HERBERT SMITH FREEHILLS MYANMAR INVESTMENT GUIDE 2016 01
MYANMAR INVESTMENT GUIDE
02 MYANMAR INVESTMENT GUIDE 2016 HERBERT SMITH FREEHILLS
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 02 Note from the authors and editors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03
Herbert Smith Freehills LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04 Herbert Smith Freehills’ Myanmar practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 05 Myanmar group contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
MLSL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
Map of Myanmar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08
At a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09
Introduction to Myanmar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Promotion of foreign investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Dual process for projects involving foreign investment licences . . . . . . . . . . . . . 19 Establishment options in Myanmar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bribery and sanctions issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Key contract law issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Lending and taking security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Dispute resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Oil and gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Labour law and visa requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Real estate law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Intellectual property law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Competition law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Glossary and abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
Since we produced the first edition of this Myanmar Investment Guide in 2012 and the second edition of this Myanmar Investment Guide in 2014, foreign investment in Myanmar has increased dramatically . Myanmar itself has undergone a period of rapid economic growth and of political change; that evolution continues at an astonishing pace . The country is now squarely on the investment map for South East Asia and presents investors with a wealth of opportunities across a range of sectors and industries .
In our experience, the country is moving from a phase of abundant, but largely untapped, potential to a phase of multiple market entrants and a more pragmatic, considered analysis of the investment climate . There are opportunities and challenges in equal measure, and further positive developments are expected following the success of the first democratic general election in 25 years .
In response to questions and feedback from our global client base, I am delighted to introduce this third edition of our guide to investing in Myanmar . The firm continues to advise clients on major transactions, capital projects, dispute resolution, business establishment, compliance, investigations and public international law issues in, or relating to, Myanmar .
Most importantly, we continue to assist our clients in navigating the practical day-to-day challenges that many have faced or will face when considering a new investment opportunity or developing a business in the country .
As with our previous editions, this guide aims to provide an overview of the prevailing legal and regulatory regime . We hope that you will find this third edition informative and focused as much on the practicalities of doing business in Myanmar as on the complexities of the legal sector .
Our Myanmar group is always available to respond to any further questions that you may have . Please let us know if we can assist further .
Justin D’Agostino Managing Partner, Asia Herbert Smith Freehills LLP
NOTE FROM THE AUTHORS AND EDITORS
There have been a number of notable developments in the Myanmar legal sector since 2014 . These include:
the opening up of the banking sector, with the award of the first preliminary licences to nine foreign banks in 2014, followed by a further four licences in 2016;
the liberalisation of the telecommunications sector into a completive market, with the reform of the Telecommunications Law of the Republic of the Union of Myanmar 2013 and the proposed establishment of the MTC as an independent regulator;
the establishment of a new framework for competition policy in Myanmar, with the passing of the new Competition Law of 2015; and
the reform of arbitrational conduct and enforcement of foreign arbitral awards in Myanmar, with the passing of the Arbitration Law (Union Parliament Act No. 5 of 2016) .
Each of these initiatives has been welcomed by the international community and (in aggregate) has boosted confidence in the overall investment climate . Whilst the Myanmar legal framework is complex, it is being continually adapted to support the development priorities of the country as it opens up to increased levels of foreign investment .
The Government of Myanmar has focused on a number of market reform initiatives; in the telecommunications and power sectors most notably and has promoted several large scale infrastructure hubs or ‘special economic zones’ such as Dawei and Thilawa . The developments have been supported by new legislation such as the Myanmar Special Economic Zone Law (2014) . Commentators believe that this trend is likely to
continue under the leadership of the new NLD led government which took its seats in parliament in February this year, after their landslide victory in the country’s first democratic general elections in 25 years .
The licensing rounds in the telecommunications and the upstream oil and gas sectors have been of real significance and have attracted considerable interest from major global corporates . Several foreign investments in those sectors have been the largest into the country to date and are likely to lead to the continued growth of long-term businesses and
socio-economic benefits for Myanmar .
In researching the third edition of this guide, we have addressed the legal position set out in the main national laws currently in force in Myanmar as of 1 April 2016 . We have also commented on informal practice in relation to the implementation of various elements of the laws . However, practice may change from time to time and may be reflected in subordinate or regional legislation .
We would like to thank the attorneys at Myanmar Legal Services Limited (MLSL) for their extremely helpful collaboration on this guide .
Herbert Smith Freehills LLP
Herbert Smith Freehills LLP
Herbert Smith Freehills LLP
HERBERT SMITH FREEHILLS LLP
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Working for many of the largest and most ambitious multinationals across the world, Herbert Smith Freehills provides innovative legal services to corporations, governments, financial institutions and all types of commercial organisations .
The firm advises on corporate, dispute resolution, banking and finance, real estate, energy, mining and infrastructure, and offers a full range of specialist services including investment funds, real estate and property, regulatory and competition, employment and employee incentives, construction, insurance, tax and IP/IT .
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HERBERT SMITH FREEHILLS’ MYANMAR PRACTICE
We believe Herbert Smith Freehills has the most experienced Myanmar practice of all of the major international law firms, having advised on a number of financings, investments, tender processes and disputes across a range of sectors in Myanmar over recent years . We have also had an on-the-ground presence in Yangon through our secondment arrangement with MLSL which is a relationship that has been commended for “work[ing] well” and being “focused on
value-adding support” (Chambers Asia-Pacific 2016) .
We have been and are currently advising on investments, market-entries and commercial arrangements for numerous multinational clients across a broad range of sectors, including (amongst others) in the oil and gas, energy and resources, telecommunications, financial services, consumer goods, automotive, agricultural, real estate, hotel and tourism and pharmaceuticals sector on their current and proposed Myanmar activities .
Our corporate, finance and disputes practices have linked up with our market-leading sanctions and bribery and corruption practices to help a number of clients as they consider their options in the jurisdiction . In particular, we have advised multinational corporations in pre-qualification and tender processes and on related regulatory,
compliance and establishment issues in Myanmar tailored to their commercial objectives . As a result of this extensive experience we understand the local legal and commercial market and the regulatory and political framework which our clients are likely to be faced with upon investing in Myanmar .
As the legal and regulatory landscape continues to change, we keep abreast of developments in Myanmar and provide updated advice through our very close ties to local advisers in Myanmar .
Our Myanmar practice group consists of approximately 20 partners from across our global network and we have approximately
13 other fee-earners within the practice group . We are committed to continuing to expand our practice in Myanmar in line with the needs of our clients .
Band 1, Mayanmar - Chambers Asia Pacific 2015-2016
MYANMAR GROUP CONTACTS
T +65 6868 8032
david .clinch@hsf .com
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alastair .henderson@hsf .com
T +65 6868 8000
pamela .kiesselbach@hsf .com
T +81 3 5412 5485
graeme .preston@hsf .com
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andrew .blacoe@hsf .com
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gavin .margetson@hsf .com
T +852 2101 4005
kyle .wombolt@hsf .com
T +852 2101 4001
austin .sweeney@hsf .com
T +44 20 7466 2764
anna .howell@hsf .com
T +44 20 7466 2270
stephen .murray@hsf .com
T +61 8 9211 7683
robert .merrick@hsf .com
T +82 2 6321 5711
lewis .mcdonald@hsf .com
T +86 10 6535 5136
tom .chau@hsf .com
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Herbert Smith Freehills GJBJ and Herbert Smith Freehills, an Australian Partnership, are separate member firms of the international legal practice known as Herbert Smith Freehills. Further information is available from www.hsf.com.
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills LLP 2016
MLSL has acted for international investors in Myanmar since 1995, advising on a wide range of projects in Myanmar including: manufacturing, infrastructure, mining, pipelines, oil and gas, and the recent award of international licences in the telecommunications sector . MLSL is experienced in dealing with both complex regulatory issues as well as local issues relating to projects in Myanmar and has connections with the relevant regulatory authorities, including senior officials at the Central Bank of Myanmar, Myanmar Investment Committee, the Attorney General’s Office and the Directorate of Investment and Company Administration . As “one of the few Myanmar law firms with high-level business law experience and skills” (Chambers Asia Pacific 2014), and being a law firm known for being “very knowledgeable in market practice” (Chambers Asia-Pacific 2016) . MLSL understands the different issues foreign investors will need to consider in deciding how to proceed with a project and has the relevant connections to be able to see projects through to completion .
KHIN CHO KYI
The MLSL team is led by Managing Director, Daw Khin Cho Kyi, who has over 30 years of legal experience in Myanmar . Her clients include private Myanmar and international corporate entities, as well as multilateral international foundations and financial institutions, foreign embassies, and law firms .
Daw Khin Cho Kyi is considered to be a top tier leading individual in general business law in Myanmar (Chambers Asia Pacific 2012), and is described as “an outstanding Myanmar lawyer
with a commercial understanding of what the client wants” (Chambers Asia-Pacific 2016) who is both “highly respected by many senior government officials” (Chambers Asia Pacific 2014) and “always good to work with” (Chambers Asia Pacific 2011) .
HERBERT SMITH FREEHILLS’ STRONG RELATIONSHIPS WITH MLSL
Our work in Myanmar has led to us developing successful working relationships with a number of local law firms, including MLSL . Herbert Smith Freehills and MLSL know each other well, having worked together on a number of matters in Myanmar over the years . We have developed a programme of seconding corporate associates to Yangon to work with MLSL . This arrangement has allowed clients to directly benefit from our secondees on-the-ground knowledge of Myanmar and ensured a seamless service is provided to clients on their Myanmar transactions .
MAP OF MYANMAR
NAY PYI TAW
AT A GLANCE
(As at the time of publication unless stated otherwise)
NAME OF COUNTRY THE REPUBLIC OF THE UNION OF MYANMAR
AREA 676,578 KM2
CAPITAL NAY PYI TAW
ADMINISTRATIVE DIVISIONS REGIONS: SAGAING, TANINTHARYI, BAGO, MAGWAY,
MANDALAY, YANGON, AYEYARWADY
STATES: KACHIN, KAYAH, KAYIN, CHIN, MON, RAKHINE, SHAN
THE UNION TERRITORIES (INCLUDING NAY PYI TAW)
MAIN LANGUAGES MYANMAR, REGIONAL DIALECTS (CHIN, JINGPHO, KAYAH,
KAREN, MON, RAKHINE, SHAN) AND ENGLISH
MAIN RELIGIONS BUDDHISM, ISLAM, CHRISTIANITY AND HINDUISM
MAIN INDUSTRIES AGRICULTURE, OIL AND GAS PRODUCTION, FORESTRY, TEXTILES, MINING AND GEMSTONES, HEAVY INDUSTRY AND IRON AND STEEL MANUFACTURING
ECONOMIC DATA AND STATISTICS
CURRENCY KYAT (MMK)
TRADE ORGANISATION MEMBERSHIPS
WTO, ASEAN, BIMSTEC, SAARC
GDP (PPP; NOMINAL) US$11244 .3 BILLION; US$65 .3 BILLION
GDP PER CAPITA US$4,800; US$1,269 .0
PRESIDENT HTIN KYAW (INAUGURATED ON 30 MARCH 2016) FIRST VICE PRESIDENT MYINT SWE (INAUGURATED ON 30 MARCH 2016) SECOND VICE PRESIDENT HENRY VAN THIO (INAUGURATED ON 30 MARCH 2016) MINISTER FOR FOREIGN AFFAIRS AUNG SAN SUU KYI
MINISTER OF COMMERCE THAN MYINT
MINISTER OF ELECTRIC POWER AND ENERGY
AUNG SAN SUU KYI
MINISTER OF INDUSTRY KHIN MAUNG CHO
MINISTER OF LABOUR, IMMIGRATION AND POPULATION
MINISTER OF NATURAL RESOURCES AND ENVIRONMENTAL CONSERVATION
THEIN SWE OHN WIN
MINISTER OF PLANNING & FINANCE KYAW WIN
MINISTER OF TRANSPORT AND COMMUNICATIONS
GOVERNOR OF THE CENTRAL BANK OF MYANMAR
THANT ZIN MAUNG KYAW KYAW MAUNG
SPEAKER OF THE UPPER HOUSE MAHN WIN KHAING THAN SPEAKER OF THE LOWER HOUSE WIN MYINT
MAIN POLITICAL PARTIES NATIONAL LEAG UE FOR DEMOCRACY PARTY, UNION
SOLIDARITY AND DEVELOPMENT PARTY, NATIONAL UNITY PARTY, SHAN NATIONALITIES DEMOCRATIC PARTY, RAKHINE NATIONALITIES DEMOCRATIC PARTY, ALL MON REGIONS DEMOCRATIC PARTY, AND NATIONAL DEMOCRATIC FORCE
INTRODUCTION TO MYANMAR
MODERN HISTORY OF MYANMAR
After gaining its independence from the British in 1948, Myanmar1 entered a period of armed conflict and political instability . Following a socialist revolution led by the military in 1962, Myanmar continued to be governed by a succession of military governments . In 1989, the government began to implement economic reforms, including passing a foreign investment law .
In November 2010, Myanmar held its first general election in 20 years, as a result of which, in March 2011, a new civilian government was established under the leadership of President Thein Sein . Since then, Myanmar has been actively introducing economic and political reforms, ranging from the introduction of foreign investment initiatives to the implementation of new labour laws protecting the rights of workers .
Myanmar has also been fostering international relations, and recently held the rotating presidency of the Association of South East Asian Nations (ASEAN) for 2014 . There have also been an increasing number of diplomatic visits from the United States (including the first by an in-office president of the United States of America when Barack Obama visited Yangon in November 2012) and European countries, in addition to those from neighbouring Asian countries including Thailand, Malaysia and Japan . Furthermore, as sanctions previously imposed on Myanmar have been suspended either in whole or in part by the European Union, the United States of America and other western countries, there has been a surge in the number of international investors seeking to expand their presence in the country .
Myanmar is a presidential republic with a bicameral legislature (Pyidaungsu Hluttaw) comprising two houses: the Upper House (Amyotha Hluttaw) containing 224 seats; and the Lower House (Pyithu Hluttaw) containing 440 seats .
Myanmar adopted a new constitution, which was announced on 29 May 2008, and subsequently ratified and promulgated by way of a national referendum . The new constitution came into effect on 31 January 2011 . Under the new constitution, a quarter of seats in both parliamentary chambers are reserved for members of the military, and the three key ministerial posts (Ministers of Defence, Home Affairs and Border Affairs) are allotted to serving army personnel .2 President Thein Sein is also a retired army general, and served as prime minister under the former military regime .
BASIS OF MYANMAR’S LEGAL SYSTEM
Myanmar’s legal system is complex and reliant on a number of very old statutes, some of which date back to the nineteenth century . It is based on a combination of:
colonial period laws (pre-1948); parliamentary laws (1948 – 1962);
Revolutionary Council laws (1962 – 1974);
People’s Assembly laws (1974 – 1988); State Law and Order Restoration Council/
State Peace and Development Council laws (1988 – 2011); and
current legal period (Pyidaungsu Hluttaw laws) (2011 to present) .
In addition to statute, the courts of Myanmar continue to apply common law principles dating back to the British colonial period .
The main sources of Myanmar’s legislation include the legislation referred to above and rules and regulations, directives, notifications and instructions, in each case issued by relevant governmental authorities in Myanmar .
OVERVIEW OF FOREIGN INVESTMENT OPPORTUNITIES
In 1988, the Myanmar Government implemented a market economy policy with a view to attracting foreign investment and revitalising the domestic private sector . It was in this context that the Union of Myanmar Foreign Investment Law of 1988 (1988 FIL) was enacted, and the Procedures Relating to the Union of Myanmar Foreign Investment Law of 1988 (FIL Procedures) were introduced to ameliorate foreign investment conditions . Despite the introduction of the 1988 FIL and FIL Procedures, until recent years, foreign investment opportunities were limited, due in no small part to the international sanctions regimes imposed against Myanmar . Since the regime change in March 2011, however, the new government has been pro-actively promulgating an open-door policy on foreign investment . This shift in attitude has brought about wide-ranging changes in the legal framework for foreign investment and has created a rapidly changing regulatory environment .
On 2 November 2012 a long-awaited and much-debated new Foreign Investment Law (2012 FIL) was signed into law by President
Thein Sein to replace the 1988 FIL . The 2012 FIL took some 10 months to pass into the Myanmar statute book . Several iterations of the 2012 FIL were put before President Thein Sein but rejected for being too protectionist before the 2012 FIL was finally enacted . The 2012 FIL has taken further steps towards the liberalisation of the foreign investment regime in Myanmar,
narrowing certain restrictions that had previously been in place and widening tax and other incentives in an attempt to attract foreign investors . On 31 January 2013, the Ministry of National Planning and Economic Development (MNPED) issued implementing rules and regulations pursuant to the 2012 FIL which further clarify the principles set out in the 2012 FIL and the rules which foreign investors must comply with (FIL Rules) .
In addition, on 31 January 2013 the Myanmar Investment Commission (MIC) which facilitates the provisions of the 2012 FIL, issued Notification No. 1/2013 which provided further detail regarding the implementation of the 2012 FIL, including the specific business activities classified as (i) prohibited, (ii) restricted to a joint venture with a maximum of 80% foreign ownership, and/or (iii) subject to terms and conditions which may be stipulated by the Myanmar Government or the relevant Ministry . On the 14 August 2014 the MIC issued Notification No. 49/2014 (MIC Notification 2014), which replaces Notification No. 1/2013 although does not significantly affect the foreign investment regime and continues to set out the specific business activities which are classified as (i) prohibited, (ii) restricted to a joint venture; or (iii) subject to conditions .
In general, the new MIC Notification 2014 introduced a more limited list of restricted activities required to be conducted in a joint venture with a Myanmar person, but also expanded the third category of activities subsect to conditions at the discretion of the relevant Ministry and extended the requirement activities within this third “conditional” category also be conducted through a joint venture with Myanmar person subject to a maximum of 80% foreign ownership threshold .
PROMOTION OF FOREIGN INVESTMENT
Myanmar’s foreign investment policy forms part of its strategy to reconstruct and develop its economy . The reform process entails adopting a market economy, encouraging private investment, and opening up the economy to foreign trade and foreign investment .
Together with its implementing legislation ie the FIL Rules and the most recent MIC Notification 2014, the 2012 FIL sets out the general framework for foreign investment in Myanmar . The 2012 FIL contains various incentives for foreign investment, such as tax exemptions and reliefs, an extension to land lease rights, and state guarantees against nationalisation and in relation to the repatriation of profits .
Additional laws intended to promote foreign investment have also recently been enacted, such as the Myanmar Special Economic Zone Law 2014 (2014 SEZL) . The 2014 SEZL replaces the Dawei Special Economic Zone Law of 2011 (DSEZL) and the Special Economic Zone Law of 2011 . The new 2014 SEZL is a general law covering all special economic zones (Special Economic Zones) within Myanmar which allow foreign investors to undertake a range of business activities in designated areas whilst offering various tax reliefs and exemptions to eligible investors .
A new Myanmar investment law is currently being developed which, if passed, will repeal Myanmar’s Citizens Investment Law 2013 and the FIL and replace them with one consolidated law (Proposed Investment Law) . It is expected (based on the draft of the Proposed Investment Law released dated 24 February 2015) that this law will include various other changes to the current foreign investment regime including
removal of the requirement for all foreign investors to obtain an MIC permit before they are eligible to obtain various rights (for example the right to lease land for 50 years rather than one year) .
GOVERNMENTAL BODIES OVERSEEING FOREIGN INVESTMENT
The MIC is the governmental agency which administers the 2012 FIL (as further implemented by the FIL Rules and MIC Notification 2014) in coordination with various ministries and organisations to facilitate foreign investment in Myanmar . It is also responsible for reviewing foreign investment proposals and has the authority to stipulate the terms and conditions of foreign investment under the 2012 FIL .3
The Directorate of Investment and Company Administration (DICA) acts as the Secretariat for the MIC and the Director General of the DICA was formally known as the Registrar of Companies and receives applications for the incorporation of foreign companies . Both the MIC and DICA are part of the MNPED .
FOREIGN INVESTMENT REQUIREMENTS AND PROCEDURES
In order to benefit from the incentives and protections set out in the 2012 FIL, any company established in Myanmar must be registered with, and obtain a permit (MIC Permit) from, the MIC in accordance with the terms of the 2012 FIL and the FIL Rules (although as noted in 2 .1 .4 above this requirement may be relaxed in the near future) . It is not mandatory for a foreign company to obtain an MIC Permit and a foreign investor may instead choose to solely register their company under the MCA without applying for an MIC Permit . However a foreign company
solely registered under the MCA will not be eligible for the benefits and protections available under the 2012 FIL, and will be subject to certain limitations in the business activities it is able to carry out .
In principle, pursuant to the 2012 FIL, the FIL Rules and MIC Notification 2014, foreign investors can invest in Myanmar through a 100% foreign owned entity, other than in relation to business activities which are classified as:
restricted to joint ventures with a Myanmar person; or
restricted to joint venture and subject to conditions which may be stipulated by the Myanmar Government or the relevant ministry .
Businesses operating in sectors which are classified as “restricted” are only open to foreign investment through a joint venture with a Myanmar entity or citizen . Any such joint venture company shall be subject to a maximum foreign ownership limitation of 80%, subject to the approval and discretion of the MIC and the Myanmar Government .
Subject to certain limited exceptions, the relevant conditions applicable to businesses operating in sectors identified in the third category are not expressly set out in MIC Notification 2014 . Such conditions are generally able to be imposed at the discretion of the relevant government ministry and some are permitted only in a joint venture with the relevant government ministry itself . In addition, MIC Notification 2014 introduced the requirement that business operating activities within this third “conditional” category will now also be subject to the maximum 80% foreign ownership limitation . While this requirement is now express, a minimum local ownership requirement was always within the broad discretionary authority of the government and ministries .
There is no longer any prescribed minimum capital investment requirement in order to obtain an MIC Permit . Historically, the MIC required a minimum foreign capital investment of between US$300,000 to US$500,000, depending on the nature of the business . However these figures are no longer prescribed under the relevant regulations and the MIC may now determine the appropriate level of capital required on a case-by-case basis depending on the nature and scale of the proposed project . In some business sectors, the minimum capital requirement is likely to be considerably higher than the above amounts .
Foreign investment projects under the 2012 FIL are also subject to a dual licensing and registration process comprising the following steps:
submitting an application to the MIC to obtain an MIC Permit; and
submitting an application to the DICA to register an entity and obtain a permit to conduct its business under section 27(A) of the MCA (a Permit to Trade) .
RESTRICTED AND PROHIBITED BUSINESS ACTIVITIES UNDER THE 2012 FIL (AND SOEEL)
As noted above, the list of prohibited activities under the most recent MIC Notification 2014 has been reduced from the list set out in MIC Notification 2013 . Prohibited activities generally include business activities in particularly sensitive sectors, such as the exploration and production of jade and gemstones or administrating electrical power systems . Business activities listed in the restricted category are required to be conducted in a joint venture subject to an 80% maximum foreign ownership limitation . This category includes most manufacturing activities and the development and construction of commercial or residential real-estate projects . The list of conditional business activities includes certain
bespoke conditions for particular sectors but also now requires some activities to be conducted in a joint venture with a Myanmar person or the relevant Government Ministry for the sector .
A number of specific business activities are listed in MIC Notification 2014 and it is therefore important to consider each new venture by reference to the activities listed in MIC Notification 2014 .
Foreign investment in business activities in sectors not included within the list of prohibited or restricted activities, or which are otherwise reserved for the state under the State-Owned Economic Enterprises Law of 1989 (SOEEL), are considered on a case-by-case basis .
RESTRICTED BUSINESS ACTIVITIES UNDER THE SOEEL
The SOEEL grants the Myanmar Government the exclusive right to conduct any economic enterprise in relation to the following 12 business sectors:
extraction of teak and sale of the same in the country and abroad;
cultivation and conservation of forest plantation with the exception of village-owned fire-wood plantation cultivated by villagers for their personal use;
exploration, extraction and sale of petroleum and natural gas and “production of products of the same” (which is likely to mean derivative products);
exploration and extraction of pearl, jade and precious stones and export of the same;
breeding and production of fish and prawns in fisheries, which have been reserved for research by the government;
postal and telecommunications services;
air transport services and railway transport services;
banking services and insurance services; broadcasting services and television services; exploration and extraction of metals and
export of the same;
electricity generating services other than those permitted by law to be carried out by private and cooperative electricity generating services; and
manufacture of products relating to security and defence which the government has, from time to time, prescribed by notification .
However, the SOEEL also permits the above listed restricted business activities to be undertaken through a joint venture with the state, or independently by any person (subject to conditions), if it is in the interests of the state . In addition to governmental approval, most of the business activities listed above will also require the permission of specific ministries .
INVESTMENT PROTECTION UNDER THE 2012 FIL
Under the 2012 FIL, the Myanmar Government guarantees that companies operating with the permission of the MIC in accordance with the 2012 FIL will not be nationalised during the period (or extended period) of the relevant contract . The law also guarantees that the investment activities taking place under an MIC Permit will not be terminated before the expiry of the term of the MIC Permit without sufficient cause .
The 2012 FIL contains another guarantee by the government that an investor of foreign capital will be able to repatriate its profits and that it may do so in a foreign currency . In practice, however, the Foreign Exchange Management Department of the Central Bank of Myanmar (CBM) must also give permission for all transfers abroad of foreign currency . Arranging
foreign currency transfers is a bureaucratic process, however provided the basis for a foreign currency transfer is approved under the terms of an MIC Permit (ie repayment of capital or interest on an approved offshore loan), obtaining the approval of the CBM should be merely administrative .
TAX RELIEFS AND EXEMPTIONS UNDER THE 2012 FIL
Under the 2012 FIL, the MIC is to grant tax exemptions to foreign companies from income tax for a period extending to five consecutive years, inclusive of the year of commencement of production of goods or services in respect of any enterprise for the production of goods or services . Where it is beneficial for the state, exemption or relief from income tax for a further reasonable period may also be granted, depending upon the success of the enterprise in which the investment is made .
In addition, the MIC may grant any of the following tax exemptions, reliefs and/or benefits to foreign companies:
exemption or relief from income tax on profits of the business if they are maintained in a reserve fund and reinvested within one year after the reserve is made;
the right to accelerate depreciation in respect of machinery, equipment, buildings or other capital assets used in the business, at the rate fixed by the MIC for the purpose of income tax assessment;
if the goods produced by any enterprise are exported, relief from income tax of up to 50% on the profits accrued from such exports;
the right to pay income tax on the income of foreign nationals at the rates applicable to the citizens residing within the country;
the right to deduct from assessable income such expenses incurred in respect of research and development relating to the enterprise
which are actually required and are carried out within the state;
if losses are sustained within two years immediately following the period set out in (a), the right to carry forward and set off such losses for up to three consecutive years;
exemption or relief from customs duty or other internal taxes or both on machinery, equipment, instruments, machinery components, spare parts and materials used in the business which are imported for use during the period of construction (along with any additional materials required in the event that the project is expanded);
exemption or relief from customs duty or other internal taxes or both on such raw materials imported for the first three years of commercial production following the completion of construction; and
exemption or relief from commercial tax on products manufactured for export .
There are no rules or guidelines in accordance with which the MIC will determine whether or not to grant the above benefits, and they are understood to be granted on a case-by-case basis . It should also be noted that the draft of the proposed new investment law the draft of which was dated 24 February 2015 does not contain any tax exemptions or reliefs and it remains unclear what the tax position of foreign investors will be under this law .
SPECIAL PROVISIONS AND PROTECTIONS UNDER THE 2014 SEZL
As mentioned above, the 2014 SEZL was passed by Parliament in January 2014 and is a general law covering all Special Economic Zones in Myanmar . The 2014 SEZL is similar to the previous special economic zone laws in that its objective is to develop industry and develop cooperation between Myanmar and other countries in relation to industry, business, the
economy and commercial and financial business within a prescribed zone identified for the purposes of development . It also aims to create employment opportunities and improve living standards in the areas surrounding the Special Economic Zones .
Additionally the MIC has issued notification 59/2014 in connection with the Kokang Special Economic Zone and the Ministry of National Planning and Economic Development has issued notification 81/2014 in connection with the Thilawa Special Economic Zone . The former sets out the boundaries of the Kokang Special Economic Zone whilst the latter outlines the procedure for businesses looking to establish in Thilawa Special Economic Zone .
Foreign entities looking to invest in Myanmar under the 2014 SEZL will need to gain approval from the Management Committee, established by the Central Body . Similar to the 2012 FIL, tax reliefs and exemptions are granted to foreign investors on a case-by-case basis .
Investors are only entitled to carry out certain business activities within the Special Economic Zones, as stipulated in the 2014 SEZL . However, in practice, virtually all kinds of businesses, provided they are not prohibited by the state and are approved by the Management Committee of the relevant Special Economic Zone, can potentially be conducted in Special Economic Zones .
TAX RELIEFS AND EXEMPTIONS UNDER THE 2014 SEZL
Foreign investors who are operating under the 2014 SEZL may also apply for the following reliefs and exemptions:
income tax exemption for the first seven years in relation to business investments in exempted zones or exempted zone businesses;
income tax exemption for the first five years in relation to business investments in business
development zones or other businesses within the territory of a Special Economic Zone;
50% relief on the income tax specified for the second five year period for investment business in an exempted zone and business development zone;
50% relief on the income tax specified for the third five year period for investment business in an exempted zone and business development zone if the profit is kept for reinvestment and reinvested into the business within one year;
exemptions from customs duty and other taxes for raw materials, machinery and equipment and certain types of goods for investors in an exempted zone; and
certain exemptions from customs duty and other taxes for the first five years on machinery and equipment for construction for investors in a business development zone, followed by relief of 50% of customs duty and other taxes for a further five years .
Under the 2014 SEZL, foreign investors are also entitled to apply for an extended land lease of up to fifty years with the option to apply for an extension of up to another twenty five years .
Developers and investors under the 2014 SEZL may also seek the permission of the Management Committee to rent, mortgage or sell the land and buildings to another person for investment within the terms granted to operate .
The 2014 SEZL also includes a guarantee against nationalisation of business ventures within the period of the investment approval granted by the relevant Management Committee .
FOREIGN EXCHANGE AND CURRENCY
Foreign exchange transactions are governed by the Foreign Exchange Management Law of 2012 (FEML) and the Foreign Exchange Management Rules of 2014 (FEMR) which are administered by the CBM . The FEML repealed the Foreign Exchange Regulations Act of 1947 (FERA) . Foreign exchange control is managed by the Foreign Exchange Management Department (under the authority of the CBM), and the Foreign Exchange Management Board in accordance with the FEML, the FEMR and the instructions of the Ministry of Finance and Revenue .
The FEML provides that there shall be no restriction on foreign exchange payments out of Myanmar for “current transactions”, which includes any payments in connection with foreign trade and business, interest on offshore loans, and payments of net income . However all foreign exchange transactions require the approval of the CBM and may only be conducted through banks authorised by the CBM to deal in foreign exchange .
Underlying documentation is likely to be required by the transferring bank making the foreign exchange payment, such as a contract or invoice . All international transfers will then be submitted to the regular sitting of the relevant CBM committee for approval as a matter of the internal procedure of the transferring bank . In practice, approval of the CBM will generally be an administrative requirement for the transfer of money out of Myanmar in accordance with a business plan which has been approved pursuant to an MIC Permit .4
If a foreigner wishes to transfer funds to a Myanmar company or citizen, this may be done through the recipient’s account with a relevant Myanmar bank licensed to conduct foreign currency transactions . It is not possible to transfer Myanmar Kyat (MMK) out of the country .
DUAL PROCESS FOR PROJECTS INVOLVING FOREIGN INVESTMENT LICENCES
The current process for obtaining various permits and registering companies is
time-consuming, typically taking approximately three months to complete the company establishment process . Efforts have been made to streamline the process and to create a
one-stop shop service within the DICA including the recent opening of a DICA office in Yangon (the head office where applications are processed has historically been in Nay Pyi Taw) and the process has certainly improved . Further reforms are expected to be introduced by way of a revised companies law, which was initially expected to be issued by the end of 2015, but which is likely to be further delayed .
CURRENT PROCESS FOR OBTAINING AN MIC PERMIT
In order to enjoy the benefits of the 2012 FIL, foreign investors are required to obtain an MIC Permit by submitting an investment proposal to the MIC in the prescribed form . The MIC Permit enables the foreign investor to carry out specific business activities under the 2012 FIL and to benefit from the tax reliefs, exemptions and other preferential treatment available under the 2012 FIL .
The requirements and supporting documents relating to the investment proposal to be submitted to the MIC in connection with the MIC Permit application is set out in detail in the Foreign Investment Rules and summarised below:
documentation evidencing financial credibility (for example the latest audited final accounts of the person or company intending to invest);
bank reference and recommendation;
detailed calculations supporting the economic viability of the project, which cover the following items:
estimated annual net profit, income and expenditure;
estimated amount of foreign exchange earnings and requirements;
estimated period for recovering initial investment;
prospects of creating employment;
prospects of increasing national income;
relevant local and foreign market conditions; and
requirements for domestic consumption (of the results of the project);
in the case of a proposal by a 100%
foreign-owned company, the draft terms of any contracts to be entered into with the relevant authorities under whose jurisdiction the project falls;
in the case of a joint venture, the draft terms of any contracts to be entered into between the foreign investor and a Myanmar national or entity, and if the joint venture is to take the form of a limited liability company, the draft articles and by-laws; and
documentation relating to any applications for tax exemptions under the 2012 FIL .
If the MIC is satisfied that the proposal fulfils all the requirements under the 2012 FIL, it will award the foreign investor an MIC Permit, with terms and conditions attached . The 2012 FIL stipulates that the MIC is required to assess the
completeness of the proposal within 15 days of its submission (and reject it where it is incomplete) . The MIC must then make a decision on whether to issue the MIC Permit within 90 days of its submission .
The MIC is empowered by the 2012 FIL to grant an extension, relaxation or amendment of any term of an MIC Permit . However, the 2012 FIL does not empower the MIC to grant approvals required by other Myanmar laws and only the authorities empowered under the relevant laws are able to grant the necessary approvals .
CURRENT PROCESS FOR REGISTERING AN ENTITY AND OBTAINING A PERMIT TO TRADE
In addition to obtaining an MIC Permit, foreign investors wishing to benefit from the incentives and exemptions available under the 2012 FIL must also establish a Myanmar company or branch office, and obtain a Permit to Trade (akin to a business permit) from the DICA, prior to commencing operations in Myanmar . This is a separate process from the MIC Permit process outlined above and is administered by the DICA rather than the MIC .
Foreign companies and branches of foreign companies must be registered with the DICA and obtain a Certificate of Incorporation or in the case of a branch office, a Certificate of Registration . The Certificate of Incorporation (or Certificate of Registration) evidences the formal commencement of the corporate entity in accordance with the MCA .
The application processes for registration of an entity obtaining an MIC Permit and obtaining a Permit to Trade were previously separate, however, these applications are now processed by the DICA and MIC simultaneously . The first step in any company registration is conducting a name check to ensure the intended name is available for use . The application for registration
of a company must include the following documentation:
application for registration;
copy of shareholders’ certificates of incorporation and copy of memorandum and articles of association;
two sets of the company’s memorandum and articles of association printed both in Myanmar and English . In the case of a joint venture with a state-owned enterprise, the memorandum and articles must also have been approved by the Attorney General and the Minister of MNPED, in accordance with the SCA;
a declaration of registered office;
letter confirming results of name check;
a declaration both in Myanmar and English, as to which documents are legal documents and which are official;
undertaking not to conduct trading activities; a declaration stating the full address of the
registered office of the company or branch
office in Myanmar;
a certificate of translation;
a list of the directors and managers of the Myanmar entity including names, nationalities and addresses and copy of passport or national registration card;
copy of passport or national registration card of each shareholder; and
a list of persons authorised to accept service of process and notices in Myanmar on behalf of the company or branch .
The requirement for a Permit to Trade applies to all entities with any foreign, shareholding or ownership, whether they are 100%
foreign-owned, a joint venture between a foreign entity and Myanmar entity (including
state-owned enterprises) or a branch office of a foreign incorporated company . Despite its name, a “Permit to Trade” does not allow a foreign entity to engage in general trading activities, but rather it acts as a general business licence for foreign entities .
The application for a Permit to Trade must be submitted to the DICA in the prescribed form and be supported by the following documents (a number of which are also required in the application for registration set out above):
Form A of the Myanmar Companies Regulation of 1957;
list of intended economic or business activities to be undertaken in Myanmar;
bank statement evidencing the financial resources of the foreign company / individual . The bank statement should show that the shareholder has sufficient capital for incorporation;
resolution of the board of directors (if both or either of the foreign and local parties to a joint venture are companies);
resolution of the shareholders; and a signed undertaking to bring into Myanmar the prescribed amount in foreign currency .
To register a branch office of a foreign incorporated company, the following documents must be submitted in addition to those required for applications for company registration:
a copy of the memorandum and articles of association or the company charter, statute or other instruments constituting or defining the constitution of the foreign head office, notarised and consularised by the Myanmar Embassy in the country where the company is incorporated;
either (i) the annual reports for the last two financial years, or (ii) copies of the balance sheet and profit and loss accounts for the last two financial years of the foreign incorporated head office, which are notarised and consularised by the Myanmar Embassy in the country where the company is incorporated; and
where the original memorandum and articles of association and other relevant documents are not in the English language, authenticated translations of such documentation .
An application for a Permit to Trade is reviewed by the Capital Structure Committee (CSC), with the Director General of the MNPED acting as Chairman . Upon accepting the application, the CSC and Chairman will decide on the amount of initial foreign capital to be brought into Myanmar, and will issue instructions for such foreign capital to be remitted . The Chairman also stipulates the terms and conditions to be attached to the Permit to Trade .
DICA PROCESS AND APPROXIMATE TIME FRAME
Submission of application to DICA
Payment of registration fee
Receipt of temporary documents
Open bank account
Receipt of final registration documents
1–2 WEEKS 1–2 WEEKS 1 WEEK
Submission of application to MIC
Review and meeting with Proposal Review Group
Submission to Ministries, local govt, and NPT Council
MIC Review and consideration
Approval or denial of MIC Permit
MIC Permit issued within 90 days of submission
MIC PROCESS AND APPROXIMATE TIME FRAME
ESTABLISHMENT OPTIONS IN MYANMAR
OVERVIEW OF BUSINESS ENTITIES
The most common business structures used in Myanmar by foreign investors are:
companies limited by shares (these includes both 100% foreign-owned companies and joint venture companies); and
branch offices .
Other options, though less commonly used, include partnerships, not-for-profit organisations, companies limited by guarantee (with or without share capital) and unlimited companies without share capital .
Until very recently, foreign banks were restricted to opening representative offices and were not permitted to open branch offices or enter into joint ventures with, or invest capital in, local banks . However, in 2014 the Myanmar Government awarded nine foreign banks preliminary licences to commence certain limited banking operations in Myanmar, followed by a further four licences awarded in March of this year . The first of these banks (Bank of Tokyo-Mitsubishi UFJ) opened in April 2015 . The concept of a representative office is different to a branch office and is limited to the financial (and insurance) sector only . A representative office is limited to being able to engage in business development and marketing activities .
COMPANY OR A BRANCH OFFICE?
The key factor in determining whether to establish a company or a branch office will usually be tax implications . A branch office is considered to be non-resident for tax purposes, and is accordingly subject to a corporate income tax rate of 35%, whereas a company is taxed at 25% . However, there may be other factors in
relation to group accounting policies which will need to be taken into account and it is important to obtain tax advice when considering which form of entity to establish .
As set out in further detail at Chapter 3 above, the establishment process is largely the same for a branch office or a subsidiary company and both must be registered with the DICA . However, in practice the actual documentation required for establishment of a company is less complicated as the documentation does not need to be consularised and notarised .
A branch office is generally able to conduct most business activities, and can also be formed either as a manufacturing or services entity . However, in the event a branch office wants to expand its operations in Myanmar, it may have difficulty obtaining any additional licences that may be required . For example, outside certain limited examples found especially in the oil and gas sector, a branch office will not generally be able to obtain a permit from the MIC in order to obtain the benefits and protections under the 2012 FIL .
COMPANY LIMITED BY SHARES5
The limited company structure is the most commonly used vehicle by foreign companies seeking to operate in Myanmar .
There are two types of limited companies; these are private limited companies and public limited companies, which are both governed by the MCA .
Companies limited by shares include:
companies incorporated in Myanmar but with 100% foreign ownership (shareholders can be both companies and individuals); and
joint venture companies incorporated in Myanmar between foreign companies or individuals and Myanmar companies or individuals (including state-owned entities) .
Both 100% foreign-owned companies and joint venture companies are governed by the MCA and/or the Special Company Act of 1950 (SCA), depending on whether or not there is state involvement .
The number of shareholders of a private limited company is limited to no more than 50 members, excluding employees and former employees . Transfers of shares, public subscriptions of shares and debentures are restricted .
There must be a minimum of two subscribers at the time of incorporation, but there is no need for a general assembly for the purpose of incorporation .
There is no upper limit to the number of shareholders in a public company .
There must be a minimum of seven subscribers at the time of incorporation .
Joint venture companies
Foreign companies and individuals are permitted to set up joint venture companies with both private and state-owned Myanmar companies, as well as with Myanmar nationals . However, the provisions governing joint venture companies will differ, depending on whether or not the state is involved in the enterprise . Joint ventures with state-owned entities are also established under the MCA, but are subject to further rules under the SCA .
Joint ventures with non-state-owned entities
Subject to restrictions set out in MIC Notification 2014, there is generally no upper limit to the percentage of foreign investment in the case of joint ventures with private Myanmar companies . It is therefore possible for foreign companies to hold close to 100% of the company’s capital, with the exception of certain sectors as discussed above .
The joint venture company is established in accordance with the MCA .
Joint ventures with state-owned entities
Subject again to restrictions set out in MIC Notification 2014 or as part of approvals granted pursuant to the SOEEL, there are no minimum foreign investment requirements in terms of the proportion of the total investment allowed by foreign investors . Joint ventures with state-owned entities are also established under the MCA, but are subject to further rules under the SCA .
As a company formed under the SCA, a joint venture with a state-owned company will need its memorandum and articles to be approved by the Myanmar Government .
Registration of foreign companies is a legal requirement under the MCA . Under the MCA, a foreign company is defined as (i) any company other than a Myanmar company or a special company or (ii) a company incorporated outside Myanmar and having an established place of business in Myanmar . The definition of a Myanmar company (a company whose entire share capital is, at all times, owned and controlled by citizens of Myanmar) means that where a foreign person holds an interest in a company (even if that interest is a single share), that company is deemed to be a “foreign company”, and as such, is required to apply for registration and obtain approval to establish itself in Myanmar as a foreign company .
Registration of foreign companies must be submitted in the prescribed form with supporting documentation (including, among other things, the company’s articles and/or joint venture agreement) to the DICA, as set out in further detail at Chapter 3 above .
Companies whose shares are held by the government are required to register in accordance with both the MCA and the SCA .
The MCA also requires companies (whether foreign or domestic) to have a registered office in Myanmar to which all communications and notices are to be addressed . The address of a company’s registered office must be provided to the DICA when filing incorporation documents, and further notice must be submitted to the DICA within 28 days of any change to the registered address .
The minimum share capital requirement for a foreign company depends on the nature of the activities that a company intends to undertake:
for foreign businesses operating a manufacturing company, or engaging in business activities which are considered to be “industrial” in nature, the minimum foreign capital requirement will be US$150,000; and
for foreign businesses operating a services company the minimum foreign capital requirement will be US$50,000 .
A foreign company must deposit 50% of the above minimum capital in foreign currency into its Myanmar bank account prior to the DICA issuing the final approvals and incorporation documents . The remaining 50% must then be deposited within one year of receiving the final Permit to Trade .
Annual general meetings
The first annual general meeting of a company must be held within 18 months from the date
of the company’s incorporation . Subsequent annual general meetings must be held every calendar year at intervals of no more than
15 months . The period between the date of the financial year for which the audited accounts are made up, and the date of the annual general meeting must not be longer than nine months . Myanmar has a mandatory financial year ending 31 March . This therefore means that a company’s accounts must be filed by
31 December .
If the company fails to hold a meeting in accordance with the MCA, the company and every director or manager of the company who is knowingly and wilfully a party to the default will be liable to pay a fine .6
Matters concluded at annual general meetings include the appointment of directors and auditors, the remuneration of directors, and the approval of audited financial statements and the directors’ report .
Within 21 days of the annual general meeting, companies must file an annual return together with their audited accounts with the DICA, as well as a copy of all extraordinary and special resolutions within 15 days from the date on which such extraordinary and/or special resolution was passed .
Issuing shares and decreasing/ increasing share capital
In principle, the MCA includes provisions which allow a company to have more than one class of shares (eg ordinary or preferential shares) . However, in practice differentiated classes of shares are not common in Myanmar and the process for registering articles with different share classes is uncertain .
Shares can be paid up in part or in full, and it is relatively common for shares to be issued otherwise than for cash (ie by payment in kind) .
Companies registered under the 2012 FIL are required to obtain authorisation from the MIC in the event that they wish to increase their capital or change their shareholding . There is no prescribed form for this, but companies must also consult with the DICA and this process usually takes three to four months .
Once the MIC has granted authorisation, companies are required to register any allotment of new shares with the DICA using the prescribed form within one month of the date of allotment . Registration usually takes about one week .
Minority shareholder protections
Companies are free to include special voting rights and other minority shareholder protections in their articles or shareholders’ agreement (if applicable) .
Foreigners are not permitted to be directors of wholly Myanmar-owned companies .
Public companies must have at least three directors . The maximum number of directors for a company is not prescribed by statute, but it is common practice for such number to be set out in the company’s articles of association .
Any changes to the composition of directors (eg new appointments or removals) must be notified to the DICA within 14 days of
the change .
The main constitutional documents of a company limited by shares are the memorandum and articles of association .
Financial statements and filing requirements
Companies must appoint one or more auditors .
The company’s directors may appoint the first auditor, and the shareholders can decide on subsequent appointments at annual general meetings . At such annual general meetings, the directors are required to present an audited balance sheet and profit and loss account, which gives a true and fair view of the company’s finances in relation to the relevant financial year .
Companies must complete and file a return setting out their estimated income for the relevant financial year within three months from the end of the relevant financial year .
Myanmar has a mandatory fiscal year which ends on 31 March . This applies to all companies regardless of their date of incorporation .
Under the MCA, a company may be wound up by the Court, voluntarily (including by members or creditors) or subject to the supervision of the Court . Past members may continue to be liable for the company’s debts either if (i) they ceased to become a member less than one year preceding the winding up or
it appears that the other members cannot satisfy their required contributions . However, past members’ liability is limited to amounts unpaid on the shares .
Other legal requirements for companies include the following:
The MCA requires the name of the company to be painted on or affixed to the outside of its registered office and every place of business . A company’s name must also be engraved in legible writing on its company seal, and stated on all stationery, notices, advertisements and other official publications .
There are no general domestic production rules or local procurement requirements, but there may be instances in which specific directions from the government are given in relation to these matters .
The MCA defines a “Branch Office” simply as a branch office of a foreign company . Branch offices are deemed to be foreign corporate entities and have a non-resident foreigner status .
Branch offices are required to be registered at the DICA in accordance with the MCA, as set out in further detail at Chapter 3 above . Both branch and representative offices must also make certain annual filings at the DICA in relation to the balance sheet of their foreign head office Company and statements of shareholdings in the foreign company .
Generally speaking, the nature of business that can be conducted by a branch will depend on the industry in which the branch and its head office are involved .
BRIBERY AND SANCTIONS ISSUES
ANTI-CORRUPTION LAWS AND ECONOMIC SANCTIONS IN MYANMAR
Since the publication of the first edition of this guide, there have been a number of developments in the anti-corruption laws and economic sanctions that apply when doing business in Myanmar .
As discussed further below, the Burmese parliament adopted a new anti-corruption law in 2013, which established a new governmental agency to investigate allegations of corruption . How the law and the agency will work in practice remains to be seen, but foreign investors will have to allow for the risk of their businesses being scrutinised by both Burmese and foreign agencies looking to combat bribery .
Most of the sanctions that had applied to foreign investors seeking to do business in Myanmar have now fallen away . However, certain elements of the US regime are still in place and investors will need to adopt a thoughtful approach to managing their potential exposures under US law .
As is the case with many developing economies that are newly opened to foreign investment and have a legacy of government control of the economy, investing in Myanmar carries with it significant corruption risks . Although the country has undergone extensive reforms in the last few years, the reform process is still ongoing and corruption is perceived to be a major and endemic challenge, particularly in the natural resources sector and regulated services sectors, and when handling import and government licensing processes . This perception is reflected in Myanmar’s low ranking in Transparency International’s Corruption Perception Index
survey (it ranked 157th out of 177 countries surveyed in 2013), and calls for investors to exercise care when engaging with government agencies, choosing business partners, using intermediaries or contracting in Myanmar in order to avoid running afoul of relevant
anti-corruption laws, such as the US’s Foreign Corrupt Practices Act or the UK’s Bribery Act .
As noted above, the domestic legal and enforcement framework concerning corruption in Myanmar has recently changed . On 7 August 2013, the Union Assembly adopted a new
Anti-Corruption Law and repealed the Suppression of Corruption Act which had been on the statute books since 1948 . Along with the Penal Code, the new law is the key anti-bribery legislation in Myanmar .
The new law was in part intended to bring Burmese anti-bribery laws into line with the UN Convention Against Corruption, to which Myanmar subscribed in 2005 . Under the law, if found guilty of corruption, public officials may be sentenced to up to 10 years’ imprisonment with certain holders of political office potentially facing sentences of up to 15 years . Other individuals found guilty of corrupt activities under the statute, which may include
bribe-payers, can serve up to seven years in jail .
The legislation also creates a new enforcement agency, the Anti-Corruption Commission (ACC) . Among other matters, the commission has powers to form investigation teams, require inspection of bank records, prohibit transfers of money and property, confiscate the proceeds of bribery and prosecute offences . The 15-member ACC is headed by a retired army officer with other members including senior civil servants, lawyers, auditors and lawmakers .
In addition to adopting new legislation, the Myanmar government has recently joined the Extractive Industries Transparency Initiative . Under this programme, signatory companies in the oil, gas and mineral sectors agree to declare any payments to governments, while member governments declare all revenue from extractive industries . Myanmar published its first EITI report, prepared independently by Moore Stephens, in January 2016 .
To date, there has been only a limited number of corruption-related investigations in Myanmar . One of the more high profile recent investigations was that commenced by Burmese authorities in 2013 into allegations of corruption involving a former telecoms minister connected to the award of telecommunications licences . The case highlights the risks foreign investors face when entering newly-opened regulated sectors in Myanmar .
So far, there has not been any major investigations of corrupt activity in Myanmar by foreign authorities, such as the US Department of Justice or the UK’s Serious Fraud Office . This is in a large part due to the fact that the Burmese economy was, until recently, effectively closed to foreign investment . It is to be expected that, with an increase of foreign investment and economic expansion, the number of investigations of corruption by foreign and domestic authorities will rise .
On 13 March 2014 the Union Assembly also passed the Anti-Money Laundering Law 2014 (Anti-Money Laundering Law) which repealed the old Control of Money Laundering Law 2002 . (Previous Anti-Money Laundering Law) However, the implementing rules for the Previous Anti-Money Laundering Law (the Control of Money Laundering Rules 2003) remain in force for the time being until new implementing rules for the Anti-Money Laundering Law are passed . Under the
Anti-Money Laundering Law a person (including
a company or organisation) convicted of money laundering is liable to a ten year prison sentence . Majority shareholders and directors are potentially liable to a 7 year prison sentence for the money laundering acts of a company . The Anti-Money Laundering Law also contains a series of lesser offences (eg a failure to report instances of money laundering by certain proscribed organisations and persons) . Certain reporting organisations (eg banks and professionals such as lawyers and accountants) also have an obligation to undertake due diligence before taking on clients .
The Anti-Money Laundering Law also establishes a series of bodies which undertake two functions: (1) a function supervising the compliance of reporting organisations and (2) a function investigating alleged instances of money laundering .
Since mid-2012, the various sanctions regimes that applied to Myanmar have been significantly relaxed . The EU and Australian sanctions have been largely rescinded, and are now effectively reduced to an embargo on trade in arms and military equipment .
Since July 2012, the scope of the US sanctions regime has been appreciably limited by the issue of a series of General Licences by the US Treasury’s Office of Foreign Assets Control (OFAC), which OFAC has recently incorporated into a revised version of its Burmese Sanctions Regulation . However, the US regime still contains certain key limitations and prohibitions:
it prohibits US persons – both individuals and corporations – from dealing with Specially Designated Nationals (SDNs), the Burmese Ministry of Defence, state or non-state armed groups, and any entity owned 50 per cent or more by any of the foregoing;
it permits US persons to engage in new investment, but requires them to abide by certain reporting requirements issued by the US Department of State where their aggregate investments exceed US$500,000 in value . The reports are in a large part made available to the general public, and are intended to set out the various policies and procedures that investors have for their investments in Burma, including policies on human rights,
anti-corruption, and any investments with the Myanma Oil and Gas Enterprise (MOGE);
it prohibits the import of jadeite and rubies into the United States; and
while it generally permits the exportation and re-exportation of financial services to Myanmar, it imposes certain conditions on these services, and it only permits US persons to engage in a broader range of transactions (including opening accounts) with 4 named Burmese banks .
The effect of these remaining restrictions is that foreign investors need to be careful when structuring their investment and activities in Myanmar to avoid running afoul of US sanctions . In particular, foreign investors, both US and non-US, need to consider putting in place appropriate controls where they have US affiliates, important support functions based in the US, or US directors or employees working in their business to avoid creating risks under US law . Further, all foreign investors will need to consider what the remaining US restrictions might mean for making payments in US dollars or using US dollars as their medium of exchange . As a practical measure, this will necessitate speaking to potential banking partners to work out how best payments to or from Burmese parties might be effected .
Finally, US investors also need to consider putting in place appropriate policies and procedures to satisfy their disclosure obligations under the Department of State’s reporting requirements .
The key to managing risks under both
anti-corruption and sanctions laws is conducting appropriate risk-based due diligence, both on proposed contractual counterparties (partners, intermediaries, suppliers, customers, etc) and transaction structures . Among other things, such diligence exercises aim to establish whether or not proposed counterparties are or are owned by government officials or SDNs, or whether the proposed transactions might involve a flow of payments or other benefits to those persons .
Conducing diligence reviews in Myanmar can be difficult because of the challenges involved in accessing public records and issues surrounding the reliability and completeness of the same . Investors can seek to address those challenges by seeking documents from counterparties, obtaining references, and negotiating appropriate contractual representations . In some cases, depending on the level of risk a particular transaction might present from a corruption or sanctions perspective and the size of the transaction, it might be appropriate to engage a third-party firm to conduct background checks on a proposed counterparty .
If an investor is intending to enter a continuing relationship with a particular counterparty, the investor should periodically refresh its due diligence review of its counterparty as the risk profile of the counterparty can change, for example, if it is acquired by an SDN . At the outset, investors will also need to consider negotiating appropriate representations, warranties, exit and termination rights and remedies with their counterparties, so that they can take appropriate steps to protect themselves should the risk profile of a business relationship turn adverse .
KEY CONTRACT LAW ISSUES
BASIC CONTRACT LAW PRINCIPLES
The Contract Act of 1872 (Contract Act) forms the basis of contract law in Myanmar, but other legislation, such as the Sale of Goods Act of 1930, the Transfer of Property Act of 1882 and the Specific Relief Act of 1877, also contain provisions governing specific kinds of contracts and remedies .
The Contract Act covers basic contract law matters such as the formation, revocation, performance and breach of contracts, but also includes provisions on fraud, misrepresentation, indemnities and guarantees, bailment and agency . Similar to other legislation, the Contract Act includes common law principles, but there is very little legal commentary generally available to assist the interpretation of the provisions of the Contract Act .
Under the Contract Act, a contract is defined as an agreement that is made by the free consent7 of parties competent to contract, for a lawful consideration and with a lawful object, and is not expressly declared to be void .
An agreement is formed if there is:
a proposal, whereby one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence;
acceptance of the proposal, whereupon the initial proposal is converted into a “promise”; and
consideration for the promise (ie the passing of something of value) whereupon the promise becomes an “agreement” .
Proposals and acceptances of proposals are capable of revocation .
According to the Contract Act, an agreement is void in certain circumstances including if:
both parties to an agreement are under a mistake as to a matter of fact essential to the agreement;
the consideration is unlawful;
it is made without consideration (subject to certain exceptions, such as contracts that are in writing and registered, promises to compensate for something done or promises to pay a debt otherwise barred by limitation periods);
it is in restraint of a lawful profession, trade or business of any kind;
it is in restraint of legal proceedings; and it is not certain or capable of being made
PRIVITY OF CONTRACT
Myanmar law does not recognise any concept similar to the English law doctrine of privity of contract and a claimant does not need to be a party to a contract to have standing in the courts to enforce its rights thereunder .
EXCLUSION OF LIABILITY
There is no court precedent in Myanmar relating to the exclusion of liability by way of agreement .
Under the Contract Act, in the case of a breach of contract, the party who suffers the breach is entitled to receive from the party in breach compensation for any loss or damage caused, which (i) naturally arises in the usual course of things from such breach and is not remote or
indirect, or (ii) the parties knew when they made the contract to be likely to result from the breach .
Penalties are permitted under Myanmar law . If the contract contains a stipulation by way of penalty, the party claiming the breach is entitled, whether or not actual damage or loss is proved
to have been caused, to receive from the party in breach of contract the stipulated penalty .
The limitation periods for claims relating to contract under the Limitation Act of 1908 are as follows:
TYPE OF CLAIM PERIOD
For specific performance of a contract Three years (from the date fixed for the
performance, or if no date is fixed, when the claimant has notice that performance is refused)
For rescission of a contract Three years (from when the facts entitling the claimant to have the contract rescinded first became known to him)
For compensation for the breach of any contract, express or implied, not in writing, not registered and not specially provided for in the Limitation Act of 1908
Three years (from when the contract is breached, or where there are successive breaches, when the breach in respect of which the claim is instituted occurs, or where the breach is continuing, when it ceases)
For compensation for the breach of a contract in writing and registered . Only certain deeds need to be registered (eg deeds for the sale of immovable properties) . Deeds can be registered at the Office of the Registrar of Deeds .
Six years (from when the period of limitation would begin to run against a claim brought on a similar contract not registered)
LENDING AND TAKING SECURITY
REQUIREMENT FOR LENDERS TO OBTAIN APPROVALS TO LEND MONEY TO MYANMAR-BASED COMPANIES
The Moneylenders Act of 1945 (Moneylenders Act) requires those who carry on a
money-lending business to register as a moneylender . As a matter of practice however, the Moneylenders Act would not apply to foreign exchange-denominated loans and therefore an overseas lender should not require a licence to lend money to a company based in Myanmar .
A new law, the Foreign Exchange Management Law of 2012 (the FEML) was passed by Parliament in August 2012 . The FEML sought to liberalise foreign exchange transactions in Myanmar . The FEML expressly provides that there shall be no restriction on foreign exchange payments into or out of Myanmar for “Current Transactions”, which includes:
Payments due in connection with foreign trade; and
other current business, including services and normal short-term banking and credit facilities and payments due as interest on loans and payments of moderate amounts for amortisation of loans .
Notwithstanding the liberalisation brought in by the FEML, in reality all foreign exchange transactions still require the prior approval of the CBM and may only be conducted through banks authorised by the CBM to deal in foreign exchange transactions . Recent regulatory controls introduced by the CBM also seek to increase visibility over all incoming loans and we understand authorised local banks now have to seek approval from the CBM before accepting the influx of foreign currency loans .
In addition, any entity which is operating under the 2012 FIL or the Myanmar Citizens Investment Law of 2013 (MCIL) will also require approval from the MIC prior to entering into any loan agreement or repayment of any amounts in relation to the same . In practice such approval can be set out as part of the investors licensing process which will make any subsequent approvals required from the CBM much more of an administrative task and should be relatively straightforward to obtain .
CONSEQUENCES OF MAKING A LOAN TO A BORROWER IN MYANMAR WITHOUT THE RELEVANT APPROVALS
In practice, it is not possible to electronically transfer money outside of Myanmar without the approval(s) noted above and therefore any overseas lender who makes a loan to a borrower in Myanmar without receiving the relevant approvals(s) may find it difficult to be repaid . Nor will it be possible to enforce a loan made to a Myanmar entity without the approval of the CBM .
LIMITS TO THE LEVEL OF INTEREST THAT CAN BE CHARGED ON LOANS MADE IN MYANMAR
Under the Regulations for Financial Institutions of 1992, the interest rate on loans by local banks in the local currency, the Kyat (MMK), is limited . There is no limit to the interest rate that can be charged on foreign currency denominated loans however, the interest rate on such loans will be reviewed by the CBM when seeking approval for the loan .
AGREEMENTS BETWEEN LENDERS ON PREFERENCE
There are no express provisions or Myanmar court decisions that could be used as guidance
as to whether one lender can agree that a second lender may be preferred over the first lender for repayment of debt irrespective of when that debt was incurred . Due to the lack of express provisions in Myanmar laws relating to subordination, it is assumed that subordination may be done by contract .
Taking meaningful security over assets in Myanmar remains one of the major challenges facing international lenders looking to make loans to companies based in Myanmar . Whilst in theory it is possible for an overseas lender to take security over several different forms of assets in Myanmar (with the notable exception of land, as described further below), there has been no established practice or procedure in which to register a security interest .
Licensing/registration requirements for a lender
Whether or not a lender has to be registered or licensed in Myanmar in order to take security hinges on the phrase “doing business”, for which there are no interpretative guidelines . However, as a matter of current practice, an overseas lender does not have to be licensed or registered in Myanmar in order to take security over assets in Myanmar or a guarantee from an entity incorporated in Myanmar .
Assets over which security can be taken
As a general rule, any entity operating under the 2012 FIL or MCIL will require prior approval from the MIC prior to entering into any security arrangements . In addition, CBM approval will be required as part of the overall loan arrangements .
ASSET LEGAL PROVISIONS
Land Section 3 of the TIPRA prohibits an overseas lender from taking a security interest over land in Myanmar . The section states: “No person shall transfer any immovable property by way of sale, purchase, gift, acceptance of a gift, mortgage, acceptance of a transfer by any other means to a foreigner or a company owned by a foreigner” . Therefore, an overseas lender cannot take a security interest over land or immovable property by way of mortgage .
In addition, Directive 3/90 issued by the government in 1990 prohibited the mortgage or sale of a right of occupancy of the whole or part of a building on leased land to foreign nationals and foreign economic organisations, except with the prior approval of the government . However, the FIL Rules provide that an investor with an MIC Permit may apply for the approval from the MIC to sub-lease or mortgage the land buildings approved for investment in certain circumstances (although this will still be subject to the restrictions under the TIPRA noted above) .
In theory an overseas lender may however be able to take a charge over immovable property in Myanmar as a charge does not create an interest or any right in the property itself so does not violate the restrictions in the TIPRA . A charge would entitle a chargee to make a forced sale of the property (with the assistance of the court) upon default . However, as with enforcement of other forms of security this also remains untested and there are uncertainties over the registration process .
One additional method for a foreigner to take security over immovable property in Myanmar may be the use of a “security agent” . We understand that in certain circumstances it may be possible for a locally authorised Myanmar bank to act as a security agent and hold a security interest on trust for a foreign entity . This procedure is however relatively untested and there remains risk with registration and enforceability .
Shares in a Myanmar company
In theory a foreign or local entity or person may take security over the shares in a locally incorporated foreign Myanmar company . However, there are uncertainties around the registration process and the enforcement of such security remains untested .
Approval of the MIC will also be required if the local entity is operating under an MIC Permit . The exercise of any security would accordingly be subject to any restrictions on change of ownership of the local company or any restrictions on foreign investment in such a company .
As a matter of practice, loan documentation will need to be reviewed and approved by the CBM, which is also likely to require sight of security documentation . However but this will need to be discussed with the CBM on a case by case basis .
ASSET LEGAL PROVISIONS
Bank accounts Myanmar law is unclear on the taking of security interests over bank accounts . However, the Rules relating to Financial Institutions of Myanmar Law of 1991 allow local banks to accept demands or time deposits with bank(s) as security for a loan .
The Myanmar courts have previously ruled that money belonging to a debtor that is deposited in a bank or a debt due to him by the bank can be attached for the purposes of enforcing a judgment by means of a prohibitory order on the bank . Further, monies in local currency and foreign currency deposited with a bank can be subject to temporary injunction . In certain foreign exchange-denominated loan transactions, bank accounts, monies on deposit and balances in bank accounts have been utilised as security for the loan .
Receivables (rights under contracts)
The TPA in theory permits the assignment of receivables but there is considerable uncertainty regarding how assignment of receivables under the TPA would work in practice, and to date there have been no reported cases on this point .
Insurance Security can be taken over insurance . Section 135 of the TPA states that every assignee, by endorsement or other writing, of a marine or fire insurance policy, in whom the property of the subject insured shall be absolutely vested at the date of the assignment, shall have transferred and vested in him all rights of suit as if the contract contained in the policy had been made with himself . In addition, illustration (ii) to section 130 of the TPA makes reference to the assignment of life insurance to a bank for securing the payment of a debt .
Approval of the CBM is also likely to be required and the security should be discussed with them as part of seeking approval for the overall loan arrangements .
Floating charge over all assets
Under section 109(1)(f) of the MCA, a floating charge on the undertaking or property of a company may be taken as a security interest . However, if immovable property is included in the assets of the company then this is subject to the provisions of the TIPRA, ie it is not possible for security to be taken by foreign entities in respect of immovable property where this gives them any right or interest in the property itself .
REGISTRATION AND FILING REQUIREMENTS OF SECURITY INTERESTS
Pursuant to section 109 of the MCA, every mortgage, charge or floating charge on the undertaking or property of a company must be registered with the DICA within 21 days of creation in order to be valid . If it is not registered, the security interest will be void and unenforceable against the liquidator and other creditors of the company . However, in practice, the process for how to actually register such security interest remains uncertain (and as far as we are aware has only been done a couple of times to date) . There is no searchable public registry in which to search security interests and therefore it is difficult for parties to independently check whether or not any security has been taken and/or registered over the property or shares of a Myanmar company . In addition, as mentioned above, we understand that the DICA is generally not in the practice of a checking for any registration of security against the shares or assets of company prior to processing any request for the transfer of such shares or assets . There is therefore a risk that even registered security interests may not provide the same protection as they would in other jurisdictions .
The Registration Act also requires that all security interests relating to immovable property be registered with the Office of the Registration of Deeds under the Ministry of Agriculture and Irrigation . Non-registration may make the security interest unenforceable . As noted above, foreign persons are not permitted to take security over immovable property in Myanmar .8
ENFORCEMENT OF SECURITY FOLLOWING DEFAULT BY THE BORROWER
As a general rule, a court order is required for the enforcement of security and a lender cannot enforce its security freely after default by the borrower . Section 69 of the TPA contains the
only notable exceptions to this general rule:
A mortgagee has the power to sell the mortgaged property for which the related loan is in default without the intervention of a court in the following cases:
where the mortgage is an “English Mortgage” . Section 58(e) of the TPA defines an English mortgage as “where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed”, and neither the mortgagor nor the mortgagee is a Hindu, Muslim or Buddhist or a member of any other race, sect, tribe or class specified in the Government Gazette;
where a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage deed and the mortgagee is the government; and
where a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage deed and the mortgaged property is situated within the towns of Yangon (formerly called Rangoon), Mawlamyaing, Pathein, Sittwe or in other towns or areas which the government may specify in the Government Gazette .
The power to sell mortgaged property as outlined above may not be exercised until written notice requiring payment of the principal money has been served on the mortgagor and default has been made in payment of the principal money or of part thereof, for three months after service .
If a court order is required, the enforcement of security is likely to take a minimum of two years .
PREVENTION OF ENFORCEMENT OF SECURITY OR GUARANTEE BY A LIQUIDATOR OR CREDITOR
A liquidator or creditor of the borrower or guarantor could prevent the enforcement of security or a guarantee . A creditor of a company (the borrower) may apply to the court for winding up under section 166 of the MCA and the court has the power to restrain further proceedings in any suit against the company .
Where a winding up order has been made by a court or a provisional liquidator appointed, no suit or other legal proceeding may be commenced or continued against the company except by leave of the court . In addition, the MCA gives the liquidator the power to take the property and assets of the company into his custody and sell them .
INSOLVENCY OF THE BORROWER AND PRIORITY OVER SECURITY
Notwithstanding the ability of a liquidator or creditor to prevent enforcement of security as described above, generally the secured assets of an insolvent borrower will be protected from the general creditors of the borrower and, subject to the payment of certain preferential claims (such as debts to the government, employee and labour and pension claims), may be enforced outside of any insolvency proceedings . The applicable Myanmar laws that would apply if the borrower becomes insolvent are the MCA, the Myanmar Insolvency Act of 1920, the Yangon Insolvency Act of 1909, the Central Bank of Myanmar Law of 1990, the Rules relating to Financial Institutions of Myanmar Law of 1990 and the Code of Civil Procedure of 1909 (CPC) . These laws include a number of sections dealing with priority of debts .
Myanmar’s Constitution and the Union Judiciary Law No 20/2010 (Judiciary Law) defines a four-tiered court system comprising:
the Supreme Court;
the State or Divisional/Regional High Courts; the Self-Administered Division/Zone Courts; the District Courts; and
the Township Courts .
The Supreme Court is located in Nay Pyi Taw and is presided over by a Chief Justice, two Deputy Chief Justices and eight other Justices . The Supreme Court is recognised as the highest court in Myanmar and supervises the judicial and administrative functions of the courts, including the appointment of all judges (with the exception of Supreme Court Justices who, along with Chief Justices, are appointed by the government) .
The Township Courts hear civil and criminal cases at first instance . Appeals can be made to the District Courts and the State or Divisional/ Regional Courts, which have the power to reverse first instance judgments .
There are also other types of special courts such as the Courts-Martial and the Constitutional Tribunal of the Union, whose powers are not subject to the Supreme Court .
The official language of the court is Myanmar . There are no jury trials under Myanmar’s legal
system . Cases are normally presided over by a
single judge, with the exception of special cases in which the Chief Justice of the Supreme Court may instruct the formation of a panel of judges .
Civil court proceedings are governed by the Code of Civil Procedure of 1909 (CPC) and the
Courts Manual .
While Myanmar has a functioning Court system, it is relatively unsophisticated and therefore not well suited to the resolution of complex commercial disputes . It is also not possible to dismiss the risk of external influence on the judicial procedure .
ENFORCEMENT OF FOREIGN COURT JUDGMENTS
A foreign court judgment can be recognised and enforced by a court in Myanmar if it is “conclusive” . Under the CPC, a foreign judgment is deemed to be conclusive except where:
it has not been pronounced by a court of competent jurisdiction;
it has not been given on the merits of the case; it appears on the face of the proceedings to be
founded on an incorrect view of international
law, or a refusal to recognise the law of the Union of Myanmar, in cases in which such law is applicable;
the proceedings in which the judgment was obtained are opposed to natural justice;
it has been obtained by fraud; or
it sustains a claim founded on a breach of any law in force in the Union of Myanmar .
However, the enforcement of foreign judgments is subject to the sole discretion of the Myanmar courts and the associated inherent risks . There are very few (if any) recent reported cases which deal with the enforcement of judgments of foreign courts .
ARBITRATION IN MYANMAR
Arbitration in Myanmar is not straightforward, although it remains preferable to the court system . Myanmar’s parliament recently enacted the much-anticipated Arbitration Law (Union Parliament Act No . 5 of 2016) (“Arbitration Law”) on 5 January 2016, replacing arbitration legislation which was more than 70 years old .
In doing so, Myanmar has given effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to which Myanmar acceded on 16 April 2013 . The new law is largely based on the model arbitration law of the United Nations Commission on International Trade Law (UNCITRAL) and deals with both the regulation of arbitration conducted in Myanmar and the enforcement of foreign arbitral awards in Myanmar .
Government policy has historically dictated that contracts between state-owned entities and foreign companies must specify Myanmar law as the governing law, and that disputes be settled by arbitration under the Arbitration Law . It may be possible to negotiate the inclusion of non-Myanmar arbitration provisions .
The new Arbitration Law is a significant development for international investors in Myanmar as it provides ()a modern framework for the conduct of arbitration in Myanmar with more minimal court intervention, and (b) the basis for giving effect to Myanmar’s obligations under the New York Convention (see below) .
ENFORCEMENT OF FOREIGN ARBITRAL AWARDS
Myanmar is also a party to the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927, both of which were implemented by the Arbitration (Protocol and Convention) Act of 1937 (A(PC)A) .
The A(PC)A only applies to foreign arbitral awards:
in relation to matters regarded as commercial under Myanmar law;
involving parties from two or more different contracting states to the 1923 Geneva Protocol and 1927 Geneva Convention; and
which have been made in one of the contracting states with which Myanmar has made a reciprocal arrangement .9
The A(PC)A stipulates that for a foreign arbitral award to be enforced, it must:
have been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed;
have been made by the tribunal provided for in the agreement or constituted in a manner agreed upon by the parties;
have been made in conformity with the law governing the arbitration procedure;
have become final in the country in which it was made;
have been made in respect of a matter which may lawfully be referred to arbitration under the law of Myanmar; and
not be contrary to public policy or the law of Myanmar .
Under the A(PC)A, a foreign award is not enforceable if the court considers that:
the award has been annulled in the country in which it was made;
the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case, or was under some legal incapacity and was not properly represented;
the award does not deal with all the questions referred to; or
the award contains decisions on matters beyond the scope of the agreement for arbitration .
In practice, however, the A(PC)A has been largely untested and there are no reported cases of a Myanmar court recognising a foreign arbitral award . Further, unlike most other South East Asian countries which have updated their arbitration laws, the A(PC)A has not been replaced since 1939 .
On 16 April 2013, Myanmar deposited an instrument of accession with the Secretary-General of the United Nations, consenting to be bound by the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) . Myanmar’s accession to the
New York Convention came into force in Myanmar on 15 July 2013 .
Myanmar’s accession to the New York Convention was effected without making any of the available reservations, such as the so-called “reciprocity” reservation . The New York Convention will therefore apply in its entirety in Myanmar . As a consequence, arbitral awards made in Myanmar should be enforceable in the 140+ countries that are already party to the New York Convention, and awards made in all signatory countries should, theoretically, be enforceable in Myanmar .
Myanmar’s accession to the New York Convention has now been implemented by replacing the previous domestic legislation with the Arbitration Law enacted in January 2016 which provides a framework for the enforcement of foreign awards .
In practice though, and even following the enactment of the new Arbitration Law early this year, any enforcement action will still require
interaction with the Myanmar Court system and the attendant risks . Effective enforcement of foreign arbitral awards in Myanmar should therefore be considered to be difficult in practice .
OTHER INTERNATIONAL AGREEMENTS OFFERING INVESTMENT PROTECTION
Myanmar is a party to the ASEAN Investment Protection Agreement (1987) and its successor, the ASEAN Comprehensive Investment Agreement of 2009 (ACIA) . In addition to investment liberalisation and promotion measures, the ACIA provides comprehensive investment protection for eligible investors including fair and equitable treatment, full protections and security, and prevention of unlawful expropriation . Importantly, eligible investors can utilise the dispute settlement mechanism contained in the ACIA in order to resolve investment disputes with Myanmar .
One claim has been brought against Myanmar under the 1987 ASEAN Agreement, but was dismissed for lack of jurisdiction .10 It is not known if there have been any claims against Myanmar under the ACIA .
As a member of ASEAN, Myanmar is also bound by the investment protection provisions (including dispute settlement mechanisms) contained in the free trade agreement between ASEAN, Australian and New Zealand .
Myanmar has concluded few bilateral investment treaties (BITs) . It is understood that Myanmar has three BITs in force with China, India and the Philippines . BITs have also been signed with the Lao People’s Democratic Republic, South Korea, Japan, Thailand and Vietnam, but these are understood not to be in force . Even those treaties that have been concluded and are understood to be in force may not provide effective legal redress for aggrieved investors as they do not necessarily include strong investor protection mechanisms .
Myanmar is not a party to the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (1965), commonly known as the ICSID convention .
Investors should, therefore:
try to avoid using Myanmar law where possible;
push hard for disputes to be resolved by an arbitral tribunal rather than by the Myanmar courts;
push hard for international arbitration, even bearing in mind that enforcement of a foreign arbitral award in Myanmar may be difficult in practice; and
consider structuring deals in a way which brings the investment within the scope of investment treaties to which Myanmar is a party .
OIL AND GAS
With its abundant resources, the Myanmar oil and gas industry continues to attract significant levels of foreign investment interest (in part, buoyed by the Myanmar Government’s various foreign investment reforms including the enactment of the 2012 FIL) .
In the upstream sector, there has been an unprecedented push by the Myanmar Government to attract more foreign investment through direct negotiations and, in response to investor calls for more transparency, open tender licensing rounds . Several licensing rounds have taken place in the recent past, but licences can also be awarded on an ad hoc basis . In 2013 alone, the Myanmar Government held open tender licensing rounds for 18 onshore blocks (of which 16 blocks were awarded in October 2013) and 30 offshore blocks (of which 20 blocks were awarded in March 2014) . Since then, the successful bidders have been engaging in active discussions with the Myanma Oil and Gas Enterprise (MOGE) to finalise the terms of the PSCs, some of which have been executed .
Despite the opening up of the upstream sector, the downstream oil and gas sector in Myanmar continues to be dominated by state-owned entities . A consolidated and up-to-date regulatory and licensing regime has not yet been developed to govern the operation of downstream trading and distribution operations, although there are plans by the government to do so .
As a result of the lack of midstream and downstream infrastructure and growing domestic demand for energy, Myanmar continues to be a net importer of oil . This may change over time, as the Myanmar Government puts in place plans to liberalise and develop all aspects of the industry and prioritise domestic
energy needs, as is evident from recent tender processes in the downstream sector .
An oil and petroleum bill is currently being developed by the Myanmar government in relation to the upstream and downstream sectors in Myanmar .
SIGNIFICANT DEVELOPMENTS IN THE MYANMAR OIL AND GAS INDUSTRY
Historically, onshore oil production has been the dominant source of production in Myanmar . However, since the Yadana and Yetagun projects commenced in the late 1990s,11 gas has accounted for over 90% of Myanmar’s total production, which has been further bolstered by output from the Shwe and Zawtika projects .
Ophir, PTTEP, Daewoo International, Woodside, Eni, CNOOC, CNPC, Total, Chevron, ONGC and Petronas all own significant interests in major upstream projects . In particular, three open tender licensing rounds have recently been held, and resulted in the following awards being made:
in early January 2012, 10 onshore oil and gas blocks were awarded to 8 companies - the winners were predominantly from Asia, including PTTEP and Petronas;
in mid-October 2013, 16 onshore oil and gas blocks were awarded - 9 out of the 26 companies that submitted a bid were successful with various companies, including Eni, ONGC and Petronas, being awarded more than one block; and
in March 2014, a further 20 offshore oil and gas blocks were awarded . Successful bidders included Chevron, the Woodside and BG consortium (awarded 4 blocks), the Shell and
Mitsui consortium (awarded 3 blocks), and the Statoil and ConocoPhillps consortium .
On 14 March 2012, the offshore dispute between Myanmar and Bangladesh over their respective maritime claims in the Bay of Bengal was resolved by a United Nations ruling in the International Tribunal for the Law of the Sea . The ruling affords greater certainty to foreign investors in respect of their petroleum operations, as they explore Myanmar’s deep waters in the Bay of Bengal which may contain large quantities of hydrocarbons .
A consortium of investors led by Daewoo International currently operate offshore blocks A-1 and A-3, which supply the 771km long 200,000 barrel per day capacity pipeline that stretches from Rakhine State in Myanmar to the Chinese border .
OVERVIEW OF KEY OIL AND GAS LAW AND REGULATION
A draft oil and petroleum bill is at the date of this guide, being developed . The extent of the revisions to current petroleum legislation is unknown, as is the proposed timeframe for implementing the new legislation . As such, the Petroleum Act 1934 (as amended by the Petroleum Act Amendment 2010) and the Petroleum Rules 1937 remain as the primary legislation governing downstream oil & gas activity in Myanmar . Whilst upstream activity continues to be primarily governed by the Oilfields Act 1918 (as amended by the Oilfields Act Amendment 2010) and the Oilfields Rules 1938 and other relevant legislation includes the Oilfields (Labour and Welfare) Act 1951, the Petroleum Resources (Development Regulation) Act 1957, the Myanmar Petroleum Concession Rules 1962 and the Environment Conservation Law 2012 .
Various notifications and rules have also been issued by various state-owned entities (as regulators) however, these have not been consolidated into a comprehensive regulatory regime and are not always widely disseminated .
Similar to mining activities, under the SOEEL, the Myanmar Government has exclusive rights to carry out the exploration, extraction and sale of petroleum and natural gas, as well as the production of petroleum and natural gas products . However, the Myanmar Government may, by notification and subject to conditions, permit any other person or private entity to carry out oil and gas activities either on its own or in a joint venture with the government .
The Myanmar Government has granted MOGE the right to enter into joint ventures, on behalf of the state, with domestic and foreign private entities for the exploration, development, production and transportation of oil and gas and MOGE conducts this business based on PSCs .
In addition, prior approval of the Foreign Exchange Controller and/or the government is required before the granting or enforcement of security can be made in relation to shares or assets of companies in the oil and gas industry .
KEY REGULATORY BODIES
The Ministry of Energy (MOE) (member of NEMC and EMC)
Myanma Oil and Gas Enterprise (MOGE)
Myanma Petrochemical Enterprise (MPE)
Myanma Petroluem Products Enterprise (MPPE)
Exploration Drilling Production
Ministry of Energy (MOE)
The MOE is responsible for carrying out the exploration and production of crude oil and natural gas, refining, manufacturing of petrochemicals, and the transportation and distribution of petroleum products .
The MOE comprises of the Minister’s Office as well as MOGE, Myanma Petrochemical Enterprise (MPE) and Myanma Petroleum Products Enterprise (MPPE) .
MOGE is a 100% state-owned enterprise and is primarily responsible for the upstream petroleum sub-sector .
MOGE’s responsibilities include: (i) the exploration of oil and gas; (ii) the supply of natural gas to factories and gas turbines via the construction of a gas supply pipeline network;
the supply of Liquified Natural Gas, as a substitute fuel for gasoline for transportation vehicles; and (iv) cooperation with foreign oil companies, via PSC arrangements for the development of onshore and offshore blocks .
MOGE itself is comprised of various departments including the Planning Department, Exploration and Development Department, Drilling Department, Production
Department, Engineering Department, Administration Department, Material Planning Department, Finance Department, and Offshore Department .
Like MOGE, MPE is a 100% state-owned enterprise and is primarily responsible for the downstream petroleum sector .
To this end, MPE operates various downstream facilities including refineries, fertiliser plants, a methanol plant, a liquefied petroleum gas (LPG) plant, bitumen and carbon dioxide plants and other processing plants .
MPE is responsible for the production of petroleum and various petrochemical products including urea fertiliser, LPG, bitumen, gaseous and liquefied carbon dioxide, methanol and lubricants .
MPE comprises of a Planning Department, Production Department, Administration Department, Finance Department and Crude Oil and Petrochemical Products Movement Department .
MPPE is also a state-owned enterprise, and is responsible for the marketing and (retail and
wholesale) distribution of petroleum products within Myanmar to various industry sectors including the agricultural sector, the fisheries sector, the transportation sector, the power generation sector, the defence sector, the construction sector and the governmental sector .
MPPE comprises of a Planning Department, Finance Department, Distribution and Sales Department and General Administration Department .
NEMC and EMC
In an attempt to develop the electricity and energy sector in Myanmar, the Myanmar Government, under Notification 12/2013 dated 9 January 2013, established the National Energy Management Committee (NEMC) and the Energy Management Committee (EMC) . Members of these committees include the MOE, MOGE (in the case of the EMC) and other relevant government institutions .
Pursuant to Notification 12/2013:
NEMC functions and duties include, among other things: (i) formulating a national energy policy based on energy demand and production: (ii) formulating energy regulation in accordance with national energy policy; (iii) prioritising and supervising oil and gas and natural resources to be able to meet domestic demand; (iv) carrying out oil and gas production through local and foreign investments in accordance with international regulations; (v) prioritise the sale of
value-added petrochemical products over the sale of unrefined ones; and (vi) inviting foreign and domestic investment in energy development projects and increasing foreign direct investment in accordance with international norms .
EMC functions and duties include, among other things: (i) adopting reform plans to improve the climate for selling raw materials
and producing and selling value-added products; (ii) adopting pricing policy and forming a pricing committee for the purchase and sale of energy products; (iii) setting procedures to allow local parties to hold stakes in investment projects in coordination with foreign investors; (iv) regulating energy development projects with foreign and domestic investment in accordance with energy development rules and regulations; and (v) investing in energy development under the leadership of the NEMC, tapping into the upmost financial and technological expertise of international monetary institutions .
The Energy Planning Department (EPD) was disbanded in early 2015 . Prior to its disbandment, the EPD had overall responsibility for energy policy formulation and the coordination, discussion and negotiation of energy development programmes . These roles have now been assumed by other bodies within the MOE (although it is not clear which bodies have undertaking which roles) and as of the date of this guide the impact of its disbandment remains uncertain .
A number of issues commonly arise through our work on market entry, investment and operation (including contracting and bidding strategies) matters in the Myanmar oil and gas industry . Below are case studies in respect of issues which a foreign oil and gas investor may encounter in Myanmar .
An international company (Offshore Co) with global operations in the United States, Europe and Asia Pacific has recently entered into negotiations with a local Myanmar company (MyanCo) to acquire an interest in a producing oil and gas block in Myanmar. Offshore Co intends to take on the operatorship role.
In order to acquire an interest in a producing oil and gas block in Myanmar, Offshore Co will
need to consider, amongst other things, the following matters:
Existing offshore O&G block
INITIAL LEGAL AND TECHNICAL DUE DILIGENCE
LOCAL PARTNERING (IF APPLICABLE): RISK ASSESSMENT, ANTI-BRIBERY AND CORRUPTION (ABC) CONSIDERATIONS
NEGOTATION OF A FARM-IN AGREEMENT
NEGOTATION OF A JOINT OPERATING AGREEMENT
OBTAINING APPROVAL FROM MOGE
THE NEED TO AMEND MIC PERMIT TO REFLECT THE CHANGE IN INVESTORS
One of the due diligence issues which Offshore Co may encounter is whether or not Environmental Impact Assessments (EIA) or Social Impact Assessments (SIA) have been completed by MyanCo . Under past generation PSCs, MIC approvals were obtained under the previous Foreign Investment Law, which did not include requirements for EIAs and SIAs to be conducted . Now, under the current 2012 MFIL regime, the completion of an EIA and SIA is required either before the MIC will grant its approval or as a condition subsequent to MIC approval . Without MIC approval, foreign investors will not be able to enjoy the benefits and incentives of MFIL .
Other due diligence issues may include MyanCo’s completion of the minimum work commitments required during the study period and the initial exploration periods (and other possible extension periods), the provision of security, restrictions on foreign ownership or transfer of interests under the PSC, approvals from MOGE and other government authorities for the farm-in and change of operatorship and transfer tax payable on the farm-in (pursuant to the terms of the PSC) . In addition, a risk assessment of local partners, and ABC and sanctions analysis should be considered, as required .
In parallel with the due diligence and negotiation processes, Offshore Co may consider whether it needs to establish an entity in Myanmar to hold its interests under the PSC . As a matter of practice, oil and gas companies tend to have established Myanmar branch offices rather than Myanmar companies . This may change under the current 2012 MFIL regime, which affords greater foreign investor protection and tax incentives .
Offshore Co would need to be aware of the relevant requirements under the applicable legislation when it moves into the operatorship role – for example, the Oilfields (Labour and Welfare) Act 1951 (which deals with health and safety issues) would need to be complied with . In addition, the Environment Conservation Law 2012 and the Environment Conservation Rules would have to be complied with in carrying out oil and gas activities such as drilling, seismic and marine services .
Offshore Co is also pursuing several new blocks in the competitive tender process being conducted by the MOE. Offshore Co is considering establishing a local branch office in Myanmar in conjunction with the preparation of its bid.
To participate in the competitive tender process operated by MOE, Offshore Co needs to consider the following matters:
New blocks: Participation in tender process
REVIEW ANY EXISTING TECHNICAL DATA MOE MAY HOLD REGARDING THE RELEVANT BLOCK
NEGOTIATE AND SIGN THE JOINT BIDDING AGREEMENT WITH ITS INTENDED PARTNERS
MEET WITH MOE TO DISCUSS THE TENDER TERMS
SUBMIT A PROPOSAL TO THE MOE AND IF SUCCESSFUL AGREE THE TERMS OF THE PSC
MOGE TO SUBMIT A PROPOSAL TO MIC TO APPLY FOR THE MIC PERMIT
SUBMIT MIC PROPOSAL AND AGREED FORM OF PSC TO CABINET
EXECUTE PSC UPON CABINET APPROVAL
NEGOTIATE A JOINT OPERATING AGREEMENT
ISSUE OF MIC PERMIT AND E&P NOTIFICATION
ISSUE OF SOEEL NOTIFICATION
APPLICATION FOR PERMIT TO TRADE
A summary of the key terms of the 2013 model PSC are set out below . Key concerns may include a move towards greater priorisation of oil and gas production towards downstream industries in Myanmar and other domestic market obligations, the provision of security to MOGE, stabilisation and the transfer tax payable on the sale or transfer of interests under the PSC to a third party . Furthermore, the requirement to deal with SDN-listed Myanmar entities may also require sanctions risks assessments to be made .
GOVERNING LAW, DISPUTE RESOLUTION
MOGE is the Government signatory . It is also the project owner, and is responsible for the management of operations under the PSC as well as the regulation of the terms of the PSC
Investor is appointed exclusively to carry out operations
Investor provides all the financial and technical facilities and carries the risk of operating costs
Investor is answerable to MOGE
Investor is required to commit to minimum expenditure and work programme (may be able to carry over)
Jurisdiction of the Myanmar courts and arbitration (subject to UNCITRAL Arbitration Rules), conducted in English in Singapore
Nothing shall prevent or limit the Government from exercising its inalienable rights and stabilisation clause
SHARING OF PROFITS/ CHANGE OF CONTROL
Exploration period plus extension period
Development and production period
– eg 20 years from the date of commercial discovery
Usually, a right to terminate at the end of each phase of the project
Bonuses (signature, discovery and production)
Domestic market obligations Research and development
Cost recovery ceiling
A percentage of the net profit made from the sale or transfer of shares in a company formed under the PSC
ASSIGNMENT AND BACK-IN RIGHTS
DOMESTIC MARKET OBLIGATIONS
Assignments to non-affiliates must be approved in writing by MOGE and the Investor will be obliged to pay a certain proportion of the net profit made on the sale or transfer of shares
MOGE back-in rights
The Investor may terminate if operations are impaired for more than a certain number of years, or if no commercial discovery is made
MOGE may terminate in the event of a material breach by an Investor, or if the investor is found to be participating in political activities detrimental to the Myanmar Government
A percentage of the PSC contractor’s share of petroleum or natural gas produced must be sold in the domestic market at a percentage of the fair market price
Investor must prioritise supply to downstream industries established in Myanmar
If the Investor considers that it is economically viable to produce value added petroleum downstream products, it must use its utmost efforts to produce such products as soon as possible in consultation with MOGE under a separate contract
Offshore Co may also wish to consider its bidding strategy, including whether or not to propose amendments to the model form of the PSC .
International oil and gas investors may be required to partner with a local partner, such as a Myanmar state-owned company, as was the case with the shallow water blocks that were offered in the 2013 tender rounds . Verifying the shareholders of a potential local partner is not straightforward, as shareholder information for Myanmar companies is generally not publicly available . The best (and usual) way to go about obtaining shareholding structure information is for companies themselves to contact the DICA, the company registrar, to request a written confirmation from the DICA of the shareholding information . This process may take a few days .
Similar to the farm-in process, Offshore Co may also want to consider whether it needs to establish an entity in Myanmar to hold its interests under the PSC if it is successful in its bid . On a practical level, it is likely to be more convenient to set up an offshore company and have that offshore company sign the PSC, followed by the actual entity establishment in Myanmar .
Offshore Co is also interested in developing a petroleum refinery and storage facility. Offshore Co would like to distribute some petroleum products from the refinery into the domestic market and to export the remainder for sale in the international market.
As noted above, under the SOEEL, the Myanmar Government has exclusive rights to carry out the exploration, extraction and sale of petroleum and natural gas, as well as the production of petroleum and natural gas products . However, the Myanmar Government may, by notification and subject to conditions, permit any individual or private entity to carry out oil and gas activities either on its own or in joint venture with the Myanmar Government . As such Offshore Co
would need to obtain Myanmar Government’s approval in order to develop such a project .
The Myanmar regulatory regime on petroleum transportation, storage, refining, marketing, pricing, domestic distribution and exporting goods should also be considered .
There is no requirement to obtain a licence to transport petroleum under the Petroleum Rules however, the transportation of petroleum (by land, sea, pipelines or otherwise) must comply with the safety standards and procedural requirements contained in the Petroleum Rules .
The following types of petroleum do not require a storage licence:
Dangerous Petroleum not exceeding six gallons and not for the purpose of sale;
Heavy Petroleum (liquid hydrocarbons with a flash point not less than 150 degree Fahrenheit) not exceeding ten thousand gallons; and
Non-Dangerous Petroleum not exceeding five hundred gallons contained in a receptacle not exceeding two hundred gallons in capacity .
All other petroleum require a storage licence .
Approval of the relevant Chief Inspector is required for refining or blending operations . The application for approval must outline the location and procedure of any refining or blending operations .
Other than the general prohibition on all petroleum activities without special approval under SOEEL, currently there are no specific regulations in relation to domestic marketing of petroleum .
Pricing of petroleum is not currently subject to regulatory controls in Myanmar .
A MIC Permit is likely to be required in practice .
Special approval under SOEEL is required and in practice is usually obtained in conjunction with an application for a MIC permit .
The Myanmar Government may impose other conditions pursuant to SOEEL .
The following are required in respect of the exports:
licences and permits for export of petroleum after special approval has been given under SOEEL;
an Exporter Registration Certificate from the directorate of trade;12 and
licences and permits for cross border trade from the Department of Border Trade .13
In addition, Offshore Co may wish to consider the Myanmar Import/Export Rules and Regulations for Private Business Enterprises (1988), issued by the Directorate of Trade under the Ministry of Commerce, which contains detailed rules and regulations on the conduct of import/export businesses in general, including in relation to registration, licensing, products, the manner in which they are transported and permitted INCOTERMS .
EXAMPLE CHECKLIST FOR OIL AND GAS PROJECTS
The following is a list of various licences, permits and approvals that may be required in connection with oil and gas projects in Myanmar:
LICENCE, PERMIT, APPROVAL OR
OTHER DOCUMENT REQUIRED RELEVANT LAW(S) RELEVANT AUTHORITY
Notifications issued under the SOEEL eg for exploration and production of petroleum in respect of a relevant block(s)
SOEEL Ministry of Energy
Notifications and orders regarding land acquisitions and easements for on-shore/offshore facilities
Land Acquisition Act of 1894
Ministry of Energy
District, State and Divisional Peace and Development Council authorities
Notifications regarding commercial tax exemptions
Commercial Tax Law of 1990
Ministry of Finance and Revenue
Permit to Trade
Certificate of Registration MCA CRO
Certificate of Incorporation MCA CRO
Exporter/Importer Registration Certificate
Control of Imports and Exports (Temporary) Act of 1947
LICENCE, PERMIT, APPROVAL OR
OTHER DOCUMENT REQUIRED RELEVANT LAW(S) RELEVANT AUTHORITY
Government / ministerial approvals
Government approval of JOA / gas transportation agreement / pipeline rights agreement / JVA / construction contract / coordination agreement in the form of a letter from the Office of the Government to the Ministry of Energy mentioning the extract of meeting minutes of the government meeting whereby the agreement is approved
Procedures Cabinet of Government
Government approval for underwater pipe laying, hooking up and maintaining pipelines
Territorial Sea and
Maritime Zones Law of 1977
Cabinet of Government
MOGE approval for Development Plan
Approval for utilisation of forest land and removing trees on government land
Forest Law of 1992 Ministry of Environmental Conservation and Forestry
Approval for connecting underground pipeline across the highway
Highways Law of 2000 Ministry of Construction
Approval for connecting underground pipe, connecting underground electric power cable, underground telecoms cables or digging in rivers and creeks
Conservation of Water Resources and Rivers Law of 2006
Ministry of Transport
Approval of CBM for all financial and banking activities relating to the Project
Export / import licence Guidelines Ministry of Commerce
Licences for import, storage and transport of explosive substances
Explosives Act of 1887 / Arms Act of 1878
Ministry of Commerce and Ministry of Home Affairs
Licences for storage and transport Oil Fields Act of 1918 and
Petroleum Act of 1934
Ministry of Energy
TECHNOLOGY AND COMMUNICATIONS
High profile liberalisation took place in the telecommunications sector in Myanmar during 2013 and early 2014 .
The telecommunications sector had been dominated by the state-owned monopoly, Myanmar Posts and Telecommunications (MPT) . Overall penetration (fixed and mobile) in Myanmar in 2012 was below 10% and internet user penetration 1% (Source: BuddeComm) . By June 2015 penetration had reached 42% (Source: www .Myanmar-business .org) after the award of two national telecommunications licences and a programme of tower construction .
Given the positive relationship between telecommunications and economic growth, the Myanmar Government has encouraged investment (including foreign investment) in telecommunications in order to support the development of the country .
Under the SOEEL, the Myanmar Government has the sole right to carry out:
postal and telecommunications service; and broadcasting service and television service, as state-owned economic enterprises .
However, if it is in the interest of the country, the government may, by notification and subject to conditions, permit these activities to be carried out by (i) any other person or any other economic organisation, or (ii) any person or any other economic organisation in joint venture with the government .
MIC Notification 2014:
prohibits foreign investment in:
print and broadcasting media without the approval of the government; and
all printing and publishing related to periodicals, magazines and journals in national ethnic languages including the Myanmar language;
permits, in a joint venture with citizens and on the recommendation of the Ministry of Communications and Information Technology, domestic and international postal services; and
in a joint venture with citizens and on the recommendation of the Ministry of Information (MOI) permits:
publishing of periodical newspapers in a foreign language;
broadcasting of FM radio programmes;
direct to home (DTH);
digital video broadcasting second generation terrestrial (DVB -T2);
production of movies; and
showing of movies .
MIC Notification 2014 permits the laying of fibre- optic cables, construction of tower pillars and construction of engine rooms on land owned by the Ministry of Rail Transportation in a joint venture and with the approval of the government .
In addition, general trading and retail activities, including the import/export and distribution of goods, are prohibited for foreign owned entities as a matter of practice . Local importers and distributors will need to be appointed .
Services companies are generally not restricted in terms of foreign investment .
The Ministry of Communications and Information Technology (MCIT) is responsible for formulating post, telecommunications and information technology policy (with responsibility for information communications technology policy and supporting government initiatives in Myanmar) and comprises the following departments/enterprises:
the Postal and Telecommunications Department (PTD), which is responsible for policy formulation, the granting of licences (with the approval of the government where the applicant is foreign) and coordination of the sector (PTD has recently taken up regulatory functions, such as numbering and spectrum planning, from MPT to function as the regulator); and
MPT, the state-owned incumbent operator .
The MOI is responsible for formulating media policy and comprises the following departments/enterprises:
Myanmar Radio and Television Department (MTRD);
Information and Public Relations Department (IPRD);
News and Periodical Enterprise (NPE); Printing Publishing Enterprise (PPE); and Myanmar Motion Picture Enterprise (MPE) .
REGULATORY FRAMEWORK Telecommunications
Myanmar has initiated a process to transform the telecommunications sector into a liberalised competitive market .
As part of this process, on 27 August 2013 the legislature approved a new telecommunications law, the Telecommunications Law of the Republic of the Union of Myanmar 2013 (Telecoms Law) .
The Telecoms Law repealed the antiquated Myanmar Telegraph Act 1885 and the Myanmar Wireless Telegraph Act 1934 .
In between October 2014 and June 2015 Myanmar also passed three sets of implementing rules in connection with the Telecoms Rules:
the Telecommunications Licensing Rules 2014;
the Telecommunications Interconnection and Access Rules 2015; and
the Telecommunications Competition Rules 2015 .
The Telecoms Law was signed by the President and enacted on 8 October 2013 . The Telecoms Law establishes the general legal and regulatory framework for the telecommunications sector .
Some of the key objectives of the Telecoms Law are to:
support the development of the country and to foster national economic growth by the widespread adoption of telecommunications technology;
enable more private sector participation in developing the telecommunication sector;
give more opportunity to the general public for the use of telecommunication services by expanding the telecommunication network
throughout the entire country and facilitating the development of the Myanmar telecommunications sector;
ensure the efficient use of national resources for the citizens of Myanmar, including the radio frequency spectrum; and
put in place a regulatory framework and institution for the sector .
The Telecoms Law provides that it is an offence to provide a telecommunications service business without a licence . The penalty includes imprisonment for a term not exceeding five year and a fine .
An application must be made to the PTD for a network facilities service licence, network services licence or applications services licence . Licences are for a minimum duration of five years and maximum duration of 20 years .
A licence to possess or use certain telecommunications equipment may also be required . The Telecoms Law has streamlined the import of communications equipment, and import permits will be required only for a notified set of equipment .
Use of appropriate spectrum may also be permitted by PTD .
Pursuant to section 88 of the Telecoms Law, the MCIT has proposed rules related to licensing, access and interconnection, spectrum, numbering, and competition .
The Telecoms Law and policy framework also provide for the establishment of an independent regulator, the Myanmar Telecommunications Commission (MTC) by 2015 . At the date of this guide, the MTC is yet to be established . The PTD will transition into MTC . The Telecoms Law makes provisions for the establishment of MTC but does not provide any more detail .
The policy framework also provides for the state-owned operator MPT to be restructured into a commercial entity and eventually privatized, operating under the MCA .
The taking of, or enforcement of, security in relation to shares in or assets of companies in the telecoms sector is subject to prior approval(s) of the Foreign Exchange Controller, PTD and the government .
The PTD is understood to be looking at designing a postal service policy and a new postal law in Myanmar that supports the implementation of the government’s economic reform programme .
On 14 March 2014, the Myanmar Government enacted:
the Media Law, which outlines the rights and obligations of the country’s media and the running of press enterprises; and
the Printers and Publishers Law, which requires media enterprises to register with the government .
The Television and Video Law 1996 stipulates that licences are required for television sets or businesses which conduct production of video, videotaping or editing, copying, distribution, hiring or exhibiting of video . It also establishes a video censor board .
The Computer Science Development Law 1996 includes measures for the development and dissemination of computer science and technology and to supervise the import and export of computer software or information (with power granted to the MCIT to prescribe types of computers or electronic machinery which require approval in order to be imported, kept or used) .
The Internet Law 2000 prohibits postings that are harmful to state interests .
The Electronic Transactions Law 2004 (ETL) promotes and regulates internet and other electronic transactions, including recognising electronic records, messages and signatures, administering certification authorities and establishing a number of offences relating
to misuse .
It is understood that the ETL is being revised to reflect good practice and is largely modelled on the UN Model Law on Electronic Commerce (1996, as amended), and the UN Model Law on Electronic Signatures (2001) .
Myanmar presently does not have explicit privacy, right to information or cybercrime legislation . Cyber security issues are handled by the Myanmar Computer Emergency Response Team (http://www .mmcert .org .mm) .
Nationwide telecommunications licences
The government received 91 expressions of interest relating to the tender for two nationwide telecoms licences on 8 February 2013 and issued pre-qualification criteria to all interested parties on 21 February 2013 .
On 11 April 2013, a total of 12 companies were prequalified from a list of 22 companies that submitted their documentation .
The MCIT issued a detailed information memorandum, bidding documents, and a draft licence to the 12 pre-qualified bidders .
Eleven bidders submitted their bids, and two were competitively selected on 27 June 2013 .
Telenor from Norway and Ooredoo from Qatar were selected and accepted their licences on 30 January 2014 .
On 16 July 2014, Japanese mobile carrier KDDI Corp . and Japanese trading house Sumitomo Corp . signed an agreement with MPT to jointly operate MPT’s mobile network in Myanmar .
The policy framework envisages a fourth nationwide telecommunications licence, awarded to a local Myanmar company with foreign investment permitted .
Prior to Telenor and Ooredoo accepting their licences on 30 January 2014, the allocation of key mobile spectrum in Myanmar was as follows:
800 MHz band (806 – 880) 2100 MHz band (1920 -1980 / 2110-2170)
806 825 835 870 880 1920 1980
10 MHz 35 MHz 10 MHz 15 MHz
15 MHz 30 MHz
900 MHz band (880 – 915/925 – 960)
880 915 925 880 2110 2170
1800 MHz band (1710 – 1785/1805 – 1880)
Reserved for future
MPT uses the whole 2 x 25 MHz GSM band for is GSM network
MPT currently also uses 2 x 15 MHz spectrum on 2100 MHz for
An additional 2 x 20 MHz at 1800 MHz band is used by MPT for
MPT is currently performing a limited LTE trial in the 1800 MHz
band but has not been assigned any spectrum in this band
As a result of the liberalisation of the telecoms market, the allocation of key mobile spectrum in Myanmar is revised as follows:
900 MHz band (880 – 915/925 – 960)
880 890 915 880 890 960
2 x 15 MHz (900 MHz band)
2 x 15 MHz (2100 MHz band)
5 5 5 5 15
5 5 5 5 15
MHz MHz MHz MHz
MHz MHz MHz MHz
2 x 15 MHz (900 MHz band)
2100 MHz band (880 – 915/925 – 960)
1920 1935 1980 2110 2125 2170
2 x 15 MHz (2100 MHz band)
New operator 1
2 x 15 MHz (900 MHz band)
2 x 15 MHz (2100 MHz band)
New operator 2
2 x 15 MHz (900 MHz band)
2 x 15 MHz (2100 MHz band)
MPT Second Myanmar operator
New operator 1 New operator 2 Reserved for future
The allocation of other spectrum in Myanmar is as follows:
Channel plan standard
Total # of channels
# of channels currently assigned
Lower 6 GHz ITU-R F .383-8 5925 – 6425 MHz 5 MHz bandwidth
28 12 MPT
2 Department of Civil Aviation
Upper 6 GHz
ITU-R F .384-10 6425 – 7125 MHz 5 MHz bandwidth
42 26 MPT
2 Department of Civil Aviation
7 GHz ITU-R F .385-10 7110 – 7900 MHz 5 MHz bandwidth
24 8 MPT
8 GHz ITU-R F .386-8 7 .9 to 8 .5 GHz 10 MHz
18 16 MPT
11 GHz ITU-R F .387-12 10 .7 to 11 .7 GHz 40 or 56 MHz
24 16 MPT
13 GHz ITU-R F .497-7 12 .75 to 13 .25 GHz 28 MHz 8 2 Other
15 GHz ITU-R F .636-3 14 .4 to 15 .35 GHz 28 MHz 15 4 Other
18 GHz ITU-R F .595-10 17 .7 to 19 .7 GHz 28 MHz
35 Not assigned None
23 GHz ITU-R F .637-4 21 .3 to 23 .6 GHz 28 or 56 MHz
40 Not assigned None
26 GHz No plan Not planned Not planned Not planned Not allocated
Source: Department, MPT
LABOUR LAW AND VISA REQUIREMENTS
Myanmar’s labour laws are currently scattered amongst a mix of legislation dating from
pre-independence to present day . The older legislation tends to be industry-specific and relates only to employees working in specific sectors . The law relating to employees engaged in sectors which are not covered by these laws generally remains unclear . A number of new employment related laws have also been passed in recent years, including:
Settlement of Labour Disputes Law (2012); Social Security Law (2012);
Minimum Wages Law (2013); and
Employment and Skill Development Law (2013).
The recently enacted, Employment and Skill Development Law of 2013 (ESDL), contains a provision requiring an employer to advertise a job vacancy with its local employment and labour exchange office . However, no implementing rules have been issued in this respect and therefore it is not clear how this is envisaged to apply in practice . Our understanding is that the Ministry of Labour will not require employers to adhere to this requirement and it is not common practice for employers to advertise job vacancies at employment and labour exchange offices .
Companies can employ male and female workers of 18 years and above .
TERMS AND CONDITIONS OF EMPLOYMENT CONTRACTS AND MINIMUM WAGE
The ESDL also makes it mandatory for employers in the private sector to sign employment contracts with employees within thirty (30) days of appointment . In addition, employers have to register and get approval of the employment contract from the relevant employment and labour exchange office . The ESDL also sets out a list of particulars which must be included in the employment contract (including but not limited to, working hours, wage, leave entitlement, termination provisions etc) . As of the date of this guide we understand that the Ministry of Labour is developing implementing rules for the ESDL . Myanmar language versions of these rules have been circulated and some of the local labour exchange offices are insisting that all contracts registered with them must be compliant with these .
In addition, the labour authorities have previously issued two sample employment contracts which although they do not have force of law, the labour authorities will expect the provisions to be complied with . The first sample employment contract was issued by the Ministry of Labour in 1976 pursuant to Notification 55/1976 (1976 SEC) . The 1976 SEC contract was then modified but not repealed by a revised sample employment contract issued by the Department of Labour in 2011 (2011 SEC) .
The Minimum Wages Law of 2013 came into force in June 2013 and provides the framework for establishment of a national committee to prescribe the minimum wages for employees . The duty of the national committee is to determine the level of minimum wage after considering a number of specific factors and
obtain approval of the union government for such minimum wage to be brought into force .
Employers convicted of violation of the applicable minimum wage orders may be subject to imprisonment or fined . Further, any employment contracts stipulating less than the minimum wage will be void .
BENEFITS AND SOCIAL SECURITY
Matters such as leave, holidays, benefits, grants and compensation are governed by the Social Security Law of 2012 and the Leave and Holidays Act of 1951 .
The Social Security Law of 2012 (which was only brought into force in 2014), provides for the entitlements of insured workers in respect of maternity leave, medical leave, unemployment benefits, pension, employment injury benefits and disability benefits .
Pursuant to the Leave and Holidays Act, employees are entitled to 6 days of paid casual leave to be taken for periods of up to 3 days . Employees with over one year of service are entitled to 10 days of leave per year . In addition, after six months of service, employees are eligible for up to 30 days paid medical leave per year . Employees are also entitled to receive paid leave for the public holidays announced each year by the government .
ENVIRONMENT, HEALTH AND SAFETY
Foreign employers must comply with different laws, rules, regulations, orders and directives in relation to health and safety, depending on the industry involved . For example, companies engaging in oil and gas activities must comply with MIC directives relating to environmental protection as well as environmental protection laws and rules . Companies undertaking mining activities must comply with the requirements of mining legislation in relation to working conditions, safety, health, environmental protection and other matters .
The Factories and General Labour Laws Department, which forms part of the Ministry of Labour, is responsible for researching, monitoring and enforcing health and safety standards in factories .
Inspectors from the Factories and General Labour Laws Department are authorised to fine employers who are in breach of minimum health and safety standards, who fail to comply with trade dispute awards or who fail to remit social security contributions .
The recently enacted SLDL sets out a new mechanism for the resolution of collective labour disputes,14 which involves the following procedures:
Workplace Coordinating Committee
An employer of more than 30 workers is required to form a Workplace Coordinating Committee (comprising representatives of both the employer and workers) .
The Committee is designed to promote the good relationship between the employer and worker/labour organisation and is responsible for negotiating and coordinating on the conditions of employment and occupational safety, health, welfare and productivity .
The Committee is the body of first instance to address any workplace grievances, which must be negotiated and settled within five days . If the dispute remains unresolved, it can be escalated to the Conciliation Body .
Conciliation Body The region or state government is responsible for forming a Conciliation Body in the townships within each region or state .
Dispute Settlement Arbitration Body
The Conciliation Body will conciliate a dispute within three days from the day that it comes to know of or receives such dispute from the Coordination Committee . Disputes may be also be made by employees or employers directly to the Conciliation Body . If the parties fail to reach a settlement after this period, the Conciliation Body must refer the dispute to the relevant Dispute Settlement Arbitration Body .
The Ministry of Labour, with the approval of the government, must form a Dispute Settlement Arbitration Body in each region or state .
The relevant Arbitration Body is required to make a decision on a collective dispute within seven days from the day of receipt of such dispute from the Conciliation Body, and to send the decision to the relevant parties within two days . If the parties are dissatisfied with the decision of the Arbitration Body, they have the option either: (i) to apply to the Arbitration Council for a decision within seven days of receipt of the decision of the Arbitration Body; or (ii) in the case of employees, to carry out a strike or, in the case of an employer, to lock out staff, in either case in accordance with the relevant law .
However, where a relevant party is dissatisfied with the decision of the Arbitration Body in respect of “essential services”, it must apply to the Arbitration Council within seven days of receipt of the decision of the Arbitration Body . For public policy reasons, striking and lock-outs are not generally permitted in respect of disputes pertaining to essential services .
Effect of the decision The decision of the Arbitration Body comes into force on the day of such decision if both parties agree with the decision of the Arbitration Body . The parties can agree to amend the decision of the Arbitration Body after three months from the day of it coming into force .
Dispute Settlement Arbitration Council (Tribunal)
The Ministry of Labour, with the approval of the government, must form a Dispute Settlement Arbitration Council with 15 qualified persons of good standing who are legal experts and/or experts in labour affairs as specified by the SLDL .
The Arbitration Council is then required to form and nominate a Tribunal to address disputes and to make a decision in respect of applications made from the Arbitration Body . The Tribunal will make a decision within:
14 days from the day of receipt of a collective dispute not concerning essential services; or (ii) seven days from the day of receipt of a collective dispute concerning essential services . The Tribunal will subsequently send its decision to the relevant parties within two days .
Effect of the decision The decision of the Tribunal is deemed as the decision of the Arbitration Council and will come into force on the day of such decision . However, the parties can agree to amend the decision of the Arbitration Council after three months from the day of coming into force .
LABOUR ORGANISATIONS, LOCK- OUTS AND STRIKES
On 11 October 2011, the Trade Unions Act was repealed by the Labour Organisation Law of 2011 (Labour Organisation Law), which governs, among other things:
the procedures for establishing, registering and managing labour organisations;
the rights of a worker to become a member of a labour organisation;
the rights and responsibilities of a labour organisation;
the duties of an employer in recognising and assisting labour organisations; and
employers’ rights to lock out workers and corresponding workers’ rights to strike .
Five types of labour organisations are recognised under the Labour Organisation Law . These are as follows: (i) Basic Labour Organisations; (ii) Township Labour Organisations; (iii) Region or
State Labour Organisations; (iv) Labour Federations; and (v) the Myanmar Labour Confederation . The formation of each organisation is subject to certain requirements, such as a minimum number of members (only in the case of a Basic Labour Organisation) or the need for formation to be “recommended” by a certain percentage of a subordinate labour organisation .15
The Labour Organisation Law also permits employers to lock out workers and workers to carry out strikes, provided:
the necessary notifications are made to the relevant employer (14 days in the case of a strike) or relevant labour organisation (14 days in the case of a lock-out in a public utility service or 3 days in the case of other services);
permission is granted by the relevant Conciliation Body (as established in accordance with the provisions of the SLDL); and
only in the case of a strike concerning a public utility service, an agreement is made as to the provision of services during the strike period .
Under the Labour Organisation Law, lock-outs and strikes without the necessary notifications or permission are illegal, as are those involving “essential services”, which include water services, electricity services, fire services, health services and telecommunications services .16
RESTRICTIONS TO NUMBER OF FOREIGN EMPLOYEES
Pursuant to the 2012 FIL, foreign investors are not allowed to employ unskilled foreign workers . However, there is uncertainty around the meaning of “unskilled” in this context .
In addition, Myanmar citizens must also make up at least 25% of the skilled workforce within the first two years of operation and companies must ensure necessary training to achieve this percentage . The percentage requirement of skilled workers must then increase to 50% within the first four years of operation, followed by 75% within the first six years of operation .17 These time limits may be extended by the MIC in the case of complex projects .
Full details of the employees (including number of foreign employees, technical expertise, salaries, etc) will need to be set out in the MIC application itself and will therefore be approved by the MIC as part of the application process .
WORK PERMITS AND VISAS
Foreign nationals intending to reside and work in Myanmar for long periods should obtain a stay permit and multiple-journey special re-entry visa . Any foreign nationals staying for longer than three months are also required to register at the Immigration and National Registration Department and to obtain a Foreigner Registration Certificate (FRC) . A FRC can be extended by one year on the presentation of a recommendation letter from an employer .
Strictly speaking, foreign nationals (in particular, executives of management level and above) intending to transfer out of Myanmar are also required to submit documentation to the DICA prior to their departure in order to obtain the necessary approvals .
REAL ESTATE LAW
The Transfer of Property Act of 1882 (TPA) is the main law that governs transactions relating to the transfer, sale, lease, exchange, mortgage and gifts of immovable property . The TPA applies to all property in Myanmar . The TPA provides that property of any kind may be transferred, except as otherwise provided by the TPA or by any other law in force for the time being .
Under the TPA, no transfer of property can be made, among others:
insofar as it is opposed to the nature of the interest affected thereby;
for an unlawful object or consideration within the meaning of section 23 of the Contract Act; or
to a person legally disqualified from being a transferee .
GENERAL PROHIBITION ON FOREIGN OWNERSHIP OF LAND
The main law relating to the transfer of immovable property to/from a foreign entity is the Transfer of Immovable Property Restriction Act of 1987 (TIPRA) . The TIPRA prohibits the transfer of immovable property by way of sale, purchase, gift, acceptance of a gift, mortgage, acceptance of a transfer by any other means to or from a foreign national or entity or a company owned by a foreign national or entity .18
The TIPRA does, however, allow the relevant ministry to grant exemptions from the general prohibition to a foreign government for the use of its diplomatic mission accredited to Myanmar or to UN organisations or any other organisations .19
Companies or organisations that have “beneficial contracts with the state” are also exempt from the provisions of the TIPRA . Joint ventures with
the state may, therefore, fall within this exemption . However, the practical application of this exemption remains unclear .
OPTIONS FOR FOREIGNERS OBTAINING INTERESTS IN LAND
As stated above, foreign investors are prohibited from owning land or immovable property in Myanmar . There are primarily three sources from which a foreign investor may be granted a lease:
a government land bank, which holds farmland, fallow land and waste land;
Government ministries and state-owned organisations (Government Lease); and
Myanmar-national-owned entities or Myanmar citizens (Private Lease) .
Pursuant to the provisions of the TIPRA, foreign nationals and foreign companies are not entitled to lease land or immovable property for a term exceeding one year unless permitted by the government in accordance with the TIPRA .
The 2012 FIL does however permit foreign nationals and companies to be granted leases of up to 50 years (as an initial term), which can be extended by two periods of ten years each, if expressly permitted as part of its MIC permit .
In order to obtain MIC approval to enter into such an extended lease, the applicant must demonstrate that the purpose and the terms of the proposed lease are consistent with the applicants intended business activities in Myanmar and that the business activities for which the lease is required are permitted for foreign investment and will contribute to the economic development of Myanmar .
Contribution in kind
In practice, most real estate related activities, including the development and sale of commercial property in Myanmar are only open to foreign investment through entry into a joint venture with a company that is 100% owned by Myanmar nationals or a government entity (Myanmar Entity), subject to a maximum foreign ownership limit of 80% .
Often in these circumstances, the Myanmar Entity joint venture partner contributes a long term lease in place of a capital contribution . The terms of the joint venture agreement, as well as the joint venture’s proposed business activities must be approved by the MIC and must be consistent with the provisions of the 2012 FIL .
However, as the joint venture company will be deemed to be a foreign entity as it has at least one foreign shareholder, the joint venture company will still not be able to own the land which was contributed in-kind and it will still revert back to the underlying leaseholder or land owner at the end of the lease term .
TITLE AND REGISTRATION OF TITLE
Under the Registration Act of 1909, any document that creates or transfers an interest in immovable property of over one year is required to be registered . In the case of ownership by companies, the requirement to register also arises under the MCA and the SCA . In the absence of registration, the creation or transfer of an interest is not legal, binding or enforceable .
Historically, there has been no established practice or procedure by which a foreign company could register a lease interest due to the restrictions in the TIPRA for foreigners to take a lease interest for more than one year . However, under the new FIL foreigners incorporated under the FIL are able to take a lease for more than one year with the permission of the MIC . The contradictions of these two laws
have recently been clarified by the President’s office/Attorney General’s office and there are now provisions which allow foreign companies to register approved land leases with the Office of the Registration of Deeds under the Ministry of Agriculture and Irrigation . Only time will tell how this procedure gets implemented in practice .
INTELLECTUAL PROPERTY LAW
The current laws concerning the protection of intellectual property rights are in need of modernisation and reform . The only substantive law currently in force is the Copyright Act of 1914 (Copyright Act), which has not been amended for many years, and as such, its provisions are unsuited to dealing with contemporary legal issues . There are other laws, which are relevant to intellectual property rights and, for example, contain penalties for certain intellectual
property-related offences . However, these laws also do not provide adequate protection or legal redress . It is expected that a new trademark law will be passed sometime this year and a new patent and industrial design law as well as a new copyright law will follow thereafter .
The Copyright Act is based on the English Copyright Act of 1911 . The Copyright Act contains basic provisions such as the definition of “copyright”,20 and deals with matters such as the infringement of copyright, the term of copyright (50 years following the death of the author), licensing or assigning copyright, and civil remedies for infringement . It is not, however, compliant with international standards as set out under the WTO TRIPS Agreement (please see below for further information) .
Other laws relating to the protection of copyright include the Computer Science Development Law of 1996, the Electronic Transactions Law of 2004 and the Television and Video Law of 1996, which deal with the copyright of specific types of material .
Myanmar currently has no specific trademark law . There are other more general laws in force as set out below which contain provisions dealing with the consequences of trademark infringement, but by modern standards these do not provide normal protection levels:
the Penal Code21– which defines a trademark as “a mark used for denoting that goods are the manufacture or merchandise of a particular person”22 – also establishes various offences, such as those relating to the falsification of trademarks and the use or possession of false trademarks . The relevant penalties are also set out in the Penal Code, which include imprisonment and fines of varying periods and amounts, depending on the offence;
the Merchandise Marks Act of 1889 – which empowers the courts to direct the forfeiture of all goods in relation to which an offence concerning trademarks has been committed;
the Sea Customs Act of 1878 (as amended up to 1962) – which prohibits the import of goods that have been affixed with counterfeit trademarks within the meaning of the Penal Code or a false trade description within the meaning of the Merchandise Marks Act; and
the Specific Relief Act of 1877 and Code of Civil procedure of 1908 – which provides a right of action to any person entitled to any property right, including a trademark, against any other person denying or seeking to deny
the former’s title . Under the Specific Relief Act, the court may, in its discretion, make a declaration of entitlement, and/or grant a perpetual injunction .
The registration of trademarks has become established practice pursuant to Direction 13 of the Registration Act, which provides for the registration of trademarks under section 18(f) of the Myanmar Registration Act of 1908, and sets out the formalities for registration . Registration alone will not amount to absolute evidence of ownership, but is likely to support any claims in civil or criminal proceedings .
Trademarks can be registered by filing a notarised or certified “declaration” of the relevant trademark at the Office of Registration of Deeds . The declaration must contain the name of the company, individual or firm represented in a special or particular manner and the signature of the applicant for registration or some predecessor in his business . A trademark may be registered in respect of particular goods or classes of goods . Although, it is not currently possible to effectively search for registered trademarks as a matter of public record and therefore, registration offers limited protection in practice .
In practice, it is also common for applicants of trademark registration to strengthen their claims to ownership by publishing a cautionary notice of ownership of the relevant trademark in the state newspaper .
PATENTS AND DESIGNS
There are currently no laws in Myanmar that provide for the protection of patents and designs to modern standards, and the current status of the laws is complex .
The Patents and Designs Act of 1911 is still technically the main law in force .
Myanmar has also developed a separate legal framework for science and technological development and technology transfer, including laws such as the Traditional Drug Law of 1996 and the Science and Technology Development Law
1994, which govern matters such as the registration of pharmaceutical patents and technology-related contracts .
WTO MEMBERSHIP AND THE TRIPS AGREEMENT
Since 1 January 1995, Myanmar has been a member of the World Trade Organisation (WTO) and is also a signatory to the
Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS Agreement), which establishes minimum levels of protection that each member state must give to the intellectual property of fellow WTO member states .
The TRIPS Agreement covers five broad issues including (i) how basic principles of trading systems and other international intellectual property agreements should be applied, (ii) how to give adequate protection to intellectual property rights, (iii) how countries should enforce those rights adequately in their own territories,
(iv) how to settle disputes on intellectual property between members of the WTO, and (v) special transitional arrangements during the period when the new system is being introduced .
Under the TRIPS Agreement, Myanmar was required to implement harmonising intellectual property legislation by 1 December 2006 . However, Myanmar has been granted a grace period for the implementation of these laws, which are currently under consideration by the Office of Attorney General and the Ministry of Science and Technology . The grace period was initially stated to last until the end of 2013 but has now been extended and to date, no new intellectual property legislation has been passed, although it is expected shortly .
THE NEW MYANMAR COMPETITION LAW
In February 2015, the Parliament of Myanmar signed off on the long-awaited new Competition Law of 2015 (Competition Act) which establishes a framework for competition policy in Myanmar . Although the Competition Act is yet to come into force, it is expected to impact on a wide range of businesses and provides for both administrative and criminal penalties (including imprisonment) for breach of its provisions .
Further guidance was expected during the statutory 90 day waiting period after the enactment of the Competition Act . However, the implementing rules and regulations for the Competition Act have yet to be finalised and published .
A NEW REGULATORY BODY
The Competition Act establishes the Myanmar Competition Commission (Commission), which will be the principal regulator responsible for enforcement . Various committees (including an Investigations Committee to investigate conduct that may infringe the Competition Act) will conduct specific functions .
The Commission is given a broad range of powers, including exempting any enterprises from the Competition Act for the interests of the State, instructing a business to reduce its market share as it considers necessary and procuring immunity for any person who has fully admitted to breaches under the Competition Act .
CONTROLLING COMPETITION ACTS & MARKET MONOPOLY
Similar to other jurisdictions, the Competition Act prohibits anti-competitive agreements and the abuse of a dominant position . However, the
Competition Act at times seems to conflate these concepts eg the prohibition against abuse of a dominant position is also contained in the part of the Competition Act which seems, primarily, to prohibit anti-competitive agreements (and it also appears in the prohibition of unfair competition) . Further clarification on this in the forthcoming rules and regulations would be helpful .
The relevant sections in the Competition Act are the prohibitions against “Controlling Competition Acts” and “Market Monopoly” .
The definition of Controlling Competition Acts is somewhat similar to the concept of
anti-competitive agreements under Article 101 of the Treaty on the Functioning of the European Union (TFEU) . It prevents inter alia agreements to fix prices, control or limit production and
bid-rigging . However, Controlling Competition Acts also expressly includes abuse of a dominant market position and monopoly by an individual or group . It is unclear how this interacts with the prohibition on Market Monopoly (discussed below) .
The Competition Act also introduces a prohibition on activities which lead to market monopoly . This appears similar to the prohibition against abuse of a dominant position under Article 102 TFEU . These activities include: controlling prices, limiting availability to control prices, lowering the quality of a good to reduce market demand, controlling the geographic market for sales to prevent entry and control market share and interfering in another business’ operations in an unfair manner . No market threshold has yet been provided for “dominant market position” .
The Competition Act also prohibits a broad array of conduct under the umbrella of “unfair competition” . This includes practices such as misleading consumers, disclosing trade secrets, intimidating other business persons and defaming the reputation of another business .
However, the prohibition on unfair competition also includes an explicit prohibition on abuse of a dominant position and forbids conduct which would traditionally fall within the concept of anti-competitive agreements eg preventing membership of a trade association where membership criteria are met . It is unclear how
this interacts in practice with the prohibitions on “Controlling Competition Acts” and “Market Monopoly” described above .
The Competition Act also introduces a merger control regime which will cover mergers, affiliations, acquisitions, joint ventures, or other mergers as determined by the Commission .
Mergers will be prohibited where they (i) would result in a market share that would exceed a level prescribed by the Commission; (ii) are intended to result in excessive market dominance (again no thresholds have been defined); or (iii) will reduce competition with the intention of creating a market with only a few competitors .
Exemptions may be available for otherwise prohibited mergers where the resulting business remains as an SME, where the merger will prevent insolvency or bankruptcy or will promote exports or the development of technology or entrepreneurship .
The Commission is empowered under the Competition Act to determine the form, procedures and conditions for merger control .
Therefore, we would expect further guidance to follow from the Commission .
Companies carrying on business in Myanmar will soon be subject to additional domestic competition laws similar to those of other ASEAN jurisdictions, on top of the already existing long arm jurisdiction of the competition laws of other jurisdictions .
Businesses should therefore take steps to identify potential infringements and ensure compliance with the ever-changing landscape of competition laws in Asia . Businesses should be auditing their existing agreements and practice and make sure that business staff are aware of the latest competition developments in order to ensure compliance .
GLOSSARY AND ABBREVIATIONS
1976 Sample Employment Contract
The Union of Myanmar Foreign Investment Law of 1988
2011 Sample Employment Contract
The Union of Myanmar Foreign Investment Law of 201223
Myanmar Special Economic Zone Law 2014
The ASEAN Comprehensive Investment Agreement of 2009
The Arbitration (Protocol and Convention) Act of 1937
The Arbitration Law (Union Parliament Act No . 5 of 2016) enacted on 5 January 2016
The Association of South East Asian Nations
Bilateral Investment Treaties
The Central Bank of Myanmar
The Contract Act of 1872
The Copyright Act of 1914
The Civil Procedure Code of 1909
The Companies Registration Office (which is part of the Directorate of Investment and Company Administration)
The Capital Structure Committee
The Directorate of Investment and Company Administration (which is part of the Ministry of National Planning and Economic Development)
The Dawei Special Economic Zone Law of 2011
Energy Planning Department
Environmental Impact Assessments
Energy Management Committee
Employment and Skill Development Law (2013)
Electronic Transactions Law 2004
Foreign Exchange Management Law of 2012
The Foreign Exchange Regulations Act of 1947
Union of Myanmar Foreign Investment Law of 1988
Foreign Investment Rules
Rules issued by MNPED to supplement the 2012 FIL
Foreigner Registration Certificate
Intellectual Property and Information Technology
The Judiciary Law of 2010
Labour Organisation Law
Labour Organisation Law of 2011
Liquefied Petroleum Gas
The Myanmar Companies Act of 1914 (as amended by the Law Amending the Myanmar Companies Act (1989) and the Law Amending the Myanmar Companies Act (1991))
The Myanmar Citizens Investment Law of 1994
Ministry of Communications and Information Technology (Ministry of Information (MOI))
The Myanmar Investment Commission (which is part of the Ministry of National Planning and Economic Development)
MIC Notification 2013
Myanmar Investment Commission Notification No . 1/2013
MIC Notification 2014
Myanmar Investment Commission Notification No . 49/2014
The Myanmar Mines Law of 1994
The Myanmar Mines Rules of 1996
Myanmar Legal Services Limited
The Ministry of National Planning and Economic Development
Ministry of Energy
Myanma Oil and Gas Enterprise
The Moneylenders Act of 1945
Myanma Petrochemical Enterprise
Myanma Petroleum Products Enterprise
Myanmar Posts and Telecommunications
National Energy Management Committee
New York Convention
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Permit to Trade
Submitting an application to the DICA to register an entity and obtain a permit to conduct its business under section 27(A) of the MCA
Production Sharing Contracts
Postal and Telecommunications Department
Specially Designated Nationals
The Special Economic Zone Law of 2011
Social Impact Assessments
The Settlement of Labour Disputes Law of 2012
The Special Company Act of 1950
Special Economic Zones Special economic zones within Myanmar which allow foreign
investors to undertake a range of business activities in designated areas whilst offering various tax reliefs and exemptions to eligible investors .
The State-Owned Economic Enterprises Law of 1989
Registration Act (1909)
The Registration Act also requires that all security interests relating to immovable property be registered with the Office of the Registration of Deeds under the Ministry of Agriculture and Irrigation .
Non-registration may make the security interest unenforceable . As noted above, foreign persons are not permitted to take security over immovable property in Myanmar .
Telecoms Law Telecommunications Law of the Republic of the Union of Myanmar 2013
The Transfer of Immovable Property (Restriction) Act of 1987
The Transfer of Property Act of 1882
Trade Unions Act
The Trade Unions Act of 1926 (as amended)
Trade-Related Aspects of Intellectual Property Rights Agreement
United Nations Commission on International Trade Law
World Trade Organisation
The country was called “Burma” at the time, and was renamed by the government as the “Republic of the Union of Myanmar” in 1989 . Under the constitution, the President is required to make such ministerial appointments from a list of suitable army personnel nominated by the Commander in Chief of the military . The constitution also requires the President to coordinate with the Commander in Chief of the military if the latter wishes to appoint military personnel to other ministerial posts . Military personnel who are appointed as Ministers of Defence, Home Affairs and Border Affairs are also permitted by the constitution to continue as serving members of the military (unlike members of the civil service, who are deemed to have retired from their positions within the civil service from the day that they are appointed as ministers) . The MIC’s remit also extends to the review of domestic investment proposals made under the Myanmar Citizens Investment Law of 2013 Please refer to the “Lending and Taking Security” section of this guide for further detail on the ability to make loan repayments out of Myanmar . The MCA also recognises companies limited by guarantee and unlimited companies . Not exceeding MMK 500 . Two or more persons are said to consent when they agree upon the same thing in the same sense (section 13 of the Contract Act) . Consent is said to be free when it is not caused by (1) coercion, (2) undue influence, (3) fraud, (4) misrepresentation, or (5) mistake .
The terms coercion, undue influence, fraud, misrepresentation and mistake are defined separately under the Contract Act .
Please see the “Real Estate Law” section of this guide for more information on the registration of long term leases granted under the 2012 FIL . Under Notification No. 180 of
2December 1938, Myanmar has reciprocal arrangements with the United Kingdom, Belgium, Czechoslovakia, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Poland, Portugal, Romania, Thailand, Spain, Sweden and Switzerland . However, all of these are also contracting states to the New York Convention, signatories to which are arguably not bound by the 1923 Protocol or the 1927 Convention, even if they have not formally repudiated the 1923 Protocol or 1927 Convention .
Yaung Chi Oo Trading Pte Ltd v Government of the Union of Myanmar (2003) . The Yadana and Yetagun projects commenced in 1998 and 2000, respectively . Existing under the Ministry of Commerce which administers the Control of Imports and Exports (Temporary) Act 1947 . Existing under the Ministry of Commerce . The SLDL defines “collective dispute” as “the dispute between one or more employer or employer organisation and one or more labour organisation over working conditions, the recognition of their organisations within the workplace, the exercise of the recognised right of their organisations, relations between
employer and workers, where this dispute could jeopardise the operation of the work of social peace . The expression includes a rights dispute or interest dispute” . The term collective dispute is distinguished from “individual dispute” which means “a rights dispute between the employer and one or more workers relating to the existing law, rules, regulation and by-law; collective agreement or employment agreement” . Individual disputes may be brought to the Conciliation Body followed by the competent court if not resolved directly with the employer .
By way of example, the formation of a Township Labour Organisation must be recommended by not less than 10% of all Basic Labour Organisations of the relevant industry or trade in the relevant township . Non-essential services may also become essential services if the strike affecting them exceeds a certain duration so as to give rise to damage which is irreversible or out of all proportion to the occupational interests of those involved in the dispute . A requirement already exists under the SEZL and DSEZL that 25% of skilled workers be Myanmar citizens within the first five years of operation, 50% within the first ten years of operation, and 75% within 15 years of operation . Sections 3 and 4 of the TIPRA . In practice, such exemptions are not usually made with respect to private organisations . Copyright is defined as the “sole right to produce or reproduce a work or any substantial part
thereof in any material form whatsoever, to perform, or in the case of a lecture to deliver, the work or any substantial part thereof in public” .
English language version obtained from the Burma Lawyer’s Council (at http://www .blc-burma .org/html/ Myanmar%20Penal%20Code/mpc .html) . The Penal Code also contains the definition of a “property mark”, as distinguished from a trademark, and which constitutes “a mark used for denoting that moveable property belongs to a particular person” . Please note that no official English translation of the 2012 FIL is yet available . This guide was produced on the basis of an unofficial translation provided by local counsel .
MYANMAR INVESTMENT GUIDE 2016
- THIRD EDITION
SUPPLEMENT NO.1 – MIC NOTIFICATION 26/2016
On 21 March 2016 the Myanmar Investment Commission (the "MIC") issued Notification 26/2016 ("MIC Notification 2016"), replacing Notification 49/2014 issued on 14 August 2014 ("MIC Notification 2014") in respect of the implementation of the Foreign Investment
Law of 2012.
MIC Notification 2016 updates the lists of specific business activities for which foreign ownership is (i) prohibited, (ii) restricted to a joint venture with a Myanmar person subject to a maximum 80% foreign ownership limitation, and/or (iii) may be subject to terms and conditions stipulated by the Myanmar Government or the relevant Ministry.
The new MIC Notification 2016 does not substantially change the investment landscape for any sectors and represents a further step by the MIC to revisit the conditions applicable to foreign investment in various business categories. We outline below some of the key changes introduced.
& CONDITIONS EASED BY MIC
The following activities, previously required to be conducted through a joint venture with a Myanmar party, are no longer expressly subject to foreign ownership restrictions. As such, business conducting these activities should now be open to 100% foreign ownership:
the production and distribution of hybrid seeds;
the production and propagation of high yield seeds and local seeds;
the manufacture of rubber and rubber products; and
NEW RESTRICTIONS IMPOSED BY MIC NOTIFICATION 2016
The overall effect of the MIC Notification 2016 is to relax restrictions on foreign investment. however one express restriction is that foreign investors are now expressly required to enter into a joint venture with the Myanmar Government in respect of businesses relating to the manufacture and distribution of vaccines. Vaccines are now also expressly required to meet the World Health Organisation's Good Manufacturing Practice.
SUPPLEMENT TO OUR MYANMAR INVESTMENT GUIDE
We note that the prohibitions, restrictions and conditions on foreign ownership set out:
in the Promotion of Foreign Investment section of our Investment in Myanmar Guide; and
in the Technology and Communications section of our Investment in Myanmar Guide,
continue to apply under the MIC Notification 2016.
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