The Companies Law
Any foreign investor wishing to undertake any type of commercial activity in Jordan must register an entity pursuant to the Companies Law by submitting an application accompanied by identification documents and draft constitutional documents to the Companies Control Department at the Ministry of Industry and Trade (CCD). The CCD has a dual role of acting as a companies registrar as well as a reviewer of the investment and registration process and, in this latter role, has significant power to allow or prevent the incorporation of, and investment in, Jordanian companies. The CCD is the main authority that checks whether:
- the investment violates any of the foreign ownership limits set by the NJIR;
- the investment has the necessary preliminary approvals by the relevant sector regulators; and
- the investor clears any national interest restrictions.
The Investment Law
The Investment Law provides for:
- the basic protections afforded to foreign investors in Jordan;
- regulating the benefits afforded to investments in certain geographical areas or industry sectors; and
- establishing a one-stop shop for the registration and licensing of investment activities.
The NJIR is drafted in a general manner to allow unlimited foreign investment in all economic activities without prejudicing national security, public policy, morality and public health. The NJIR defines ‘economic activities’ as covering industrial, agricultural, tourism, media, craftsmanship and service activities (including information technology). There is no clear definition of public policy and morality under Jordanian laws. Therefore, jurists have determined that the main principle underpinning public policy and morality is public interest, whether such interest is political, economic, social, or moral or ethical in nature.
As set out in question 1, there are certain economic activity sectors where restrictions apply. The restrictions apply in accordance with the following categories:
- projects in which foreign ownership is completely prohibited (such as bakeries of all types, security services, trading, importing and maintenance of firearms, ammunition, and trading and importing fireworks);
- projects in which foreign ownership is limited to a maximum of 50 per cent (such as retail and wholesale, including distribution, import and export services, engineering consultation and services, ship management services, and certain passenger and cargo transportation services); and
- projects in which foreign ownership is limited to a maximum of 49 per cent (sports clubs, maintenance of television and broadcasting equipment, and the purchase of land for the establishment of residential apartments).
These limits do not apply to economic activities conducted in the Free Zones and Special Economic Zones established pursuant to the Investment Law.
The legislator has used the word ‘projects’ when allowing or restricting foreign investments. This broad term is used to capture foreign investments not only in shares of companies registered in Jordan, but in joint ventures, unincorporated partnerships and consortia.
Despite the foregoing, foreign ownership restrictions do not apply to foreign companies that are 50 per cent owned by Jordanians unless such foreign companies are public shareholding companies or the investment relates to projects where foreign ownership is completely prohibited. Additionally, Jordan has entered into a number of bilateral and multilateral treaties with various countries that offer nationals of such countries the same treatment offered to the nationals of Jordan and removes foreign ownership restriction on such nationals. Moreover, ownership in companies and projects beyond the percentages listed above is still permissible for certain economic activities if approved by the Council of Ministers, based on the recommendation of the Chief of the Investment Commission.
National security, public policy and morality
The NJIR restricts foreign investment whenever there is a national security, public policy or public morality concern. This is implemented during the registration of the relevant company or transfer of shares therein by the CCD. The CCD liaises with the Ministry of Interior and other security and government departments before issuing any registration certificate or allowing any share transfer based on a list of ‘national interest’ suspect nationalities or sectors. This is to determine whether the investor, investment or the project itself is or may be harmful to national security or is or may be in contravention of public policy and morality. It is difficult to clearly specify which sectors the government and other security departments exercise special scrutiny over given that such scrutiny is highly dependent on the sector and nationality of the investor and changes from time to time.
The Competition Law
Competition clearance pursuant to the Competition Law for certain investments may need to be procured for transactions (ie, acquisitions or investments) that satisfy the economic concentration tests. These clearances need to be procured from the Minister of Industry and Trade prior to concluding these transactions.
The CCD (or any relevant economic sector regulator) does not check on the satisfaction of any competition clearances at the time of approval of the share transfer or subscription of shares in Jordanian entities. Separate applications to obtain such clearances need to be made. The Competition Law grants the Minister of Industry and Trade the power to take any action necessary if no application has been made. Therefore, the Minister of Industry and Trade has the discretion to reverse the transaction.
Any activity resulting in full or partial transfer of ownership or beneficial interest in properties, rights, shares or obligations of one establishment to another in a way that enables such establishment to control, whether directly or indirectly, another establishment shall be considered an economic concentration. The approval of the Minister of Industry and Trade would be required to complete an economic concentration if:
- the economic concentration would affect competition (noting that there is no threshold and accordingly even minor effects could trigger the requirement); and
- the total market share of the entity or entities involved exceeds 40 per cent (noting that the requirement is that either entity or both entities together satisfy the threshold, as opposed to the threshold being exceeded as a result of an economic concentration).
The language used in the Competition Law is wide enough to cover investment in Jordanian entities whether directly or indirectly through the acquisition of any of its shareholders. Additionally, any acquisition or change of ownership in minority interests in the Jordanian entities that already enjoy a market share of 40 per cent may trigger the competition clearance approval requirement.
The Investment Fund Law
The Investment Fund Law established the Jordan Investment Fund. Rights of ownership, investment, development and operations of certain projects are exclusive to the Jordan Investment Fund. These include national railway projects and electricity connection projects with Saudi Arabia. The Jordan Investment Fund has reserved these projects for companies established by Arab sovereign funds and Arab and foreign investment corporations (see question 1).
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