Although Myanmars Parliament passed a
foreign investment law last week, multinationals may find
that there are investment hurdles closer to home in the
US reporting requirements and the EUs recently
While Myanmars natural resources and population
are highly attractive, corporates in the US and EU must tread
carefully to comply with both domestic and home country
New York Department of Financial Services actions
regarding Standard Chartereds transactions in
sanctioned Iran is a reminder of the importance of staying in
line with international compliance laws.
Before leaping ahead into a project,
multinationals should spend the time learning about the market
to avoid being blindsided by domestic or international
law, said Michael Aldrich, managing partner at Hogan
US reporting requirements
On July 11 the White House formally eased US sanctions
on Myanmar. But significant restrictions on investment
Department fact sheet says that US persons are prohibited
from investing with the Burmese Ministry of Defense, state or
non-state armed groups.
But counsel have warned multinationals may find this
difficult due to the militarys influence and involvement
in the private sector. Mark Lehmkuhler, partner at Davis Polk
& Wardwell Hong Kong said this restriction would continue
to be a thorny issue.
Moreover US persons cannot deal with Specially
Designated Persons (SDNs) or any entity in which an SDN has a
majority stake. Blocked persons are listed by the
Treasury Departments Office of Foreign
Many have complained that the SDN list is out of date
and that SDNs with government and military connections control
many of Myanmars valuable companies. For example
well-known Myanmar company Max Myanmar Group is owned by SDN
and businessman U Zaw Zaw.
Sources are unconcerned. Although it may be
inconvenient, Aldrich said that it is possible to consider what
sort of ancillary business transactions are viable within the
scope of US transactions.
For example, if the Myanmar aviation sector consists
of companies that have contacts with the former military
regime, it is possible to handle related transactions under the
US sanctions regime, such as aircraft financing, spare parts,
aviation fuel distribution or catering.
The opportunities are limitless but in each
instance, an investor will need to obtain proper guidance from
US trade law specialists, added Aldrich.
But the reporting requirements also pose due diligence
hurdles. The announcement requires companies to include
information regarding policies and procedures with respect to
human rights, workers rights and environmental
stewardship among others.
But standards in relation to environmental stewardship
and human rights are not well-defined.
Regardless counsel have warned that extensive due
diligence will be required in certain sectors, such as energy
and natural resources.
Although some of the most attractive potential
investments involve energy and natural resources, making
investments in these sectors will be complex as there have been
extensive allegations of environmental and human rights
associated with these issues, Lehmkuhler
Surprisingly there are few restrictions on investing
with national oil and gas company Myanmar Oil & Gas
Enterprise (MOGE), which has a history of corruption and
lack of transparency. While US persons can invest with
MOGE, they must report all transactions within 60
Aside from reporting requirements, counsel frequently
mentioned related laws, such as the US Foreign Corrupt
Practices Act (FCPA). IFLR sources have said that
FCPA compliance is the biggest barrier to Southeast Asian
deals. Myanmar is no different: Transparency
International ranks the country 180 out of 183 in its
Corruption Perceptions index.
In May 2012 the Counsel of the European Union
suspended sanctions on Myanmar for one year to encourage
the country to continue its reform process.
Paul Kreijger, head of the Dutch EU and competition
practice of Linklaters, said that before suspension, the latest
version of the sanctions date from 2008 and are more focused
than US regulations. Although they only concern specific
sectors and listed persons and entities, many of them likely
overlap with those listed by the US.
He also noted that the regulation provides for a
limited transitional regime regarding the prohibition on
financing or otherwise cooperating with listed entities.
If an EU person is financing an entity or person that is
not listed, but later becomes listed, they can continue to meet
their obligations, though certain reporting requirements
apply, he added.
All sanctions have been lifted until May 2013, and
there are no reporting requirements other than what is required
by the EU for all transactions a decision facilitating
European investment in Myanmar.
But questions remain. If the sanctions are reinstated
after investors make use of the opportunity, the regulations
are uncertain. Kreijger said that he did not have an answer.
As far as the EU is concerned, its not possible to
tell what will happen in May 2013, he said.
US/EU comparison: different policy
Sources agreed that EUs sanctions suspension is
much less restrictive than the US reporting requirements.
However that may be due to the USs sanctions regime,
which was stricter to start with and therefore more difficult
Moreover the loosening of sanctions is closely related
to policy goals. Aldrich explained, the US would like to keep
pressure on the Government of Myanmar for further positive
change whereas the Europeans seem to be looking forward to a
new day of engagement.
Ultimately counsel agreed that multinational
corporations should apply the same common sense standards and
techniques they follow in their home countries. This is
just good business, said Aldrich.