Policy & Law

The Legal System Favourable for Ensuring

Rights and Interests of Foreign Investors

The government of the Democratic People’s Republic of Korea provides legal protection to foreign investors and their legitimate rights and interests, thereby expanding and developing external economic relations and cooperation through foreign investment.

It has thus proclaimed the laws and regulations in relation to foreign investment, and revised and supplemented them on several occasions in its effort to create relevant legal and institutional devices.

The government has provided foreign investors with favourable environment for investment.

Investment-related laws of the DPRK include the Law on Foreign Investment, basic law, and other laws and regulations on the equity joint venture, contractual joint venture, wholly foreign-owned enterprises, foreign-invested banks, special economic zones, the leasing of real estate, taxation for foreign-invested businesses and foreign individuals, and settlement of disputes in foreign investment.

The Law of the DPRK on Foreign Investment stipulates in Article 14, “Foreign-invested enterprises, joint venture banks and wholly foreign-owned banks shall become corporate bodies of the DPRK. Foreign enterprises’ branches, agencies and representative offices and foreign banks’ agencies that are set up within the territory of the DPRK shall not become corporate bodies of the DPRK,” thus providing legal environment for investment, including the treatment of foreign investors, encouraged sectors of foreign investment and their preferential treatment, legal guarantees of foreign capital, and dispute settlement.

The government of the DPRK satisfies the interests of foreign investors by providing legal principles for encouraged sectors and preferential treatment of investments.

In order to encourage investment in the sectors of great concern to foreign investors, it stipulates the encouraged sectors and preferential treatment in the foreign investment-related laws.

Article 7 of the Law of the DPRK on Foreign Investment stipulates as follows: “The State particularly encourages investment in sectors that introduce modern technologies including the high technology, sectors that produce internationally competitive goods, the sectors of infrastructure construction, and the sectors of scientific research and technology development.”

And its Article 8 stipulates, “Those foreign invested enterprises that invest and operate in priority sectors shall receive preferential treatment, including the reduction of or exemption from income and other taxes, favourable conditions for land use and the preferential supply of bank loans.”

The foreign investment-related laws of the DPRK ensure legal guarantee for the property invested by foreigners and their rights and interests.

The foreign investment law stipulates in Article 4, “The State shall protect the legal rights and interests of foreign investors and provide as well as the conditions for the management activities of foreign invested enterprises and foreign-invested banks.” Accordingly, the lawful rights and interests of foreign investors as well as conditions for management activities of foreign-invested businesses and banks are fully guaranteed.

Article 19 of the mentioned law stipulates as follows: “The assets of foreign investors, foreign-invested enterprises and foreign-invested banks shall not be subject to nationalization or seizure by the State. Should unavoidable circumstances as those for public interests make it necessary to nationalize or seize, they shall be notified of it in advance and fair compensation shall be paid through legal procedures.”

The government settles disputes relating to foreign investment on the principle of providing foreign investors with convenience.

To this end, it stipulates in Article 22: “Any disagreement concerning foreign investment shall be settled through consultation.

“In case disputes arise, the parties concerned shall settle them in relevant organs of the DPRK or a third country under mutual agreement.”

Foreign investment-related laws of the DPRK have also stipulated the legal problems related to the special economic and trade zones and lease of real estate.

The government of the DPRK has concluded with foreign countries agreements on the encouragement and protection of investment. It has thus concluded with scores of countries including Switzerland, Thai and Vietnam, agreements on protection of investment and on prevention of double taxation.

The government of the DPRK shall further improve and perfect the foreign investment-related legal and institutional devices so as to create more favourable environment for foreign investment.