THE LAW OF THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA ON FOREIGN INVESTMENT
Article 1. It is the consistent policy of the DPRK to develop economic cooperation with other countries. The State encourages foreign investors to invest in the territory of the DPRK on the principles of complete equality and mutual benefit.
Article 2. This law is intended to stipulate the general principles and rules relating to the protection of investment of foreign investors and establishment and operation of foreign-invested enterprises in the DPRK.
A foreign investor is body corporate or an individual from a foreign country that invest in the territory of the DPRK.
A foreign-invested enterprise is a contractual or equity joint venture enterprise, or a wholly foreign-owned enterprise that is set up in the territory of the DPRK.
A contractual joint venture is business activity in which investors from the DPRK and a foreign country jointly invest, the management is assumed by the partner from the host country and, depending on the provisions of the contract, the portion of the investment made by the foreign investor is redeemed or the share of the profits to which the foreign investor is entitled is allotted.
An equity joint venture is business activity in which investors from the host side and from a foreign country invest jointly, operate the business jointly, and profits are distributed to the investors in accordance with the share of their investment.
A wholly foreign-owned enterprise is a business enterprise in which a foreign investor invests and which the foreign investor manages on his own account.
Article 3. A foreign investor shall be permitted to establish equity and contractual joint ventures within the territory of the DPRK and to set up and operate wholly foreign-owned enterprises in the Free Economic and Trade Zone.
Article 4. The State, subject to the laws of the DPRK, shall guarantee the legal rights and interests of foreign investors and foreign-invested enterprises.
Article 5. Institutes, companies, enterprises, individuals, and other economic bodies from abroad shall be permitted to invest within the territory of the DPRK. Korean nationals living outside the territory of the DPRK shall also be allowed to invest, subject to this law.
Article 6. A foreign investor shall be allowed to invest in various sectors such as industry, agriculture, construction, transport, telecommunication, science and technology, tourism, commerce and financial services.
Article 7. The State particularly encourages investment in sectors that require high and modern technology, sectors that produce internationally competitive goods, the sectors of natural resource development and infrastructure construction, and the sectors of scientific research and technology development.
Article 8. Those foreign-invested enterprises that operate in the sectors stipulated in the previous article shall receive preferential treatment, including the reduction of and exemption from income and other taxes, favourable conditions for land use, and the preferential supply of bank loans.
Article 9. Those foreign investment enterprises that operate in the Free Economic and Trade Zone shall receive preferential treatment as follows:
l . No customs duty shall be levied on export and import materials other than on those items that are prescribed by the State.
2. No income tax shall be payable for 3 years from the year the profit is first accrued in the production and income tax reduced by up to 50 percent shall be paid for the following 2 years. The rate of income tax shall be 14 per cent, a concessionary rate in comparison with rates in other areas.
Article 10. The State shall make convenient the entry and exit formalities and methods for foreign investors who travel with the purpose of setting up or operating business enterprises in the Free Economic and Trade Zone.
Article 11. Investment in those projects which hinder the development of the national economy and threaten national security, or which are technically obsolete and harmful to the environment shall be prohibited or restricted.
Article 12. A foreign investor may invest in the form of currency, property in kind, industrial property rights, technical know-how and other properties and property rights. The value of property and property rights invested shall be determined through an agreement between the partners on the basis of the international market prices prevailing at the time of the evaluation.
Article 13. Foreign investment enterprises shall be permitted to open branch offices, representative offices or agencies and to establish subsidiaries in the DPRK and other countries. They shall also be permitted to conduct joint operations with companies in the DPRK and other countries.
Article 14. Equity and contractual joint venture enterprises and wholly foreign-owned enterprises which are established within the territory of the DPRK shall become bodies corporate of the DPRK. Those branch and representative offices and agencies of foreign-invested enterprises that are set up within the territory of the DPRK shall not become bodies corporate of the DPRK.
Article 15. The State shall lease the land required for foreign investors and the establishment of foreign invested enterprises for a maximum period of 50 years. The leased land may, with the approval of the relevant department, be transferred or inherited, within the term of the lease.
Article 16. A foreign-invested enterprise must take its labour force from the host country. Management personnel, technicians and skilled workers with special job classifications, as prescribed in the contract, may be brought from abroad under an agreement with the external economic department of the Administration Council.
When employing or dismissing citizens of the DPRK, a contract must be made with the relevant labour service agency.
Article 17. Foreign investors and foreign-invested enterprises must pay income tax, business tax, property tax and other taxes, subject to the relevant laws of the DPRK.
Article 18. Foreign investors shall be permitted to reinvest the whole or part of their profit within the territory of the DPRK. In such cases the whole or part of the income tax already paid on the reinvested portion may be recovered.
Article 19. Foreign-invested enterprises, and assets invested by foreign investors, shall not be subject to nationalization or seizure by the State.
Should unavoidable circumstances make it necessary to nationalize or seize such enterprises and assets, fair compensation shall be paid.
Article 20. Legal profit and other income earned by a foreign investor in its business activities, and any money that remains after the liquidation of the business, may be remitted abroad, subject to the laws and regulations of the DPRK relating to foreign currency control.
Article 21. The State shall protect by law the managerial secrets of foreign-invested enterprises and shall not disclose them without prior agreement with the foreign investor.
Article 22. Any disagreement concerning foreign investment shall be settled through consultation. Disputes shall be examined and settled by a court of law or an arbitration body of the DPRK, according to prescribed procedures, or may be taken to an arbitration agency in the third countries for settlement.
THE LAW OF THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA ON CONTRACTUAL JOINT VENTURE
(Adopted at the Standing Committee of the Supreme People’s Assembly on October 5, 1992 and Approved at the Fourth Session of the Ninth Supreme People ‘s Assembly on December 11, 1992) ã€€
Article 1. The DPRK Law on Contractual Joint Venture is intended to contribute to the expansion of economic cooperation and technical exchange between the DPRK and the rest of the world.
Article 2. Contractual joint venture consists of business activities in which investors from the DPRK and from a foreign country invest jointly, with production and management being assumed by the host partner, and the portion of the investment made by the foreign partner is redeemed or the portion of the profit to which the foreign partner is entitled is allotted in accordance with the provisions of the joint venture contract.
Article 3. Contractual joint ventures shall be established primarily in sectors producing exportable goods, using advanced technology, and also in tourism and the service sectors.
Article 4. The State encourages foreign investors to bring in modern equipment and advanced technology, and to invest in sectors producing internationally competitive goods.
Article 5. Korean nationals living outside the territory of the DPRK may also take part in contractual joint venture, as stipulated under this law.
Article 6. Establishments, enterprises, and institutes which wish to conduct a contractual joint venture are required to consult with their governing bodies. agree the joint venture contract, with the foreign investor, and submit an application for the venture to the external economic organ of the Administration Council.
The application should be accompanied by all other relevant documents, including the deed of contract and a feasibility study report.
Article 7. The external economic organ of the Administration Council shall approve or reject the application within 50 days of the day of its submission.
Article 8. A contractual joint venture should be registered within 30 days of its approval at the administrative and economic committee of the province (or city under direct jurisdiction) where the venture is to be situated. The day of registration shall be the date of the establishment of the joint venture.
Article 9. A contractual joint venture shall not engage in pursuits other than those specified at the time of its approval. If the partners wish to engage in other pursuits, they should obtain approval from the external economic organ of the Administration Council.
Article 10. If one partner in the joint venture wishes to concede the whole or part of its rights and duties to a third party, it should obtain the approval of the external economic organ of the Administration Council after reaching agreement with the other partner.
Article 11. It is permissible for a joint venture to employ, in accordance with the contract, technicians from the foreign investor or, upon agreement with the external economic organ of the Administration Council, technicians from a third country.
Article 12. A joint venture enterprise is allowed to import materials for use in production and management and to export goods it produces .
Article 13. The redemption of the portion of the investment or the distribution of profit to the foreign investor shall be realized primarily in goods produced by the joint venture enterprise, but also in other ways on which the two partners agree.
Article 14. If it is provided for in the joint venture contract, goods produced and revenues earned by the joint venture enterprise may be used first for the redemption of invested capital or the distribution of profit.
Article 15. Any legal profit and other income earned by the foreign investor may be remitted abroad, subject to the laws and regulations of the DPRK on foreign currency control.
Article 16. The partners in a joint venture shall be allowed to set up a non-permanent body for joint consultation. The body shall examine important matters concerning the operation of the venture, such as the introduction of new technology, the improvement of quality and reinvestment.
Article 17. A joint venture enterprise shall settle its accounts on a monthly, quarterly, and yearly basis. Every joint venture enterprise shall be required by law to submit a statement of accounts to the relevant department and to undergo supervision by financial and banking institutes.
Article 18. When the profit is distributed under the contract, a contractual joint venture enterprise shall be required to pay tax as stipulated in the laws of the DPRK.
Article 19. In cases where either of the joint venture partners fails to fulfill its duties as stipulated in the contract, making it impossible to operate the joint venture enterprise, the enterprise may be wound up with the approval of the external economic organ of the Administration Council. Any resultant losses shall be sustained by the partner that failed in its duties.
Article 20. A joint venture shall end when the period of contract expires. When the contract term expires or the unit is wound up before the expiration of the contract, the enterprise must, subject to the law, settle its debts and credit accounts and go through the relevant formalities for canceling its registration. In cases where they wish to continue to run the joint venture even after the expiry of the period of contract the partners shall be required to obtain the approval of the external economic organ of the Administration Council 6 months before the expiration of the term of the contract.
Article 21. Any disagreements concerning the joint venture shall be settled through mutual consultation.
Disputes shall be examined and settled by a court of law or an arbitration agency of the DPRK, in accordance with the relevant procedures.
REGULATIONS FOR THE IMPLEMMENTATION OF THE LAW ON EQUITY JOINT VENTURE
Chapter 1. General
Article 1. These regulations are formulated to provide for system and discipline in joint venture businesses subject to the Law of the DPRK on Equity Joint Venture, and to expand and develop economic and technical cooperation and exchange between the DPRK and other countries.
Article 2. Institutions,enterprises or entities of the DPRK (hereinafter called the investor of the DPRK) can establish an equity joint venture with corporate bodies and individuals of other countries and Korean compatriots resident outside the territory of the DPRK (hereinafter called the foreign investor).
Equity joint ventures shall be established mainly in Rason economic and trade zone (hereinafter called the foreign investor).
Equity joint ventures shall be established mainly in Rason economic and trade Zone .
Article 3. An equity venture is one that is jointly incorporated and operated with joint investment by, and whose profit is distributed proportionate to the share of contributions between the investor of the DPRK and the foreign investor.
An equity joint venture shall have the ownership of the assets contributed by its parties, be independent in business and be liable to corporate debts within the limit of assets under its ownership.
Article 4. The assets of equity joint ventures shall not be nationalized or expropriated by the State. Legal rights and interests of equity joint ventures and the parties shall be protected by the State . Legal rights and interests of equity ventures and the parties shall be protected by the State .
The assets and employees of equity joint ventures shall not be used for other purposes except in unavoidable circumstances.
Equity joint ventures and parties are obliged to respect and strictly observe the laws and regulations of the DPRK.
Article 5. Equity joint ventures shall be placed under the unified guidance and control of the Ministry of Foreign Trade (hereinafter called the central trade guidance organ ).
Article 6. All documents of equity joint ventures shall be made in Korean .
Where the documents are made in a foreign language as may be agreed between the parties , the Korean version shall be attached thereto.
Article 7. Within the territory of the DPRK all equity joint ventures shall be established and operated in compliance with these regulations.
Provisions not specified in these regulations shall be subject to the relevant laws and regulations of the DPRK.
Chapter 2. Establishment of an Equity Joint Venture
Article 8. Equity joint ventures may be effected in the fields of science , technology ,electronics,
And automation, machine-building , metal, mining, power, building-materials, pharmaceutical chemical industries, construction, transport, finance, and others.
Article 9. The State shall encourage equity joint ventures conducive to the introduction of high technology and other state-of-the-art technologies, manufacturing of products with high international competitiveness, scientific research and technological development, exploitation of underground natural resources and infrastructure construction.
Article 10. Equity joint ventures in priority projects , those with overseas Korean compatriots with the citizenship of the DPRK ,or those established in a special economic zone like the Zone, may be accorded preferential treatments, such as reduction of or exemption from tax and favourable conditions for land use ,pursuant to appropriate laws and regulations of the DPRK.
Article 11. Establishment of equity joint ventures in the fields specified otherwise by the State and those detrimental to national security or to public interests shall be prohibited.
Article 12. Equity joint ventures that fail to meet environmental criteria, those whose equipment and production process are outdated from the economic and technical point of view ,those that export unprocessed natural resources of the DPRK ,and those with low economic efficiency shall be restricted .
Article 13. In order to establish an equity joint venture , the investor of the DPRK , shall prepare a draft equity joint venture contract, memorandum of association and feasibility study report with the foreign investor.
Article 14. The equity joint venture contract shall include:
- Title of the company and its domicile,
- Names of the contracting parties and their addresses,
- Purpose of the establishment of equity joint venture, categories of business , and its duration .
- Total amount of investment, registered capital, shares and amount of contributions and transfer of the shares of contributions and transfer of the shares of contribution.
- Rights and duties of the contracting parties.
- Operational management structure and labour management.
- Transfer of technology.
- Creation and use of funds, settlement of accounts and distribution of disputes,
- Liability to and relief from defaults and settlement of disputes
- Amendment, supplement or cancellation of contract and insurance governing laws.
- Dissolution and liquidation
- Validity of the contract, and
- Other necessary provisions.
Article 15. The memorandum of association shall include:
- Title of the company and its domicile.
- Names of the parties to the joint venture and their addresses.
- Purpose of the establishment of the equity joint venture, categories of business, scope and scale of operation, and its duration
- Total amount of investment, stages and periods of investment, registered capital, shares of contribution, list of contribution, period of calls, and transfer of contribution
- Formation of the board of directors and its obligations, procedure of the board of directors, ways of notification, and representative of the highest decision-making body of the company
- Management structure, staff and their mandates, head of the company and number of the company and number of employees (including foreign nationals)
- Planning and production activities (business included),marketing of products, and purchase of equipment, raw and other materials.
- Conditions for the activities of the trade union,
- Bookkeeping and labour management
- Settlement of accounts and distribution, creation and use of funds,
- Dissolution and liquidation
- Amendment and supplement of memorandum, and
- Other necessary provisions
Article 16. The feasibility study report shall include the details of investment, information concerning construction, production and disposal of products, amount of labour, raw and other materials, finance and power and water required and the ways of their provision and data on phased profitability, technical analysis, environmental protection, labour safety and hygiene and other necessary details.