Legal Certainty and the Standard of Treatment:

Evaluating the Protection of Foreign Enterprises in the Maldives’ New Investment Regime

Mohd Arsh Shery, Amish Abdullah, and Aishath Shifra Ahmed Shareef

 

ABSTRACT: The Maldivian Foreign Investment Act (FI Act) (Law No. 11/2024) is a key legislative emendation of the overall legal framework relating to foreign investment in the Maldives. Despite expressing a desire to attract foreign direct investment (FDI), it leaves an important legal gap, lacking a clear, enforceable standard of non-discrimination that expressly protects foreign enterprises operating through permanent establishments (PEs) in the Maldives. By relying exclusively on a broadly worded fair and equitable treatment provision in Section 28 of the FI Act without a binding non-discrimination guarantee, the FI Act imposes legal uncertainties on PEs, thereby exposing them to the possibility of treatment less favourable than that accorded to domestic enterprises. This vulnerability represents a significant risk to the Maldives, a small island developing state that is structurally dependent on foreign capital for economic diversification away from tourism and that has a negligible network of bilateral investment treaties in force. This article examines non-discrimination frameworks in three major international instruments: specifically, the OECD Model Tax Convention (Articles 5, 7, and 24), the WTO General Agreement on Tariffs and Trade (Article III) and General Agreement on Trade in Services (Article XVII), and the Treaty on the Functioning of the European Union (Articles 49 and 63). Using doctrinal and comparative legal methodology, it outlines critical distinctions regarding definitional scope, substantive tests, and enforcement mechanisms for each of these three frameworks. The paper further assesses whether the principles of these frameworks can be effectively implemented in Maldivian domestic law. This research proposes that a hybrid statutory reform be implemented by suggesting tailored changes to the FI Act, including a proposed non-discrimination provision, mandatory mutual agreement procedure provisions, and recommending the Maldives’ accession to the ICSID Convention.