Summary of relevant laws and regulations for investors in Algeria

 

The Algerian authorities have made significant efforts to improve and secure the business and investment climate, particularly through the following measures:

• The implementation of new legislation for e-commerce, including electronic advertising, through Law No. 18-05 (Law 18-05) of May 10, 2018 on e-commerce, demonstrating a major step forward by introducing a legal regime to a field that had been previously unregulated; and

• The implementation of a new legal framework for the protection of personal data through Law No.

18-07 (Law 18-07) of June 10, 2018 on the protection of natural persons with regard to the processing of personal data has recently been passed. The latter confirms the willingness of the authorities to improve the investment climate and to secure personal data through the dedication of this new legal framework.

Investment Incentives

Decree No. 17-101 implementing Law No. 16-09 on the promotion of investment (the Investment Law) specifies the arrangements for implementing investment incentives, namely:

• The advantages applicable to the extension and rehabilitation investments;

• The exceptional advantages;

• Other advantages granted depending on the investment’s location;

• The other advantages for any investment exceeding AD5bn (€36.3m); and

• The advantages for projects of particular interest to the national economy.

51:49 Rule

Since the 2009 Complementary Finance Law (2009 CFL), Algerian foreign investment regulations provide for the limitation of foreign ownership to 49% in any investment made in the sectors pertaining to the production of goods and services, as well as in the imports sector – so the 51:49 rule ensures the creation of joint ventures in which Algerian partners hold the majority stake.

Preemption Right of the Algerian State

The State Holding Council (Conseil des Participations de l’Etat, CPE) has undertaken certain measures in order to facilitate the transfer of shares to benefit Algerian shareholders, such as Resolution No. 10-154 of October 12, 2017.

As a reminder, Article 30 of the Investment Law states that any sale of shares in a Algerian company by or to foreign investors is subject to the state preemption right. However, the CPE, through this resolution immediately implemented, devotes a new principle, namely the CPE would not intend to exercise this preemption right in the following cases:

• The transfer of shares from a foreign shareholder to the benefit of other foreign shareholders, provided that the transfer does not affect the 51:49 rule;

• The transfer of shares by Algerian resident shareholders owning 100% of an Algerian entity provided that such a transfer would not exceed the maximum limit of 49% of the share capital; and

• The transfer of shares by foreign shareholders to the benefit of Algerian resident shareholders under companies that were established before the 2009 CFL came into effect.

Repurchase Rights

Article 47 of the 2010 CFL introduced the Algerian state’s right to repurchase; however, there were a certain number of uncertainties regarding the implementation of this right. Article 31 of the Investment Law clarified that any sale of 10% or more of shares of a foreign company owning an interest in an Algerian company that enjoyed advantages or benefits at the time of establishment are required to inform the CPE prior to the operation. Non-compliance with this obligation, or the reasoned objection of the CPE, within one month of receiving this information, confers on the state a right to repurchase, at most, the interests in the Algerian company held by the foreign company. It should be highlighted that this right to repurchase by the state is limited to the shares of Algerian firms that have benefitted from advantages – which, in the absence of further specifications, may include tax and Customs exemptions by the current investment agency, the National Agency of Investment Development (Agence Nationale de Développement de l’Investissement, ANDI), or by the country’s former investment agency, the Investment Promotion Agency.

Local Financing

The obligation to resort to local financing for investments (excluding the constitution of social capital for companies), which has been relaxed since Article 55 of the 2016 Finance Law (2016 FL), enables Algerian businesses to resort to outside financing essential to the completion of strategic investment and is subject government approval on a case-by-case basis. Shareholders’ loans granted by the foreign partners of an Algerian company are possible on the condition that no remuneration is paid to the shareholder in this respect, and to the extent that the funds do not remain available to the company for more than three years. After the three-year period, the balance of the shareholders’ loans would have to be capitalised in the share capital of the company.

Reinvestment

Article 142 of the Direct Tax Code, as modified by Article 5 of the 2014 FL and Article 2 of the 2016 FL, provides that a company benefitting from exemptions or reductions granted during the exploitation period as a result of the ANDI regime must reinvest at least 30% of their profit in Algeria. The time frame for these exemptions or reductions is within four years of the end of the fiscal year during which the favourable regime is applied.

Public Procurement Contracts

The newly established Public Procurement Code was instituted by Presidential Decree No. 15-247 on September 16, 2015. According to Article 9 of Decree No. 15-247, “State-owned companies are not subject to the public procurement procedures.” However, state-owned companies are “required to draw up and to obtain the implementation, by their corporate bodies, of public procurement procedures, according to their specificities, complying with the principles of freedom of access to public sector contracts, equality of treatment of applicants and transparency of procedures”. As a result, companies operating in Algeria remain subject to the key principles of public procurement regulations.

Compliance with these principles by state-owned companies will be ensured by the joint external control of all state-owned companies, namely control by statutory auditors, the Court of Accounts and the General Inspectorate of Finance. Within this framework, state-owned companies are free to define their own procurement regulations.

Public Service Delegation

The first implementation of the legal framework regarding the territorial communities – Decree No. 15-247, dated September 16, 2015 – has introduced a new legal framework allowing legal entities responsible for public services to delegate the management of this services by agreement. The remuneration of the delegate is mainly ensured by the exploitation of the public service.

Decree No. 15-247 provides several forms of delegation, concession, affermage (leasing), public service management or management contracts. The form of delegation employed is determined by a number of factors, which include the risk taken by the delegate, the level of control over of the delegating authority and the level of complexity of the public service. At the end of the delegation agreement, all investments and goods relating to the delegated public service become the property of the delegating public legal entity.

Within this framework, the modalities of the public service delegation have been defined by Decree No. 18-199 of August 2, 2018, relating to the public services delegation, regarding the territorial community and the attached administrative public establishments.

Decree No. 18-199 defines the public service delegation as the transfer of certain missions – but not the sovereign missions – to a delegate for the purpose of the public interest, being specified that the delegate has to be a legal entity (public or private) governed by Algerian law. Thus, for such delegations by territorial communities, no delegation to a foreign company would be possible.

The delegation agreement is entered into according to the following procedures:

• Competitive tendering which is the common procedure and aims at obtaining the best offer, i.e., the offer with the best professional, technical and financial guarantees according to the rating scale defined by the specification. It can be noted that the competitive tendering has for the first phase a preselection of candidates; only the selected candidates can submit an offer.

• Non-competitive procedure, (“gré à gré”), which is a derogatory procedure only possible in case of emergency or a monopolistic position.

• A conclusion procedure with a consultation of only three candidates is also possible in case of unsuccessful competitive procedure or for public services for which such a competitive procedure is not necessary (these public services have to be legally defined). To ensure quality of the service, performance and good public service management, the delegating authority has to implement a priori and posteriori control of the public service delegation process and its performance.

This control carried out by the delegating authority ensures rigorous, continuous, sustainable and efficient management. Within this framework, the delegating authority has to notably hold with the delegate at least quarterly meetings to evaluate the management of the public service by the delegate.

Implementation of a Legal Data Protection Framework

In 2018 Algeria implemented a legal framework for the protection of personal data by Law No. 18-07 of June 10, 2018, relating to the protection of individuals in personal data processing.

Law 18-07 is applicable when:

• Personal data processing is performed by an Algerian resident or a legal entity for which the representative is established on the Algerian territory;

• Personal data processing is performed by an individual or a legal entity for which the representative is established on the territory of a state which has legal rules considered as similar to Algerian law; and

• The representative of the legal entity is established outside of Algeria but his/her uses for the personal data processing means are localised on the Algerian territory (excluding the means used for the simple transit of data). Law 18-07 defines personal data as any information, regardless of the support, that directly or indirectly relates to an identified or identifiable person (named “concerned person”). For example, an identification number or any physical, physiological, genetic, economic or biometric elements.

Any responsible or subcontracting of personal data processing, i.e., any operation or set of operations performed by automatised or non-automatised means, applies to personal data (e.g., collection, registration, retention modification or adaptation). The responsible party of such a processing must inform individuals on the processing of their personal data, but also guarantee to the latter a right of access and correction of their data as well as an opposition right to this processing. The compliance with this new regulation requires the accomplishment of formalities before the Algerian Authority of Personal Data Protection as well as the implementation of technical and organisational measures for the protection of this data. More broadly, the said Algerian Authority of Personal Data Protection will control implementation of this new regulation.

The breach of these rules is punished by administrative and criminal sanctions (fines and imprisonment). Law No. 18-07 will be applicable within one year from the implementation of the Algerian Authority of Personal Data Protection. As of late 2018, the authority does not yet exist.

New E-Commerce Legislation

Algeria has established the general rules for e-commerce of goods and services by implementing Law 18-05 of May 10, 2018. The law defines e-commerce as any “activity by which an e-supplier proposes or provides, to an e-consumer, remotely and by means of electronic communication, the supply of goods and services”.

The purpose of this new framework is to organise e-commerce activity, with a focus on protecting the consumer.

The scope of Law 18-05 is broad since its provisions are applicable to any e-commerce transactions for which one of the parties:

• Has Algerian nationality; or

• Legally resides in Algeria; or

• Is an Algerian legal entity; or

• The contract is entered into or performed in Algeria. E-commerce is submitted to the general Algerian law and notably to the foreign exchanges control regulations.

However, Law 18-05 prohibits e-commerce for certain activities, notably gambling games, bets and lotteries, alcoholic beverages and tobacco, pharmaceutical products, or goods and services for which an authentic instrument is required.

Law 18-05 also strictly organises e-commerce transactions, which have to be:

• Preceded by an electronic offer: this offer has to be visible, readable and understandable, and provide mandatory information as to the delivery modalities, the general conditions of sale (notably information relating to the protection of personal data), the price and payment modalities or the commercial warranty; and

• Formalised by an electronic contract duly validated by the e-consumer: this contract must provide the specifications of the sold good or service, the delivery modalities, the warranty conditions, the payment modalities, the duration, the conditions for termination and claim or the competent jurisdiction. The e-supplier must send the e-consumer an electronic copy of the contract as well as the invoice issued in accordance with Algerian law. It should be specified that the e-consumer can require a hard copy of the invoice.

Regarding personal data, Law 18-05 provides that the e-supplier must notably obtain the approval of the e-consumer’s consent before any collection of data, and guarantee the security of the systems and the confidentiality of their data.

Law 18-05 also regulates electronic advertising and notably prohibits commercial prospection by sending emails without the individual’s prior agreement.

Measures Regarding Imports

Since the end of 2017, several measures have been adopted by the Algerian authorities in order to regulate and restrict the importation of goods. The finance law for 2018 states that restraint measures can be introduced on imported goods until the balance of payments is restored. The main and latest measures regarding import regulations are listed below.

Import Licences

Law No. 15-15 of July 15, 2015 (Law 15-15), which amends and adds to order No. 03-04 of July 19, 2003 (Order 03-04), set in place a specific import licensing system. Executive decree No. 15-306 of December 6, 2015 sets out the application terms and conditions for merchandise import and export licence regimes. With falling oil revenues in mind, this system aims to safeguard Algeria’s “exterior financial balance” in order to limit the decrease of the country’s foreign reserve assets.

Classification of Import Licences

In accordance with classifications made by the World Trade Organisation, the abovementioned system distinguishes between two types of import licence that may be imposed on operators:

• Automatic licences: these are granted in all cases following the submission of an application and are not administered in such a manner as to have restricting effects on imports or exports. These licences may be maintained as long as the reasons for their implementation still exist.

• Non-automatic licences: these licences are those that do not fall within the automatic licences definition. These licences shall not have trade-restrictive or distortive effects on imports or exports, which add to those caused by the imposition of the restriction.

Award Criteria of Licences

The applications for non-automatic licences are reviewed by the permanent inter-ministerial committee, which takes into account the expressed needs, the statistics resulting from the exploitation of data obtained and/or issued by the ministerial departments, and the accredited trade and employer’s association representatives.

Each licence gives right to the allocation of quotas and contingents made in accordance with one of the following conditions:

• When the processing method is based on a chronological order, the allocation of quotas and contingents is made on a first-come-first-served basis;

• When the processing method is based on the allocation of requested amounts in quota, all the registered applications are simultaneously reviewed in order to determine the quantity or portion of the quota or contingent necessary to the granting of import licences;

• When a quota or contingent is reserved for the so-called traditional operators, the traditional flow of trade is taken into account; and

• When the processing method is based on a call for expression of interest, the quota or contingent use rights are auctioned. If the allocation conditions mentioned above “prove to be inadequate”, the permanent inter-ministerial committee may resort to any other more appropriate method, which shall be specified in the licence’s notice of initiation.

Please note that a recent interministerial order dated on January 8, 2018 has approved a specification setting out the conditions and the rules of access by auction to the quota or contingent.

Temporary Suspension on Importation of 877 Products

Executive Decree No. 18-02 of January 7, 2018 – amended and completed by Executive Decree No. 18-139 of May 7, 2018 – provides a list of 877 products subject to temporary import suspension. The concerned products are, notably, foodstuffs, household appliances and electronic products.

Banking Domiciliation of Imports Operations

An instruction 05-2017 of October 22, 2017 sets out the specific conditions relating to the domiciliation of goods imports for resale in the same conditions. It provides that the domiciliation of import operations of goods intended for resale in the same conditions shall be made at least 30 days prior to the shipment of such goods, and that the importer shall constitute a provision of at least 120% of the value of the import transaction.

In addition, a press release issued by the Ministry of Commerce on March 1, 2018 requires that a certificate of free marketing in the country of origin and/or provenance shall be provided at the time of the banking domiciliation for the importation of goods for resale.

Validity Limitations of Importers’ Trade Register Extract

An order of the Ministry of Commerce dated November 2, 2017 specifies that the period of validity of trade register extracts that are issued to operators importing raw materials, products and goods for resale as such is limited to two years (renewable).

Import operations that are carried out by any economic operator as part of its production, processing and/or performance activities, within the limits of its own needs, are not subject to such provisions.

Certificate of Conformity for Importers of Goods for Resale

Executive Decree No. 18-51 dated January 30, 2018 has amended and completed the Executive Decree No. 05-458 of November 30, 2005, setting out the rules for the exercise of imports of products for resale as such. Companies having an activity of import of products for resale as such shall obtain from the Ministry of Commerce a certificate of conformity demonstrating compliance with the following requirements:

• Be an Algerian commercial company subject to the supervision of a statutory auditor;

• Have appropriate storage and distribution infrastructures that are properly equipped and can be checked by the competent authorities, and which shall be used solely for operations related to its import activities;

• Use of transport methods suited to the characteristics of their activities; and

• Implement the necessary measures to check the compliance of imported products before their entry into Algeria. This certificate shall be requested before the exercise of the import activity and is valid for two years (renewable).

Tax Measures Applicable to Import Operations

The 2018 FL and 2018 CFL have toughened the tax and regime applicable to import operations, notably with the following measures:

• A solidarity contribution of 1% applicable to the import operations of goods released for consumption in Algeria. This tax concerns all import operations and notably the imports of goods intended for resale in the same conditions and other imports;

• The creation of a new Customs duty rate of 60%; and

• The creation of an additional temporary duty applicable to import operations of goods released for consumption in Algeria with rates between 30% and 200%. The list of concerned goods and the applicable rates are fixed by regulations.

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The Report: Algeria 2018

Legal Framework chapter from The Report: Algeria 2018

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