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Foreign Investors Benefit from Spain-Venezuela Agreement
To attract foreign investment jurisdictions not only offer local tax incentives but also international legal agreements to benefit the foreign investor. Agreements on reciprocal promotion and protection of investments (APPRIs) launched in the 1980 are a prime example of international agreements designed to benefit the foreign investor. Today there are over 2,500 APPRIs worldwide. All APPRIs have the same structure, content and purpose; ensuring national investments carried out by Country A to Country B are fair and receive equal treatments to those carries out in the recipient country.
The Venezuelan government realised to increase its economical cooperation and improve its economy there was a need to sign APPRIs to encourage foreign investment. Venezuela has since signed 25 APPRIs with countries such as Argentina, Barbados, Canada, Chile, France, Germany, Peru, Portugal, Spain, Uruguay and Vietnam, all with the main purpose of creating the best conditions for foreign investments to be carried out in Venezuela. In this article Taxand Venezuela highlights the APPRI signed between Venezuela and Spain and the benefits it brings to foreign investors.
On 1 September 1997 Venezuela signed an APPRI with Spain. Below please find the main aspects of the treaty highlighted:
Application of the Agreement
- The Agreement applies to investments carried out before or after the Agreement came into force.
- In the event claims or controversy arise, wherein the causes originated before the Agreement came into force, the Agreement does not apply.
This Agreement guarantees that investments made in the territory of one of the parties by investors from the other country shall not be nationalized, expropriated or any other similar decision, except in the case in which such measures be taken exclusively for reasons of public interest. If this is the case, a fair, effective and rapid compensation will be granted. The compensation will notbe less favourable than the offer granted by the contracting party where the investment was carried out with national investors or a third country. Those investors who suffer any type of losses due to wars, armed conflicts, state of national emergency, rebellion or any other similar circumstance, will receive the same treatment.
In the case of foreign currency transfer resulting from the investments carried out in one of the two party States, the Agreement guarantees such transfer without restrictions or discrimination, of payment related to the investments. This therefore guarantees the investor the opportunity to acquire foreign currencies needed to transfer the total amount received from income, profits, wages and salaries, reimbursement of loans, raw material acquisition, semi manufactured products or any other sum necessary for the continuity and development, or finishing and liquidation of such investment . In this regard, the process for transfers shall be facilitated, without delay, and shall not take longer than three months, from the date of application.
This Agreement also offers another guarantee, which is important to highlight, regarding the methods used to end controversy generated between the country where the investment has been made and the investor. In this way any differences about the interpretation or application of the Agreement will be resolved amicably for both parties. However, if an agreement has not been met after six months of negotiations, then the dispute shall be resolved under a Court of Arbitration upon request of either of the parties. This Court shall issue a sentence based on the norms established in such Agreement or any other signed between Venezuela and Spain in force at the time, considering the Principles of International Law.
APPRIs play an important role in building the Venezuelan economy. The APPRI between Venezuela and Spain is helping to bring Spanish investors to the country whilst at the same time supporting Venezuelan companies to become established in Spain. With this in place it also presents a good opportunity to build relations with other European Union Countries.
The most important aspect of APPRIs is the promotion of commerce and relationship building that occurs between countries as a result of their implementation. The minimum standards of the Venezuelan-Spain bilateral agreement means companies can move their business between countries with the knowledge that their capital and interests are protected. Should controversies occur the Court of Arbitration will step in.
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