Frequent legal amendment’s effect on foreign investments

Legal amendments are a necessity in any country or state; and the reason for that is to keep up with the frequently developing sectors and emerging legal challenges.

Therefore any country that does not keep up with emerging legal issues and challenges by issuing new legal amendments, will suffer from a legal gap that will, most probably, create problems for the government itself and for the nation and whoever deals with the government or nation, so as we have stated above, legal amendments are a very important part of any country’s legal system, and they enable the legal system to adapt with the emerging challenges.

So what exactly is the effect of (frequent) legal amendments on investment?

First of all, we need to clarify that it is not an easy process for an amendment to pass through the legislative system, it takes many steps and a good amount of time and effort to get the new rule amendment into effect.

For example if you need to change a law, first of all either the parliament or senates or the government itself, need to suggest that there is a need to change a law, and then, if this need is seen as real and necessary, the parliament starts suggesting what needs to be changed exactly, then it needs to be approved by the senates, and if it passes through them, it gets sent to the ruling king for approval, finally, it takes effect either immediately or on a specific date, or after 30 days of being published.

So now, after getting to know very briefly how law amendments take effect, what are the consequences of changing them very frequently?

As a matter of fact, changing the laws very frequently can have tremendous effects on the stability of the whole legal system not only on investments. The reason for this, is that the nation itself, companies, and investors need legal stability and rule of law to feel safer and more relaxed while dealing with one another, 

Changing the laws very frequently can cause people to feel insecure while dealing with each other, the biggest example that we are currently living is the suspension of imprisonment of debtors, and after this suspension, every one in the market has clearly become more careful in lending others because if the debtor does not pay back the creditor, the creditor won’t be able to force him to, therefore, the circulation of money in the country has substantially decreased, and all of  that is from a local point of view.

The more scary effect of frequent amendments is on foreign investments, because any foreign investor needs to make a feasibility study before entering a market, and that includes financial growth, taxation, security, political stability, and most importantly the local laws and the rule of law.

It is a deal breaker for any foreign investor when he finds out that the laws keep changing very frequently and he can never expect what will the new law be after a couple of years.

But the very strong upward shift that the new parliament has made with its new head of parliament Abdulmunem AlOdat who comes from a very strong legal background and the current P.M Bisher AlKhasawneh who comes from a very strong legal background as well, has caused the Jordanian parliament and government (who both are in charge of changing rules as we explained before) to start thinking in the right way by changing any law that needs to be changed all at once and keeping it that way for a long period of time, which will eventually have great effect on rule of law and on creating the right atmosphere for foreign investors.