exemption of Special Economic Zones which can provide “one-stop-shop” service. However, in 2015 the General Administration Department established One Stop Shops (OSS) to facilitate tax payments and assist in obtaining other required permits. As of April 2019, the government has opened 316 One Stop Shops in 72 townships across the nation.
Competition and Anti-Trust Laws
A Competition Law was passed on February 24, 2015, and went into effect on February 24, 2017. The objective of the law is to protect public interest from monopolistic acts, limit unfair competition, and prevent abuse of dominant market position and economic concentration that weakens competition.
The Myanmar Competition Commission serves as the regulatory body to enforce the Competition Law and its rules. The Commission is chaired by the Minister of Commerce, with the Director General of the Department of Trade serving as Secretary. Members also include a mixture of representatives from relevant line ministries and professional bodies, such as lawyers and economists.
The law classifies four types of behavior as punishable violations: acts restricting competition (applicable to all persons); acts leading to monopolies (applicable only to entrepreneurs); unfair competitive acts (applicable only to entrepreneurs); and business combinations such as mergers. The law also restricts the production of goods, market penetration, technological development, and investment, although the government may exempt restrictive agreements “if they are aimed at reducing production costs and benefit consumers,” such as reshaping the organizational structure and business model of a business so as to improve its efficiency; enhancing technology and technological advances for the improvement of the quality of goods and service; and promoting competitiveness of small- and medium-sized enterprises.
Burma is not party to any bilateral or regional agreement on anti-trust cooperation.
Expropriation and Compensation
The 2016 Myanmar Investment Law prohibits nationalization and states that foreign investments approved by the MIC will not be nationalized during the term of their investment. In addition, the law stipulates that the Burmese government will not terminate an enterprise without reasonable cause, and upon expiration of the contract, the Burmese government guarantees an investor the withdrawal of foreign capital in the foreign currency in which the investment was made. Finally, the law states that “the Union government guarantees that it shall not terminate an investment enterprise operating under a Permit of the Commission before the expiry of the permitted term without any sufficient reason.”
ICSID Convention and New York Convention
Burma is not a party to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID). In 2016, the Burmese parliament enacted the Arbitration Law, putting the 1958 New York Convention into effect (see international arbitration below).
Investor-State Dispute Settlement
To date, Burma has not been party to any investment dispute or dispute settlement proceeding at the WTO.
Under the 2016 Arbitration Law, local courts must recognize and enforce foreign arbitral awards against the government unless a valid ground for refusal to enforce exists. Valid grounds for refusal include: one or more parties’ inability to conclude an arbitration agreement; the invalidity of the arbitration agreement, lack of due process, the award falls outside the scope of the arbitration agreement; the arbitration was not in compliance with the applicable laws; or the award is not in force or has been set aside.
International Commercial Arbitration and Foreign Courts
The 2016 Arbitration Law is based on the UNCITRAL Model Law (Model Law), addressing arbitration in Burma as well as the enforcement of a foreign award in Burma. For example, the provisions relating to the definition of an arbitration agreement, the procedure of appointing arbitrator(s) and the grounds for setting aside an award are mirrored in the Arbitration Law and the Model Law; however there are some differences between these two laws. For instance, while parties are free to decide on the substantive law in an international commercial arbitration, the Arbitration Law provides that arbitrations seated in Burma must adopt Burmese law as the substantive law. According to the Arbitration Law, foreign arbitral awards can be enforced if they are the result of a commercial dispute and were made at a place covered by international conventions connected to Burma and as notified in the State Gazette by the President. If the Burmese court is satisfied with the award, it has to enforce it as if it were a decree of a Burmese court. While observers note that there are still issues to be resolved, the Arbitration Law brings Burma’s legislation much closer to international arbitration standards and legislation.
In February 2020, the government of Burma passed the new Insolvency Law, which replaces the Insolvency Act of 1910 and the Insolvency Act of 1920. The new law adopts the United Nations Commission on International Trade Law (UNCITRAL) Model Law on cross-border insolvency, providing greater legal certainty on transnational insolvency issues.
The legislation establishes an effective insolvency regime that addresses both corporate and personal insolvency, with a focus on protecting micro, small and medium-sized enterprises (MSMEs). With regards to personal insolvency, the new law encourages debtors to enter into a voluntary legally binding arrangement with their creditors. This agreement allows part or all of the debt to be written off over a fixed period of time. The law also provides equitable treatment for creditors by enabling an efficient liquidation process to ensure creditors receive maximum financial recovery from the property value of a non-viable business.
The new law establishes the Myanmar Insolvency Practitioners’ Regulatory Council to act as an independent regulatory body and assigns DICA the role of Registrar with the authority to fine individuals contravening the law. In addition, the court with legal jurisdiction can order an individual to make good on the default within a specified time.