Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

Project documents need to be adapted to specific Myanmar laws and practices, including permits, licences and government approvals. See ‘due diligence issues’ below. With a few exceptions, project documents may be in English, be governed by foreign law and adopt international arbitration for dispute resolution.

There is no direct translation in Myanmar for the term ‘loan agreement’. Besides the absence of specific provisions on loan agreements in the Burma Code, there were issues to do with applicable stamp duty. The current Stamp Duty Act provides for 0.5 per cent stamp duty, and a 10x penalty for late affixing of duty stamps, under the category ‘bond’. Regulatory approvals are required for foreign loans from MIC (for MIC companies) and CBM. There is a 15 per cent withholding tax rate on interest on offshore loans.

Specific security documents are required, some of which may be governed by foreign law assuming one or more foreign shareholders, etc. Requirements for stamp duty and registration of each security document need to be determined.

Following the effective date of the MCL on 1 August 2018, all Myanmar companies had to register online with DICA.

Regulatory agencies: Under the 2008 Constitution, which became effective on 31 January 2011 (first convening of the new Union Assembly), the Myanmar Union government includes seven regions, seven states and five autonomous areas.

On 1 April 2016, the number of ministries was reduced from 36 to 20. Subsequently five additional ministries were established.

Foreign investors often deal with MIC and DICA in Yangon and government regulators in Nay Pyi Taw, but need to understand the local laws and regulations in one or more of the 19 states, regions or autonomous areas of Myanmar.

There are at least 11 types of land, and there often is a need to upgrade titles, as follows:

  • state-owned land;
  • freehold land;
  • grant land;
  • farm land;
  • religious land;
  • vacant land, fallow land and virgin land;
  • town land;
  • village land;
  • forest land;
  • cantonments; and
  • garden land.

There are at least 15 laws applicable to land, as follows:

  • the Transfer of Property Act 1882;
  • the Land Acquisition (Mines) Act 1885 (Repealed) by Law No. 19/12 the Law revoking the Land Acquisition (Mines) Act, on 1 November 2012;
  • the Upper Burma Land and Revenue Regulations 1889;
  • the Land Acquisition Act 1894, latest amendment issued on 13 July 2015;
  • the Code of Civil Procedure 1908;
  • the Water Power Act 1927;
  • the Disposal of Tenancies Law 1948;
  • the Transfer of Immovable Property Restriction Act 1987;
  • the Procedures Conferring the Right to Cultivate Land/Right to Utilise Land for Agriculture, Livestock Poultry Farming and Agriculture Purposes 1991;
  • the Forest Law 1992;
  • the Constitution 2008;
  • the Right to Use Land Notification 39/2011;
  • the Farm Land Law 2012 and its rules;
  • the Vacant, Fallow and Virgin Lands Management Law 2012;
  • the Ward and Village Tract Administration Law 2012; and
  • the Myanmar Investment Law 2016, section 50 and its rules.

In each project sector, and in each state, region and autonomous area, there may be numerous laws, rules, regulations, orders and directives to be identified and complied with.

There is an absence of environmental, health and safety law.

The Environmental Conservation Law was enacted in March 2012. Environmental Conservation Rules were issued in June 2014. No Myanmar bank has adopted the Equator Principles.

Due diligence issues include the following:

  • Who is the government counterparty?
  • What is the model form of concession/MoU/JVA with each government counterparty?
  • How will the new Arbitration Law No. 5/2016 (based on UNCITRAL Model Law) be used in practice?
  • What will be the choices of venue for dispute settlement by arbitration?
  • What are choices of governing law?
  • Will government guarantees of the performance of Myanmar counterparties be available?
  • How will acquisition of land for roads and transmission lines be facilitated?
  • What is the scope of business of the new branches of foreign banks which opened in 2015 and 2016?
  • In the case of foreign lenders, there is a requirement for mortgages of immovable properties owned by the borrower to be held by a Myanmar bank as security agent for foreign lenders. Land must be transferable to be mortgaged.
  • There was a requirement for existing companies and branches to re-register after 1 August 2018.
  • There are new forms of company documents under the new Companies Law (2017) effective 1 August 2018.
  • There is a change in fiscal year to 30 September, effective from 2020.

Due diligence requirements and challenges include the following:

  • access to DICA records of Myanmar companies;
  • litigation searches;
  • title deed searches and determination whether the land is transferable;
  • limited electronic capacity of regulators;
  • translations (English and Myanmar);
  • failure to affix stamp duty (prior to or on date of document);
  • failure to register documents;
  • new regulatory practices after change of government 2016; and
  • qualifications in legal opinions on Myanmar law and practice.
Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

Financing and project agreements need to be registered with government authorities (DICA, ORD and land records offices) to be enforceable, with limited exceptions under the new Myanmar Registration Act For Immovable Property.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

A foreign or foreign arbitration award is enforceable by a Myanmar court without a retrial of the merits of the case (subject to conditions).

Myanmar acceded without reservations to become a contracting state of the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards, effective on 15 July 2013.

The Arbitration Law (2016) revoked the old Arbitration Act 1944, which did not recognise arbitration abroad. The new law is based on the UNCITRAL Model Law, and allows enforcement of foreign arbitration awards in Myanmar on certain conditions. Regulations under the Arbitration Law (2016) have not been issued.

Provisions on settlement of disputes by arbitration often provide for foreign arbitration, Singapore International Arbitration Centre (SIAC) arbitration in Singapore being a common resolution. Note that regulations under the new Arbitration Law (2016) have not been issued, and there is no recorded case of enforcement of a foreign arbitration award.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

Assuming one or more foreign shareholders, and no mandatory Myanmar law provision, project agreements are often subject to foreign law, (eg, English, Singapore, Thai).

Project contracts with Myanmar regulators are governed by Myanmar law. Myanmar law includes the laws of the Republic of the Union of Myanmar.

Financing agreements with foreign lenders and Myanmar branches of foreign banks are typically governed by foreign law.

Permits, licences and regulatory approvals, agreements regarding lease of land, procurement from government entities, and pledges of shares of Myanmar companies, are usually governed by Myanmar law.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

Disputes regarding project and financing documents governed by foreign law cannot be heard by a Myanmar court.