3. Legal Regime
Transparency of the Regulatory System
The national government manages all regulatory processes. Information about regulations is often scattered among various ministry and agency websites and is sometimes only available through direct communication with officials. It is advisable for U.S. investors to consult with local attorneys or advisors to assist with locating comprehensive regulatory information.
On the 2019 Global Innovations Index, the Dominican Republic’s overall rank remained flat (87) compared to 2018. In sub-sections of the report, the Dominican Republic ranks 98 out of 129 for regulatory environment and 74 out of 129 for regulatory quality. The World Economic Forum 2019 Global Competitiveness Report ranked the Dominican Republic 87 out of 141 countries with respect to the efficiency of the legal framework in challenging regulations, and 108 out of 141 regarding burden of government regulations.
The World Bank Global Indicators of Regulatory Governance report states that Dominican ministries and regulatory agencies do not publish lists of anticipated regulatory changes or proposals intended for adoption within a specific timeframe. Law 200-04 requires regulatory agencies to give notice of proposed regulations in public consultations and mandates publication of the full text of draft regulations on a unified website: . Foreign investors, however, claim that these requirements are not always met in practice and many businesses note that the scope of the website content is not always adequate for investors or interested parties as not all relevant Dominican agencies provide content, and those that do often do not keep the content up to date. U.S. businesses reported that some laws went into effect before agencies issued implementing regulations to guide the businesses on how to comply with requirements.
The process of public consultation is not uniform across government. Some ministries and regulatory agencies solicit comments on proposed legislation from the public; however, public outreach is generally limited and depends on the responsible ministry or agency. For example, businesses report that some ministries sometimes upload proposed regulations to their websites or post them in national newspapers, while others may form working groups with key public and private sector stakeholders participating in the drafting of proposed regulations. Public comments received by the government are generally not publicly accessible. Some ministries and agencies prepare consolidated reports on the results of a consultation for direct distribution to interested stakeholders. Ministries and agencies do not conduct impact assessments of regulations or ex post reviews. Affected parties cannot request reconsideration or appeal of adopted regulations.
The Dominican Institute of Certified Public Accountants (ICPARD) is the country’s legally recognized professional accounting organization and has authority to establish accounting standards in accordance with Law 479-08, which also declares (as amended by Law 31-11) financial statements should be prepared in accordance with generally accepted accounting standards nationally and internationally. The ICPARD and the country’s Securities Superintendency require the use of International Financial Reporting Standards (IFRS) and IFRS for small and medium-sized entities (SMEs).
By law, the Office of Public Credit publishes on its website a quarterly report on the status of the non-financial public sector debt, which includes a wide array of information and statistics on public borrowing (www.creditopublico.gov.do/publicaciones/informes_trimestrales.htm).
In addition to the public debt addressed by the Office of Public Credit, the Central Bank maintains on its balance sheet nearly USD $12 billion in “quasi-fiscal” debt. When consolidated with central government debt, the debt-to-GDP ratio is near 53 percent, and the debt service ratio is near 30 percent.
International Regulatory Considerations
Since 1995, the Dominican Republic has presented 280 notifications to the WTO Committee on Technical Barriers to Trade (TBT). In recent years, the Dominican Republic has frequently changed technical requirements (e.g., for steel rebar imports and sanitary registrations, among others) and has failed to provide proper notification under the WTO TBT agreement and CAFTA-DR.
Legal System and Judicial Independence
The judicial branch is an independent branch of the Dominican government. According to Article 69 of the Constitution, all persons, including foreigners, have the right to appear in court. The basic concepts of the Dominican legal system and the forms of legal reasoning derive from French law. The five basic French Codes (Civil, Civil Procedure, Commerce, Penal, and Criminal Procedure) were translated into Spanish and passed as legislation in 1884. Some of these codes have since been amended and parts have been replaced. Subsequent Dominican laws are not of French origin.
The World Economic Forum 2019 Global Competitiveness report ranked the Dominican Republic 123 out of 141 countries in judicial independence and 87 of 141 in the efficiency of the legal framework in settling disputes. On the 2018 Global Innovations Index, the Dominican Republic ranked 91 out of 129 countries for rule of law.
There is a Commercial Code and a wide variety of laws governing business formation and activity. The main laws governing commercial disputes are the Commercial Code; Law No. 479-08, the Commercial Societies Law; Law No. 3-02, concerning Business Registration; Commercial Arbitration Law No. 489-08; Law No. 141-15 concerning Restructuring and Liquidation of Business Entities; and Law No. 126-02, concerning e-Commerce and Digital Documents and Signatures.
Some investors complain of long wait times for a decision by the judiciary. While Dominican law mandates overall time standards for the completion of key events in a civil case, these standards frequently are not met. The World Bank’s 2020 Doing Business report noted that resolving complaints raised during the award and execution of a contract can take more than four years in the Dominican Republic, although some take longer. Some investors have complained that the local court system is unreliable, is biased against them, and that special interests and powerful individuals are able to use the legal system in their favor.
While the law provides for an independent judiciary, businesses note the government does not respect judicial independence or impartiality, and improper influence on judicial decisions is widespread. Several large U.S. firms cite the improper and disruptive use of lower court injunctions as a way for local distributors to obtain more beneficial settlements at the end of contract periods. In order to engage effectively in the Dominican market, many U.S. companies seek local partners that are well-connected and understand the local business environment.
Laws and Regulations on Foreign Direct Investment
The legal framework supports foreign investment. Article 221 of the Constitution declares that foreign investment shall receive the same treatment as domestic investment. Foreign Investment Law (No. 16-95) states that unlimited foreign investment is permitted in all sectors, with a few exceptions for hazardous materials or materials linked to national security.
The Export and Investment Center of the Dominican Republic (CEI-RD) aims to be the one-stop-shop for investment information, registration, and investor after-care services. CEI-RD maintains a user-friendly website for guidance on the government’s priority sectors for inward investment and on the range of investment incentives ( ).
Competition and Anti-Trust Laws
The National Commission for the Defense of Competition (PRO-COMPETENCIA) has the power to review transactions for competition-related concerns. Private sector contacts note, however, that strong public pressure is required for PRO-COMPETENCIA to act.
Expropriation and Compensation
The Dominican constitution permits the government’s exercise of eminent domain; however, it also mandates fair market compensation in advance of the use of seized land. Nevertheless, there are many outstanding disputes between U.S. investors and the Dominican government concerning unpaid government contracts or expropriated property and businesses. Property claims make up the majority of cases. Most, but not all, expropriations have been used for infrastructure or commercial development. Many claims remain unresolved for years.
Investors and lenders have reported that they typically do not receive prompt payment of fair market value for their losses. They have complained of difficulties in the subsequent enforcement even in cases in which the Dominican courts, including the Supreme Court, have ordered compensation or when the government has recognized a claim. In other cases, some indicate that lengthy delays in compensation payments are blamed on errors committed by government-contracted property assessors, slow processes to correct land title errors, a lack of budgeted funds, and other technical problems. There are also cases of regulatory action that investors say could be viewed as indirect expropriation. For example, they note that government decrees mandating atypical setbacks from roads or establishing new protected areas can deprive investors of their ability to use purchased land in the manner initially planned, substantially affecting the economic benefit sought from the investment.
Many companies report that the procedures to resolve expropriations lack transparency and, to a foreigner, may appear antiquated. Government officials are rarely, if ever, held accountable for failing to pay a recognized claim or failing to pay in a timely manner.
ICSID Convention and New York Convention
In 2000, the Dominican Republic signed the International Center for the Settlement of Investment Disputes (Washington Convention), however, the Dominican Congress did not ratify the agreement as required by the constitution. In 2001, the Dominican Republic became a contracting state to the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The agreement entered into force by Congressional Resolution 178-01.
Investor-State Dispute Settlement
The Dominican Republic has entered into 11 bilateral investment treaties that are in force, most of which contain dispute resolution provisions that submit the parties to arbitration.
As a signatory to CAFTA-DR, the Dominican Republic is bound by the investment chapter of CAFTA-DR, which submits the Parties to arbitration under either the ICSID or the United Nations Commission on International Trade Law (UNCITRAL) rules. There have been three U.S. investor-state dispute cases filed against the Dominican Republic under CAFTA-DR. One case was settled; in the other two, an arbitration panel found in favor of the government. Dual nationals of the United States and Dominican Republic should be aware that their status as a Dominican national may interfere with their status as a “foreign” investor if they seek dispute settlement under CAFTA-DR provisions. U.S. citizens who contemplate pursuing Dominican naturalization for the ease of doing business in the Dominican Republic should consult with an attorney about the risks that may be raised by a change in nationality with regard to accessing the dispute settlement protections provided under CAFTA-DR.
There are at least 27 U.S. investors who are involved in ongoing legal disputes with the Dominican government and parastatal firms involving payments, expropriations, contractual obligations, or regulatory obligations. The investors range from large firms to private individuals and the disputes are at various levels of legal review.
International Commercial Arbitration and Foreign Courts
Law 489-08 on commercial arbitration governs the enforcement of arbitration awards, arbitral agreements, and arbitration proceedings in the Dominican Republic. Per law 489-09, arbitration may be ad-hoc or institutional, meaning the parties may either agree on the rules of procedure applicable to their claim, or they may adopt the rules of a particular institution. Fundamental aspects of the United Nations Commission on International Trade (UNCITRAL) model law are incorporated into Law 489-08. In addition, Law 181-09 created an institutional procedure for the Alternative Dispute Resolution Center of the Chamber of Commerce Santo Domingo (http://www.camarasantodomingo.do/).
Foreign arbitral awards are enforceable in the Dominican Republic in accordance with Law 489-09 and applicable treaties, including the New York Convention. U.S. investors complain that the judicial process is slow and that domestic claimants with political connections have an advantage.
Law 141-15 provides the legal framework for bankruptcy. It allows a debtor company to continue to operate for up to five years during reorganization proceedings by staying legal proceedings. It also authorizes specialized bankruptcy courts; contemplates the appointment of conciliators, verifiers, experts, and employee representatives; allows the debtor to contract for new debt which will have priority status in relation to other secured and unsecured claims; stipulates civil and criminal sanctions for non-compliance; and permits the possibility of coordinating cross-border proceedings based on recommendations of the UNCITRAL Model Law of 1997. In March 2019, a specialized bankruptcy court was established in Santo Domingo. The national juridical school is still training specialized bankruptcy judges.
The Dominican Republic scores lower than the regional average and comparator economies on resolving insolvency on most international indices.
5. Protection of Property Rights
The Dominican Constitution guarantees the right to own private property and provides that the state shall promote the acquisition of property, especially titled real property. All land must be registered under Dominican law, and that which is not registered is considered state land. There are no restrictions or specific regulations on foreigners or non-resident owners of land.
Mortgages and liens exist in the Dominican Republic. The Title Registry Office maintains a reliable system of recording titles, as well as a complementary registry of third-party rights, such as mortgages, liens, easements, and encumbrances. A patchwork history of land titling systems and sometimes violent political change has complicated land titling in the Dominican Republic. The country transitioned to a new system based on GPS coordinates in 2008 and has been working towards establishing clear titles, but industry sources estimate the proportion of clear titles remains around 35 percent of all land titles. The government advises that investors are ultimately responsible for due diligence and recommends partnering with experienced attorneys to ensure that all documentation, ranging from title searches to surveys, have been properly verified and processed.
Property owners maintain ownership of legally purchased property even if it is unoccupied or occupied by squatters. However, for land without a title (thereby state-owned), “adverse possession” can come into play, meaning squatters can acquire legal ownership of the land.
Land tenure insecurity persists, fueled by government land expropriations, institutional weaknesses, lack of effective law enforcement, and local community support for land invasions and squatting. Some companies have reported that concessions granted by the government are subsequently interfered with or not respected and cite alleged political expediency or influence as reasons for such actions. In some cases, holders of title certificates received little or no additional security. Long-standing titling practices, such as issuing provisional titles that are never completed or providing title to land to multiple owners without requiring individualization of parcels, have created substantial ambiguity in property rights and undermined the reliability of land records. Some of these practices have been curtailed in the last few years, but nonetheless undermine the reliability of existing land documentation. In addition, the country has struggled to control fraud in the creation and registration of land titles, including illegal operations within the government agencies responsible for issuing titles.
According to the World Bank’s report Doing Business 2020, registering property in the Dominican Republic requires 6 steps, an average of 33 days, and payment of 3.37 percent of the land value as a registration fee. In the 2020 report, the Dominican Republic rank for ease of registering property improved from 77 to 74 (out of 190 countries in ease of registering property). In the last decade, the Dominican government received a $10 million USD Inter-American Development Bank (IDB) loan to modernize its property title registration process, address deficiencies and gaps in the land administration system, and strengthen land tenure security. The project involved digitization of land records, decentralization of registries, establishment of a fund to compensate people for title errors, separation of the legal and administrative functions within the agency, and redefinition of the roles and responsibilities of judges and courts.
Intellectual Property Rights
Intellectual property rights (IPR) are issued by several IP authorities in the Dominican Republic. The National Copyright Office (ONDA) issues copyrights, the National Office of Industrial Property (ONAPI) issues trademarks and patents, the Ministry of Public Health and Social Assistance (MISPAS) issues sanitary registrations required for marketing foods, pharmaceuticals, and health products, and the Directorate of International Trade (DICOEX) has jurisdiction over the implementation of geographical indications. Despite strong IPR laws on the books and marginal operational improvements in recent years, the quality of decision-making at these IPR-issuing authorities is still inconsistent.
Enforcement is carried out by the Customs Authority (DGA), the National Police, the Special Office of the Attorney General for Matters of Health, the Special Office of the Attorney General for High Tech Crimes, and the National Copyright Office (ONDA). However, due to the absence of an interagency mechanism, these institutions demonstrated varying levels of capacity and commitment. The result is that enforcement remains weak as the government achieved little progress in addressing longstanding IPR issues such as the widespread cultural acceptance of signal piracy and counterfeit products.
Signal piracy has become the most common and flagrant IP infringement in the Dominican Republic, and it continues to become more widespread with the development of new technologies. For example, many people modify Amazon Firesticks to gain illegal access to virtually unlimited content via internet protocol television (IPTV). Businesses that provide services related to piracy often operate with impunity as ONDA rarely submits formal requests for the telecommunications regulator (INDOTEL) to cancel the licenses of those using pirated signals. Similarly, the country’s Special Prosecutor for High Tech Crimes rarely pursues copyright infringement cases, instead focusing resources on cybercrimes.
Despite the efforts of the Special Office of the Attorney General for Matters of Health, illicit or counterfeit goods are also still widely available. Counterfeit or smuggled alcohol and cigarettes are common because those items are taxed at a relatively high rate. In certain shopping districts like La Duerte, Villa Consuelo, and Moca, it is easy to find counterfeit apparel, shoes, luxury handbags, pharmaceuticals, cosmetics, and electronics. The availability of counterfeit goods in these shopping districts is common knowledge and law enforcement is unresponsive, reflecting the cultural acceptance of counterfeiting throughout the country.
Industry representatives also noted that the absence of specialized tribunals and weak technical capacity in the judicial system hinder prosecution of IP violations. While a limited number of judges in the capital city of Santo Domingo possess the skills and experience to adjudicate IP disputes, judges outside of the capital have little or no understanding of IP legal issues.
In 2019, the Dominican Republic passed Law No. 17-19 on the Eradication of Illicit Trade, Smuggling, and Forgery of Regulated Goods, which increased prosecution of some IP violations. This law prohibits the sale of pharmaceuticals, spirits, gasoline, and tobacco without official registration. The law also allows prosecutors to pursue legal action in the absence of a plaintiff.
According to the Special Office of the Attorney General for Matters of Health, much of the increase in its counterfeit goods cases can be attributed to this new legislation. In 2019, the number of counterfeit goods cases pursued by this office increased 76 percent and arrests increased 31 percent over 2018.
Since 2003, the U.S. Trade Representative (USTR) has designated the Dominican Republic as a Special 301 Watch List country for serious IPR deficiencies. The country, however, is not listed in the notorious market report.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
* Source for Host Country Data: Central Bank of the Dominican Republic (BCRD). The BCRD does not report investment stock positions.
Table 3: Sources and Destination of FDI
No information for the Dominican Republic is available on the IMF’s Coordinated Direct Investment Survey (CDIS) website. According to the Dominican Central Bank (BCRD), total inward flows of FDI for 2019 were $3.01 billion. The BCRD provides a breakdown of FDI to the Dominican Republic by individual source country for the top investing countries. The five largest investing countries accounted for 82.3 percent of total inward FDI in 2019. Neither World Bank nor Dominican sources break down FDI from the Dominican Republic to individual destination countries
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$3,012.8||%||Total Outward||Amount||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
* Source for Host Country Data: Central Bank of the Dominican Republic (BCRD), 2019 FDI inward flows.