By: Dr. Haytham Ereifej
Attorney-at-Law
Jordan Daily - An investment project may benefit from generous incentives, yet its economic viability can deteriorate before operations even begin. A delayed license, a location that fails to meet regulatory requirements, or a contract that leaves responsibility for delays unresolved can significantly affect the project's prospects. A sound investment decision must therefore begin with a careful assessment of the relationship between licensing requirements, investment incentives, and contractual obligations, and their implications for project costs, operational timelines, and bankability.
Jordan's Investment Environment Law No. 21 of 2022 and Investment Environment Regulation No. 7 of 2023, as amended, constitute key components of the country's investment framework. However, a comprehensive legal assessment requires examining these provisions alongside company, tax, labor, environmental, and sector-specific legislation. Every investment project requires a clear legal roadmap identifying its corporate structure, applicable foreign ownership restrictions, if any, land-use rights, necessary approvals, and the conditions governing the granting and continued enjoyment of investment incentives.
Such a legal roadmap is particularly important before purchasing land, importing equipment, or entering into long-term contractual commitments. Company registration does not necessarily establish that a proposed location is suitable for the intended activity, while preliminary approvals may remain subject to additional conditions before operations can commence. Accordingly, contractual obligations should be aligned with the project's development stages, with appropriate provisions addressing licensing delays or refusals, the treatment of advance payments, and the parties' rights to terminate agreements or extend contractual deadlines.
Consider an investor who leases premises and purchases equipment, only to discover that commencing operations requires substantial modifications to the property or an additional regulatory approval. Rental and financing costs would continue accumulating before the project generates any revenue. Such risks can be mitigated through preliminary legal due diligence and by making major financial commitments conditional upon obtaining essential approvals, while clearly allocating responsibility for securing them.
Against this background, I propose introducing a formal preliminary regulatory assessment issued through coordination among the relevant authorities. This assessment would identify the licenses, fees, conditions, and procedural requirements applicable to a proposed investment project. Its legal effect, validity period, the consequences of an investor's reliance upon it, and the circumstances permitting its amendment following changes in project information or legislation should all be clearly regulated. Official regulatory information becomes a reliable planning instrument only when its legal implications are sufficiently defined.
I also propose establishing enforceable deadlines for deciding complete licensing applications, clearly identifying when those deadlines begin, limiting permissible grounds for suspending them, and requiring the competent authority to request missing documents or information in a consolidated manner and provide reasoned decisions when rejecting applications. A system of deemed approval could be considered for precisely defined low-risk activities, while excluding approvals relating to public health, safety, and environmental protection. An expedited administrative appeal mechanism should also be available to address unjustified delays.
From a procedural perspective, investors need a unified electronic platform displaying the status of each approval, the authority responsible, the remaining processing time, and the reasons for any delay. Interagency coordination must rest on clearly defined powers and an effective mechanism for resolving conflicting administrative positions. Publishing performance indicators and ensuring consistent service standards across Jordan's governorates would further promote accountability, administrative transparency, and equal treatment of investors.
With respect to investment incentives, a distinction must be drawn between initial eligibility and the conditions required to retain those benefits. I propose a unified incentive determination specifying the benefits granted, their duration, the beneficiary's obligations, and the consequences of changing the project's activity, disposing of assets, or breaching applicable conditions. A formal written interpretation mechanism would provide additional legal certainty. Any recovery of incentives following noncompliance should be proportionate to the seriousness of the breach, with appropriate opportunities for corrective action and administrative appeal.
Investment incentives should also be linked to transparent and measurable criteria, including job creation, workforce training, local value added, and economic development in disadvantaged regions. Investors must understand how these criteria will be assessed from the outset, while the government must regularly evaluate their outcomes. The fiscal cost of incentives should produce demonstrable economic and social benefits while maintaining fair competition among businesses.
Legislative stability represents another essential consideration. Appropriate legal protections should reflect the scale of an investment and the nature of potential harm, while reasonable transitional periods should accompany regulatory changes that impose substantial new obligations. Nevertheless, the financial consequences of legislative changes for existing projects must be distinguished from the state's legitimate responsibility to strengthen protections for workers, the environment, and public health. Regulatory impact assessments, prior consultation, and clearly defined transitional arrangements can help reconcile these interests, improving investment predictability without restricting the state's legitimate regulatory authority.
In the energy sector, legal due diligence should focus particularly on licensing, grid connection, power purchase agreements, and the alignment of their respective timelines with financing and construction contracts. In public-private partnership (PPP) projects, special attention must be given to responsibility for land availability and permits, demand risks, changes in law, and compensation and termination mechanisms. I recommend developing model contractual provisions and risk-allocation matrices, accompanied by proper assessment of public financial commitments and enforceable standards governing service quality, continuity, and equitable access.
This framework should be complemented by a specialized investment grievance mechanism operating within defined deadlines and issuing reasoned decisions, without prejudice to the right of access to the courts. At the contractual level, dispute resolution provisions must be carefully drafted. Where arbitration is legally permissible and agreed upon, the agreement should clearly determine its scope, applicable rules, seat, language, and arrangements for enforcing arbitral awards. Effective legal protection ultimately depends on dispute resolution mechanisms appropriate to the parties and the nature of their contractual obligations.
Before making substantial financial commitments, investors should obtain documented answers to several fundamental questions: Does the proposed activity and location satisfy applicable legal requirements? Which approvals are necessary, and how long should they take? What conditions govern the continued enjoyment of incentives? Who bears the risks associated with delays and regulatory changes? And how can contractual and statutory rights be enforced in the event of a dispute?
These answers connect legal due diligence directly to financial feasibility, allowing investors to identify risks at an early stage and determine whether the proposed transaction requires restructuring or a reassessment of its costs.
Strengthening Jordan's investment environment requires clear legal rules, disciplined administrative procedures, balanced contractual arrangements, and incentives measured by their actual outcomes. The success of this framework should be reflected in sustainable projects, stable employment opportunities, and economic development extending across the governorates, while safeguarding fair competition, environmental standards, and public resources.
Legal certainty is not merely an additional investment advantage. It is a fundamental means of reducing investment risk and providing the confidence necessary for long-term capital commitments.
