Trinidad and Tobago's legal system ideal for foreign investment

A vibrant, multicultural country, over the past two decades Trinidad and Tobago has forged a reputation of being one of the leading destinations for direct foreign investment in Latin America and the Caribbean. The twin island country has a rich democratic history and a strong commitment to the rule of law. At the base of this success is a legal system that has been integral to the development of one of the strongest economies in the Caribbean. As a former British Caribbean colony, upon independence T&T inherited the Westminster model system of government with an elected House of Representatives and an appointed Senate. Elections are held every five years by universal suffrage and the most recent elections held on September 7, 2015 resulted in the country undertaking a peaceful change of government for the sixth time in the nation’s history.

Also a member of the Commonwealth of Nations, T&T enjoys healthy relationships with many countries around the world. Its unique geographic position at the southern end of the Caribbean basin has allowed it to have extensive trading relationships with the rest of the Caribbean and Latin America, along with the major economic powers such as China, the US and Europe.

Legal & Judicial System

Fundamental legal principles such as the rule of law, separation of powers, and freedom of expression, press and property are enshrined in the Constitution of T&T for the benefit of its citizens, foreigners and legal entities. Legislation enacted by Parliament has been based predominantly on English statutes and, to a lesser extent, Canadian and Australian legislation. T&T is a common law jurisdiction where the doctrine of judicial precedent applies. The highest court in the land is the Judicial Committee of the Privy Council, although there has been a campaign to move the court of final appeal to the Caribbean Court of Justice. T&T’s legal system is also made up of a number of courts below the Privy Council such as the Court of Appeal, the High Court of Justice and the Magistrates Court, in descending order. Additionally, there is also a Family Court that deals with matrimonial and family matters; an Industrial Court, which deals with industrial relations and employment law matters; the Environmental Commission, which deals with offences arising under the Environmental Management Act; and the Tax Appeal Board, which has jurisdiction over appeals on decisions by the Board of Inland Revenue.

Civil Procedure Rules

As of September 16, 2005, the practice and procedure for civil division of the High Court and the Court of Appeal is governed by the Civil Proceedings Rules, 1998. The rules replaced the Orders and Rules of the Supreme Court of Judicature of 1975 and were a product of a joint consultative project between the Rules Committee and several local bodies such as the Judiciary and the Law Association of T&T.

The rules seek to improve access to justice for those utilising the system. They provide fairly straightforward procedures from the commencement of proceedings to the quantification of costs and the filing of appeals, all geared towards reducing complexity and the cost of litigation. The courts are given extensive case management powers, which both facilitates and encourages the early settlement of disputes. The courts also have the jurisdiction to grant injunctions, search orders and other orders providing interim relief where the circumstances merit same. Finally, the rules further provide for the use of IT at every stage of proceedings.

Alternative Resolutions

In addition to the formal litigation process for the settlement of legal disputes, there has been a movement towards the development and utilisation of alternative dispute resolution mechanisms such as arbitration and mediation as part of the effort to improve the efficiency of the judicial system. Litigants in T&T benefit from a Court Annexed Mediation Programme that is designed to encourage the amicable settlement of disputes. Under the Mediation Act Chapter 5:32, judges are empowered to refer any of the cases on their docket to a certified mediator. Community mediation is also available for the settlement of disputes between citizens, religious leaders and communities. T&T’s Mediation Board oversees the training and certification of mediators and has allowed for the establishment of a cadre of experienced practitioners in this field. The T&T Chamber of Commerce has also established the Dispute Resolution Centre (DRC), which specialises in the provision of alternative dispute resolution services. The DRC provides facilities where arbitrations, adjudications and mediations can take place and related training.

Foreign Judgements

The Judgements Extension Act Chapter 5:02 allows for the courts in T&T to enforce the judgements of other courts outside of the jurisdiction. It applies to some Commonwealth and CARICOM countries, namely Australia, territories administered by Australia, India, Guyana, Grenada, St Vincent, Barbados, the Leeward Islands, St Lucia, Bahamas and Jamaica. Where a judgement does not emanate from one of these territories it will only be enforceable where it is given by a court regarded as being jurisdictionally competent by the courts of T&T, is final and conclusive, for a definite sum of money and where there is no defence to the recognition of the foreign judgment.

Banking & Finance

The Central Bank of T&T (CBTT) is the main regulator of the banking sector. Its powers are primarily derived from the Central Bank Act Chapter 79:02 and the Financial Institutions Act Chapter 84:01. There are eight commercial banks and 16 non-bank financial institutions in T&T. A company wishing to establish a commercial bank or conduct business of a financial nature must apply in writing to the CBTT and satisfy certain eligibility requirements, including the ability to meet the minimum capital requirement of $15m or such higher sum as the CBTT may require.

Securities Industry

The Securities and Exchange Commission is the regulatory authority for the securities sector and regulates, inter alia, public offerings, disclosure obligations applicable to reporting issuers, and other registrants and takeover bids. Companies or individuals wishing to conduct business within T&T in the capacity of a market actor are subject to registration requirements under the Securities Act Chapter 83:02. The statute provides that no person shall carry on business or hold himself or herself out as a broker-dealer, an investment advisor or underwriter of securities unless registered in such capacity with the commission or otherwise exempted.

Fatca Compliance

The government of T&T has passed the Tax Enforcement Exchange Act 2017. This Act provides the legislative framework to enable the country to comply with its obligations under the inter-governmental agreement on the US Foreign Account Tax Compliance Act. The provisions of the Tax Enforcement Exchange Act enable the Board of Inland Revenue to obtain information on US citizens and foreign entities with substantial US ownership from local financial institutions and report this to the US Internal Revenue Service.

Corporate Law

The Companies Act Chapter 81:01 is modelled on the Canadian Business Corporations Act of 1985 and provides a comprehensive framework on most aspects of the law relating to companies. Under the act, both foreign and local companies can incorporate as a local limited liability company (LLC). In addition, foreign companies incorporated elsewhere can also register as an external company operating within T&T.

The Companies Act provides that no association, society, body or other group consisting of more than 10 persons may be formed for the purpose of carrying on trade or business for gain in T&T unless it is:

• Incorporated under the Companies Act;

• Formed under some other written law of T&T; or

• A partnership. Incorporation proceedings, which grant the status of limited or unlimited liability, can be completed in one to two days. In the case of a trading company, the most common form is that of a company limited by shares. There is no particular requirement that a company has to have a certain number of shareholders or a particular amount of required capital. Nor is it required that the shareholders be T&T nationals. Under the Companies Act, in relation to the incorporation of a subsidiary company, the name of a proposed company with limited liability must include the word “Limited” or “Ltd” as the last word in the name, and the name must be approved by the Registrar of Companies. The Companies Act also requires the preparation and registration of articles of incorporation which comprise the constitutional instruments of the firm, together with other statutory forms.

Another common option that is used to establish a legal entity in T&T under the Companies Act is the registration of an external company in T&T. Section 317 of the Companies Act places an obligation on any incorporated body of persons that is formed under the laws of a country other than T&T and establishes a place of business within T&T to register as an external company within 14 days from establishment.

The registration of an external company in T&T is akin to the registration of a branch office in T&T of a company incorporated in another country. As such, the parent company, or head office, will be responsible for the debts and liabilities of the external company, which is the branch office, registered in T&T. One advantage of the registration of an external company in T&T as opposed to the incorporation of an LLC is that if the company ceases to carry out business in T&T, it may simply file a notice to that effect with the Companies Registrar, which may cancel, and subsequently revive, the registration of the external company without any further formalities being required.

Foreign Investment Act

For foreigners seeking to invest in T&T the law governing the acquisition of real estate or equity in locally incorporated companies is set out in the Foreign Investment Act Chap 70:07. The Foreign Investment Act defines a foreign investor as:

• An individual who is not a national of T&T or another member state of CARICOM as defined under the Treaty of Chaguaramas;

• Any firm, partnership or unincorporated body of persons of which at least one-half of its membership is held by persons who are not nationals of T&T or another member state; or

• Any company or corporation that is not incorporated in T&T or another member state, or if so incorporated, is under the control of persons to whom the first or second conditions apply or is deemed to be under the control of a foreign investor. A company or corporation shall be deemed to be under the control of foreign investors if:

• At least one-half of the votes exercisable at any meeting of the company or corporation are vested in foreign investors;

• Having a share capital at least one-half of the nominal amount of its issued shares that are voting shares are vested in foreign investors;

• Not having a share capital at least one-half in number of its members are foreign investors; or

• It is in fact controlled by foreign investors. A foreign investor who is desirous of incorporating a private company in T&T or of acquiring shares in any private firm incorporated in the country must prior to doing so supply the Ministry of Finance (MoF) with the following information:

• Name, address, nationality of the foreign investor;

• If it is a company, its place of incorporation, principal place of business; the names, nationality, former nationality and addresses of its directors; and the name of any controlling shareholder;

• Identity of any other country in which the foreign investor holds investments;

• Purpose of the investment;

• Whether the foreign investor is or is not a resident of T&T within the meaning of the Exchange Control Act Chapter 79:05; and

• Full particulars of the consideration for the investment and of any payments and credits made, and the name of the bank through which each such payment or credit was made or given. The intended shareholder(s) of the company must pay for shares being acquired in an internationally traded currency through a local commercial bank. A foreign investor may acquire land, the area of which does not exceed one acre for residential purposes without obtaining a licence under the Foreign Investment Act Chapter 70:07. The foreign investor can also, without a licence, acquire land, the area of which does not exceed five acres for the purposes of trade or business. The consideration paid for the acquisition of the land must also be in an internationally traded currency through a local commercial bank. In addition to the restrictions and regulations outlined above, the Foreign Investment Act gives the responsible minister the power to declare any area in T&T an area for which a foreign investor must obtain a licence, regardless of its size or usage.

Free Zones Acts

Under the Free Zones Act Chapter 81:01 certain areas have been designated as free zones wherein persons with free zone status enjoy incentives such as

• Exemptions from Customs duties on the import of goods into the free zone;

• Exemptions from income tax, corporation tax, business levies, withholding taxes on remittance of profits, dividends; and

• Other distributions and exemptions from land and building taxes on land, buildings, improvements to buildings, plant and machinery in the free zone. There are different areas and activities that may be granted free zone status, including warehousing and storing, manufacturing operations, trans-shipment operations, loading and unloading operations, exporting, importing; service operations including banking and insurance; professional services; assembling; processing, refining, purifying and mixing; and merchandising, including international trading on products.

Manufacturers as well as import/export giants that export the majority of their goods and services outside of T&T or businesses providing outsourcing or financial services to external markets that are incorporated or registered in T&T may apply for free zone status. The Free Zones Company Limited is responsible for administration of the provisions of the Free Zones Act.

PPP

Well before the fall in global commodity prices, the government recognised the need to partner with the private sector to reduce dependency on the state to fund major projects. As commodity prices continue on a downward trajectory, the country will be facing a new paradigm of significantly reduced energy revenues over the short to medium term, which makes the formation of public-private partnerships (PPP) even more relevant. PPPs seek to combine the best of both worlds: the private sector’s resources, management skills and technology, and the public sector’s regulatory actions and protection of the public interest.

In 2011 the MoF established a Public Private Partnership (PPP) Unit within the Investments Division of the MoF to promote a PPP infrastructure for T&T. This unit has principal responsibility for:

• Developing and disseminating PPP policy throughout the public and private sectors;

• Regulating the PPP programme to ensure PPP projects are developed in accordance with policy, principles and processes;

• Contributing to the development of PPP projects by screening projects submitted by ministries and agencies for consideration by the Ministerial Committee and subsequently becoming part of the PPP execution team responsible for implementing the

• Being a repository of skills and knowledge by continually building knowledge on managing PPPs, drawing from domestic and international experience to inform PPP programme development.

Tax Holidays

The Fiscal Incentive Act Chapter 85:01 allows for the granting of a tax holiday for a period of up to 10 years for the manufacturing of approved products by approved enterprises. The act provides for different classifications into which the enterprises may be categorised. These categories include, inter alia, enterprises utilising a significant portion of local inputs, export enterprises where products are manufactured solely for export and enterprises investing in excess of TT$50m ($7.5m). In order to be granted these holidays, the enterprises must apply to the Ministry of Trade and Industry via Tourism and Industrial Development Company of T&T. An approved enterprise must be a locally incorporated company. Tax exemption status can be extended to dividends which may be tax exempt and free of non-resident withholding tax on any taxes in excess of the investor’s tax rate on the dividend in his or her country of residence. Once an enterprise is approved, they may enjoy exemptions from Customs duties on the construction of an approved project, as well as exemptions on value-added tax and income tax.

Labour & Employment Issues

From doctors and lawyers, engineers to IT professionals, sales clerks to gardening services, T&T has a diversified labour force and many different avenues where individuals may seek employment. Whilst Trinidad is driven by the oil and business sector, Tobago is more focused on tourism and many of its residents are employed in hotels, restaurants and often sell their own handmade creations. The present minimum wage in T&T is TT$15.00 ($2.24) per hour based on a 40-hour work week. T&T has enjoyed low unemployment rates over the past decade, with the current rate at 4.4%, but this is expected to rise given the slowdown in the economy caused by the contractions in the petrochemicals sector. However, it is hoped that any surplus labour from the energy sector will be absorbed by other sectors of the economy such as manufacturing, hospitality and retail, where there have been critical labour shortages.

The country has a well established trade union movement that origins of which date back to the 1930s. There are unions for almost every classification of worker in T&T and they strive to ensure that employees are made aware of their rights and receive all the benefits to which they are entitled. Where labour disputes arise, they are settled at the Industrial Court established under the Industrial Relations Act Chapter 88:01

Maternity Leave

The Maternity Protection Act provides that a female employee shall be entitled to 13 weeks maternity leave once she has worked continuously for one year, which can be taken up to six weeks in advance of the probable date of confinement. The act also provides that such employees are entitled to receive pay to an equivalent of one month’s leave with full pay and two months leave with half pay and to resume work on no less favourable terms than what she enjoyed prior to her departure on leave. An employee who is on maternity leave is also entitled to National Insurance benefits. This is a weekly sum that depends on her weekly earnings. Should the payments made by the employer and the benefits under the National Insurance Act be less than what the employee’s full pay would have been for the 13-week period, the employer is obliged to pay the difference.

Employer Responsibilities

An employer is required to have a policy of insurance in force to cover workmen’s compensation. Compensation is based on a prescribed scale set out in Section 5 of the Workmen’s Compensation Act Chapter 88.05. In order to comply with the Occupational Safety and Health Act Chapter 88:08, an employer must also ensure, so far as is reasonably practicable, the safety, health and welfare of all employees, and provide adequate and suitable protective equipment at no cost to the employee, as well as adequate training, instruction and supervision.

Under Section 99 of the Income Tax Act Chapter 75:01, an employer must remit an employee’s income tax to the Board of Inland Revenue. Should the employer fail to deduct or withhold income tax or to remit such tax to the Board of Inland Revenue, the employer will be guilty of an offence and liable to penalty.

In addition, an employer also has duties under the National Insurance Act Chapter 32:01, which provides for a system of compulsory national insurance to insure against the loss of earnings occasioned by illness, pregnancy, invalidity, death or retirement, or injury to an employee. The employer must register with the National Insurance Board, which is a body corporate set up under the act, and must also register each person in its employ. Although it is stated that two-thirds of contributions are to be paid by the employer and one-third by the employee, the employer will pay the full sum to the board and deduct the equivalent of the employee’s contribution from his or her salary. An employer must also deduct from an employee’s gross salary health surcharge contributions. Deductions are subject to a fixed rate and depend on the number of Mondays in a given month. If there are four Mondays in the month, the sum deducted for that month is TT$33 ($4.93). If there are five Mondays in the month, then the sum deducted for that month is TT$41.25 ($6.16).

Employee Termination

An employer may terminate an employee’s tenure at will, but must give notice subject to the basis on which the employee is paid. If there are no express terms in the contract, then the court will imply a period that is reasonable in the circumstances of the case and monetary compensation will be given. Where there is cause for termination, the employer must allow the employee an opportunity to respond to the allegations that constitute the reasons for his or her dismissal. If there is a wrongful dismissal, an employee’s matter may be taken to the Industrial Court if that employee falls within the definition of a worker under the Industrial Relations Act. If taken, the Industrial Court may make a ruling that there be compensation and/or reinstatement. Employees who fall outside the scope of a worker will have to go to the High Court, where either damages or monetary compensation may be awarded.

Immigration & Work Permits

Persons other than citizens and residents may work in T&T without a work permit if they are working for a maximum of 30 days within a period of 12 consecutive months. Otherwise, a work permit must be obtained by all persons who wish to gain employment within the country. Work permit applications must be made by the local company wishing to employ the non-national, or by a practicing T&T attorney where the applicant is self-employed. However, CARICOM nationals wishing to work in T&T do not require work permits once they have obtained a certificate of recognition or CARICOM skills qualification. This certificate allows entry into all 12 CARICOM member states for an initial six months, whereby all qualifications are reviewed by the receiving state. Once approved, such persons will be granted indefinite entry.

Real Estate

Real estate in T&T is a booming industry with a constant availability of land and buildings for sale and continuous growth in the construction industry. There are two systems of registration of land titles in T&T: the common law system and a registration of title system. The common law system is governed by the Conveyancing and Law of Property Act Chapter 56:01 and the Registration of Deeds Act Chapter 19:06, under which land transactions are carried out by the registration of deeds at the Land Registry. The registration of title system is based on the well-known Torrens system and is governed by the Real Property Act, Chapter 56:02 (RPA). Under the RPA all dealings with respect to property must be recorded (endorsed) on the certificate of title relating to that property. The register is considered conclusive evidence of the interest registered. The title under this RPA system is guaranteed by the state and any person deprived of an interest in land by fraud may claim compensation from a fund called the Land Assurance Fund, which was established by the act for that purpose. Notwithstanding these advantages of the RPA, most land in T&T is still held under the unregistered system.

Compulsory Acquisition

The Land Acquisition Act Chapter 58:01 allows the state to acquire land when it appears to the president that any land is likely to be required for public purposes. The state can also acquire property by way of private treaty negotiation. The compulsory process involves notifying the affected persons, and allowing them to present claims for compensation and negotiate on the amount of compensation to be paid. In special cases, state lands may be made available to private individuals for investment purposes. The interested purchaser is required to submit an application to the state, along with supporting documentation, such as a development plan showing the proposed use of lands. The lands will usually be vested by way of a state lease for a term of between 30 and 99 years at a rent, premium or both.

Construction Incentives

There is a range of tax incentives intended to promote the local construction industry. These can be discretionary or performance based. Approved property development companies that engage in both urban and rural property developments may apply to the Board of Inland Revenue to be approved as an urban and rural property development company. As a prerequisite, companies must be locally owned, and undertake construction in both rural and urban areas. Once approved, they are entitled to an allowance against their taxable income of 15% of construction costs for all commercial properties that are completed in the year of income.

Housing Act Exemptions

The Housing Act Chapter 33:01 allows for the profits from construction of certain dwelling houses to be tax exempt. To be exempt the houses must have construction costs of less than TT$250,000 ($37,400). An approved housing company will also be allowed to distribute tax exempt profits by way of tax-free dividends. Any houses constructed by an approved housing company may then be exempted from income tax on rentals for a period of 10 years from the construction date.

The Income Tax Act further provides for construction incentives that are performance based. Any taxpayer may now obtain a wear and tear allowance on a newly constructed commercial property at the rate of 10% per annum on the declining balance. As an alternative, rental income can be exempted until the year 2000. However, once the taxpayer has elected for one of these incentives the election is irrevocable.

Tourism Development

The Tourism Development Act (TDA) 2000 Chapter 87:22 (as amended) lays out the benefits available to the owners and operators of various types of tourism projects, if these projects have the potential to contribute substantially to the development of the tourism sector. The benefits include:

• Tax holidays up to seven years;

• Tax exemption on profits from the initial sale of villas, condominiums and sites thereof within an integrated resort development;

• Carry-over of losses from a tax exemption period;

• Duty concessions on vehicles;

• Duty exemption for building materials and articles of tourism equipment;

• Capital Allowances; and

• Accelerated depreciation.

Eligibility Criteria

To access benefits under the TDA the tourism project must:

• Be registered with the local government corporation or the Tobago House of Assembly;

• Be subject to annual inspection by the local government corporation in respect of matters concerning Trinidad, and the House of Assembly in matters concerning Tobago;

• Provide relevant statistics and economic data at intervals as required by the corporation or the assembly;

• As far as possible, engage and utilise the human resources of T&T;

• Show linkages to the agricultural, construction and furniture industries, and other manufactured goods and services of T&T; and

• Have a minimum capital expenditure, which varies with the type of tourism project as outlined in Schedule 9 of the TDA.

Data Protection

The Data Protection Act 2011 Chapter 22:04 sets out several general privacy principles applicable to all individuals and organisations both public and private. These include:

• Information must be collected for a specified purpose;

• Must be accurate, complete and up-to-date; and

• Collected fairly and legally and limited to what is necessary. The act creates several offences, such as wilfully disclosing any personal information. The penalties for these offences include fines of up to $100,000 or up to five years’ imprisonment for individuals, and fines of up to 10% of the company’s annual turnover.

Intellectual Property

T&T adheres to the World Trade Organisation Trade Related Aspects of Intellectual Property Rights agreement and creators of intellectual property (IP) rights are afforded protection and rights under local legislation, but it should be noted that these penalty provisions have not yet been assented to and are not yet in force. The country has not acceded to Protocol Relating to the Madrid Agreement (1989). Therefore, trademark owners seeking protection in T&T must file individual trademark applications with the T&T IP Office. Trademarks are valid for 10 years from the filing date of the application and may be renewed for successive 10-year periods. A claim for trademark infringement cannot be brought for an unregistered mark. However, our courts recognise that a trademark (registered or not) also accrues rights under the English common law remedy of passing off. Patents, like trademarks, are considered sovereign rights, meaning that they can only be granted by a state within its jurisdiction. The most current legislation is the Patent Act 1996 Chapter 82:76. T&T is also party to several international patent treaties, including the Paris Convention for the Protection of Industrial Property and the Patent Corporation Treaty. Other IP rights, copyrights, industrial designs, integrated circuits and trade secrets are also afforded protection under T&T legislation.

Patents Act

The Patent Act Chapter 83:76 incorporates the majority of the provisions of the Patent Cooperation Treaty (PCT), which is an international filing system for patents. The PCT assists applicants seeking patent protection internationally for their inventions, helps patent offices with their patent granting decisions and facilitates public access to a wealth of technical information relating to those inventions. By filing one international patent application under the PCT, applicants are able to simultaneously seek protection for an invention across 148 countries around the world, making it a one-stop solution for registering and managing patents. IP rights such as copyright, industrial designs, integrated circuits and trade secrets are also afforded protection in T&T. In recent years, the T&T IP Office has also made attempts to deal with other critical IP matters, including the valuation of IP, marketing and branding government-owned IP, IP in the sports industry and many related issues.

Trademarks

Trademark law is governed by the Trademark Act Chapter 82:81, which makes provision for both foreign and local persons who desire trademark protection in T&T to file individual trademark applications. Once registered trademarks are valid for 10 years. While an action for trademark infringement cannot be brought with regard to an unregistered mark, IP laws in the country recognise that a trademark whether registered or not still accrues rights under the English common law cause of remedy of passing off.