Belize: Arbitration-Friendly Or Not?

Belize is a small economy that is open to foreign direct investment (FDI) and has no restrictions on foreign ownership or control of companies. However, foreign investments must be registered with the Central Bank of Belize and adhere to the Exchange Control Act and related regulations.

Belize's Arbitration Act, last amended in 1980, governs local arbitration and provides for the enforcement of foreign awards. The Act incorporates three international conventions: the 1923 Geneva Protocol on Arbitration Clauses, the Convention on the Execution of Foreign Arbitral Awards, and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). While Belize is not a signatory to the New York Convention, its final appellate court, the Caribbean Court of Justice, has held that the Act gives effect to the Convention in domestic law.

Belize has a history of settling international investment disputes through arbitration, with around five to eight cases settled in international courts over the past decade, including one involving a US company.

Belize's Arbitration Act

The Act provides standard provisions for parties to submit disputes to arbitration and for applications to be made to stay court proceedings pending arbitration. It also:

• Provides guidelines for the appointment of arbitrators
• Elaborates the implied powers of arbitrators
• Provides for enforcement

Under the Act, foreign awards are governed by three international conventions that have been incorporated into domestic law:

• The Protocol on Arbitration Clauses (the Geneva Protocol 1923)
• The Convention on the Execution of Foreign Arbitral Awards
• The New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958

While Belize is not a party to the New York Convention, its final appellate court, the Caribbean Court of Justice (CCJ), has held that the provisions of the convention are embodied in domestic law through the 1980 Ordinance.

The Act allows the Supreme Court of Belize to support and supervise dispute settlement between private parties by arbitration. In 2013, the Supreme Court introduced court-connected mediation as an alternative method to reduce costs and the duration of litigation.

Belize's investment challenges

Belize has the smallest economy in Central America, with a GDP of US $2.57 billion in 2022. Here are some of the challenges to investing in Belize:

• Small population: Belize has a small population of around 432,516 people, which can limit the potential consumer base and workforce for businesses.
• High import duties: Belize imposes high import duties, which can increase the cost of doing business and impact the profitability of firms.
• Bureaucratic delays: Red tape and bureaucratic delays are common in Belize, which can hinder investment and business operations.
• Corruption: Corruption is endemic within politics and government institutions in Belize, creating an uncertain and unpredictable business environment.
• Political interference: There have been instances of political interference in private disputes, which can deter investors and create regulatory risks.
• High cost of doing business: The high cost of inputs, such as utilities and fuel, drives up the cost of doing business in Belize.
• Infrastructure: Belize often has insufficient infrastructure, which can be a challenge for businesses operating in the country.
• Public debt: Belize has a high public debt, which can impact the country's economic stability and ability to attract investment.
• Limited access to financing: Small and medium-sized enterprises (SMEs) in Belize may face challenges in accessing financing due to requirements for local ownership and collateral.
• Land issues: There have been concerns about land fraud, corruption, and insecurity in the Lands and Survey Department, which can create risks for investors.
• Exchange controls: Belize has currency controls and exchange control regulations that can impact the ability of investors to repatriate profits and manage their investments.
• Regulatory environment: The regulatory environment in Belize can be complex and unpredictable, with frequent changes and a lack of transparency.
• Limited market size: Belize is a small consumer market, which may limit the potential for businesses to scale and expand.

Belize's foreign investment incentives

Belize has the smallest economy in Central America, with a gross domestic product (GDP) of US$1.2 billion in 2020. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government is open to, and actively seeks, foreign direct investment (FDI).

100% Foreign Ownership

The Belize government allows 100% foreign ownership of land and company assets.

Encouragement of Joint Ventures

The government supports joint ventures and partnerships as a preferred mechanism for investment.

Special Incentives for Retirees

Belize offers special incentives for retirees, including the Qualified Retirement Program (QRP), which grants special status and tax benefits to retirees over 45 who can prove a permanent and consistent income from investments, pensions, or other retirement benefits.

Tax Holidays

The Fiscal Incentives Act 1990 relates to tax holidays and duty exemptions for companies engaged in specific sectors, such as agriculture and mariculture.

Duty Exemptions

Belize offers duty exemptions for companies granted an Approved Enterprise Order (Development Concession), allowing them to import items such as building materials, machinery, equipment, and vehicles without paying import duties.

Trade Agreements

Belize benefits from trade agreements with several developed countries and regions, including preferential market access to the Caribbean Common Market (CARICOM) and preferential treatment from the U.S. under the Caribbean Basin Initiative (CBI).

Export Processing Zones (EPZs)

Belize's EPZs provide substantial benefits to investors in sectors such as tourism, agriculture, and light industry. Advantages include exemption from various duties and taxes, income tax holidays, dividend tax exemption, and the opportunity to open foreign currency bank accounts.

Bilateral Investment Treaties

Belize has Bilateral Investment Treaties with several countries, including Austria, Cuba, El Salvador, Italy, and the United Kingdom.

Belize's property rights

Belize's property laws are mainly derived from the Common Law and English Statutes of the 19th century. The Law of Property Act, Chapter 190, is similar to the Real Property Act 1925 of England.

There are two types of land in Belize: Undeclared and Declared. Undeclared Land transactions must be recorded at the Titles Registry, while transactions for Declared Lands are registered at the Land Registry. Both offices are located in Belmopan in the Cayo District.

Belize has three types of titles to freehold property:

• Deed of Conveyance: The oldest form of title ownership, which is a registered right to ownership.
• Transfer of Certificate of Title: A physical title to a particular parcel of land, which is more secure but costly and time-consuming to transfer.
• Land Certificate: An absolute title that applies to purchases in new or specially designated areas.

The government is working to re-register all freehold lands to achieve a uniform system of nationwide land ownership, but this will take time as some areas need to be resurveyed.

Belize's Constitution preserves the right of individuals to own private property and operate private businesses. There are generally no restrictions on foreign ownership and control, and foreigners have the same rights as citizens regarding property ownership. However, foreign investments must be registered at the Central Bank of Belize, and certain incentives are only available to companies with a minimum of 51% local ownership.

There have been concerns about corruption and manipulation of land titles, especially in the Lands and Survey Department, so investors are advised to do their due diligence before purchasing property. Additionally, real estate transactions between residents and non-residents must be conducted in Belize dollars, per Central Bank regulations.

Belize also has strict anti-squatting laws, requiring uninterrupted possession of land for at least 30 years on National and Conveyed lands or 12 years on Registered lands for someone to claim title through the Supreme Court.

Belize's investment disputes

Belize has a history of investment disputes, with the government involved in arbitration proceedings with local and international investors. In some cases, the government has opposed the enforcement of arbitral awards on the grounds of public policy.

In one notable case, the government was ordered to pay $171 million for nationalising a telecoms company. This case was halted for four years due to a Belizean court injunction but was later uncontested due to a settlement.

Another dispute involved the former deputy chair of the UK's Conservative Party, Lord Ashcroft, who threatened to bring a treaty claim against Belize over his company's investment in a proposed port terminal.

Belize has also faced criticism for its handling of land titles, with investors expressing concerns about the security of land ownership. There have been reports of corruption and manipulation of land titles by both private individuals and government officials.

The government has also been accused of expropriating private property, including land belonging to foreign investors, without providing fair compensation. These cases can take many years to settle, and there are allegations that some expropriations were done for personal or political gain.

Additionally, Belize has faced challenges in enforcing arbitral awards against the government, with some cases being appealed up to the Caribbean Court of Justice (CCJ). The government has also passed legislation, such as the Crown Proceedings (Amendment) Act and the Central Bank of Belize (International Immunities) Act, which affect the enforcement of foreign arbitral awards.

Overall, while Belize has a history of investment disputes, the government has taken steps to improve the investment climate by encouraging foreign direct investment (FDI) and implementing economic reforms.

Frequently asked questions