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LAW REPORT
Lao People’s Democratic Republic
Lao People’s Democratic Republic
Dirksen Flipse Doran & Lê
Lawyers & Counselors
Mekong Commerce Bldg #1, POB 2920
Luang Prabang Road, Vientiane, Lao PDR
Tel: (856) 21 216-927-9
Fax: (856) 21 216-919
E-Mail: DFDLLAOS@loxinfo.co.th
Copyright © Dirksen Flipse Doran & Lê 1997
Legal System in Transition
The legal system of the Lao PDR has been shaped by Lao tradition and custom, by the establishment of the French colonial administration, and after 1975, by the adoption of a Soviet-styled socialist ideology. Since the mid-1980's, however, the legal system has also been influenced by the legal and economic transitions taking place in neighboring, Vietnam and China. The legal system of the Lao PDR still contains elements from all of these historical influences, but its current development is driven by the economic needs of the country, by the concurrent development of the Lao PDR's own market economy, and by the desire to strengthen cooperation with ASEAN neighbors.
To meet these needs, many new laws and decrees are being drafted, and for guidance, the Lao PDR is considering the laws of a variety of market-oriented countries around the world. At present, the Lao PDR has over forty laws and hundreds of decrees and regulations. All of the laws, and most of the decrees and regulations in current use, were drafted after 1989.
Investment Procedures
The Law on the Promotion and Management of Foreign Investment ("Foreign Investment Law") is the basic law governing foreign investment in the Lao PDR.
The Foreign Investment Law classifies foreign investment companies in two categories: joint venture companies and wholly foreign-owned companies. A joint venture is a foreign investment company that is jointly owned and operated by foreign and domestic investors, with the general requirement that the foreign investors must contribute at least 30% of the total capital.
Overview
Following is a brief outline of the typical process for establishing a foreign investment company in the Lao PDR.
Investment License
Before commencing any activity in the Lao PDR, a foreign investment project must obtain a Foreign Investment License. To obtain a Foreign Investment License, the project submits a standard Foreign Investment License Application provided by Committee for Investment and Foreign Economic Cooperation ("CIFEC"), along with various supporting documents.
The Foreign Investment Law mandates that CIFEC review the application and either grant a Foreign Investment License or reject the application within 60 days. Once the application is approved, CIFEC issues the Foreign Investment License.
Company Registration
All companies in the Lao PDR must register with the Company Registry of the Ministry of Commerce ("MOC"). In order for a foreign investment company to register with the Company Registry, it must submit an application to the MOC along with various supporting documents.
Document Registration
The foreign investment company must also register its legal documents and pay document registration fees.
Tax Registration
All business enterprises in the Lao PDR must also register with the Tax Department of the Ministry of Finance. Foreign investment companies must obtain this registration within 90 days of receipt of the Foreign Investment License.
Other Licenses and Permits
Before the foreign investment company is fully authorized to carry on business in the Lao PDR, it will often need an array of additional licenses and permits depending on the type of business to be carried out.
Investment Guarantees
The Foreign Investment Law guarantees that foreign investment companies:
Investment Incentives
The Foreign Investment Law also provides the following incentives:
Structure of the CIFEC
The current structure of CIFEC (relevant to foreign investment) is as follows:
Investment Sectors
Promoted Sectors
Most sectors of the Lao economy are open to foreign investment, and the Lao Government is particularly promoting foreign investment in the following sectors:
Activities Reserved for Lao Citizens
The Lao Government prohibits foreign investors and foreign personnel from undertaking certain commercial activities in the Lao PDR. Some of these reserved activities include:
Investment Structures
The Business Law is essentially the "Companies Act" of the Lao PDR. This law applies equally to both foreign and Lao companies and provides legal protection for the capital, property, and rights of the companies.
Pursuant to the Business Law (and the Foreign Investment Law), the following corporate structures are available to foreign investors in the Lao PDR:
Taxation
Unless exemptions are granted by the Lao Government, a foreign investment company would be subject to the following taxes, among others:
For additional information, please contact:
Dirksen Flipse Doran & Lê
Lawyers & Counselors
Dirksen Flipse Doran & Lê ("DFDL") is an international law firm focusing on the legal markets of Laos, Cambodia, Vietnam, Myanmar, and the Yunnan Province of China. In 1993, DFDL opened its office in Vientiane, and became the first officially authorized law firm in Laos. In 1994, DFDL opened its office in Phnom Penh, also becoming the first officially authorized law firm in Cambodia, and established an office in Ho Chi Minh City, Vietnam.
Following is a brief profile of the lawyers in our Vientiane office:
Todd E. Dirksen is a member of the New York Bar and the US Supreme Court Bar, and a graduate of Georgetown University Law Center. He has published articles entitled "Doing Business in Vietnam: The Legal Aspects," in Asia Business Law Review, Vol. 2, and "Security Arrangements in Laos," in Creating and Enforcing Security in Asian Emerging Markets, Vol. 1. He is currently working on several hydropower projects, an ICC arbitration, and general investment, commercial and banking matters in Laos. Languages: English, French and Spanish.
Mary S. Flipse is a member of the New York Bar and the US Supreme Court Bar, and a graduate of Georgetown University Law Center. She has published the following articles: "Asia's Littlest Dragon: An Analysis of the Lao Foreign Investment Code and Decree," Georgetown University Law Center journal of Law & Policy in International Business, Vol. 23, No. 1; "Laos: Banking, Finance and Taxation," in Capital Flows Along the Mekong, Vol. 1. Ms. Flipse is now advising international clients on foreign investment in Laos, particularly in the hydropower, construction and aviation sectors, and is litigating several corporate and commercial cases in the Lao courts. Languages: English, Lao and Thai.
Robert R. Allen Jr. is a member of the Maryland Bar, and holds a Juris Doctor degree from Columbus School of Law, Catholic University of America in Washington, D.C. Mr. Allen also holds a Mechanical Engineering degree from the University of Maryland, and a diploma from the Nuclear Power Engineering School of the General Electric Corporation. Prior to joining DFDL, Mr. Allen worked for more than four years as an engineer in the United States power industry, followed by several years as a business and legal consultant on corporate, energy, and environmental issues in the United States.
Desarack Teso holds a Juris Doctor from the University of Hawaii, and is a candidate for admission to the Bar of the State of Hawaii. He has published a series of articles on Lao law in the Vientiane Times. He is fluent in English, Lao and Thai.
Phasith Phommarak is a member and a section leader of the Lao Bar Association, and one of the few lawyers to be appointed as an authorized private attorney by the Lao Ministry of Justice. He is a graduate of L'Institut Royal de Droit et Administration, in Vientiane, Laos, and Georgetown University's American Language Institute. Specializing in commercial contracts and dispute resolution, he assists in many of the firm's litigation matters before Lao courts of law. Languages: Lao, Thai, English, French.
Contact Information
Attn: Todd E. Dirksen
Dirksen Flipse Doran & Lê
Mekong Commerce Bldg #1, POB 2920
Luang Prabang Road, Vientiane, Lao PDR
Tel: (856) 21 216-927-9
Fax: (856) 21 216-919
E-Mail: DFDLLAOS@loxinfo.co.th