(1) An application for an FSM Foreign Investment Permit shall be made on the form or forms prescribed in the FSM Foreign Investment Regulations, as may be supplemented in particular cases by order of the Secretary. Such application form or forms shall be made publicly available by the Secretary and by responsible authorities in each of the States. The application form shall require the applicant to identify clearly the person(s) resident in the Federated States of Micronesia who are designated as agent for service of process.
(2) Submission of an application for an FSM Foreign Investment Permit may be made either (a) to the Secretary or (b) to the responsible authorities in the State in whose territory the foreign investment takes place or is proposed to take place. In the latter case, the responsible State authorities shall forward the application directly to the Secretary.
(3) Upon receiving an application for an FSM Foreign Investment Permit, the Secretary shall, within such periods of time as may be prescribed for this purpose in the FSM Foreign Investment Regulations, take one or more of the following actions, as appropriate:
(a) determine whether the application relates to a foreign investment in a Category A, Category B, or Category C.
(b) deny the application if;
(i) it relates to a foreign investment in a Category A (National Red List) economic sector, or
(ii) it relates to a foreign investment in a Category B (National Amber List) economic sector but is incomplete or does not satisfactorily demonstrate that the investment would meet all of the applicable national criteria established in the FSM Foreign Investment Regulations pursuant to section 206(1)(b) of this chapter;
(c) forward the application to the responsible State authorities if it relates to a foreign investment in an economic sector other than those designated for inclusion in Category A, Category B, or Category C;
(d) Forward a notification copy of the application to the responsible State Authorities if it relates to a Foreign Investment in economic sector categories A, B, or C.
(e) require the applicant to submit further information if the application is incomplete or does not provide enough information for the Secretary to determine
(i) what economic sector(s) is (are) involved, or
(ii) whether the requirements for an FSM Foreign Investment Permit have been or will be met.
(f) issue an FSM Foreign Investment Permit if:
(i) the application
(A) relates to a foreign investment in a Category B (National Amber List) economic sector;
(B) is complete; and
(C) demonstrates that the foreign investment meets all of the applicable national criteria established in the FSM Foreign Investment Regulations pursuant to section 206(1)(b) of this chapter; or
(ii) the application is complete and relates to a foreign investment in a Category C (National Green List) economic sector.
(4) Upon taking any action described in paragraph (b), (e), or (f) of subsection (3) of this section, the Secretary shall, within such periods of time as may be prescribed for this purpose in the FSM Foreign Investment Regulations, advise the applicant of the action and the reasons therefor.
(5) The nature and amount of the application fee, if any, to be paid by an applicant seeking an FSM Foreign Investment Permit shall be established in the FSM Foreign Investment Regulations.
(6) If the Secretary issues an FSM Foreign Investment Permit pursuant to subsection (3)(f) of this section, the FSM Foreign Investment Permit will be sent to the applicant, with copies to be (a) inserted into a register to be maintained by the Department for this purpose and (b) sent to the responsible authority in each State, for insertion in a register to be maintained by such authorities for this purpose.
(7) If the Secretary denies an application for an FSM Foreign Investment Permit pursuant to subsection (3)(b)(ii) of this section, the applicant may (a) resubmit the application with modifications designed to meet the applicable national criteria established in the FSM Foreign Investment Regulations pursuant to section 206(1)(d) of this chapter, or (b) provide to the Secretary additional information or explanation to indicate how, in the applicant's opinion, the foreign investment would satisfy such criteria. On receipt of such modifications or additional information, the Secretary shall review the application and make a determination under the procedures prescribed in subsection (3) of this section. There is no limit to the number of times an applicant may modify an application in an attempt to satisfy the applicable criteria.
Source: PL 10-49 § 12; PL 14-32 § 3.
Case annotations: The “applicant” referred to in the Foreign Investment Act is one interested in doing business, not just investing money, in the FSM, and considerations to be employed in determining whether to grant an application relate to business operations within the FSM, not to investment of funds. Michelsen v. FSM, 3 FSM R. 416, 425 (Pon. 1988).
Since engaging in business is defined as carrying out any activity relating to the conduct of a business and expressly includes leasing property of any kind for commercial purposes, when a foreign investment permittee engaged in the business of providing operational and maintenance support to helicopters servicing fishing vessels in the FSM, its leasing helicopters is one aspect of its business that relates to its fishing activity and is therefore that leasing activity is subject to the FSM’s exclusive jurisdiction and regulation for foreign investment purposes. Thus Pohnpei may not require it to apply for a foreign investment permit. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM R. 329, 335 (Pon. 2007).
Since, by statute, an economic sector included in any of the Categories for National Regulation must not appear in any of the Categories for State Regulation, the statutory provision contemplates that state and national regulation will be mutually exclusive, and works hand in glove with the stated purpose of the Foreign Investment Act, which is to encourage foreign investment. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM R. 329, 335-36 (Pon. 2007).
When a company has obtained a national foreign investment permit in an area in which the FSM’s jurisdiction is exclusive and the company has complied with national laws and regulations in this regard, Pohnpei may not require it to obtain a state foreign investment permit in addition to the FSM permit that it already has. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM R. 329, 336 (Pon. 2007).
When the court has granted summary judgment on the basis that the plaintiff’s helicopters are engaged in fishing, the court need not address the plaintiff’s further contention that it is also subject to exclusive national regulation by virtue of the fact that its helicopters are engaged in interstate and international air transport and international shipping. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM R. 329, 336 (Pon. 2007).
Public hearings are a standard part of the foreign investment permit application process. Smith v. Nimea, 18 FSM R. 36, 45 (Pon. 2011).
An application for a State Foreign Investment Permit shall be made in accordance with the provisions of State Foreign Investment Legislation and State Foreign Investment Regulations. In the interest of coordination and reducing administrative burdens on foreign investors, such provisions should:
(1) establish rules and procedures consistent with the provisions of this chapter and with the provisions of the FSM Foreign Investment Regulations;
(2) direct the responsible State authorities to make available to the Department copies of the application forms for State Foreign Investment Permits, together with such other materials and information necessary for the Department to assist prospective foreign investors;
(3) direct the responsible State authorities to forward to the Secretary any application for an FSM Foreign Investment Permit, or any information submitted in support of such an application; and
(4) direct the responsible State authorities to forward to the Department a copy of any State Foreign Investment Permit issued by those authorities.
Source: PL 10-49 § 13.
Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code.
(1) FSM Foreign Investment Permits shall be in the form prescribed in the FSM Foreign Investment Regulations. State Foreign Investment Permits shall be in the form prescribed in State Foreign Investment Legislation and State Foreign Investment Regulations.
(2) Upon the issuance of an FSM Foreign Investment Permit, the holder shall fulfill the requirements, if any, included in the FSM Foreign Investment Regulations for the payment of an annual fee.
(3) An FSM Foreign Investment Permit shall be valid until it has been canceled, suspended, or surrendered pursuant to subsections (7) to (11) of this section.
(4) An FSM Foreign Investment Permit shall not be transferable between investments or investors and shall not be assignable to any investment or investor other than the one for which it was issued.
(5) The holder of an FSM Foreign Investment Permit may not make a change in the business that the holder is engaging in without obtaining either
(a) a new FSM Foreign Investment Permit for that purpose under section 207 of this chapter (or, if applicable, a new State Foreign Investment Permit under the relevant State Foreign Investment Legislation) or
(b) a modification in the terms of its FSM Foreign Investment Permit. Such a modification may be requested by the business entity, and granted by the Secretary, in accordance with such procedures and requirements as the Secretary shall establish in the FSM Foreign Investment Regulations. However, no such modification is necessary if an existing business entity for which an FSM Foreign Investment Permit has been issued is expanded, without any change in the business it is engaging in.
(6) For purposes of subsection (5) of this section, a "change in the business" a person is engaging in occurs if that person begins operations in a different economic sector from the one(s) for which the FSM Foreign Investment Permit was issued.
(7) The Secretary may cancel an FSM Foreign Investment Permit only if the Secretary determines, following the procedural requirements of subsection (9) of this section, that one or more of the following circumstances exist:
(a) the annual fee, if any, required under either subsection (2) or subsection (3) of this section has not been paid;
(b) the holder of the Permit requests its cancellation;
(c) the permit application is found to have contained false or fraudulent information;
(d) the holder of the Permit bribed or otherwise exercised, or attempted to exercise, undue influence on the decision to issue the Permit;
(e) the holder of the Permit fails or refuses to comply with the reporting requirements under section 213 of this chapter or with any other requirements of this chapter or of the FSM Foreign Investment Regulations;
(f) the holder of the Permit fails or refuses to comply with any restrictions or conditions included in the Permit, or engages in activities not authorized by the Permit;
(g) a substantial ownership interest in the holder is owned by a noncitizen who does not meet the character criteria established pursuant to section 205(3) of this chapter.
(8) If an FSM Foreign Investment Permit is canceled pursuant to subsection (7) of this section, the noncitizen holding that canceled Permit shall:
(a) immediately stop engaging in business in the FSM;
(b) take such steps as the Secretary shall direct in order to dispose of that noncitizen's interest in any applicable business entity; and
(c) pay any fines or other penalties that may be imposed under section 220 of this chapter.
(9) If it appears to the Secretary that one or more of the grounds for cancellation of an FSM Foreign Investment Permit, as enumerated in subsection (7) of this section, may exist, the Secretary may temporarily suspend the validity of that FSM Foreign Investment Permit and shall commence the following procedures leading to cancellation:
(a) The Secretary or his designee may schedule a hearing on the matter before the Secretary or his designee. At least 21 days' written notice of the hearing shall be given to the holder or registered agent of the FSM Foreign Investment Permit or the holder's registered agent, stating the alleged grounds for cancellation. If during that time the holder of the FSM Foreign Investment Permit takes action satisfactory to the Secretary to disprove the allegations or otherwise remedy the situation, the Secretary may cancel the hearing and reinstate the FSM Foreign Investment Permit if it was temporarily suspended.
(b) Hearing procedures shall be prescribed by the Secretary in the FSM Foreign Investment Regulations and shall include the right of the holder of the FSM Foreign Investment Permit to participate and to be represented by counsel, to call witnesses, and to cross-examine witnesses called against the holder of the FSM Foreign Investment Permit.
(c) Within ten days after a hearing, the Secretary shall issue a written decision including reasons for the action taken and the remedy to be imposed pursuant to subsection (8) of this section, and shall transmit that decision immediately to the holder of the FSM Foreign Investment Permit.
(d) If a decision has not been issued pursuant to subsection (9)(c) of this section within the ten days specified, any temporary suspension ordered by the Secretary shall automatically end, and the validity of the FSM Foreign Investment Permit shall automatically be reinstated.
(e) Within 20 days after receiving the notice of the decision of the Secretary, the holder of the FSM Foreign Investment Permit may appeal the decision to the Supreme Court of the FSM. Copies of any notice of appeal shall be served on the Secretary and the FSM Secretary of Justice.
(10) If an FSM Foreign Investment Permit is suspended pursuant to this chapter, the noncitizen holding that suspended permit shall immediately stop engaging in business in the FSM and refrain from resuming the business unless and until the FSM Foreign Investment Permit is reinstated.
(11) A holder of an FSM Foreign Investment Permit may surrender it by meeting requirements specified for this purpose in the FSM Foreign Investment Regulations. Mere cessation of engaging in business in the FSM, without meeting such requirements, does not relieve the holder of an FSM Foreign Investment Permit from the requirements incident thereto.
Source: PL 10-49 § 14; PL 14-32 § 4.
Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the FSM Supreme Court are found in title 4 of this code.
Case annotations: PL 10-49 repealed the previous Foreign Investment Act, as amended by PL 5-134. The following case annotations that interpreted provisions of the previous Foreign Investment Act have been retained below for reference purposes.
The national government has neither the constitutional authority nor law enforcement capacity to oversee, on a worldwide basis, every noncitizen acquisition of an interest in a business operating within the FSM. Michelsen v. FSM, 3 FSM R. 416, 423 (Pon. 1988).
Since Congress used TT Investment Act as overall model in drafting FSM Foreign Investment Act and adopted language similar to that employed in the TT statute for describing activities to be covered in the FSM law, analysis of the new Act must begin with a presumption that Congress intended that the FSM Foreign Investment Act would regulate essentially the same activities as those covered by the TT Investment Act. Carlos v. FSM, 4 FSM R. 17, 26 (App. 1989).
The Foreign Investment Act does not explicitly limit judicial review therefore an aggrieved person affected by an agency decision may seek review under the Administrative Procedures Act. Michelsen v. FSM, 5 FSM R. 249, 254 (App. 1991).
Scheme of national, constitutionally-authorized foreign investment legislation is so pervasive there is no room for the state to supplement it. Non-FSM citizen attorneys and their private practice of law are expressly subjected to the nat’l legislative scheme. Insofar as attorneys who are engaged in private practice of law and whose business activities are within the scope of the nat’l FIA, the state FIA is invalid. Berman v. Pohnpei, 5 FSM R. 303, 306 (Pon. 1992).
An isolated interest-free unsecured loan is not engaging in business within the meaning of the Pohnpei State Foreign Investment law. Kihara v. Nanpei, 5 FSM R. 342, 345 (Pon. 1992).