, Legal protection of investment in Nicaragua

Legal protection of investment in Nicaragua

The configuration of the Nicaraguan economic system was one of the areas reinforced in the recent Law of Partial Reform to the Political Constitution of the Republic of Nicaragua (published in the Gazette, Official Journal No. 26 of February 10, 2014). Thus, throughout the article of the current Political Constitution is the express recognition of a set of rights that form the necessary fabric of an economic democracy, characterized by freedom of enterprise, freedom of contract, respect for human rights and Private property, prohibition of confiscation of property and disturbance of the domain and legal possession of any of the forms of property recognized by the constituent as part of the mixed economic model declared in the constitutional text.

Principles such as equality of companies before the law, tax legality and reservation of law to create taxes and tributes, protection of intellectual property and consensus between government, private sector and workers, with the aim of achieving productive stability and tranquility in business are fundamental pillars of the socio-economic order enshrined in the Nicaraguan Political Constitution.

The aforesaid is complemented by the pertinent recognition – also at the constitutional level – of the responsibility of the State to protect, foster and promote the different forms of property and private economic and business management to guarantee economic and social democracy. In addition to safeguarding and guaranteeing free competition, consumer rights, national and foreign investments, public-private and the leading role of private initiative in order to contribute to the country’s social economic development.

The Nicaraguan legal system promotes the economic development of the country. National and foreign investments enjoy the same treatment and preference throughout the national territory. Law No. 344, “Law on the Promotion of Foreign Investments,” establishes that foreign investors shall enjoy the same rights and means to exercise them on an equal basis with national investors, likewise, the foreign investor shall be granted the full exercise of the right on the profit, use, exploitation and control of the property related to its investment without any limitations other than those established in the Political Constitution, enjoys free access to the purchase and sale of available foreign currency and the free convertibility of the currency; meaning that there are no restrictions with respect to the conversion or transfer of funds related to investments, there is freedom of transfer of earnings, dividends and profits, after payment of taxes and freedom to pay and remit abroad payments for debts contracted in the exterior, interests: royalties; Income and technical assistance.

The Political Constitution in its article 5 establishes the recognition to the different forms of property and the State stimulus for the production of the wealth with a social function. Within the national legal framework are different legal norms that regulate the investments in the country, among these, it is possible to emphasize the Civil Code and Code of Commerce, Law No. 344, Law of promotion of foreign investments and Law No. 540, Law of mediation and arbitration. This last law regulates alternative methods to the judicial process to solve any type of controversy that results from contractual relations, and it has a national and international scope of application, without prejudice to treaties, agreements, pact or any other instrument of International Law of which Nicaragua is a party.

In the Arbitral proceeding, the Tribunal shall be composed of professionals highly qualified in the matter and freely chosen by the parties, under the procedures previously agreed upon by them, without the nationality thereof being an impediment to acting as such, unless Parties have so agreed unless otherwise agreed, the maximum time established by Law No. 540 for the Arbitral Tribunal to issue its final award is six months from the date of its integration. Both the agreement reached by the parties in a Mediation process and the Arbitral Award resulting from an Arbitration process are final and enforceable immediately under the rules established by the Civil Procedure Code of Nicaragua to carry out the Procedural Execution of the same.

As we have pointed out, Nicaragua stimulates and fosters foreign investment through regulated incentives in different national laws. Thus, we can find incentives for investment in Law No. 822, Tax Concertation Law, Law No. 382, Law on temporary admission for active improvement of export facilitation, Law No. 917, Law on Free Trade Zones of exportation, Law No. 532, Law for the Promotion of Electricity Generation with Renewable Sources, Law No. 387, Special Law on Mining Exploration and Exploitation, Law No. 306, Incentive Law for the Tourism Industry of the Republic of Nicaragua, Law No. 694, law for the promotion of income of pensioners and rentier residents, Law No. 838, General Law of Ports of Nicaragua, Law 428 No. Organic Law on Urban and Rural Housing, and Law No. 489, Fisheries and Aquaculture Law. All these legal instruments recognize attractive incentives for those who wish to invest in Nicaragua.

At the international level, Nicaragua is part of several multilateral organizations that promote and encourage investment. It has been a member of the Central American Integration System since 1951 with the creation of the Organization of Central American States (ODECA for its acronym in Spanish); In the framework of this integration process, Nicaragua is part of numerous regional treaties such as the Protocol of Tegucigalpa to the letter of ODECA (1991), the General Treaty of Central American Economic Integration (1960), the Protocol to the General Treaty of Central American Economic Integration (1993 ), Treaty on Investment and Trade in Services between the Republics of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua (2002), Multilateral Treaty on Free Trade and Central American Economic Integration (1958), Central American Uniform Customs Code (CAUCA for its acronym in Spanish) (2008) And its regulations, the framework agreement for the establishment of the Central American Customs Union (2007), among others, that promote regional trade and seek the improvement of the Central American customs union that provides economic development to the countries of the region. Nicaragua is also a member of the Bolivarian Alternative for the Americas (ALBA for its acronym in Spanish).

It has also signed numerous bilateral and multilateral agreements with different countries and regions of the world, such as the Free Trade Agreement between the United States, Central America and the Dominican Republic, the Association Agreement with the European Union, the Central American Free Trade Agreement with Mexico, The Free Trade Agreement between Central America and the Dominican Republic, the Free Trade Agreement between the Republic of Nicaragua and the Republic of China (Taiwan), the Free Trade Agreement with Panama, the Free Trade Agreement between Central America and Chile, Of Partial Scope signed with Colombia and the Bolivarian Republic of Venezuela and others that are in the process of negotiation.

In particular, the Investment Chapter of the Free Trade Agreement between Central America, the United States and the Dominican Republic (CAFTA-DR), recognizes the following principles of protection for foreign investment:

    • a) National Treatment
    • b) Most Favored Nation Treatment
    • c) Investment treatment under customary international law, including fair and equitable treatment, as well as full protection and security.
    • d) Expropriations only for (i) a public purpose cause; (ii) in a non-discriminatory manner; (iii) by prompt, adequate and effective payment of compensation; And (iv) in accordance with the principle of due process.
    • e) Freedom of transfers from and to the territory of: (i) capital contributions; (ii) profits, dividends, capital gains, and proceeds from the sale or liquidation, total or partial of the investment covered; (iii) interest, royalty payments, administrative expenses, technical assistance and other charges; (iv) payments made under a contract, including a loan agreement; (v) Payments derived from an expropriation indemnity; (vi) payments arising from a dispute.
    • Thus, Nicaragua is inserted in the world market through the various organizations of which it forms part as the World Trade Organization (WTO), the Central American Integration System (SICA) of which Nicaragua forms part of all its institutionality and its Council of Economic Integration Ministries (COMIEEC for its acronym in Spanish), the Secretariat for Central American Economic Integration (SIECA for its acronym in Spanish), the Executive Committee for Economic Integration (CEIE for its acronym in Spanish) and the Central American Bank for Economic Integration (BCIE for its acronym in Spanish). It is also part of the International Investment Settlement Center (ICSID), the Multilateral Investment Guarantee Agency (MIGA), the Private Investment Investment Corporation (OPIC), the United Nations Commission on Trade Law (UNCITRAL), the New York Convention and the Inter-American Convention on Commercial Arbitration, and agreements with the Multilateral Investment Guarantee Agency of the World Bank (MIGA).

All this broad international normative body regulates the commercial relations of Nicaragua with the world, being a propitious destiny to direct the glances towards the investment and the economic development.

Ma. Asunción Moreno Castillo