PAPUA NEW GUINEA: An Introduction to General Business Law

Legislation Governing Business in PNG

Papua New Guinea is a resource-rich developing country in the Southwest Pacific whose formal economy is dominated by gas and mining projects, with logging, commercial/smallholder agriculture and pelagic fishing also playing major roles. Its laws and regulation can be complex, but are generally familiar to practitioners in common law jurisdictions. Proper legal advice should always be sought.

The Constitution of the Independent State of Papua New Guinea came into effect when independence was achieved in 1975, and created a Westminster-style parliamentary democracy, allied with a common law judicial system. PNG is a member of the British Commonwealth, and lawyers working within those systems will find them similar. A unicameral legislature is elected every five years, with MPs choosing a Prime Minister who, in turn, selects ministers, and the whole forms the National Executive Council. The Head of State is, nominally, the King of England, but the actual functions of the Head of State are performed by a Governor General selected by Parliament.

The Constitution is a substantive document, and it departs from the English model by also providing for written fundamental human rights enforceable at law. Special parliamentary majorities can amend the Constitution and pass a special category of constitutional laws known as Organic Laws, which lesser legislation may not contradict.

Normal Acts of Parliament are enforced by simple majority and may provide for regulations to be introduced giving administrative effect to elements of the Acts.

PNG is not a federal system but has sub-national provinces and one Autonomous Region. Provincial powers can be relevant, but are generally of secondary importance to foreign direct investors.

Business structures

Foreign investment is encouraged. Subject to obtaining administrative certification, foreign entities may operate in PNG either as a branch or through a locally incorporated subsidiary.

The Companies Act provides a familiar framework for incorporation of companies with shares/shareholders and a board of directors – or for registration in PNG of foreign companies wishing to operate without a locally incorporated subsidiary. The Investment Promotion Act establishes a system for certification of foreign-owned enterprises to carry on business in their preferred industry and location. While a (relatively small) number of activities are reserved for PNG citizens, achieving certification to carry on business in PNG is generally not substantively difficult, though the process can sometimes be time-consuming, particularly with respect to compliance by PNG with its international obligations in the Anti-Money Laundering and Counter Terrorism Financing Act.

Corporate transactions can take place by the sale of shares, the sale of the underlying business, or by schemes under the Companies Act, which would be generally familiar to corporate practitioners in other jurisdictions.

Trade practices and larger-scale business acquisitions are subject to the Independent Consumer and Competition Commission Act,which establishes an eponymous regulator. There is a notification requirement for proposed transactions above a value of PGK50 million (about USD11.5 million in mid-2025) or that would likely result in a market-share increase of 50% or more for the acquirer. Clearance is required if the proposed transaction is likely to potentially substantially cut competition in a market, and a deal can be authorised if an otherwise impermissible transaction will likely result in such a benefit to the public that it should be permitted.

Employment is relatively lightly regulated, and non-citizens may be employed with appropriate permission.

Land laws

PNG’s land laws are complex at the margins, although, for most offshore investors, the relevant title will be a leasehold estate – a State Lease – which is a type of registered title (adopting the Torrens system) based on a long-term lease from the State (typically 99 years) of the land, for the purpose of carrying out a particular activity (business, residential, agricultural, etc). Registered State Leases can be mortgaged, transacted and generally dealt with in ways familiar to lawyers in other registered title jurisdictions.

As State Leases are a form of leasehold, they contain obligations to pay the State rent of 5% of the unimproved value of the land, and to build and maintain improvements on the land appropriate for its particular use. In cities and towns, there are planning and development obligations pursuant to the Planning Act and Building Actthat would be conceptually similar to other commonwealth jurisdictions.

Intellectual Property is protected by the Copyright and Neighbouring Rights Act and the Trademarks Act, the effect of which is generally within international norms.

Oil and gas laws

PNG’s single-largest export industry is the exploitation of hydrocarbons, which are the property of the State whilst in situ. Its first oil discovery commenced operation in the early 1990s, operated by the Chevron Corporation, but PNG’s major fields are primarily gas. “PNG LNG”, an ExxonMobil operated multi-field LNG export project producing 8.3MTA of LNG since 2014, is the region’s largest single project and export earner. A 5.6MTA LNG project is also being advanced by a consortium led by the French supermajor Total Energies. Additionally, a number of onshore and offshore projects are being advanced by a range of companies.

The licensing regime established by the Oil & Gas Act is a permit-based system using graticular blocks, providing for phased exploration and development from a prospecting licence through to a development licence.

As at mid-2025 the government is actively pursuing a change from the current permit-based system to a Production-Sharing Contract model, similar to the system in place in Malaysia.

The holding of licence interests by offshore entities is permitted, and interests in licences and projects can generally be transacted subject to certain administrative requirements. In practice, tenement holders from around the world will be found on PNG licences.

There are complex provisions for the sharing of benefits of petroleum developments with the state through taxation, royalty, levies and equity; and with local landowners and provincial and local governments. There is a specific project-based taxation regime which ring-fences projects for tax purposes and permits accumulated exploration expenditure and accumulated capital expenditure to be carried forward from exploration to production.

The administration of the Oil & Gas Act is vested in the corporate National Petroleum Authority.

A state-owned enterprise called Kumul Petroleum Holdings acts as the national oil company, primarily through holding State equity interests in oil and gas projects. Recently, Kumul Petroleum Holdings has been looking to participate more actively in developments.

As at mid-2025, the government is actively pursing a change from the current permit-based system to a Production-Sharing Contract model, similar to the system in place in Malaysia.

Mining laws

Mining is also a major contributor to the formal economy. PNG has world-class mines in operation, including large, open-pit mines, such as i) Lihir, one of the world’s largest gold mines, operated in an active caldera by the Newmont Corporation; ii) Ok Tedi, a major copper mine owned by Kumul Minerals Ltd, an SOE filling the role of PNG’s national mining company; and iii) Porgera, a large-scale gold mine operated by the Barrick Corporation in conjunction with Kumul Minerals. There are also a number of smaller mines, including, among others, underground gold copper mine K92; Ramu Nickel, a laterite nickel development; and Simberi, a sulphides gold mine on a small offshore island. PNG’s nascent industries for iron sand and other commodities are also being developed.

Licensing of mining under the Mining Actis structurally similar to the Oil & Gas legal regime. The resource in situ belongs to the state (except in the Autonomous Region), the process of exploration and exploitation is governed by a permitting system that progresses from prospecting to large-scale mining, the system is managed by a corporatised regulator – in this case the Mineral Resources Authority – and there are complex provisions for sharing the costs and benefits of development among the developer, the State in its various guises, the local landowners, and the relevant subnational governments. Similarly, there is a project-based ring-fenced taxation system permitting the carryforward of certain categories of exploration and capital expenditure into a resulting revenue-generating development.

Commercial agriculture and fishing

Tree crops and the plantation sector are a major part of the PNG economy, contributing particularly to employment and the rural economy. Palm oil is the dominant agricultural commodity, and its sector enjoys the largest foreign direct investment. The biggest operator, New Britain Palm Oil, operates RSPO-certified plantations, processing plants and refineries, and is wholly owned by Sime Derby Berhard. Hargy Oil Palms is owned by private Belgian agribusiness SA Sipef NV. Many palm oil projects operate on a model incorporating both a company-owned plantation and extensive farmer or locally owned smallholdings, satellite farms or customary land plantings.

Coffee and Cocoa are major tree crops, and there are smaller activities in vanilla, sugar, copra, balsa and others.

Internationally owned tuna fishers, both purse seine and long line, fish PNG’s EEZ pursuant to a licensing system, with some domestic processing.

Proper legal and accounting advice should always be sought.