do business in the Dominican Republic - Pellerano & Herrera

Pellerano & HerreraAttorneys at lawestablishing that such companies must, either be affiliated with a Dominicancompany, or be a mixed capital company belonging to both Dominican and foreigninvestors.Foreign participation in the government contract shall not exceed 50%,but 70% maybe accepted when for whatever reasons national participation cannot exceed 30%.Furthermore, when the project is extremely complex or sophisticated foreign companiesmay request to the government agency that the project be deemed outsidethe scope of Law 322. If the government agency contracting the project agrees todo so the foreign company would be able to have all the rights over the contract,without the need of local participation.6ELECTRICITYEVOLUTION OF THE SECTORBefore the reform of the electricity sector that started in 1999, the generation,transmission and distribution of energy was in the hands of a State owned enterprise,Corporacion Dominicana de Electricidad (CDE).The inability of this companyto supply the energy required by the country was one of the most seriousproblems that hindered the sustained development of the national economy.Although the capacity of CDE had been gradually increased, it had yet to meetthe energy demand of the different sectors, which kept growing every day as aresult of the economic development experienced in the country,especially in thefree zones and tourist sectors.In order to improve its capacity CDE started in the early nineties to purchaseenergy from private companies. The increase in the quantities of energy purchasedfrom private sources did not imply however an improvement in the service,since a lot of energy was lost as a result of the bad conditions of the energydistribution network.In 1997 Law 141-97 on the Reform of Public Companies ordered the capitalizationof CDE. In 1998 the Superintendence of Electricity was created to regulatethe sector,and in the year 1999 took place the privatization of the generation anddistribution units of the CDE, which were turned into three distribution and twogeneration companies that were transferred to foreign capital companies.Energy problems were however still very serious, and the sector lacked a comprehensiveregulatory framework. Finally, in the year 2001, after almost a decadeof debate (the bill had been submitted to Congress in 1993), General ElectricityLaw 125-01 was enacted.The application regulations of the law are contained inDecree 555-02 of 19 July 2002.Nevertheless, in the year 2003, under still unclear circumstances, the DominicanGovernment repurchased two of the privatized electricity companies, whichtook the process back to its starting point and created a number of difficulties ofvery different nature, with implications surpassing energy related issues.69