YSC, Title 22.  Business & Professions
 
 
 
Chapter 3.  Yap State
Foreign Investment

§301.   Short Title.
§302.   Purpose.
§303.   Definitions.
§304.   Requirement that a foreign investor obtain a Foreign Investment Permit.
§305.   Categories of economic sectors.
§306.   Relationship between the Yap State Government and the FSM
             Government regarding  the regulation of foreign investment within the
             State  of Yap.
§307.   Application procedures for Yap State Foreign Investment Permits.
§308.   Fees, renewal, modification, and cancellation of Yap State Foreign
             Investment Permits.
§309.   Expatriate Worker Authorizations and Entry Permits.
§310.   Reports by holders of Yap State Foreign Investment Permits.
§311.   Reports by the Director.
§312.   Guarantees and entitlements regarding foreign investments.
§313.   Injunction and penalties.          
§314.   Judicial review.
§315.   Confidentiality.
§316.   Enforcement.
§317.   Effectiveness; transition.
§318.   Foreign Investment Act supercedes other laws.
§319.   Severability.

     §301.  Short Title.
     This chapter shall be known and may be cited as the "Yap State Foreign Investment Act".

          Source:  YSL 4-79 §1 (Section 301), modified.

     §302.  Purpose.
     The purpose of this chapter is to encourage foreign investment within the State of Yap in a manner which serves the economic, social, and cultural interests of the State of Yap.  This purpose shall be borne in mind in the implementation and interpretation of the provisions of this chapter.

          Source:  YSL 4-79 §1 (Section 302), modified.

     §303.  Definitions.
     When used in this chapter, the following terms shall have the following meanings, which are consistent with the definitions set forth in the FSM Foreign Investment Act of 1997, unless otherwise stated or required by the context:

     (a)  "Business entity" means any sole proprietorship, partnership, company, corporation, joint venture, or other association of persons engaging in business;

     (b)  "Citizen" means a citizen of the FSM;

     (c)  "Director" means the Director of the Department of Resources and Development of the State of Yap;

     (d)  "Engaging in business" means carrying out any activity relating to the conduct of a business and shall include the activities enumerated in subsection (d)(1) of this section but shall not include the activities enumerated in subsection (d)(2) of this section:

               (1)  Engaging in business shall include:

     (i)  buying, selling, leasing, or exchanging goods, products, or property of any kind;

     (ii)  buying, selling, or exchanging services of any kind;

     (iii)  appointing a representative, agent, or distributor by a noncitizen to perform any of the acts described in subsections (1)(i) and (1)(ii) of this subsection, unless said representative, agent, or distributor has an independent status and transacts business in its name for its own account and not in the name of or for the account of any noncitizen principal;

     (iv)  maintaining a stock of goods in Yap State for the purpose of having the same processed by another person in Yap State;

     (v)  establishing or operating a factory, workshop, processing plant, warehouse, or store, whether wholesale or retail;

     (vi)  mining or exploring for minerals or for the commercial exploitation or extraction of other natural resources;

     (vii)  providing services as a management firm or professional consultant in the management, supervision, or control of any business entity;

     (viii)  providing professional services as an engineer, surveyor, accountant, auditor, or other professional providing services for a fee; provided however, that such a professional shall not be considered to be engaging in business unless he, while present in Yap State, performs his respective professional services for more than seven days in any calendar year;

     (ix)  providing professional services as an attorney except as provided in subsection (d)(2)(i) of this section;

     (x)  providing professional services as a physician or dentist; provided, however, a physician or dentist shall not be considered to be engaging in business if, while present in Yap State, (a) the physician or dentist is performing professional services in conjunction with a grant or aid program, or (b) the physician or dentist is performing professional services in conjunction with a medical referral program sponsored by the Department of Health Services; and

     (xi)  owning at least ten percent ownership interest in a business entity, whether such ownership interest is owned directly by a noncitizen or is owned as a beneficial interest;

               (2)  Engaging in business shall not include:

                            (i)  providing professional services as an attorney if, while present in Yap State, (a) the attorney is admitted pro hac vice, or (b) the attorney renders professional services on a pro bono basis;

     (ii)  the publication of general advertisements through newspapers, brochures, or other publications, or through radio or television;

     (iii)  the conducting of scientific research or investigations if (a) the research or investigation is sponsored by a university, college, agency, or institution normally engaged in such activities primarily for purposes other than commercial profit, and (b) the particular research or investigation at issue is not for purposes of or expected to yield commercial profit;

     (iv)  the collection of information by a bona fide journalist for news publication or broadcast;

     (v)  participating as a party in any cause of action, suit, administrative proceeding, arbitration, or mediation;

     (vi)  maintaining bank accounts; or

     (vii)  an individual's acceptance of employment or employment with an agency or department of the FSM or Yap State Government or with a private employer.

     (e)  "Foreign investment" means any activity in the State of Yap by a noncitizen which amounts to engaging in business as defined in subsection (d) of this section;

     (f)  "Foreign Investment Permit" means either an FSM Foreign Investment Permit or a Yap State Foreign Investment Permit;
 
     (g)  "Foreign investor" means a noncitizen who is engaging in business within the State of Yap;

     (h)  "FSM" means the Federated States of Micronesia;

     (i)  "FSM Foreign Investment Act" means the Foreign Investment Act of 1997 enacted by the Congress of the Federated States of Micronesia as FSM Public Law No. 10-49;

     (j)  "FSM Foreign Investment Permit" means a foreign investment permit issued by the FSM Secretary of Economic Affairs pursuant to the provisions of the FSM Foreign Investment Act;

     (k)  "FSM Foreign Investment Regulations" means the regulations promulgated by the FSM Secretary of Economic Affairs pursuant to the provisions of the FSM Foreign Investment Act;

     (l)  "Hearing officer" means either the Director or any individual designated by the Director to preside over a public hearing pertaining to the cancellation or suspension of a Yap State Foreign Investment Permit;

     (m)  "Noncitizen" means any person who is not a citizen of the FSM and any business entity in which at least a ten percent ownership interest, in aggregate, is owned by a person or persons who are not citizens of the FSM;

     (n)  "Ownership interest" in a business entity means the direct or indirect ownership or control of any shares, stock, property, assets, voting rights, or rights to profits or revenue from, that business entity; provided, however, that:

                  (1)  Ownership interest shall not include a security interest in real or personal property for the purpose of securing a loan; and

                  (2)  Any interest owned or controlled by the spouse, minor child, or other dependent of a person shall be counted as owned or controlled by that person in determining whether he has an ownership interest in a business entity, provided further that this subsection shall not apply to a noncitizen spouse who has entered into a bona fide marriage with a citizen and who does not hold an ownership interest in the business entity in his own right;

     (o)  "Person" includes both individuals and legal entities;

     (p)  "Pre-Existing Foreign Investment Permit" means a foreign investment permit issued by the FSM Secretary of Economic Affairs prior to the date on which this chapter took effect and which has not expired according to its terms or been suspended or cancelled;

     (q)  "Yap State Foreign Investment Permit" means a permit issued by the Director in accordance with the provisions of this chapter; and

     (r)  "Yap State Foreign Investment Regulations" means regulations promulgated by the Director in accordance with the provisions of this chapter.

          Source:  YSL 4-79 §1 (Section 303), modified.

     §304.  Requirement that a foreign investor obtain a Foreign Investment Permit.
     A noncitizen shall not engage in business within the State of Yap unless that noncitizen holds a valid Foreign Investment Permit authorizing that noncitizen to engage in business.

          Source:  YSL 4-79 §1 (Section 304), modified.

     §305.  Categories of economic sectors.

     (a)  Investment in the following economic sectors is prohibited within the State of Yap:

                  (1)  Manufacture of toxic materials and waste;

                  (2)  Manufacture of weapons and ammunitions;

                  (3)  Commercial export of reef fish;

                  (4)  Any activity which is injurious to the health and welfare of the citizens of Yap State; and

                  (5)  Such other economic sectors as the Director may designate in the Yap State Foreign Investment Regulations.

     (b)  Investment in all other economic sectors is allowed.

          Source:  YSL 4-79 §1 (Section 305), modified.

     §306.  Relationship between the Yap State Government and the FSM Government regarding the regulation of foreign investment within the State of Yap.
     The Director shall:

     (a)  Take all action within the Director's power to prohibit foreign investment within the State of Yap falling within economic sectors designated pursuant to Section 205(l) of the FSM Foreign Investment Act of 1997 for inclusion on the National Red List (Category A).

     (b)  Participate or designate someone from his office to participate in meetings convened by the FSM Government to review sector developments and to add economic sectors to, or remove them from, Categories A, B, and C under Section 205(l) of the FSM Foreign Investment Act;

     (c)  Cooperate in other ways with the FSM Department of Economic Affairs, and with responsible authorities from other States, regarding the regulation of foreign investment; and

     (d)  Regulate foreign investment within the State of Yap, including, but not limited to, the issuance of Yap State Foreign Investment Permits pursuant to section 307 of this chapter.

          Source:  YSL 4-79 §1 (Section 306), modified.

     §307.  Application procedures for Yap State Foreign Investment Permits.

     (a)  An application for a Yap State Foreign Investment Permit shall be made on the form or forms prescribed in the Yap State Foreign Investment Regulations, as may be supplemented in particular cases by order of the Director.  Such application form or forms shall be made available at the Director's offices.  The application form shall require the applicant to identify the person(s) resident in the State of Yap who are designated as agent for service of process.

     (b)  Submission of an application for a Yap State Foreign Investment Permit shall be made to the Director.  By submitting an application for a Yap State Foreign Investment Permit, the applicant consents to the exclusive jurisdiction of the Yap State Court for all actions, claims, or controversies arising out of the application process or the denial, suspension, or cancellation of any Yap State Foreign Investment Permit which may be issued.

     (c)  Upon receiving an application for a Yap State Foreign Investment Permit, the Director shall, within such periods of time as may be prescribed for this purpose in the Yap State Foreign Investment Regulations, take one or more of the following actions, as appropriate:

                  (1)  Determine whether the application relates to an investment in a prohibited economic sector;

                  (2)  Deny the application if:

     (i)  it relates to an investment in a prohibited economic sector; or

     (ii)  the application is incomplete.

                  (3)  Forward the application to the Secretary if it relates to foreign investment in an economic sector which is included in Categories A, B, or C, as described in Section 205(l) of the FSM Foreign Investment Act of 1997;

                  (4)  Require the applicant to submit further information if the application is incomplete or does not provide enough information for the Director to determine which economic sectors are involved.

                  (5)  Issue a Yap State Foreign Investment Permit if the application is complete and does not relate to a prohibited economic sector.

     (d)  Upon taking any action described in subsection (c)(2), (c)(3), (c)(4) or (c)(5) of this section, the Director shall, within such periods of time as may be prescribed in the Yap State Foreign Investment Regulations, advise the applicant in writing of the action and the reasons therefor.

     (e)  The amount of the application fee, if any, to be paid by an applicant seeking a Yap State Foreign Investment Permit shall be established in the Yap State Foreign Investment Regulations.  If an application fee is required, it shall be tendered at the time that the application is submitted to the Director.

     (f)  If the Director issues a Yap State Foreign Investment Permit pursuant to subsection (c)(5) of this section, the Yap State Foreign Investment Permit shall be sent to the applicant and copies shall be (i) inserted into a register to be maintained by the Director for this purpose, (ii) sent to the Secretary, for insertion in a register to be maintained by the FSM Department of Economic Affairs for this purpose, and (iii) distributed to the appropriate Yap State Government agencies as may be designated in the Yap State Foreign Investment Regulations.

     (g)  If the Director denies an application for a Yap State Foreign Investment Permit pursuant to subsection (c)(2)(ii) of this section, the applicant may resubmit the application with the additional information requested by the Director.  On receipt of such additional information, the Director shall review the application and make a determination under the procedures prescribed in subsection (c) of this section.  There is no limit to the number of times an applicant may modify an application in order to meet the requirements for a Yap State Foreign Investment Permit.  Upon the resubmission of an application, the applicant shall also submit the application fee, if any, if the initial application has been substantially modified.

          Source:  YSL 4-79 §1 (Section 307), modified.

     §308.  Fees, renewal, modification, and cancellation of Yap State Foreign Investment Permits.

     (a)  Upon the issuance of a Yap State Foreign Investment Permit, the holder shall fulfill the requirements, if any, included in the Yap State Foreign Investment Regulations for the payment of an annual fee.
 
     (b)  A Yap State Foreign Investment Permit shall be valid for one year, and, unless it has been canceled, suspended, or surrendered pursuant to subsections (e) through (h) of this section, it shall be automatically renewed on an annual basis upon the fulfillment of the requirements, if any, included in the Yap State Foreign Investment Regulations.

     (c)  A Yap State Foreign Investment Permit shall not be transferable between foreign investors and shall not be assignable to any foreign investor other than the one for which it was issued.

     (d)  The holder of a valid Yap State Foreign Investment Permit may engage in any lawful business activity within the State of Yap not prohibited by section 305(a) of this chapter.

     (e)  The Director may suspend or cancel a Yap State Foreign Investment Permit if the Director determines by a preponderance of the evidence, following the procedural requirements of subsection (g) of this section, that one or more of the following circumstances exist:

                  (1)  Any fees required under subsection (a) or subsection (b) of this section have not been paid;

                  (2)  The holder of the permit requests its cancellation;

                  (3)  The permit application is found to have contained false or fraudulent information;

                  (4)  The holder of the permit bribed or otherwise exercised, or attempted to exercise, undue influence on the decision to issue the permit;

                  (5)  The holder of the permit fails or refuses to comply with the reporting requirements under section 310 of this chapter or with any other requirements of this chapter or of the Yap State Foreign Investment Regulations;

                  (6)  The holder of the permit knowingly included false or fraudulent information in the annual report required under section 310 of this chapter or of any other report required under the Yap State Foreign Investment Regulations;

                  (7)  The holder of the permit fails or refuses to comply with any restrictions or conditions included in the permit or engages in business in prohibited economic sectors; or

                  (8)  The holder of the permit fails to comply with any applicable State or FSM law.

     (f)  If a Yap State Foreign Investment Permit is suspended or canceled pursuant to subsection (e) of this section, the noncitizen holding that permit shall:

                 (1)  Immediately stop engaging in business in the State of Yap;

                 (2)  Take such steps as the Director shall direct in order to dispose of that noncitizen's interest in any applicable business entity; and

                 (3)  Pay any fines or other penalties that may be imposed under section 313 of this chapter.

     (g)  If it appears to the Director that one or more of the grounds for cancellation or suspension of a Yap State Foreign Investment Permit, as enumerated in subsection (e) of this section, may exist, the Director may temporarily suspend the Yap State Foreign Investment Permit and shall commence the following procedures:

                  (1)  The Director or the Director. s designee shall schedule a public hearing on the matter before a hearing officer.  The public hearing shall be held at a designated location in Colonia, Yap.  At least 21 days written notice of the hearing shall be given to the holder of the Yap State Foreign Investment Permit, stating the alleged grounds for cancellation and the location of the hearing.  Notice of the hearing shall be published in a newspaper of general circulation within the State and announced on the radio and television on at least three separate days no more than 21 days and no less than one day prior to the date of the public hearing.

                  (2)  If prior to the date of the hearing the holder of the Yap State Foreign Investment Permit takes action to remedy the violation or provides substantial evidence to disprove the allegations to the satisfaction of the Director, the Director may cancel the hearing and reinstate the Yap State Foreign Investment Permit.

                  (3)  Hearing procedures shall be prescribed by the Director in the Yap State Foreign Investment Regulations and shall include the right of the holder of the Yap State Foreign Investment Permit to participate in the hearing and to be represented by counsel, to call witnesses, to cross-examine witnesses, and to submit relevant evidence at the hearing.

                  (4)  Within the ten days after a hearing, the hearing officer shall issue a written decision including findings of fact, the reasons for the action taken, and the remedy or penalty to be imposed pursuant to subsection (f) of this section, and shall transmit that decision immediately to the holder of the Yap State Foreign Investment Permit and to the Director.

                  (5)  If a decision has not been issued pursuant to subsection (g)(4) of this section within ten days, any temporary suspension ordered by the Director shall automatically end, and the Yap State Foreign Investment Permit shall be automatically reinstated.

                  (6)  Within 30 days after receiving the notice of the decision of the hearing officer, the holder of the Yap State Foreign Investment Permit may appeal the decision to the Yap State Court Trial Division.  Copies of any notice of appeal shall be served on the Director and the Attorney General of Yap State.  The Yap State Administrative Procedure Act shall apply to all appeals filed pursuant to this subsection.

     (h)  A holder of a Yap State Foreign Investment Permit who wishes to cease doing business within the State of Yap shall surrender the original Yap State Foreign Investment Permit to the Director, along with a sworn statement that all taxes and fees due and owing to the State of Yap and the FSM or any subdivisions thereof have been paid in full.  The Director may promulgate regulations setting forth additional requirements for the surrender of a Yap State Foreign Investment Permit.

Source:  YSL 4-79 §1 (Section 308), modified.
 
Cross-reference:  The statutory provision on the Office of the Attorney General is found in section 128 of Title 3 (Executive) of this Code.  The statutory provision on the Yap State Court are found in Title 4 (Judiciary) of this Code.

     §309.  Expatriate Worker Authorizations and Entry Permits.
     The Director shall be guided by the provisions in Sections 210, 211, and 212 of the FSM Foreign Investment Act of 1997, and of the provisions of the FSM Foreign Investment Regulations, concerning the issuance of expatriate worker authorizations ("EWAs") and entry permits; provided, however, that for these purposes the reference in Section 210(3) of the FSM Foreign Investment Act of 1997 to "Section 209" of that Act shall be read as a reference to section 308 of this chapter.

          Source:  YSL 4-79 §1 (Section 309), modified.

     §310.  Reports by holders of Yap State Foreign Investment Permits.

     (a)  The holder of a Yap State Foreign Investment Permit shall submit to the Director such reports concerning its foreign investment as the Director may prescribe in the Yap State Foreign Investment Regulations.

     (b)  The holder of a Yap State Foreign Investment Permit shall immediately report to the Director:

                 (1)  Any ten percent or greater change in the aggregate foreign ownership or control of a business entity to which a Yap State Foreign Investment Permit has been issued; or

                 (2)  Any change resulting in an individual foreign investor owning or controlling a ten percent or greater ownership interest in a business entity to which a Yap State Foreign Investment Permit has been issued.

     (c)  After reviewing any report submitted pursuant to this section or the Yap State Foreign Investment Regulations, the Director may take such action as he considers appropriate, including the cancellation of the Yap State Foreign Investment Permit if appropriate under the provisions of section 308 of this chapter.

          Source:  YSL 4-79 §1 (Section 310), modified.

     §311.  Reports by the Director.

     (a)  The Director shall publish information annually, in such form and detail as may be prescribed in the Yap State Foreign Investment Regulations concerning the extent of foreign investment in the State of Yap.

     (b)  The Director shall provide a copy of the information published pursuant to subsection (a) of this section to the Secretary of the FSM Department of Economic Affairs.

          Source:  YSL 4-79 §1 (Section 311), modified.

     §312.  Guarantees and entitlements regarding foreign investments.
     Subject to the provisions of this chapter and to regulations promulgated pursuant to those provisions, the Government of the State of Yap or any agency or department thereof shall not take action which would result in a foreign investor being given treatment that is less favorable than the treatment given to citizens engaging in business in the State of Yap.

          Source:  YSL 4-79 §1 (Section 312), modified.

     §313.  Injunction and penalties.

     (a)  Where, on application by the Director, the Yap State Court has determined by a preponderance of the evidence that a person has acted, or is about to act, in contravention of the provisions of this chapter or of the Yap State Foreign Investment Regulations, the court may enjoin said act or grant such other remedy as it deems appropriate.  The Rules of Civil Procedure for the State Court of Yap shall apply to any proceeding brought pursuant to this subsection.

     (b)  If the Director determines that any person has failed or refused to comply with requirements imposed under or pursuant to this chapter or the Yap State Foreign Investment Regulations, the Director may, in addition to taking action under subsection (a) of this section:

                 (1)  Suspend or cancel a Yap State Foreign Investment Permit pursuant to section 308 of this chapter;

                 (2)  Impose such administrative fines and penalties as may be prescribed in the Yap State Foreign Investment Regulations; or

                 (3)  Initiate measures for the imposition of criminal penalties as described in subsection (c) of this section or in other laws of the State of Yap.

     (c)  Any person guilty of willfully contravening the provisions of section 304 of this chapter shall be guilty of unauthorized foreign business, and upon conviction thereof by the Yap State Court, shall be subject to the following penalties:

                 (1)  In the case of an individual, imprisonment for not more than one year, or fined not more than $10,000.00, or both.

                 (2)  In the case of a legal entity, a fine not more than $50,000.00.

                 (3)  In any case, the forfeiture to the State of Yap of the assets or property rights in any business entity engaging in business in contravention of this chapter; provided, however, that the value of such assets or property so forfeited shall not be unreasonable in relation to the illegal behavior and the injury it has caused.

Source:  YSL 4-79 §1 (Section 313), modified.

Cross-reference:  The statutory provisions on the Yap State Court are found in Title 4 (Judiciary) of this Code.

     §314.  Judicial review.
     A decision by the Director pursuant to section 307(c) of this chapter denying an application for a Yap State Foreign Investment Permit may be appealed by the applicant to the Yap State Court Trial Division.  A notice of any such appeal shall be filed with the Clerk of the Yap State Court within 30 days of receipt of notice of the Director's decision.  For the purpose of this section, receipt of notice of the Director's decision shall be deemed to occur upon the date of actual hand delivery, if such notice is hand delivered, or seven days after the notice is postmarked by the FSM Postal Service, if such notice is mailed.  A copy of any such notice of appeal shall also be served on the Attorney General of the State of Yap and the Director.  The Yap State Administrative Procedure Act shall apply to all actions filed pursuant to this section.

Source:  YSL 4-79 §1 (Section 314), modified.

Cross-reference:  The statutory provisions on the Yap State Court are found in Title 4 (Judiciary) of this Code.

     §315.  Confidentiality.
     In carrying out the responsibilities imposed by this chapter regarding the regulation of foreign investment in the State of Yap, the Director shall maintain or cause to be maintained the confidentiality of any sensitive business information relating to a particular foreign investor or prospective foreign investor, if so requested by such person; provided, however, that this provision shall not prevent the Director from disclosing information upon order of a court of competent jurisdiction or pursuant to other laws and regulations of the State of Yap or the FSM.

Source:  YSL 4-79 §1 (Section 315), modified.

     §316.  Enforcement.

     (a)  Primary responsibility for the enforcement of this chapter shall be placed in the Director and in the Attorney General.

     (b)  In carrying out the responsibilities imposed by this chapter, the Director may issue subpoenas requiring the attendance of any citizen or noncitizen at a meeting or hearing conducted by the Director or his designee and may require such persons to testify or to produce at, before, or after such meeting or hearing documents, information, and things relevant to enforcement of the provisions of this chapter.

     (c)  The Director shall promulgate the regulations necessary to implement this chapter, which regulations shall have the force and effect of law.

          Source:  YSL 4-79 §1 (Section 316), modified.

     §317.  Effectiveness; transition.

     (a)  This chapter shall take effect 60 days after its approval by the Governor, or 60 days after its becoming law without such approval.

     (b)  For a period of 12 months after the date on which this chapter becomes effective, any valid Pre-Existing Foreign Investment Permit held for an investment within the State of Yap shall continue to be valid in accordance with its terms, subject to the provisions of this chapter and the provisions of the FSM Foreign Investment Act of 1997.

     (c)  Notwithstanding the provisions of section 304 of this chapter, any noncitizen who was, as of the date on which this chapter becomes effective, conducting any activity that amounts to "engaging in business", as defined in section 303 of this chapter, but who was not required, under the law in effect immediately prior to that date, to obtain a Foreign Investment Permit for that activity, shall have a period of three months from the effective date of this chapter to either (i) apply for and obtain a Foreign Investment Permit or (ii) cease engaging in business in Yap State.

          Source:  YSL 4-79 §1 (Section 317), modified.

     §318.  Foreign Investment Act supercedes other laws.
     The provisions of this chapter shall supercede in their entirety any other provisions of any State laws that may be interpreted as inconsistent with any provision of this chapter.

          Source:  YSL 4-79 §1 (Section 318), modified.

     §319.  Severability.
     If any provision of this chapter or any regulation or order promulgated hereunder, or the application of any such provision, regulation or order to any person or circumstance shall be held invalid, the remainder of this chapter, or any regulations or orders promulgated pursuant thereto, or the application of such provisions, regulations or orders to persons or circumstances other than those to which it is held invalid shall not be affected thereby, and to this extent the provisions of this chapter are severable.

          Source:  YSL 4-79 §1 (Section 319), modified.