Starting a Foreign Business in Tunisia

This piece highlights issues for consideration when starting a foreign business in Tunisia in four areas: 1) foreign business start-up, 2) access to industrial land, 3) foreign ownership issues across sectors, and 4) commercial dispute arbitration.

Foreign Business Start-Up

Foreign investors who want to set up a subsidiary in Tunisia (Tunis) will have to allow 19 days and go through 14 different procedural steps, a process that is more complex than the IAB regional and global averages. 4 procedures are specific to foreign-owned businesses. All documents of the parent company must be translated into either Arabic or French. An investment declaration that provides basic information on the prospective project must be filed with the Guichet Unique Agency for Promotion of Investment (API). Investment in manufacturing industries, agriculture, agribusiness, public works, and certain services requires only a simple declaration of intent to invest. In addition a trade license must be obtained from customs if the company wants to engage in international trade. The company must also obtain a certificate of capital importation from the Central Bank of Tunisia. There are certain exchange control and currency regulations limiting foreign currency bank accounts (also called “professional accounts in convertible dinars”) to subsidiaries that will be exporting all of their production Professional accounts in convertible dinars may be opened, upon authorization from the Central Bank of Tunisia, by any resident individual or legal entity having foreign currency. There is no minimum paid-in capital requirement for setting up a local or foreign LLC. However, any capital investment agreed upon in the articles of association must be paid in full. There are no restrictions on the composition of the board of directors or appointment of officers in a foreign-owned subsidiary.

Access to Industrial Land

Tunisian law states that, in Tunis, foreign companies may lease privately held land for 2 years (renewable) without authorization. If the lease contract is for longer than 2 years, the governor’s authorization is required, unless the land is located in an industrial zone that is specifically designated for industrial activities. Foreign companies seeking to access land in Tunisia also have the option to lease publicly held land and buy privately held land. It is not possible to purchase publicly owned land. The process of leasing private land is efficient and streamlined compared with the regional and global average. Lease contracts can be of unlimited duration and offer the lessee the right to subdivide, sublease, and mortgage the leased land. There are no restrictions on the amount of land that may be leased. Land-related information can be found in the land registry and cadastre, which are located in the same agency, but are not linked or coordinated to share data. Currently there is no centralized land information system (LIS) or geographic information system (GIS) in place.

Foreign Ownership Issues across Sectors

Of the 5 countries covered by the report in the Middle East and North Africa, Tunisia has the fewest limits on foreign equity ownership. The country has opened up the majority of the sectors of its economy to foreign capital participation. As a notable exception, the electricity transmission and distribution sectors are closed to foreign ownership. Furthermore, these industries operate under monopolistic market structures with the publicly owned company STEG as the only provider. While foreign capital participation is not restricted by law in electricity generation, the public monopoly of STEG together with a high perceived difficulty of obtaining the required operating license make it difficult for foreign investors to engage.

Commercial Dispute Arbitration

Tunisia’s Arbitration Code (1993) is largely based on the UNCITRAL Model Law. The main difference is the addition of Article 44, which stipulates that when an arbitration award is totally or partially annulled, the court shall, upon request by all parties, decide on the merits of the dispute. This solution allows for both proceedings to take place before the same court (Tunis Court of Appeal) without filing separate claims. All commercial disputes are arbitrable except those concerning the state and public companies. Arbitration agreements inferred by conduct are legally enforceable. Parties can only choose an odd number of arbitrators. Judges and public agents can be appointed as arbitrators after obtaining prior authorization from the competent authority. Foreign lawyers can represent parties in both domestic and international arbitration proceedings taking place in Tunisia. The Supreme Court has issued several decisions that interim measures ordered by arbitrators are not subject to annulment by the court and that recognition and enforcement of arbitral awards may only be denied in very limited circumstances. The law provides for judicial assistance with orders of interim measures and taking of evidence issued by arbitrators. The Court of Appeal of Tunis is designated to enforce foreign arbitral awards. On average, it takes around 47 weeks to enforce an arbitration award rendered in Tunisia, from filing an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 51 weeks to enforce a foreign award.