FIPPA, At a Glance

Knowledge of the history legislation of acts and regulations give us a vision in interpretation of the rules. Do you know anything about the main Iranian foreign investment law? How much do you know about Foreign Investment Promotion and Protection Act (FIPPA)? 

Brief History of FIPPA

The original foreign investment law in Iran was approved in 1955. This law and its implementing regulation remained in force after the 1979 Islamic Revolution.  The foreign investment in Iran gradually re-emerged in 1993 after a long hiatus since 1979.  Structural barriers in the economy and instability in the macroeconomic setter were more decisive factors in the slow pace of foreign investment in Iran compared to political concerns.  Nearly 140 investment decrees were issued between 1993 and 2002, with investors from Germany holding the first rank.

Following months of dispute between the Parliament and Guardian Council, the Expediency Council ratified the final version of a new foreign investment law in Iran coined as the Foreign Investment Promotion and Protection Act (FIPPA) on 26 May 2002, and its implementing regulations on 15October 2002

Tell me more about FIPPA!

Under FIPPA and similar to the previous foreign investment law, commercial risks are not covered but any expropriation or nationalization will be compensated by the government. In some cases, if an act of the government disrupts the business activity, the government will be under obligation to make payments for any loan installments that are due on behalf of the project company.

The law also permits more options for repatriation of profits in hard currency combined with a broader definition of foreign investment. For the first time, project financing schemes such as buy-back agreements and BOT projects (only under an operator status) are specifically covered under the foreign investment law

Foreign investors are not limited to importing their capital through FIPPA. The main purpose of FIPPA is to provide special treatment for investors by granting special guarantees against expropriation and foreign exchange restrictions. By not using FIPPA, foreign investors will be treated as equal to Iranian investors and would be subject to national laws serving Iranian investors as recourse in the case of any nationalization or expropriation. Moreover, investors will also be subject to the general foreign exchange restrictions of the country

In conclusion,  Given the complexity of laws and regulations in Iran, foreign companies should seek legal advice prior to initiating any activity in Iran. Libra lawyers have remarkable experience with providing advice and representation. You can schedule an initial consultation with a lawyer by calling. Also you can write a good article about Iran’s Foreign Investment Manual on LegaMart weblog.

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