Transparency of the Regulatory System
The Independent Consumer and Competition Commission (ICCC) is charged with fostering competition. While there are transparent policies in place, the competition regime is oriented towards regulating existing monopolies and does little to foster competition. Tax, labor, environment, health, and safety and other laws do not distort or impede investment. There are long bureaucratic delays in the processing of work permits and frequent complaints about corruption and bribery in government departments.
The IPA and the Government are moving, with the assistance of the International Finance Corporation, towards a more streamlined regulatory framework to encourage foreign investment. One example of this trend is the IPA’s move to an online registration process for businesses. There are informal regulatory processes managed by nongovernmental organizations and private sector associations. There are impediments to the licensing of skilled foreign labor that are imposed by local professional associations, such as the Papua New Guinea Institute of Engineers and the Law Society (both of which have their own regulatory processes), that foreigners must go through before they can work/practice in the country.
There are no private sector or government efforts to restrict foreign participation in industry standards-setting consortia or organizations. Proposed laws and regulations are made available for public comment, but comments are not always taken into consideration or acted on by lawmakers or regulators. Legal, regulatory, and accounting systems are transparent and consistent with international norms, but there are delays in the dispute resolution system due to a lack of human resources in the judiciary.
When possible, proposed laws are made available for public comment, but comments are not always taken into consideration or acted on by lawmakers. Frequently, important Parliamentary decisions, such as the annual budget, are taken with no hearings and little or no debate before voting.
Regulatory decisions can sometimes be capricious and opaque, but they do not specifically target foreign-owned businesses. Most regulatory decisions can be appealed to courts with jurisdiction. There are no regulatory reforms currently planned. Many PNG government functions and documents are available online, but not all, and they are not centralized.
The Marape government successfully processed the 2019 supplementary and 2020 national budget plans, aided in large part by an AUD 300 million infusion by the government of Australia. The new Treasurer, Ian Ling-Stuckey, proactively conducted a due diligence exercise on the state of the country’s economy, which was led by a joint committee comprising international financial institutions and key government economic agencies. The public was well-informed of the findings of a month-long review through press commentaries and debate on the floor of parliament during the tabling of the supplementary budget.
There is strong political will in PNG to restore public confidence and engagement in the government’s fiscal reporting systems. However, greater action by reporting agencies is critical to realize full and timely reporting practices in PNG’s public finance management systems.
Overall, the government needs greater coordination among reporting agencies to deliver their mandated functions and responsibilities effectively. This includes all government agencies consistently and fully reporting all required financial activities, with proper financial statements to the supreme audit institution. The lack of full and timely reporting practices continues to undermine public finance management systems, and publicly available budget information.
At the same time, most budget documents remain incomprehensible to many ordinary citizens due to low financial literacy levels and the lack of proper public and civic awareness programs.
International Regulatory Considerations
PNG is a party to the Melanesian Free Trade Agreement. The agreement came into effect in 2017 and does address the need for competent regulatory authorities in each country (PNG, Solomon Islands, Vanuatu, and Fiji). However, the regulatory chapter is small and is designed to be strengthened and improved going forward.
When international standards are used in PNG, they are most often Australian models due to PNG’s history under Australian colonial governance and their continuing close economic ties.
The government has notified the WTO Committee on Technical Barriers to Trade only once. That notification covered food safety issues and was issued in 2006.
Legal System and Judicial Independence
The legal system is based on English common law. Contract law in Papua New Guinea is very similar to and applies in much the same way as in other common law countries such as Great Britain, Australia, Canada, and New Zealand. There is, however, considerably less statutory regulation of the application and operation of contracts in Papua New Guinea than in those other countries.
The Supreme Court is the nation’s highest judicial authority and final court of appeal. Other courts are the National Court; district courts, which deal with summary and non-indictable offenses; and local courts, established to deal with minor offenses, including matters regulated by local customs.
While often painstakingly slow, the judiciary system is widely viewed as independent from government interference. The Supreme Court has original jurisdiction in matters of constitutional interpretation and enforcement and has appellate jurisdiction in appeals from the National Court, certain decisions of the Land Titles Commission, and those of other regulatory entities as prescribed in their own Acts. The National Court also has original jurisdiction for certain constitutional matters and has unlimited original jurisdiction for criminal and civil matters. The National Court has jurisdiction under the Land Act in proceedings involving land in Papua New Guinea other than customary land.
Laws and Regulations on Foreign Direct Investment
Foreign investors can either be incorporated in PNG as a subsidiary of an overseas company or incorporated under the laws of another country and therefore registered as an overseas company under the Companies Act 1997. The 1997 Companies Act and 1998 Companies Regulation oversee matters regarding private and public companies, both foreign and domestic. All foreign business entities must have IPA approval and must be certified and registered with the government before commencing operations in PNG. While government departments have their own procedures for approving foreign investment in their respective economic sectors, the IPA provides investors with the relevant information and contacts. In 2013, the government amended the Takeovers Code to include a test for foreign companies wishing to buy into the ownership of local companies. The new regulation states that the Securities Commission of Papua New Guinea (SCPNG) shall issue an order preventing a party from acquiring any shares, whether partial or otherwise, if the commission views that such acquisition or takeover is not in the national interest of PNG. This applies to any company, domestic or foreign, registered under the PNG Companies Act, publicly traded, with more than 5 million PGK (USD 1.53 million) in assets, with a minimum of 25 shareholders, and more than 100 employees.
In recent years, this law was not used to prevent ExxonMobil’s acquisition of InterOil or Chinese company Zijin Mining’s purchase of 50 percent of the Porgera Joint Venture gold mine. The IPA website ( https://www.ipa.gov.pg/ ) is the official online information platform to engage with the public on matters relating to the IPA’s mandated roles and function.
Competition and Antitrust Laws
The 2002 Independent Consumer and Competition Commission Act is the law that governs competition. It also established the Independent Consumer & Competition Commission (ICCC), the country’s premier economic regulatory body and consumer watchdog; introduced a new regime for the regulation of utilities, in particular in relation to prices and service standards; and allowed the ICCC to take over the price control tasks previously undertaken by the Prices Controller as well as the consumer protection tasks previously undertaken by the Consumer Affairs Council. The ICCC’s website is http://www.iccc.gov.pg .
There have been no significant actions taken by ICCC in the last 12 months that have affected international investors.
Expropriation and Compensation
The judicial system upholds the sanctity of contracts, and the Investment Promotion Act of 1992 expressly prohibits expropriation of foreign assets. The 2013 nationalization of the Ok Tedi copper-gold-silver mine was an Act of Parliament, considered and voted on in the regular order of business. There was no recourse or due process beyond the Parliament.
ICSID Convention and New York Convention
PNG signed the instrument of Accession to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on June 22, 2019. The Instrument of Accession was deposited with the UN Treaties Depository in New York on July 17, 2019, and PNG became the 160th country to accede to the New York Convention. As a signatory to the New York Convention, PNG’s National Executive Council endorsed reform to the country’s outdated Arbitration Act 1951 (Chapter 46 of the Revised Laws of PNG) through the adoption of new legislation based on international model laws to implement the New York Convention and to provide enhanced support for modern arbitration in PNG.
PNG has been a member of the International Centre for Settlement of Investment Disputes (ICSID Convention) since 1978. In agreements with foreign investors, GPNG traditionally adopts the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL model law). While no specific domestic legislation exists for enforcement of awards under the 1958 New York Convention or ICSID Convents, in early 2018, an Arbitration Technical Working Committee (ATWC) was formed to advance arbitration reform in PNG. Consisting of members of the PNG Judiciary and representatives of the First Legislative Counsel and other relevant inter-governmental departments and agencies, the ATWC produced a draft Arbitration Bill 2019 in consultation with the United Nations Commission on International Trade Law (UNCITRAL), Asian Development Bank and internationally recognized arbitration experts. The draft Arbitration Bill 2019 aims to conform with best modern international arbitration law practice. The draft bill is subject to further vetting before its enactment.
Investor-State Dispute Settlement
Investment disputes may be settled through diplomatic channels or through the use of local remedies before having such matters adjudicated at the International Centre for the Settlement of Investment Disputes or through another appropriate tribunal of which Papua New Guinea is a member. The Investment Promotion Act 1992, which is administered by the IPA, also protects against expropriation, cancellation of contracts, and discrimination through the granting of most favored nation treatment to investors. PNG does not have a Bilateral Investment Treaty (BIT) with the United States, and no claims have been made under such an agreement. There is not a recent history of international judgments against GoPNG nor is there a recent history of extrajudicial action against foreign investors. PNG does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.
Over the last 10 years, there here have been no known disputes involving a U.S. person or other foreign investors, nor have the local courts heard cases to recognize or enforce foreign arbitral awards issued against the governments. There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
According to the Port Moresby Chamber of Commerce & Industry, local and foreign parties settle disputes in Papua New Guinea through the courts. Litigation in PNG is perceived to be an expensive and drawn-out process, sometimes taking years for a decision to be handed down.
There is no domestic arbitration body outside of the courts and contract enforcement. A 2015 international arbitration decision in favor of Interoil (which has since been acquired by ExxonMobil) and against Oil Search was reportedly respected in PNG. To date, there have been no cases in which SOEs were involved in investment disputes.
Papua New Guinea’s bankruptcy laws are included in chapter 253 of the Insolvency Act of 1951 and sections 254 through 362 of the Companies Act of 1997, which covers receivership and liquidation. Bankruptcy and litigation searches can only be conducted in person at the National Court in Port Moresby.
According to the World Bank’s Doing Business Report, resolving insolvency in Papua New Guinea takes an average of three years, and typically costs 23 percent of the debtor’s estate. The average recovery rate is 25.2 cents on the dollar. Globally, Papua New Guinea stands at 141 out of 189 economies for the Ease of Resolving Insolvency on the World Bank Ease of Doing Business Survey.