Transparency of the Regulatory System

Investors face myriad requirements for permits, approvals, and clearances that take substantial time and effort to obtain. The difficulty of navigating the system provides opportunities for corruption and bribery when officials facilitate routine transactions. Regulations in the areas of labor, health and safety, and the environment often go unenforced, or are selectively enforced. In addition, civil servants have threatened to enforce antiquated regulations that remain on the books to obtain favors or bribes.

Draft bills are usually made available for public comments through the business associations or relevant sectors, or in public meetings. Changes to laws and regulations are published in the National Gazette. Public comments are usually limited to input from a few private sector organizations, such as CTA. There have been complaints of short comment periods and that comments are not properly reflected in the National Gazette. The GRM is considering a law that would make public consultation on future legislation mandatory.

International Regulatory Considerations

Mozambique is a member of the SADC (Southern African Development Community). In June 2016, the GRM signed an Economic Partnership Agreement (EPA) with SADC, which includes Botswana, Lesotho, Namibia, South Africa, and Swaziland. Mozambique exports aluminum under the EPA agreement.

The GRM ratified the Trade Facilitation Agreement (TFA) in July 2016 and notified the WTO in January 2017. A National Trade Facilitation Committee was established to coordinate the implementation of the TFA.

Legal System and Judicial Independence

Mozambique’s legal system is based on Portuguese civil law and customary law. In December 2005, the Parliament approved major revisions to the Commercial Code – the result of a collaborative effort starting in 1998 between the Mozambican government, the private sector, and donors. The previous Commercial Code was from the colonial period, with clauses dating back to the 19th century, and it did not provide an effective basis for modern commerce or resolution of commercial disputes. The revised code went into effect July 1, 2006. In April 2018, the Council of Ministers passed new provisions for the Commercial Code, which will be debated in Parliament.

Laws and Regulations on Foreign Direct Investment

The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, and Decree No. 56/2009, approved in October 2009, form the legal basis for foreign direct investment in Mozambique. Operating within these regulations, APIEX analyzes the fiscal and customs incentives available for a particular investment. Investors must establish foreign business representation and acquire a commercial representation license. During project development, investors must document their community consultation efforts related to the project. If the investment requires the use of land, the investor will also have to present, among other documents, a topographic plan or an outline of the site where the project will be developed.

If the investment involves an area under 1,000 hectares and the investment is up to approximately USD 25 million the governor of the province where it will be located can approve the investment. APIEX has the authority to approve any project between USD 25 million and approximately USD 40 million. The Minister of Economy and Finance must approve national or foreign investment between approximately USD 40 million and USD 225 million. If the investment (national or foreign) occupies an area of 10,000 hectares or an area superior to 100,000 hectares for a forestry concession, or it amounts to more than USD 225 million, the project must be approved by the Council of Ministers.

On February 21, 2017, the GRM approved a new regulation to facilitate visas for foreign nationals intending to invest in projects in Mozambique. The measure reduced the minimum investment amount required from USD 50 million to USD 500,000 for an investment visa. Under the new visa regulations, citizens of nations that have Mozambican embassies or consulates may now also request visas upon entry, although implementation of this law has been uneven. The new border visa is valid for 30 days and allows two entries.

Competition and Anti-Trust Laws

Law 10/2013, passed on April 11, 2013, and known as the Competition Law, established a modern legal framework for competition in Mozambique and created the Competition Regulatory Authority. A budget has still not been allocated to this body, and the GRM needs to appoint a board of directors. The framework is inspired by the Portuguese competition enforcement system. Violating the prohibitions contained in the Competition Law (either by entering into an illegal agreement or practice, or by implementing a concentration subject to mandatory filing) could result in a fine of up to 5 percent of the turnover of the company in the previous year. Competition Regulatory Authority decisions may be appealed in the Judicial Court in Maputo for cases leading to fines or other sanctions, or to the Administrative Court for merger control procedures.

Expropriation and Compensation

While there have been no significant cases of nationalization since the adoption of the 1990 Constitution, Mozambican law holds that "when deemed absolutely necessary for weighty reasons of national interest or public health and order, the nationalization or expropriation of goods and rights shall (result in the owner being) entitled to just and equitable compensation." No American companies have been subject to expropriation issues in Mozambique since the adoption of the 1990 Constitution.

Dispute Settlement

ICSID Convention and New York Convention

Mozambique acceded in 1998 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

For disputes between U.S. and Mozambican companies where a BIT violation is alleged, recourse via the international Alternative Dispute Resolution may also be available. No investment disputes in the past ten years have involved U.S. investors. Investors who feel they have a dispute covered under the BIT should contact the U.S. Embassy.

International Commercial Arbitration and Foreign Courts

In 1999, the Parliament passed Law no. 11/99 on July 8 (Law on Arbitration), which allows access to modern commercial arbitration for foreign investors. The Judicial Council approved Resolutions No. 1/CJ/2017 and No. 2/CJ/2017 on August 25, 2017, creating the Regulations of Mediation Services in Judicial Courts and the Judicial Mediators’ Code of Conduct. These new resolutions are designed to promote the mediation process as an alternative to litigation.

The Center for Commercial Arbitration, Conciliation, and Mediation (CACM) works under the Ministry of Labor and Social Security and offers commercial and labor arbitration. It has offices in Maputo and Beira, with 98 percent of commercial arbitration cases originating from Maputo province. During 2017, CACM handled 23 cases of commercial arbitration, and another 11 case are in progress. CACM has 247 arbitrators and 26 mediators throughout the country. One of the main constraints to the use of arbitration is that many contracts do not incorporate a clause that allows conflicts to be resolved via arbitration instead of in the courts.

Bankruptcy Regulations

In June 2014, the GRM passed a comprehensive legal regime for bankruptcy, streamlining the bankruptcy process and settings the rules for business recovery. Globally, Mozambique stands at 75 in the ranking of 190 economies on the ease of resolving insolvency according to the 2018 Doing Business Report.