Mozambique

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Introduction to the Country

Quote
“Moçambique nossa terra gloriosa! Pedra a pedra construindo o novo dia!”
(“Mozambique, our Glorious Land! Rock by rock constructing the new day!”)
(From the National Anthem of Mozambique)

Population
22,900,000

Capital
Maputo

Government type
Republic

Legal system
The legal system is based on the Portuguese civil law system and customary law and Mozambique has not accepted compulsory ICJ jurisdiction.

Economy overview
Mozambique was one of the world's poorest countries when it achieved indepdence in 1975. It suffered further due to socialist mismanagement and a brutal civil war from 1977-92 which further exacerbated the situation. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. Nevertheless Mozambique is heavily reliant on international assistance for a lot its annual budget, and the vast majority of the population are impoverished.

Subsistence agriculture and farming provides the main source of employment for the majority of the working population.

Mozambique's foreign debt has been reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries programme. Further, in July 2007, the Millennium Challenge Corporation signed a Compact with Mozambique that will focus on improving sanitation, roads, agriculture, and the business regulation environment with the aim of improving economic growth in the country.

Map

Next election due
The next election is to be held in 2014

 

Legal and Regulatory framework

Since the end of the 1990s, Mozambique has been investing on the expansion of its power grid, with the ultimate purpose of allowing rural and small urban communities to have access to electricity. To this end, a program called Electrification of Rural Areas Project (ERAP) was approved with the aid of several donors. The ERAP has also been supported by the so-called Energy Fund (FUNAE), which was created in 1997 by way of Decree No. 24/97, of 22 July 1997.

Also in 1997, the Parliament approved a new Electricity Law by way of Law No. 21/97, of 1 October 1997 (“Electricity Law”). One of the stated purposes of the Electricity Law was to attract private investment to the power sector. Accordingly, although the generation, transmission, distribution and trading of electricity continued to qualify as a public utility, the participation of private companies in the exploitation of those services became possible.

The Electricity Law also created the so-called National Electricity Council (Conselho Nacional de Electricidade - “CNELEC”), a legal entity with both administrative and financial autonomy, with the aim of serving as a consultative body as well as a conciliation, mediation and arbitration authority as regards disputes between different concessionaires and between concessionaires and consumers.

Furthermore, the Electricity Law requires the National Power Transmission Grid and the corresponding Dispatch Center to be operated and managed by a public entity. Accordingly, by way of Decree No. 43/2005, of 29 November 2005, State-owned Electricidade de Moçambique, E.P. (“EDM”) was entrusted with the role of Manager of the National Power Transmission Grid and the corresponding Dispatch Center. Despite this, EDM has been required to adopt such an organisational structure as to separate the responsibilities of Grid Manager from its generation, transmission, distribution and trading activities – i.e., a first step towards unbundling.

Mozambique is now starting to take advantage of its natural resources for power generation being considered as a high potential exporter of electrical power (especially hydro electric power) for the Southern African region, namely South Africa and Zimbabwe.  

The main source of power generated in Mozambique is hydro electric power, due to the high water potential of the country, where a special mention should be made to the Cahora Bassa Dam. There is a national will to reduce dependence on fossil fuels for power production purposes. In addition,  there is a growing interest in renewable energy sources, in particular biofuels.

Notwithstanding this, currently Mozambique is still a major power importer while domestic production does not yet satisfy internal needs. Some major projects are being planned in the sector though, amongst which a special mention shall be made to (i) the construction of the M’panda Nkwa Dam, a project of USD 8 thousand million, and (ii) the extension of the electric grid in 1,400 Km and the expansion of the production capacity of the Cahora Bassa Hidroelectric (“CHB”), which involves an investment of USD 1 thousand million. The current installed capacity of CBH is of 2,075 Megawatts, which can be expanded up to plus 1,000 Megawatts, through the construction of a northern power plant.

Moreover, certain projects such as a coal-fired heat and power station, a natural gas combined cycle central and various hydropower stations are underway in a move aimed at using the Moatize coal, the Pande and Temane natural gas and the country’s immense river potential – in particular, the Zambezi River – in an effort to boost power generation, hitherto heavily dependent on the CBH. 

Bearing the above in mind, Mozambique is in a competitive position with respect to its Southern African Developing Country neighbours. The Government of Mozambique (“GoM”) is committed in pursuing the goals of enhancing regional interconnection between national power transmission grids (under ERAP) and increase power production.

For that purpose a comprehensive review of the electricity framework, including, but not limited to the implementation of a national regulator, is currently ongoing.

Finally, the World Bank and countries as Norway, Sweden, Denmark and Germany, and now Portugal are the main partners of Mozambique in the development of the power sector. 

 (a) Key enabling legislation

(i) Key legislation and regulations: please list the key legislation and regulations that govern a project company and a power project, particularly relating to power supply and generation.

Energy Legal Framework:

(A) Energy Policies and Strategies

  • Resolution No. 10/2009, of 4 June 2009 - Energy Policy and Strategy
  • Resolution No. 22/2009, of 21 May 2009 - Biofuels Policy and Strategy
  • Resolution No. 62/2009, of 14 October 2009 – Renewable Energy Policy
  • Resolution No. 64/2009, of  2 November 2009 – Natural Gas Market Development Strategy
  • Decree No. 67/2009, of 11 December 2009 – National Atomic Energy Agency

(B) Power generation and supply

  • Law No. 21/97, of 1 October 1997 - Electricity Law
  • Decree No. 8/2000, of 20 April 2000 - Regulations on the Powers and Procedures for the Award of Concessions, and the Import and Export of Energy
  • Decree No. 42/2005, of 29 November 2005 - Regulations on the National Power Transmission Network Regulations (“NPTN”)
  • Decree No. 43/2005, of 29 November 2005 - which entrusts the role of NPTN Operator to Electricidade de Moçambique, EP (“EDM”)
  • Decree No. 45/98, of 25 September 1998 – Regulations on management of power facilities built or renovated with own funds in the Districts which has not been assigned to a public company
  • Ministerial Diploma No. 31/85, of 31 July 1985 - Regulations on Technical Skills for preparing, implementing and operating power facilities of particular service
  • Decree No. 48/2007, of 22 October 2007 - Licensing Regulations for Electric Facilities
  • Decree No. 43/2005, of 29 November 2005 - entrusts the role of NPTN Operator to Electricidade de Moçambique, EP (“EDM”)
  • Decree No. 25/2000, of 3 October 2000 – Electricity National Council (CNELEC) Statutes
  • Decree nº 46847 - Regulation of safety of high voltage power lines and distribution networks of low voltage power
  • Decree nº 46847 - Regulation of safety of substations and stations of transforming and sectioning
  • Decrees 29782, 30308 and 37823 - Regulation of safety of low voltage power facilities

Other Legal Framework applicable:

(C) Corporate

  • Decree-Law No. 2/2005, of 27 December 2005 as amended by Decree-Law No. 2/2009, of 24 April 2009 – Mozambican Commercial Code
  • Decree 49/2004, of 17 November 2004 - Commercial Activities’ Licensing Regulations

(D) Investment

  • Law No. 3/93, of 24 June 1993 - Investment Law (“IL”)
  • Decree No. 14/93, of 21 July 1993, as amended by Decree No. 43/2009, of 21 August 2009 - Investment Law Regulations (“ILR”)

(E) Tax & Customs

  • Law  No. 34/2007, of 31 December 2007, as amended by Law No. 20/2009, of 10 September 2009 - Corporate Income Tax Code (“CIRPC”)
  • Decree No. 9/2008, of 16 April 2008, as amended by Decree No. 68/2009, of 11 December 2009 - Corporate Income Tax Regulations
  • Law No. 32/2007, of 31 December 2007 - VAT Code
  • Decree No. 7/2008, of 16 April 2008 - VAT Code Regulations
  • Law No. 4/2009, of 12 January 2009 – Tax Benefits Code 
  • Decree No. 34/2009, of 6 July 2009 - Customs Clearance of Goods

(F) Labour

  • Law No. 23/2007, of 1 August 2007 - Labour Law
  • Decree No. 55/2008, of 30 December 2008 - Expatriate Regulations
  • Decree No. 38/2006, of 27 September 2006 – Visa Regulations

(G) Environment

  • Resolution No. 5/95, of 3 August 1995 – National Environment Policy
  • Law No. 20/97, of 1 October 1997 - Environment Law
  • Decree No. 45/2004, of 29 September 2004, as amended by Decree No. 42/2008, of 4 November 2008 – Environmental Impact Assessment Regulations
  • Decree No. 13/2006, of 15 June 2006 – Waste Management Regulations

(H) Foreign Exchange

  • Law 11/2009, of 11 March 2009 - Foreign Exchange Law
  • Bank of Mozambique’s Order No. 5/GGBM/96, of 19 July 1996 – Foreign Exchange Regulations

(I) Land

  • Law 19/97, of 1 October 1997 - Land Law
  • Decree 66/98, of 8 December 1998, as amended by Decree No. 1/2003, of  18 February 2003 and Decree No. 79/2009, of 29 December 2009  - Land Law Regulations

(J) General

  • Mozambican Constitutional Law – approved on 16 November   2004
  • Mozambican Civil Code
  • Civil Procedure Code
  • Law No. 11/99, of 8 July 1999 - Arbitration, Conciliation and Mediation Law (“ACML”)
  • Decree No. 15/2010, of 24 May 2010 - Regulations on Procurement for Public Works, Supply of Goods and Provisions of Services to the State

(ii) Overriding legislation and regulations: is there any legislation or are there regulations that apply to a power project or project company and that prevail over the terms of the project documents, such as the terms of the generating licence?

There is neither overriding legislation nor regulations applicable to a power project or project company that prevail over the terms of the project documents apart from those mentioned in (i) above.

 (b) Powers and capacity of the Government and Constitutional issues

(i) Governmental involvement: which levels of Government will need to be involved in the Project, e.g. national/federal, state, local?

The Project will require the intervention of different levels of Governmental, Provincial and/or Local entities depending on the installed capacity of the facility. Thus, the concession shall be granted either by the Provincial Governors, the Ministry of Energy (“ME”) or the Council of Ministers.

On the other hand, some actions will also require the intervention of other national entities – e.g. CNELEC and Administrative Court – and/or local authorities, including local communities’ leaders. Please refer to our response below.

(ii) Powers of Government: briefly, how are the powers of the Government entities referred to in paragraph (i) derived (under statute?)

As per the Electricity Law, the production, transmission, distribution, supply, trade, import or export of electric power, as well as the construction, operation or management of power facilities, are subject to prior authorization by means of a Concession granted by the State.

As a general rule, the governmental authorities with powers to approve power projects vary according to the installed capacity of the facility, as follows:

Council of Ministers - => 100 MW;

ME - between 1 MW and 100 MW[1];

Provincial Governors - < 1 MW[2]

(iii) Powers in respect of the project: what are the powers vis-à-vis the Project and a project company?

Apart from the licensing powers by means of granting a Concession as set out in (d) (ii) above, the Government has also supervision powers being, therefore, responsible for verifying the (i) the compliance with legal requirements, (ii) the fulfilment of concessionaire’s duties set out either in the Concession Contract or in the relevant investment project approved, if any.

(iv) Power to contract: does the Government have the power to enter into the project documents to which it is party (and any direct agreement with the lenders relating to them) and perform its obligations thereunder?

Yes, the Government has the power to enter into the project documents, including commercial contracts on a commercial basis, as well as to perform its obligations thereunder.

(v) Are there any legislative restrictions applicable to the giving of sovereign guarantees?

The Civil Procedure Code sets forth certain restrictions applicable to the giving of sovereign guarantees by the Government, notably as regards certain assets and/or rights which may not be pledged.

Moreover, in practice, sovereign guarantees granted by GoM shall require prior authorization from the World Bank / FMI under the negative pledge provisions set out in the agreements entered into between GoM and the Wold Bank / FMI.



[1] The ME may delegate this power to relevant local authorities whenever both the following situations are met (i) when the installation is confined to the area of jurisdiction of the relevant authorities and is not connected to other power facilities located outside the jurisdiction’s area limits and (ii) when the installed capacity does not exceed 10 MW.

 

 

[2] And whenever the ME delegates its powers as mentioned in reference 1 above.

 (c) Regulator

(i) Is there a regulator: please advise whether there are any regulators (independent or otherwise) in the jurisdiction with powers/rights in respect of the power project or project company.  If so, how are their powers derived (under statute) and what are their powers vis-à-vis the power project and a project company? 

Currently, there is no independent regulator for the energy sector in Mozambique. The regulation and the supervision of the electricity sector is assigned to the Ministry of Energy through the Electrical Energy National Directorate (Direcção Nacional de Energia Eléctrica - “DNEE”).

On the other hand, the renewable energy sector is also dependent of the Ministry of Energy through the Renewable Energy National Directorate (Direcção Nacional de Energias Renováveis - “DNER”).

Notwithstanding the aforesaid, CLENEC was created under the Electricity Law as a consultative body with the aim of serving as a conciliation, mediation and arbitration authority as regards disputes between concessionaires and between concessionaires and consumers.

The Government is now in the process of endorsing CNELEC as the National Regulator. The relevant status, powers, and responsibilities of the regulator are not yet defined though.

(ii) Power to contract: does the regulator typically enter into project documents relevant to the Project? If so, does it have power to do so?

As previously mentioned in (i) above, there is no independent regulator of the power sector in Mozambique. Project documents are entered into between the concessionaire and the relevant authority (ME, Council of Ministers, Provincial Governors).

(iii) Licence: what is the form of licence or licences (if any) that the regulator (or relevant entity) typically issues? Is it possible to amend the proposed form of licence?

As previously mentioned in (i) above, as a rule, power projects allocated by means of a Concession. The terms and conditions of the Concession are defined in the Concession Contract which shall deal with a number of matters, including, but not limited to, (i) scope of the concession, (ii) duration, (iii) rights and duties of the parties, (iv) tariffs, fees and taxes, (v) dispute resolution, (vi) liability and insurance, (vii) land use and exploitation, (viii) guarantees, (ix) environmental protection measures, (x) governing law, (xi) State’s redemption right and (xii) agreements to be entered into with the NPTN manager. So as to be valid and enforceable, Concession Contracts require the approval of the Administrative Court Visa and are subject to publication in Mozambique’s Official Gazette.

As a rule, Concession Contract clauses may be amended by means of agreement of the parties, provided that the amendments do not breach the provisions set forth in the Electricity Law and/or in any other regulations or ancillary statutes applicable, including approved governmental relevant policies and/or strategies. When the Concession is granted by the Council of Ministers the amendments will only be enforceable if approved by the same entity.

(iv) Independence: is the regulator regarded as being genuinely independent from government/the utility? How is the regulator funded?

N/a. Please refer to our response to (i) above.

 (d) Procurement

(i) Procurement process: please advise whether there is any requirement to have pursued any form of procurement or tender process prior to awarding the Project.

Pursuant to the law, Power Production, Transport, Distribution and/or Trading Concession Licenses are awarded by means of public tender. The authorities with licensing powers set out above are responsible for the call for applications for such purpose. The bids are then evaluated by both the relevant authority which has called for applications and the CNELEC.

(ii) Other procurement issues: are there any other procurement requirements in respect of the development of the Project, e.g. to source or favour labour, equipment or machinery from the country?

Yes.

As a previous note, and the investment approval secures certain incentives / benefits such as (i) hire foreign workers in excess of the quota regime set forth in the labour legislation, (ii) import/re-export the equipment required, (iii) obtain customs duties exemptions.  Such benefits shall impact on procurement requirements in connection with such matters as follows:

Labour

As a rule, the Labour Law foreign workers may only be hired under certain circumstances mentioned therein. Investment projects duly approved by CPI may provide a specific hiring regime by setting forth a different percentage for the quota regime or other specific rules for expatriate labour purposes. Please see further below.

Equipment

In principle, companies operating in Mozambique may only benefit from CPI’s benefits in connection with equipment’s import and customs duties exemption where such equipment is not available in Mozambique. Moreover, imported items shall be duly imported into Mozambique, notably by complying with temporary import regime or with the specific import regime set out in CPI’s approval, if applicable.

Moreover, the Regulations on Procurement for Public Works, Supply of Goods and Provisions of Services to the State sets forth that public works contracts and the acquisition of goods or services shall be allocated by means of a public tender. The regulations also set out specific principles for allocation issues including (i) stability, (ii) competition, and (iii) good financial management.

The project company is required to comply with the abovementioned requirements.

 (e) Power plants

(i) Power purchase agreement: is there a standard form of power purchase agreement used in the jurisdiction?

No, there is not a standard form of Power Purchase Agreement (“PPA”). Thus, the parties may freely negotiate same and include the provisions same deem relevant. Although, certain provisions are mandatory to be included in the agreements entered into between the parties including, but not limited to, (i) tariffs, (ii) payments and invoice procedures, and (iii) anti-corruption provisions.

(ii) Merchant power: are there merchant power plants in the jurisdiction, and if so, are these plants allowed to (or obliged to) sell power back to the grid?

There are no merchant power plants in Mozambique yet.

The law does not prevent the existence and/or the operation of merchant power plants in Mozambique. Nevertheless, there is not a specific regime applicable to merchant power plants, thus the Electricity Law shall apply. In fact, the difference between merchant power plants and regular power plants is not based on legal grounds but rather on the relevant commercial strategy and practice. Therefore, such distinction shall be assessed based on relevant provisions governing the commercial relationship between the parties to the PPAs. This said, whether or not merchant power plants are allowed (or obliged to) sell power back to the grid shall be defined therein and/or in the relevant Concession Contract entered into with the relevant authority.

 (f) Consents required and authorisations from other ministries

(i) Key licences/consents: please list the key licences, permits or consents that are typically required by a project company for the design, finance, construction, operation and maintenance of a power plant.

Apart from the Concession license set out above other licenses/consents may be also required, including (i) CPI Approval, (ii) Foreign Exchange Registration/Authorization, (iii) Commercial/Industrial License, (iv) Environmental License, (vi) Land Use and Exploitation Right (“DUAT”) and (vii) Administrative Court Visa.

(ii) Security: are these consents capable of being secured and are transferable to the lenders? 

No.

(iii) Process of application: please also provide details of all conditions applicable, specifying process, timing and costs for obtaining the consents.

CPI Approval (CPI) – please see below.

Foreign Exchange Registration/Authorization – Where a non-resident entity is a party to the Concession Contract the relevant contract and/or the investment project approved by CPI, if applicable, shall be subject to prior approval of the Ministry of Finance (“MinFin”) and approval/registration with the Bank of Mozambique (“BoM”) for foreign exchange control purposes. An application for such purposes shall be submitted to BoM by the interested party directly or through a financial intermediary – normally a commercial bank – who then deals with the licensing process with BoM. The above mentioned application shall include (i) all the information and evidence necessary for the complete legal and economic description of the operation, (ii) the parties’ identification, and (iii) the total amount of the operation. Besides, BoM may require additional information and shall decide upon the request within 15 days of the date on which the application has been submitted.

Commercial/Industrial License - The Mozambican Commercial Code sets forth that a company seeking to operate in the country is required to obtain a so-called commercial license and/or an industrial license, as applicable, from the Ministry of Industry and Commerce (“MIC”). An application for such purposes shall be submitted to MIC.

Environmental License – An Environmental License has to be obtained whenever the activity to be conducted is deemed to have impact on the environment. In order to obtain such a license, an Environmental Impact Assessment (“EIA”) is required. The EIA and the relevant documentation therein shall be submitted and evaluated by the Ministry of Environment (“MICOA”).The Environmental License is required to be obtained prior to the any other licenses required for the project. 

Land Use and Exploitation Right – The implementation of projects which require the use of land are subject to prior award of Land Use and Exploitation Right (Direito de Uso e Aproveitamento da Terra – “DUAT”). For that purpose, the project company is required to comply with the procedures detailed in the Land Law and respective Regulations, such as (i) application for a DUAT, (ii) consultation with local communities, (iii) issuance of Provisional Authorization, (iv) demarcation of the land plot, (iv) project implementation, (v) payment of taxes and fees due, and (iv) relocation of any local population on site and related compensation package. The DUAT shall be issued by the relevant authority depending on extension of land required as follows (i) Provincial Government - up to 1000ha, (ii) Ministry of Agriculture - between 1000ha and 10.000ha, (iii) Council of Ministers – more than 10.000ha. This is a rather time-consuming and bureaucratic process.

Administrative Court Visa – The Concession Contract requires the Administrative Court Visa so as to be effective and enforceable.

 (g) Competition law

(i) Exclusivity: are any rights of exclusivity granted to a project company enforceable?

As a rule, the law sets out the principle of free competition in the power industry in Mozambique and prevents both monopolistic conveys and cartel activity in connection with tariffs or other charges applicable to consumers. Nevertheless, in certain circumstances, exclusivity rights may be granted on the grounds of the Concession Contract and/or the PPA. In this case, exclusivity rights are enforceable provided that same do not breach mandatory legal provisions.

(ii) Restrictions on competition: are there any restrictions on the ability of a project company to compete freely in the country?

There are no restrictions on the ability of a project company to compete freely in Mozambique provided that same are granted with the required licenses and comply with the law in force. Indeed, free competition is one of the basic principles of the power sector as a way for promoting investment so as to provide populations higher standards of living and contribute towards poverty’s reduction by enhancing economic development. This is also one of ERAP’s major principles in connection with the Mozambican power sector.

 

 (h) Environmental regulations

(i) Regulations: are there any environmental or health and safety regulations or legislation applicable to power plants?

In Mozambique, there are no specific environmental regulations applicable to power plants or power projects. Nevertheless, the Environmental Law and the Regulations on Environmental Impact Assessment shall apply.

This said, an Environmental License has to be obtained whenever the activity to be undertaken is deemed to have relevant impact on the environment. As a rule, major projects such as a power plant require a prior Environmental Impact Assessment (EIA) so as to obtain such a license.

Pursuant to the law, the Environmental License is required to be obtained prior to the any other licenses required for the project. 

(ii) Additional consents: are there any environmental licences, permits or consents that are required by a project company in relation to a Project?   If so, please provide details of how / from whom these licences can be obtained as well as the timing and costs thereof.

As a rule, power projects require and Environmental License. For such purposes, an application shall be submitted to MICOA which shall qualify the project and further advice on whether or not an EIA is required depending on the type, location and scale of the project to be implemented. The application shall comprise (i) a description of the project, (ii) relevant information on the activity and the project company, (iii) socio-economical and environmental information pertaining to the relevant area, (iv) environmental assessment steps required, and (v) Preliminary Environmental Information Form duly filled. Further the EIA shall be performed by the project company and, if approved an Environmental License is granted.

Finance and Tax matters

(a) Financial assistance

(i) Are there prohibitions or restrictions on the ability of a company to guarantee and/or give security to support borrowings incurred to finance the direct or indirect acquisition of shares of a project company; or any company which directly or indirectly owns shares in a project company; or shares in a sister subsidiary?

No. Nevertheless, please note that for the approval of both the Concession and the investment project, evidence of the company’s financial capacity is required.

(b) Lending restrictions/banking monopolies

(i) Please indicate whether there are any restrictions or requirements applicable to the importation of capital by lenders to the Project.

The legal regime in force does not prevent the importation of capital by lenders to the Project. However, the relevant loan is subject to prior approval and registration with BoM for forex control purposes.

(ii) Is there a requirement for the lenders/security agent to be registered in the jurisdiction?

No.

(iii) Can foreign lenders lend into the jurisdiction?

Yes, provided that the relevant loan is duly approved by BoM.

(c) Restrictions relating to repatriation of dividends

(i) Are there any restrictions relating to repatriating dividends?

Pursuant to the legal regime in force there are no restrictions on repatriating dividends, provided that (i) the distribution of dividends is deemed legal, (ii) all legal redemptions are made and taxes are paid and (iii) the above mentioned BoM’s authorization for forex purposes is approved.

(d) Convertibility

(i) Are there any restrictions on the convertibility of the jurisdiction’s currency?

Yes. Pursuant to the Foreign Exchange Regulations, the convertibility of currency qualifies as a foreign exchange operation. As a rule, such operations are subject to BoM’s prior authorisation and registration therewith. Moreover, with respect to accounts in Metical (“MZM”), while non-resident entities are allowed to open and operate such bank accounts in Mozambique through a local financial institution, the balance of such accounts cannot be converted and transferred abroad.

(e) Interest payments

(i) Are there any restrictions on the payment and compounding of interest?  If so, does this also affect both local and foreign lenders? 

Compounding of interest is a common practice in Mozambique and specific provisions pertaining to same are often included in loan agreements. However, pursuant to the Mozambican Civil Code, so as to be enforceable compounding of interest requires either the parties to enter into an agreement when the interest is due or a court notice.

Further, as loan agreements between forex residents and foreign lenders are subject to approval by BoM, interest provisions must satisfy BoM’s requirements.

(f) Tax

(i) Withholding tax: are there any withholding tax issues in relation to interest payments and fees to foreign lenders on loans used by a project company; payment of principal on debt; or payments received under any agreements (other than any referred to above)?

Yes. Except as otherwise provided by a double taxation treaty existing between Mozambique and the lender’s home country a 20% withholding tax is levied on both interest and fees paid to foreign lenders.

Moreover, where applicable, VAT is also due and levied by the rate of 17% upon the total income in connection with services rendered for consideration in Mozambique.

(ii) Double taxation treaties: please note the existence of any double taxation treaties.

Mozambique has double taxation treaties with Portugal, Macau, South Africa, Italy, Mauritius, and UAE.

(iii) Lender issues: are there any risks that lenders should be aware of in respect of tax liabilities/tax domiciliation as a result of providing debt to the project or project company and/or taking/enforcing security interests?

In principle, foreign lenders are not required to establish a presence in Mozambique, thus tax domiciliation in Mozambique is not required.

In Mozambique, a Permanent Establishment (“PE”) for IRPC purposes is deemed to exist whenever a non-resident company has in the country a fixed facility or permanent representation through which a commercial, industrial or agricultural activity is carried on. The existence or non-existence of a local PE is rather important in view of the different taxation regime that may apply. In fact, while foreign non-resident entities with no PE in Mozambique may benefit from a final IRPC reduced withholding, a foreign non-resident having a local PE does not benefit from such a withholding regime and is subject to the general IRPC rate of 32% on year-end profits. The foreign entity deemed to have a local PE is required to register for tax purposes and obtain a so-called NUIT - stands for Single Identification Tax Number. The PE would be required to keep organised accounts in Mozambique, file the IRPC annual return and pay IRPC directly to the tax authorities.

This said, lenders shall assess whether or not their activity in Mozambique is deemed as having a local PE. While not having a PE in Mozambique, no liabilities/tax domiciliation issues arise besides those mentioned in respect of withholding tax and VAT payment, if applicable.

(iv) Repayment and enforcement: please advise whether loan repayment / enforcement proceeds could be treated negatively from a tax perspective for the lenders.

No tax issues arise in connection with repayment and enforcement proceeds further other than those mentioned herein in respect with withholding tax, VAT and/or stamp duty, if applicable.

(g) Stamping costs

Please advise whether stamp duty or similar applies in respect of finance and security documents and security interests (and if so advise on the rate thereof), including the registration of immovable property or vehicles; security documentation; or transfer of assets on enforcement of security; or increase in share capital.

Amongst others, some finance, security, corporate and transfer documents are subject to stamp duty. The rate at which stamp duty is levied varies depending on both (i) the nature of the relevant document books, papers or legal acts and (ii) the value of the respective operation therewith.

Security, Enforcement and Insolvency

(a) Overview of security regime

(i) Can a security interest be obtained over a company's assets, e.g.:

(A) accounts receivable (book debts);
(B) inventory (stock in trade);
(C) shares of a company (issued and authorised);
(D) equipment;
(E) real property;
(F) insurances; and
(G) project contracts.

Yes, in principle, the law does not prevent to obtain security interest over a company's assets. However, that project documents and/or certain rights or property assets may be subject to prior authorisation for transfer purposes and/or may not be granted as security (e.g. land use rights). Thus, securities to be granted shall be analysed on a case-by-case basis.

(ii) Can shares of a project company validly be pledged and enforced under an English law share charge?

No. If the company is incorporated under the Mozambican Law, this is the Law that shall be applied.

(iii) Can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility?

Yes.

(iv) If the borrowings to be secured are under a revolving credit facility, are there any special priority or other concerns?

No.

(v) Can the relevant security interests be granted to a security agent or trustee on behalf of the lenders from time to time?

As a preliminary note, even though an entity such as a security trustee is not expressly provided for in the law, powers may be granted for someone to act as security agent/trustee by means of a Power of Attorney (“PoA”).

Although, in principle, the transfer of lenders’ interests in credit facilities may be possible, certain consents or authorisations may be required considering each particular case, including (i) BoM’s approval or (ii) the Ministry of Finance’s approval.

In fact, certain restrictions may arise (i) in the law, (ii) by way of the Financing Agreements entered into and/or even, in certain circumstances, (iii) the terms and conditions set out in the power production Concession Contract itself. Thus, such transfers shall always be analysed on a case-by-case basis.

(vi) Please indicate the claims that would have priority over the relevant security interests.

In principle, and in certain circumstances, only the State and local authorities would have priority over the relevant security and interests thereunder.

(vii) Is there a public security registry?

In Mozambique, there is no central registry comprising information on security documents or other alike. The Commercial Code makes reference to a mandatory book of charges and encumbrances but in practice virtually no company in Mozambique has such a book. Nevertheless, depending on the type of security placed and the relevant asset/right upon which same is granted the registration with the relevant Registry Office is mandatory (e.g. securities granted over immovable property shall be registered with the Real Estate Registry Office and securities placed upon company’s shares shall be registered with the Legal Entities Registry Office).

(viii) Formalities in respect of security creation:

(A) Statutory perfection requirements;

The expatriation of monies and interest in connection with security interest in case the payee is a non-resident entity has to be approved by the Ministry of Finance and registered with BoM. The documentation to be filed with the exchange authorities typically comprises a copy of the relevant agreement and relevant security which are subject to previous approval. Moreover, and despite the above prior authorization is obtained, the permission to expatriate interest must be requested each time such payment is to be made.

(B) Any other formalities.

The law sets out specific formalities for each type of security depending on the relevant asset/right upon which same is granted. As a rule, (i) shareholder approval, (ii) notary deed, (iii) registration in the share registry book, with the Legal Entities Registry Office and/or with other relevant Registry Offices, if applicable, are required.

(C) Steps for perfection and length of time taken

Bearing in mind our response above, the steps required so as to perfect securities and/or register same with the relevant Registry Office shall also depend on the specific asset/right upon wich the security is granted. As a general rule, an application to the relevant Registry Office is required and a registration fee is due.

(D) Any significant financial costs or significant time delays required to create and perfect the relevant security interest?

Yes. As previously mentioned, the law sets out specific formalities for each type of security depending on the relevant asset/right upon which same is granted. Nevertheless, as a rule, amongst others, notarial fees, registration fees and stamp duty shall apply.

(b) Insolvency and enforcement regime

(i) Is there a court or similar register that can be searched in respect of proceedings and insolvency actions?

There is no central registry, meaning that one would have to this information on a court-by-court basis upon request of the interested parties. This said, insolvency proceedings need to be registered with the Legal entities Registry and therefore a search with such Registry should provide information on the insolvency status of the company.

(ii) Summary of the different options for an insolvency related process.

Pursuant to the Civil Procedure Code, a company that is unable to fulfill its commercial obligations is deemed bankrupt. The bankruptcy status must be declared by a court. Bankruptcy proceedings may be initiated by the company itself, by its creditors or by the Attorney-General Office.

Preventive Measures

Prior to filing for bankruptcy, it is possible for the company to apply to the court having jurisdiction to convene its creditors so as to try recover from its financial distress situation. Such application must detail the causes for the bankruptcy condition, the payments cease date (if already applicable) and enclose documentary evidence of any factual circumstances claimed and on the existing creditors.

The judge shall issue an initial order appointing an administrator (and one or more creditors) to assist and monitor the action of the company’s management in the running of its business and in the administration of its assets and  set a date, time and place for a credits verification meeting. The main consequence of the order is the stay or suspension of most ongoing enforcement proceedings against the applicant.

After recognition of the credits, a creditors’ final assembly will be held, in which the creditors may agree on a composition – which may consist of a simple moratorium on the payment of the non-preferential credits or involve a reduction of the credits value.

Where a composition is not put forward by the applicant or any creditor or if a composition is proposed but is not approved by the creditors, the creditors have a further mechanism to avoid bankruptcy: subject to the favourable vote of a 75% majority of creditors, the creditors may decide to incorporate a new company to hold the assets of the company which do not secure any preferred credits. The preferred creditors will thus be paid and the other creditors will become quotaholders of the new company. If the quotaholders wish to acquire goods securing other credits, same shall pay the corresponding credit or guarantee its payment on maturity.

If the foregoing preventive / recovery measures fail – i.e., the creditors fail to agree on a composition with the debtor or on the incorporation of a new company or if these measures are rejected by the court –, the debtor will be declared bankrupt.

Declaration of Bankruptcy

The bankruptcy petition may be filed by the company itself, any creditor and/or the Attorney-General Office. There are several circumstances allowing a creditor to apply for a debtor’s bankruptcy, most importantly a cease of payments. The creditor’s petition shall lay its grounds and justify the existence of the relevant credit, and shall enclose all the evidence on which the creditor is to rely.

A court hearing shall then be held – with or without the presence of the bankrupt – and a bankruptcy judgment will be rendered if one of the grounds for bankruptcy is proved. The judgment will include the appointment of an administrator and shall set a deadline of between 30 and 90 days for creditors to file their claims, being subject to specific publication requirements. The judgement is subject to appeal and/or challenge. Once the court declares the company bankrupt, the company is barred from administering and disposing of its assets. In addition, all ongoing enforcement proceedings against the debtor are suspended or stayed.

Suspension of Bankruptcy Proceedings

After the completion of the liabilities verification process, it is nevertheless possible for the proceedings to be suspended. This may happen if (i) the bankrupt or its representatives put forward a creditors' composition, and (ii) the creditors or the bankruptcy administrator request the court to convene a creditors’ assembly to decide on the merits of such a composition or on the incorporation of a new company. These measures are very similar to those of a preventive nature available prior to filing for bankruptcy.

Liquidation and Payment

At a final stage, after the liabilities verification process is concluded and all liabilities have been determined, all assets and rights included in the bankrupt’s estate are then sold. Subsequently, subject to payment of certain specific expenses and credits which enjoy a special privilege, the proceeds of the sale of mortgaged or pledged assets will be forthwith allocated to settle the claims of the corresponding creditors. If such creditors’ claims are not fully satisfied, those creditors will then join the others as ordinary creditors for the unpaid balance of their claims. Despite the foregoing, 25% of the proceeds of sale of mortgaged or pledged assets will remain in deposit with court as security for the payment of court costs and additional expenses to be assessed at the end of the proceedings.

(iii) Are summary or expedited proceedings available?

No.

(iv) Are any governmental or other consents required in connection with:

(A) the enforcement of a security interest in shares;

(B) the enforcement of a security interest in other assets; or

(C) the enforcement of a guarantee (sovereign or otherwise)?

As a rule, the enforcement of either security interest or guarantees does not require Governmental consent.

Nevertheless, the transfer of certain assets and/or rights may require prior authorisation (e.g. the Concession License cannot be either pledged or transferred without prior Governmental consent). Moreover, where values resulting from the enforcement of securities are to be transferred abroad BoM’s authorisation is also required for forex purposes.

(v) Do lenders inherit all environmental liabilities when they become owner of the shares upon enforcement (or at any other time)?

As a rule, any entity that causes damages to the environment as a result of its conduct and/or activity is liable towards third parties. The obligation to repair arises from the environmental risk inherent to the activity developed by same. The Environment Law sets forth a strict liability regime while everyone who causes damages to the environment as a result of its conduct shall be under the obligation to repair such damages and/or pay compensation regardless of fault. Thus, the company would be deemed liable for environmental damages, even when faultless, should there be an action or inaction on the part of the company which caused same. 

The law does not provide a straight answer as regards liability for historic environmental issues. Thus, it shall be assessed on a case-by-case basis. Nevertheless, in principle, the lenders themselves would not be deemed liable for environmental damages but rather the company in which they hold shares upon enforcement.

(vi) Can security interests be enforced by both private sale and public auction, and is it necessary to appoint a court or other official to carry out the enforcement?

Yes, it is required to appoint a court to carry out the enforcement which may than be performed either by private sale or public auction as the court deem fit or as otherwise provided by the law.

 

 

Corporate, Insurance and Employment matters

(a) Corporate vehicle

(i) Project company incorporation:

(A) Type of vehicle: what is the most appropriate type of corporate vehicle for a project and can you describe its key features (e.g. limited liability, shareholding requirements, share capital requirements)?

There are two main types of companies in Mozambique: (1) the joint stock corporation – “Sociedade Anónima de Responsabilidade Limitada (“SA”) – and (2) the private limited liability company by quotas – “Sociedades por Quotas” (“Lda”).

Since the latest revision to the Commercial Code, there is no minimum required capital to incorporate a company. Nevertheless, as per the law, share capital should be deemed fit for the relevant activity to be undertaken. A minimum of 3 shareholders is required to incorporate a SA company, whereas Lda companies require 2 shareholders.

In practice, Lda’s are the most widely used type of company. It is a convenient form of organization for small and/or closely-held enterprises due to its less complex administrative and supervisory structure. One of the main Lda features is the fact that its members (quotaholders) are liable not only for their own capital contributions but also, jointly with the others, for all contributions necessary to pay up the company’s share capital.

Differently, a SA has a more complex administrative and supervisory structure. It is an appropriate form of organisation for large and widely held enterprises

Typically, a SA is an attractive structure when a large number of shareholders are involved or otherwise it is important from the standpoint of marketing to clients to show a more robust form of company. Another reason to opt for a SA is the ability to hide the identity of the shareholders through the issuance of bearer shares. This is not possible in a Quota Company as the names of the shareholders are subject to public record in the relevant Articles of Association and in the Legal Entities Registry Office.

From a tax standpoint, there are no substantial differences between the two types of company.

(B) Thin capitalisation: are there any issues relating to thin capitalisation?

Yes. Pursuant to the CIRPC provisions, where shareholder’s loans overlap twice the company’s share capital, interest on the surplus can not be deducted as tax prejudice.

Moreover, please note that, as per the Mozambican Commercial Code, the company’s net position be less than 50% of its share capital, the board shall propose either the company’s dissolution or the share capital reduction, except where the shareholders decide to contribute cash to reinstate the share capital amount.

(C) Indigenous shareholdings: We have come across requirements in certain jurisdictions to have a specific percentage of shares in a project company held by nationals of the jurisdiction.  Please advise whether any such requirements apply in the country.  Please indicate any prescriptive requirements or limitations in respect of incorporating a special purpose company such as:

(I) Requirement for a certain amount of equity to be held by indigenous entities;

For power companies the law does not require any amount of equity to be held by Mozambican nationals.

(II) Thin capitalisation requirements;

Please see above.

(III) Can a limited liability company be established?

Yes. Please see above.

(IV) Is it possible to use a foreign company or a branch of a foreign company to act as project company?

The law does not prevent foreign companies to act as Project Company. Nevertheless, in practice, either a subsidiary or a branch shall be used so as to develop a power project. Otherwise same would hardly be approved. 

(D) What is the estimated timescale for incorporation in the country? Are there any specific fees or other costs payable to governmental authorities in respect of incorporation?

Timescale

It is not easy to provide an estimate timescale for company’s incorporation and/or registration purposes while it will always depend on various circumstances. Nevertheless, it is worth to mention that as a result of GoM’s strategy for improving the business environment in Mozambique up until 2012, certain conditions for timescale reduction are being implemented throughout the country.

As a result, at present and in normal circumstances, incorporation and registration of companies usually takes roughly one month. However, the reduction of certain bureaucratic procedures is still required, and the extension and full implementation of GoM’s strategy abovementioned in all provinces is mandatory.

Costs

Costs payable to the relevant authorities – i.e., MIC, Legal Entities Registry Office, Notary Office and Oficial Gazzette – are levied both on the share capital value and on the length of the Articles of Association approved. Thus, there are not fixed costs and, should that be of interest, the applicant shall request and estimative prior to the incorporation of the company and/or registration of the branch.

(b) General corporate issues

(i) Is a private company free to lend and/or issue guarantees?

Yes, provided that the law does not prevent the relevant assets/rights to be issued as guarantees.

(ii) Are there any restrictions on dividend distribution?

Yes. Dividends may not be distributed where (i) losses from previous exercises have not yet been covered/reimbursed and (ii) where the legal or statutory reserve has not been catered for. Moreover, the distribution of dividends is subject to prior resolution of the board or the General Assembly which shall describe the profits, the available reserves and the total amount to distribute.

There may also exist dividend repatriation limitations where the foreign shareholder of Mozambican company is not covered by a duly approved investment project.

(c) Insurance

(i) Mandatory insurance: are there any insurances which the project company or the Project is required to have by law (or regulations or similar)?

Yes. The Mozambican law sets forth certain mandatory insurances applicable to the project as follows:

Power Industry - The Electricity Law sets forth that power companies shall grant security by means of an insurance policy covering (i) losses and/or damages to premises, or equipment, (ii) property loss or damage or bodily injury suffered by any third party in the course of the operations (iii) liability to employees engaged in the operations, and (iv) any third party liability resulting from the operations.

Moreover, please note that Concession Contracts and/or PPA’s may also include insurance clauses requiring those engaged in power projects to keep insurance of such type and in such amount as is customary for similar projects in the international power industry and in accordance with international good practices. Such insurance may cover (i) loss or damage to the machinery, equipment and other assets acquired or used in the operations, (ii) property losses or damages or bodily injuries suffered by any third party in the course of the operations, (iii) liability to employees engaged in the operations, (iv) any third party liability resulting from the operations. As a rule, the insurance shall have a minimum value which shall also be set out in the Contract. 

Environment – The Environmental Law sets forth that everyone performing activities bearing a high risk of environmental degradation must take out third party liability coverage.

Worker’s compensation - The Labour Law determines that employees must have collective insurance so as to cover work-related accidents and occupational diseases and, in case of activities comprising high professional risks. The relevant insurance policy must cover all employees subject to such risks.

Motor vehicles – third party liability insurance is mandatory for all motor vehicles.

(ii) Is there any minimum requirement to place the insurance with local insurers or any other similar restrictions? If so, can reinsurance be lawfully placed internationally?

As a rule, pursuant to the Insurance Law and the Insurance Regulations, only Mozambican insurance and reinsurance companies and Mozambican branches of insurance and reinsurance companies with registered offices abroad are allowed to carry out the insurance and reinsurance business in the country, provided that it has been authorised by the Ministry of Finance for such purpose and is registered with the Insurance General Directorate (Inspecção Geral de Seguros - IGS).

The above statutes also limit the execution of insurance policies abroad by an insured or the policyholder. Nevertheless, taking out insurance abroad may be authorised by IGS in the following cases (i) when it is evidenced that the local authorised insurers have refused to subscribe the policy, or (ii) when it is evidenced that the foreign insurers offered better conditions than those offered by the local insurers.

Again, please note that Concession Contracts and/or PPA’s may also include insurance clauses pertaining to insurance policies placed internationally as is customary for similar projects in the international power industry and in accordance with international good practices.

(iii) Are there any restrictions in respect of granting security rights over the insurances or reinsurances?

In principle, the law does not prevent granting securities over the insurances or reinsurances. Nevertheless, certain restrictions may indeed arise including, but not limited to, (i) regulatory consents so as to grant such securities notably by way of assignment and (ii) foreign exchange authorisation where payments to non-resident entities are required. Thus, this issue shall always be assessed on a case-by-case basis.

(d) Employment

(i) Legislative/regulatory issues: is there any legislation or regulation impacting on foreign employees, in particular the conditions relating to work and residence permits? Please give an indication of the process and costs in relation to obtaining work and residence permits.

Yes. The rendering of work in Mozambique by foreigners has both labour and immigration implications.

As a general rule, expatriate employees are only entitled to work in Mozambique under a Mozambican law employment contract entered into with a Mozambican employer (either a Mozambican company or the Mozambican branch of a foreign company) under the following regimes:

Communication (or “Quota”) Regime

Depending on the total number of employees (with reference to the previous calendar year), a given percentage of foreigners may be hired by means of simple notice to the Ministry of Labour as follows (i) 5% for companies having more than 100 employees, (ii) 8% for companies having between 10 and 100 employees and (iii) 10% for companies having up to 10 employees.

Under this regime, the employer is required to notify the foreign employee’s admission to the relevant Provincial Labour Department, describing the level of implementation of the available expatriate quota after the relevant admission and enclosing both the corporate and the employee’s documentation as required.

Authorisation Regime

Whenever the employer has reached its expatriate quota, the hiring of additional foreigners is subject to a prior authorisation from the Ministry of Labour. This authorisation is granted by the Minister on a case-by-case basis, and provided that the following compulsory requirements are met (i) inexistence of Mozambican nationals qualified to carry out the work in question, and/or (ii) insufficient Mozambican nationals duly qualified to meet the demand.

Short Term Assignments (“STA”) Regime

Pursuant to the Expatriate Regulations, expatriates are entitled to work in Mozambique for short terms of up to thirty (30) days, renewable for a maximum of ninety (90) days per year. Thus, STAs are neither subject to the quota regime, nor to authorisation from the Ministry of Labour. In this case, the employer shall rather submit a letter to the relevant Provincial Labour Authority.

Investment Projects’ Regime

Investment projects duly approved by CPI may provide a specific hiring regime by setting forth either a different percentage for the quota regime or other specific rules for expatriate hiring purposes. Therefore, the expatriate hiring procedure would be simpler, for the employer would only need to attach to the communication to the labour authorities a copy of the relevant investment project’s terms of authorisation expressly stating the number of foreign workers to be admitted and/or any other approved hiring conditions.

Expatriates working in Mozambique without a work permit obtained pursuant one of the foregoing hiring regimes are deemed to be illegally working in the country. If a labour inspection identifies such a situation, the relevant expatriate worker will be immediately suspended and severe fines may be applied both to the employer and to the expatriate. Under certain circumstances, the Minister of Labour may further prevent foreign workers to develop any further activity in the country and/or expel them from Mozambique.

(ii) Foreign restrictions: are there any restrictions that apply to foreign employees and foreign contractors/subcontractors and if so what do they need to do in order to comply with local legislation?

Notwithstanding the abovementioned, the Labour Law sets forth that the employer shall procure to provide national workers with work positions of high technical complexity and/or management in the company. On the other hand, the law also sets forth that foreign employees shall have equal treatment under the terms of   International Rules and applicable reciprocity clauses. Please also refer to our response to (i) above.  

Land

(a) Land registry: is there a land registry (or similar) in the country that can be searched to confirm whether a project company has granted of any mortgage, charge, option assignment, lien or other encumbrance over the whole or part of the properties or assets of a company?

In Mozambique, the land is property of the State. The use and exploitation of the land required for power projects is governed by the provisions set out in the Land Law and the Land Law Regulations. As a general rule, projects requiring land use rights are subject to prior award of a land use and exploration rights (“DUAT”).  Thus, in Mozambique there are no ownership rights in connection with land, and same cannot be sold, traded, mortgaged or otherwise disposed of.

There is a Real Estate Registry Office in Mozambique, which aims to publicize the legal situation of the real property, namely its description, ownership, mortgage, covenants or other charges concerned. Land use rights may be registered therein even though no mortgage or other charges may be granted over same. Buildings erected within the land may be granted as security though, and same shall also be registered with the Real Estate Registry Office.

(b) Landlord's rights: please indicate whether there are any rights which accrue to the landlord (or the government or any other bodies) that may override the terms of a land lease or threaten the rights of a project company particularly any right of repossession or acquisition.

Please refer to our response to section above.

In Mozambique, the land is property of the State but DUATs may be granted by means of application of the interested parties. Depending on extension of land required, DUAT’s shall be issued by following authorities (i) Provincial Government - up to 1000ha, (ii) Ministry of Agriculture - between 1000ha and 10.000ha, (iii) Council of Ministers – more than 10.000ha. A public consultation shall precede the issuance of the relevant DUAT. This process is guided by the Geographic and Cadastral Services. An annual fee is due levied on the extension of the land granted.

Definitive authorizations usually are valid for fifty years, renewable.  Nevertheless, the relevant authorities may revoke the DUATs granted where the investment project approved is not complied with. Under this scenario building and/or other equipment installed in the land shall revert to the State.

Finally, it is worth to mention that the Investment Law provides the obligation of the State to ensure the protection and safety of the assets and rights included within the approved investments, requiring the payment of fair compensation for nationalization or expropriation.

(c) Direct agreement: are you aware as to whether a direct agreement in respect of a lease has been previously been provided to lenders on other transactions?

Please refer to (a) and (b) above.

(d) Forfeiture rights: do relief from forfeiture rights exist and would the lenders be entitled to rely on such rights?

Please refer to (a) and (b) above.

(e) Is there any additional legislation governing property rights?

As a rule, property rights are established in the Mozambique Constitution and the Mozambican Civil Code.

Nevertheless, with regards to land issues please refer to our responses to (a) and (b) above.

(f) Are there any formalities with which lenders need to comply when enforcing security over land?

Please refer to (a) and (b) above.

International law and arbitration

(a) Supra-national treaties

(i) List all Bilateral Investment Treaties to which the country is party.

Mozambique has bilateral investment treaties and trade agreements with Portugal, USA, Zimbabwe, Malawi and China.

The country has also entered into Preferential Trade Agreements with the Republic of Zimbabwe and the Republic of Malawi.

Amongst others, Mozambique also has trade and mutual protection agreements with Angola and Brazil and is a member to the Southern Africa Development Community (“SADC”).

(ii) Is the country a signatory to the Energy Charter Treaty?

Mozambique is not a signatory to the Energy Charter Treaty.

(b) Arbitration

(i) Requirements and restrictions applicable to the choice of arbitration roles and place of arbitration

The Mozambican legal framework governing arbitration is set forth in the Arbitration, Conciliation and Mediation Law (“ACML”), a fairly modern and sophisticated statute which is mainly based on the Portuguese Arbitration Law.

The main principle of the ACML is the Parties’ freedom to agree on (i) the composition of the arbitral tribunal, (ii) the procedural rules, (iii) the applicable law and (iv) the language of the proceedings as follows:

Constitution and Composition of the Arbitral Tribunal

As per the law, parties to an arbitration agreement may agree on the manner in which the tribunal is to be constituted, including the number of arbitrators - provided however that such number is always an odd number -, notably by referring to a set of arbitration rules of an arbitral institution or by choosing an arbitral institution to conduct the proceedings.

Procedural Rules

The parties may freely agree on the rules to be observed in the proceedings. However, certain fundamental principles must always be observed, such as (i) the principle of equality between the parties, (ii) the adversarial system in all stages of the proceedings and (iii) the requirement that both parties be heard, either orally or in writing, before the final award is rendered.

Place of Arbitration

The parties may agree on the place of arbitration. The Arbitral Tribunal may hold meetings in any other place deemed appropriate, though.

Applicable Law on the Merits

The ACML authorizes the parties to permit the Arbitral Tribunal to rule on their dispute on the basis of equity or according to certain domestic or international usages and customs. In the case of international arbitration[1], the ACML states that the Tribunal will rule on the dispute in accordance with the law chosen by the parties to govern the merits of the dispute. The parties’ reference to a given law is deemed to be to the substantive provisions of such law, not to its rules on conflicts of laws.

Language

The parties in international arbitration may freely choose the language or languages to be used in the proceedings. If no agreement is reached, it shall then be for the Tribunal to determine the language(s) of the proceedings.

[1]The definition of international arbitration set out in the ACML follows the one adopted in the 1985 Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL). International arbitration is defined as being the one in which international trade interests are at stake. The ACML lists several situations where it deems that international trade interests are at stake, including, as in the case in hand, the circumstance of the parties to the arbitration being residents of different countries. 

(ii) Are foreign arbitral awards / decisions are enforceable in the country (i.e. is the country a party to the New York Convention on the Recognition of Foreign Arbitral Awards?

Yes, Mozambique is a member to the New York Convention on the Recognition of Foreign Arbitral Awards, enacted by means of Resolution No. 22/98, of 2 June 1998.

Thus, foreign arbitral awards are enforceable. However, said judgment would first have to undergo a review and confirmation process in the Mozambican courts. The procedure to have a foreign arbitral award recognized and enforced through the Mozambican courts is made in accordance with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – to which Mozambique is a party.

 

Renewable Energy

(a) Has the country enacted any legislation specifically designed to promote and enable the development of renewable energy projects?

Currently there is no specific legal framework governing renewable energy projects. Nevertheless, GoM has recently enacted the Renewable Energy Policy and the Biofuels Policy and Strategy. In line with GoM’s previously expressed views on the role of renewable energy and biofuels in the energy sector, both the Policies stress the relevance of such industry so as to (i) develop the country’s technical skills and capacity and (ii) increase the energy resources available on sustainable standards.

Mozambican is deemed to have a high potential on renewable energy, such as water, solar, wind and geothermal. In addition, projects for production of biofuels from sugarcane, soya and cocoa are having strong governmental support. In fact, some are already ongoing though no specific framework is yet in force.

Based on the foregoing expressions of intent set out in the Policies, a comprehensive legal framework detailing the procedures and requirements applicable to renewable energy and biofuels projects is expected to be enacted in the near future.

It is also worth to mention that Mozambique is implementing the UNFCCC - Clean Development Mechanism (CDM), through the Appointed National Authority (“AND” – Autoridade Nacional Designada). The power sector is included the group of the eligible areas for CDM projects.

(b) Is the country is a signatory to the Kyoto Protocol?

Yes, Mozambique is a member of the United Nations Framework Convention on Climate Change and has signed the Kyoto Protocol on 18 January 2005.

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