A guide to Tunisia's legal code

Tunisia is currently in something of a paradoxical situation. As the country of origin of the Arab Spring, it is, to date, the only example of a successful peaceful democratic transition in the Arab world. After a long and laborious gestation, the National Constituent Assembly, elected after the 2011 revolution, adopted, by an overwhelming majority, a new constitution, laying the foundation of the second Republic of Tunisia.

Under the new constitution, parliamentary and presidential elections were held in 2014. One of the main political parties, the Islamist Ennahda, was democratically defeated. Béji Caïd Essebsi, the candidate backed by the secularist party Nida Tounes, won the presidential elections in the second round. Nida Tounes also won a plurality in the parliamentary elections and has established a broad coalition including Ennahda. This successful democratic transition has earned Tunisia the support of much of the international community.

New Demands

On the other hand, the economic downturn that followed the revolution and the newly acquired freedom of speech favoured an increase in demands for social and economic change. In addition, tourism, an important sector for employment and foreign currency earnings, has been greatly affected by two deadly attacks that scared off potential travellers and cooled post-electoral enthusiasm. This difficult social and security context has been complicated by international events and the border with Libya, which has been destabilised since 2011, and contributed to a decline in investment, especially from abroad.

Aware of the need to boost the economy and promote investment, Tunisia has taken a number of operational and legislative measures to improve security conditions. Finally, the authorities have opened a vast legislative project to facilitate and simplify investment in Tunisia. It is in this context that parliament passed a law on public-private partnerships (PPPs) and initiated a rewriting of legislation regarding competition and prices.

Furthermore, a draft of a new investment code has been introduced by the government and presented to parliament for approval. Given the strong majority the current government has in parliament, it is likely that the project will be adopted. However, it is expected to undergo some minor modifications in the first half of 2016.

Law PPPs

The current legal framework for PPPs in Tunisia has a long history. Sectoral laws have been enacted in order to facilitate large concession projects and partnerships, and these were in place long before the development of more generic laws that set out a legal framework for concessions or partnership contracts. However, this has resulted in a somewhat disparate and incomplete legal framework for the sector.

The current legal options available in each case are considered to be inadequate for the promotion of the development of PPPs. The Tunisian government now appears to favour the establishment of more standard regulations.

Therefore, an initial framework law on concessions was enacted on April 1, 2008. Since then, various draft laws on PPPs have been developed without further results, until the enactment of Law No. 49-2015 on PPPs, dated November 27, 2015 and hereafter referred to as the PPP Act.

The PPP Act provides for the adoption of various decrees. The implementation of the PPP Act is subject to the implementation of such decrees. However, it is also provided that the latest implementation date for the PPP ACT shall be June 1, 2016, without being specified that this date is also the deadline for the promulgation of related decrees. However, without the passing of those decrees the PPP Act would still be implemented. The PPP Act regulates any PPPs that must be concluded by the government, local authorities and businesses, and/or public institutions.

General Principle

PPP contracts must meet the needs of public partners in accordance with national and local priorities under the development plan. These contracts must respect the principles of good governance, procedural transparency, contractual balance and equal opportunities through a competitive process that distinguishes between the candidates.

Preliminary Studies

Prior to the implementation of a project under a PPP contract, any public entities involved must carry out a study on the various legal, economic, financial, social, technical and environmental aspects, as well as the elements that justify the project being conducted as a PPP. This study will be subject to the judgement of the National Forum of PPPs. The legal opinion of this forum will be based on legislative precedents and will bind the public entity that is carrying out the project. Furthermore, the public entity will have to prepare their own study to assess the impact of the project as a PPP on the budget and the financial situation of the public entity. This second study will be submitted to the minister of finance for further review.

Selection Of A Private Partner

In principle, the selection of a private partner for the purpose of a PPP contract takes place in the context of a competitive tender. However, there are two alternative procedures that may be used in Tunisia for the purpose of selecting a private partner.

The competitive dialogue option is used when, due to the nature of the project, the public entity is unable to determine in advance the means and technical and financial solutions that meet the needs of the public entity. In this case, the public entity begins a dialogue with a group of selected candidates, the purpose of which is to improve and develop the technical, legal and financial structure of the project according to its needs.

The second option is negotiation by contracts. This procedure is used in the following cases:

  • Reasons related to national defence or general security;
  • In order to ensure the continuity of a public service and/or an emergency arising from unforeseeable causes beyond the control of the public entity and;
  • If the object refers to an activity that can only be carried out by the holder of a specific patent.

Furthermore, it is understood that a private operator may in some cases be the initiator of a PPP project. In this even, the procedures used to choose a candidate will be based on the best economic offer. Bid evaluation is based on different criteria, including quality, performance, the total cost of the project, the value added, the employment ratio in terms of Tunisian workers, the staff ratio, the ratio of use for local products and whether or not the project meets the needs of sustainable development. Furthermore, the tender will set a minimum percentage of subcontracting to small and medium-sized Tunisian enterprises, as well as a weight for each of the selection criteria. The offer with the highest score will be deemed the best economic offer.

Duration Of PPP Contracts

The duration of a PPP contract must take into account the depreciation period for the necessary investment and funding. A PPP contract is not renewable, although it is possible to extend the contract with approval from the National Forum of PPPs for a maximum period of three years in case of:

  • Force majeure;
  • Unpredictable events; or
  • Emergencies threatening the continuity of a public service.

Content Of A Contract

Under the PPP Act the private partner is required to establish a company dedicated to the project. It is this company that will enter into the PPP contract. The act also requires that the public entity be entitled to take a minimum stake in the project company. However, the PPP Act does not quantify this participation. This will most likely be cleared up by a decree of application or, on a case-by-case basis, by the documentation related to the tender.

In addition, the PPP Act stipulates that the contract should specify the cases and conditions for termination of the contract, as well as the compensation to be paid. Moreover, the PPP Act provides that the contract must state that in case of litigation arising from the contract, the parties shall seek an amicable solution before any legal action before judicial or arbitral tribunals. In the event of arbitration Tunisian law will be applicable; the law does not provide a similar provision in the event of the parties seeking recourse in court.

Assignment & Subcontracting

Given the continuity and nature of public service, the identity of the private partner involved is important for the public entity. In this context, it is expected that the private partner must obtain permission from a government entity prior to the sale of all or part of its stake in the project company. Likewise, any transfer of the benefit of the PPP contract to a third party is subject to the authorisation of the public entity as provided by the contract.

It is also anticipated that according to the options that will be provided under the PPP contract, the project company is required to perform the contract personally. If the project company uses the provided outsourcing companies, it shall inform the public entity in advance and will not be allowed to outsource a majority share of the work. The project company will, in all cases, be responsible for the execution of the contract towards the public entity contract.

Remuneration Of The Project Company

With regards to the remuneration paid by the public entity to the project company, the amount will be calculated mainly as the amount committed through investment, financing and maintenance. These elements will be assessed separately. The contract shall also prescribe the manner of calculation, as well as including a compensation review of the project company for the public entity.

Real Right

Unless otherwise provided for or specified in the PPP contract, it is established that the project company has a specific real right to fixed constructions, structures and equipment that the company is responsible for under the contract. This right provides, over the term of the contract, the prerogatives and obligations of the owner to the extent provided by law.

Constructions, structures and equipment can only be mortgaged by the private partner to guarantee the credit or to finance their development, modification, extension, maintenance or renewal, and only after having informed the public entity. The effects of mortgages on buildings, structures and installations end upon the expiration of the terms of the PPP contract.

No person shall, for the duration of the contract, assign or transfer for any reason whatsoever real rights on buildings, structures and installations, including security over these rights, without prior and written authorisation from the public entity.

Occupation Of The Public Domain

When the contract entails use of public property, it is authorised to occupy this area for its duration. Tenure, obligations linked thereto and the rights arising therefrom are regulated by the provisions of the partnership agreement and in accordance with the legislation in force.


Under the PPP Act the project company is required to regularly report to the public entity any developments regarding legal, accounting, financial and technical documents related to the project, including provisions of the contract. In addition, it must communicate upon request of the public entity any studies and technical specifications in a timely manner. Finally, the project company is required to notify the public entity of an annual report on the progress of the project and its execution by the project company.

Moreover, PPP contracts are subject to regular assessment and are reviewed by the Court of Auditors, the National Forum of PPPs and the public entity’s own supervisory bodies covering the PPP.

End Of A PPP Contract

A PPP contract is considered to be concluded at the end of the period specified in the contract. However, it may be prematurely terminated in the following cases:

  • By agreement of the parties; or
  • If one of the causes of early termination stipulated within the contract is realised.

In addition, the contract may be terminated unilaterally by the public entity in cases involving serious misconduct by the private partner, or if it is necessary for the public interest. Furthermore, the public entity may order the cancellation of the project company in cases involving a breach by the latter of its contractual obligations after a formal notice is ignored. The PPP contract will specify any failures that will result in cancellation and the conditions that must be met if the private partner is to continue any work that has been started.

Prior to making a final decision on cancellation of a contract, the public entity must notify any creditors which registered their receivables in a register kept for this purpose. They have a set period, which will be specified in the PPP contract, to propose an alternative private partner to replace the failed partner. The transfer of the benefit of the PPP contract to the new private partner is subject to the prior approval of the public entity.

Reforming Competition & Price Laws

On September 15, 2015 the country’s parliament enacted a new law on competition and prices, hereinafter referred to as the New Law. Although it has repealed the old legislation governing competition and prices, the New Law is not an overhaul of the previous legislation. It simply takes over most of the provisions of the old law, with additional modifications that focus on:

  • Anti-competitive practices; and
  • Regulations applicable to monopolies.

Anti-Competitive Practices

The New Law maintains the prohibition against and definition of anti-competitive practices that were provided under the auspices of the old law. Thus, anti-competitive practices are defined as “concerted actions, collusions and express or tacit agreements having an object or an anti-competitive effect.” It also includes the following practices:

  • Preventing price fixing by the free play of supply and demand;
  • Limiting access to the market for other companies or the free exercise of competition;
  • Limiting or controlling production, market opportunities, investment and/or technical progress; and
  • Sharing markets or sources of supply.

Under the old law, agreement and practices were not considered anti-competitive as long as the party in question could justify them as an effect of technical or economic progress, and show that consumers received a fair part of the resulting benefit. However, the New Law changed this exception to the definition of anti-competitive practices by requiring, first, that the practice in question be essential to expected technical or economic progress and, second, that the practice in question be limited to what is indispensable to the attainment of the firm’s goals, and that it not lead to a total suppression of competition in the market or in a substantial part of the market.

The New Law has also changed the role of the minister of trade and commerce, who previously only had authority to deny or allow the practice in question. However, today the minister can, in addition to his or her prior prerogatives, issue temporary authorisations, which are subject to periodic review. The minister also has the ability to revoke authorisations in cases of non-compliance by businesses under the permit conditions. In addition, the New Law requires the minister of trade and commerce to justify his or her decision on authorisation. However, this same requirement has not been extended to negative decisions.

Finally, the financial penalty imposed by the Competition Council where there is evidence of anti-competitive agreements (express or implied) has been increased to 10% of the company’s turnover, excluding tax realised in the domestic market during the past financial year. This sanction is observed in cases involving the following:

  • Non-compliance with the general precautionary measures set out by the Competition Council, and this includes cases that have not led to a ruling on the merits of a dispute; and
  • Non-compliance with the decisions taken by the Competition Council and imposed on a company to end a practice that resulted from a deal or an agreement with a competitor, or a practice involving the creation of a situation that places one company in a dominant position.

Economic Concentrations

The New Law defines a monopoly as resulting from any action, in whatever form, that constitutes a transfer of ownership or enjoyment of all or part of a company’s rights or obligations which has the effect of allowing a company or group of companies to exercise, directly or indirectly, a decisive influence over one or more other companies. This means any project or operation of concentration likely to create a dominant position in the domestic market or a substantial part of that market must be subject to approval by the minister of trade and commerce, and the Competition Council.

This obligation applies to all companies concerned by the concentration, whether they are parts or subject, as well as companies that are economically linked to them, and provided that:

  • During the last three years the parts of these companies together exceed 30% of sales, purchases or other transactions in the internal market for goods, substitutable products or services, or a substantial part of that market; or
  • The overall turnover achieved by these companies in the domestic market exceeds an amount determined by decree. Under the prior legislation, the maximum amount was set at TD20m (€9.2m). This threshold is very low, but is still applicable. However, a new decree is expected which should, in all probability, significantly increase this amount.

New Time Limits

One of the main changes introduced under the new law on the regulation of concentration relates to the reduction in processing times for applications from six to three months. This period starts upon the receipt of a complete file containing all of the required documents listed under the New Law. This period shall be suspended in cases where the department requests additional documents and will not commence until the receipt of all documents.

Moreover, the New Law limits the authority of the minister of trade and commerce in cases involving a concentration that was carried out as part of bankruptcy proceedings. Thus, a judge deliberating on a ruling regarding the transfer of a company under economic difficulties to a competitor can, in the event that the assignment is likely to create or strengthen a dominant position, request the technical opinion of the minister of trade and commerce. The court will be bound by this opinion to the extent that it does not impede the realisation of the assignment and rescue operation. Thus, these concentrations transactions involving firms in difficulty, which under the former legislation were subject to sole authorisation of the Ministry of Trade and Commerce, are now largely exempt from this prior authorisation.

New Code Of Investment

The will of the legislators who drew up the new investment code is clearly to simplify the legal framework for investment in Tunisia, especially the foreign investment framework. This commitment is reflected both in the new code’s form and context.

Thus, from a formal point of view the new code is very short, barely 25 articles spanning five to six pages. In contrast, the previous code included 67 complex articles and several dozen pages.

In terms of substance, changes to the legal framework introduced by the draft of the new code are many and important.

Freedom Of Investment

The new code establishes the principle of freedom of investment for both nationals and foreigners. This freedom is a significant evolution given the rules that were previously in force. Thus, under the current investment code, foreigners are free to invest in certain activities, which have been thoroughly listed by an implementing decree. Conversely, any investment that is necessary to carry out, but is not included on the list of free activities, requires, depending on the case, authorisation from the Central Bank of Tunisia or the Higher Investment Commission. For example, under the old code foreigners could not invest in distribution or financial services.

However, under the new code freedom of investment is not absolute. Article 4 stipulates that the new principle of freedom is not intended to override legislation specific to certain sectors. References to sectoral legislation are present in two main forms. In some cases, for example, investments in the banking or insurance sectors – other than through a capital increase within the limits set out under preferential subscription legislation – are subject to formal approval, and that applies to both Tunisians and foreigners. This situation has not been altered by the new code, so investors will continue to be obligated to seek and obtain such approval in order to create or acquire stakes in such areas.

In other cases, sectoral laws impose limits on foreign investment. For example, in the retail sector Tunisian law stipulates that a company that does not have Tunisian nationality is required to obtain a dealer’s card in order to carry out any retail activity in Tunisia. Insofar as one of the conditions for a company to be considered Tunisian is linked to the holding of at least 50% of its capital by Tunisian nationals, it follows that any majority holdings by foreign investors in any company operating in the retail sector are subject to the obligation of obtaining a dealer’s card.

It is interesting to note that any refusal of such a request must be legally justified, which will tend to reduce the number of refusals, especially since the new code provides that the criteria for refusal must be related to security considerations, national defence, support and protection of natural resources, cultural heritage, environmental protection and public health. It should also be noted that the lack of a reply from the administration within the deadline, which will be set by decree, will be considered tacit authorisation.

Access To Home Ownership

The new code also establishes the principle of freedom of acquisition or lease of real estate by foreign investors, with the exception of agricultural land, ownership of which is still reserved for Tunisians. The principle of freedom posed by the new code is an improvement over the previous situation. The acquisition by a foreigner of property is subject today, in most cases, to the authorisation of the governor of the region where the property is located.

Some companies may find it be regrettable that the new code maintains the prior prohibition on foreigners owning agricultural land. Indeed, it follows from this prohibition that foreign investors wishing to conduct agricultural activities must usually recourse to renting farmland. This prohibition is in place today and will continue to be under the new code, which may be an obstacle to the development of foreign investment in agriculture.

However, the current drafting of the new code is less restrictive than current legislation. Under the previous code it was prohibited for foreigners to not only own agricultural land but also to hold the smallest interest in Tunisian companies that own agricultural land. This prohibition of indirect holding has been deleted. The result is that foreigners may hold stakes in Tunisian companies holding farmland. These investments, however, may not exceed 50% of the capital of the foreign investor’s companies, which would strip the company of its legal status as a Tunisian entity and hence its ability to own agricultural land.

Employing Foreign Managers

The new investment code provides that any company can recruit up to 10 foreign executives. Beyond this limit the recruitment of a foreign manager is subject to authorisation. This is a significant relaxation of the current rules governing the recruitment of foreign workers. Under prior Tunisian investment laws, the recruitment of any foreign employee by a company was subject to authorisation, except for exporting companies, which can recruit up to four foreigners without permits.

Exchange Control

The new code maintains the transfer guarantee enjoyed by foreign investors. As a result a foreigner who invests regularly in Tunisia can freely export dividends, shares or company stock sale proceeds and any liquidation surplus. This transfer guarantee is provided for investments made via the import of currency. Any other form of investment (contribution in kind, debt conversion, etc.) is eligible to benefit from the transfer guarantee only after authorisation by the Central Bank of Tunisia.

In general, the new code introduces no substantive changes to the Tunisian currency exchange regulatory framework. Tunisian exchange regulation distinguishes between transfers for current transactions that are free and transfers for other transactions that are subject to prior approval by the Central Bank of Tunisia. Current operations are listed in a decree. However, beyond the maintenance by the new code of the concept of current operations as a criterion for freedom of transfer, the most interesting change to note is in authorisation procedures. Currently, the processing time for application authorisation by the Central Bank of Tunisia is around three months – although in some cases it may be longer. The most positive changes to this under the new code are:

  • The response time from the Central Bank of Tunisia will be limited by decree and a reply received within this period will be considered an authorisation; and
  • The new code also requires that any refusal should be explained in writing.

Accompany Investors

In order to facilitate between foreign investors and various Tunisian government agencies and/or bodies, the new code provides for the creation of a new institution known as the “investor’s sole interlocutor”, which will be responsible for the following:

  • Welcoming and assisting investors by providing them with any necessary information, as well as coordinating with any relevant bodies;
  • The completion, on behalf of the investor, of any paperwork needed to establish a company and obtaining the required permission; and
  • Fielding requests from investors and supporting their economic development via the relevant government agencies.

Grants & Benefits

Furthermore, the new code provides for the allocation of benefits and various subsidies for investors, such as grants intended to add value and improve competitiveness. These subsidies are granted for investments in priority areas, which are determined by the relevant authorities, and may include the following:

  • Physical investments aimed at improving knowledge and usage of new technologies, with the goal of improving productivity;
  • Intangible investments;
  • Investments in research and development;
  • Training intended to improve workers’ skills; and
  • Improving recruitment capacity.

OBG would like to thank Meziou Knani & Khlif for its contribution to THE REPORT Tunisia 2016.

Regional Development Grants

Grants for the purpose of regional development may be awarded for certain industrial activities and services, which will be specified by decree, and in accordance with the proposed location for production. Subsidies may also be granted for the purpose of sustainable development, as long as the investment contributes to efforts to reduce pollution and protect the natural environment.

It is possible to combine various subsidies provided for by the new code and other applicable regulations, on the condition that the aggregate does not exceed one-third of the total cost of the investment. This ceiling does not include the assumption by the state of any necessary external infrastructure for the project. Percentages, ceilings and conditions for the benefit of these grants will be fixed by decree. The decision to award these grants is the responsibility of the Tunisian Investment Council, created by the new code.

Moreover, projects considered by the relevant government body to be of national importance will, besides the above subsidies and regardless of the criteria for these grants, receive:

  • An exemption of profits from taxes for a maximum period of 10 years;
  • A grant not exceeding one-third of the total project cost; and
  • An assumption by the state of the cost of external infrastructure for the project.


In general, the Tunisian legal framework prioritises the freedom of parties to a contract with a foreign element, as well as the choice of applicable law. In such a case, the party can choose the terms of recourse to international arbitration or the jurisdiction of a foreign court. The new code also stipulates that the settlement of disputes between foreign investors and the Tunisian state, which may arise from differences in interpretation or application, shall be resolved through conciliation, as long as one of the two parties has not given up this method of resolution.

A failure to reach an agreement between the parties on a viable solution will lead to the application of the Conciliation Rules of the UN Commission on International Trade Law. If further conciliation fails between the Tunisian state and the foreign investor, the new code states that it is possible to submit the dispute to arbitration under an arbitration agreement concluded between the parties. The new code, while affirming total equality of treatment between nationals and foreigners, does show differential treatment in terms of dispute settlement to the extent that it limits the use of arbitration for disputes with Tunisian investors to conflicts of an international nature, and it provides, in such a case, for the application of any relevant Tunisian codes of dispute settlement.


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The Report: Tunisia 2016

Legal Framework chapter from The Report: Tunisia 2016

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