Transparency of the Regulatory System
Grenada recognizes that investors value transparent rules and regulations dealing with investment.
The Investment Act and the new Investment Promotion Regime promote transparency by authorizing investment incentives to key sectors through the GIDC. This helps to streamline processes, standardize treatment of investors, and better define investment rights. It also provides procedural guarantees and reduces the possibility for political influence in business negotiation.
Grenada also promotes investment by consulting with interested parties, simplifying and codifying legislation, using plain language drafting, developing registers of existing and proposed regulation, expanding the use of electronic dissemination of regulatory material, and publishing and reviewing administrative decisions.
Tax, labor, environment, health and safety, and other laws or policies do not distort nor impede investment. In theory, bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent. In practice, local authorities recognize that the implementation of procedures can sometimes be slow.
Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. Public finances and debt obligations, including explicit and contingent liabilities, are also transparent and in keeping with international requirements. There are clear institutional arrangements established to support the implementation of transparent regimes governing investment.
International Regulatory Considerations
Grenada has been a member of the WTO since 1996 and is a party to agreements established under the organization. In pursuit of WTO compliance, Grenada recently signed, and is in the process of negotiating, trade and investment agreements that contain provisions better aligned with the provisions of the WTO. Grenada is a member of CARICOM and the Caribbean Single Market Economy (CSME), which adheres to the international norms and regulatory standards outlined by the WTO.
Legal System and Judicial Independence
The Prime Minister and his cabinet have the executive authority to negotiate and sign international agreements and conventions with other states and international organizations.
Grenada’s judicial system is based on English common law. The judiciary has four levels: the Magistrates Court, the High Court, the Eastern Caribbean Supreme Court, and the UK-based Privy Council.
The Magistrates Court primarily handles minor civil and criminal cases, while the High Court adjudicates cases under the purview of the Acts of Parliament. Appeals from the Magistrates Court are heard by the High Court, while appeals from the High Court are heard by the Eastern Caribbean Supreme Court. The Eastern Caribbean Supreme Court is comprised of the Chief Justice, who serves as the Head of the Judiciary; four Justices of Appeal; nineteen High Court Judges; and three Masters, who are primarily responsible for procedural and interlocutory matters. The Court of Appeal judges are based at the Court’s headquarters in Castries, Saint Lucia.
The Privy Council serves Grenada as the final Court of Appeal. However, the Caribbean Court of Justice (CCJ) has compulsory and exclusive jurisdiction under Section 211 of the Revised Treaty of Chaguaramas, to which Grenada is a party. The Treaty delineates rights and responsibilities within CARICOM to hear and decide disputes concerning the interpretation and application of the Treaty.
The judicial system remains independent of the executive branch, and judicial processes are generally competent, fair, and reliable. Provisions are also made for appeals with the relevant court. Grenadian law also provides for the use of arbitration and mediation to resolve investment disputes.
Laws and Regulations on Foreign Direct Investment
The economy is supported by a strong legislative and regulatory framework that encourages FDI and promotes investment initiatives. Grenada augmented the investment climate with a revitalization of its Citizenship by Investment (CBI) program. That program generated investments of XCD 81.1 million (USD 30.4 million) in 2017, providing financing for a number of developments in the tourism sector.
In 2016, parliament passed several legislative changes to promote investment:
- Value Added Tax Amendment Act – This Act amended the Value Added Tax Act Cap.333A to provide for VAT exemptions for qualifying investments in priority sectors and should be applied in conjunction with regulations made pursuant to the Investment Act of 2014 to determine what the priority sectors are for economic growth.
- Excise Tax Amendment Act – This Act amends the Excise Tax Act Cap. 94 to provide for tax incentives for investors engaged in manufacturing and investors entitled to conditional duties exemptions for motor vehicles.
- Property Transfer Tax Amendment Act – This Act amends the Property Transfer Tax Act Cap. 257C to provide more favorable rates of property transfer tax for investors. The Property Transfer Tax (Amendment) Act, 2015 (No. 23 of 2015) reduced the property transfer tax payable by non-citizens with qualifying investments from 10 percent to 5 percent. This Act expands this incentive and would be applied in conjunction with regulations made pursuant to the Investment Act for the establishment of priority sectors for economic growth.
- Customs Service Charge Amendment Act – This Act amends the Customs (Service Charge) Act Cap. 75D to remove the discretionary power of cabinet to prescribe varying rates of customs service charge (CSC) and to prescribe a new rate of CSC applicable to investors engaged in manufacturing.
- Investment Amendment Act– This Act provides for specified circumstances under which the Minister of Finance may make regulations under the principal Act.
- Bankruptcy and Insolvency Amendment Act – This Act modernized the law relating to bankruptcy and insolvency of individuals and companies. The Bankruptcy Act, which applies only to individuals, was repealed. Provisions in other Acts, such as the Companies Act, dealing with liquidation or winding up, continue to apply. The Act is based on the Canadian Bankruptcy and Insolvency Act, which has been used as a model in a number of Caribbean countries.
- Income Tax Amendment Act– This Act amended the Income Tax Act Cap. 149 to provide for a waiver on withholding tax applicable on specified types of repatriated funds relating to investors engaged in tourism accommodation or health and wellness, among other matters.
The GIDC, together with the Inland Revenue and Customs Departments of Grenada, works to ensure adherence to the rule of law and to facilitate the procedures outlined in the revised investment regime. The legal and regulatory framework governing foreign direct investment in Grenada is described here: http://grenadaidc.com/investor-centre/investors-guide/starting-up-a-business/#.WLA0BfnQe70
Competition and Anti-Trust Laws
There are no laws that regulate competition in Grenada. However, Grenada discussed model draft bills at the CARICOM and Organization of Eastern Caribbean States (OECS) levels. These drafts are being formulated to strengthen market regimes under the CSME. CARICOM established a Competition Commission and plans are underway to establish a sub-regional Eastern Caribbean Competition Commission.
Expropriation and Compensation
According to the Constitution, Grenada shall not compulsorily acquire or take possession of any investment or any asset of an investor except for a purpose which is legal and non-discriminatory. If the government expropriates property for a legal purpose, it must promptly pay adequate and effective compensation. Owners of expropriated assets have the right to file claims in the High Court regarding the amount of compensation or ownership of the expropriated asset. In 2016, parliament repealed the 1994 Electricity Supply Act and opened the market to potential investors who will transition to alternative sources of power generation, decreasing costs, reducing dependence on imported fossil fuels, and improving energy efficiency. The 2016 Electricity Supply Act allows a new government-run regulatory body to grant multiple licenses to energy generators.
In the past, Grenadian citizens had their lands expropriated to permit foreign investments, but were compensated for such actions. There are no sectors at greater risk of expropriation, and there are no laws requiring local ownership. All expropriations have been subject to legal due process.
ICSID Convention and New York Convention
Grenada is a signatory and contracting member of the International Center for Settlement of Investment Disputes since 1991, and has engaged this platform to resolve past disputes. While Grenadian laws have adapted the provisions outlined in the New York Convention, the country is not a contracting state and has not ratified the convention.
Investor-State Dispute Settlement
There were no known investment disputes involving a U.S. person over the past 10 years.
There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
In the event of an investment dispute between two foreign parties, between a foreign investor(s) and Grenadian parties, between Grenadian partners, or between investors and the government of Grenada, Grenadian law mandates that the parties shall first seek to settle their differences through consultation or mediation. In the event that the parties fail to resolve the matter, they may then submit their dispute to arbitration; file a lawsuit in Grenadian courts; invoke the jurisdiction of the Caribbean Court of Justice; or adopt such other procedures as provided for in the Articles of Association of the investment enterprise.
There is no government interference in the court system. Grenada participates in a court-connected mediation mechanism that can be accessed through the Mediation Centre. This Centre was established by the statutory provisions of the Practice Direction Act No.1 of 2003. It extends court-connected mediation to all member states of the OECS and allows for civil actions filed in court to be referred to mediation. Through this system, parties can utilize alternative dispute resolution mechanisms, including mediation, if the court deems them to be appropriate mechanisms for resolving the case.
Court-connected mediation, however, cannot be used in family proceedings, insolvency (including winding up of companies), non-contentious probate proceedings, proceedings when the High Court is acting as a prize court, and any other proceeding in the Supreme Court.
Grenada is ranked 168 out of 190 for ease of resolving insolvency in the World Bank’s Doing Business Report for 2019, the same ranking it received in 2018.
Chapter 27 of the Bankruptcy Act (Amended by Act No. 10 of 1990) makes provisions for all aspects of bankruptcy. This was one of the laws recently amended under the new investment regime to modernize the law relating to bankruptcy and insolvency of individuals and companies.
Part III of this Act sets out what constitutes bankruptcy and the procedure for creditors to apply to the High Court for a bankruptcy order against a debtor and the appointment of a trustee in bankruptcy. There are also provisions for the court to appoint an interim receiver pending the outcome of the application for a bankruptcy order.
Part III also has provision for a process whereby an insolvent person, with leave of the court, may make an assignment of the insolvent person’s property for the general benefit of creditors of the insolvent person.
The High Court exercises exclusive jurisdiction in matters related to bankruptcy.