Transparency of the Regulatory System
The government has adopted laws that have furthered transparency during recent years. In 2016, the government approved a new anti-corruption bill, which aims to introduce the provisions of the UN Convention Against Corruption in the Mauritanian judicial system so that it is consistent with international standards. In 2017, the government approved the new anti-discrimination law aimed at tackling discrimination. In 1999, the government created a regulatory authority that is charged with overseeing the privatization process and ensuring that transparent policies and laws are used to foster competition through the bidding process. There is no law or policy in place that impedes foreign investment in Mauritania. In practice, ownership in many sectors of the economy is concentrated among a few tribal affiliates. They have significant oligopolistic power, which is reinforced by formal and informal regulatory barriers.
While the government is moving to streamline bureaucratic procedures for investment, difficulties remain. There is a complex and often overlapping system of permits and licenses required to do business. In the “Ease of Starting a Business” portion of the World Bank’s 2018 Doing Business profile, Mauritania ranked 150 out of 189 countries. There continues to be a lack of transparency in the legal, regulatory, and accounting systems, which do not meet international norms. Proposed laws and regulations are supposed to be published in draft form for public comment before being sent to the National Assembly, but this does not always occur. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations and laws and regulations do not discriminate against foreign investment.
In 2011, the government promulgated two orders to regulate accounting practices of nongovernmental and private entities, which must now have reputable financial management and submit periodic reports of financial transactions. All such entities must also have a local bank account with an identifiable account number and address. As of 2018, these orders are inconsistently followed and were not enforced by the government.
In 2018, the Mauritanian government continues to make meaningful progress in implementing the EITI standard.
International Regulatory Considerations
Mauritania is a member of the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) economic trade block. In 2017, Mauritania and Economic Community of West African States (ECOWAS) countries signed an Association Agreement aimed towards allowing free flow of goods in the region. Mauritania has also been a member of the World Trade Organization (WTO) since May 31, 1995. The country however is in a transitional stage regarding its commitments. It is currently engaging the WTO to ensure it makes progress towards complete compliance with required commitments.
Legal System and Judicial Independence
The Mauritanian judicial system combines French and Islamic (Malikite rite) judicial systems. The constitution guarantees the independence of the judiciary (Article 89), and an organic law also protects judges from undue influence. Civil and Commercial Codes exist and are designed to protect contracts, although court enforcement and dispute settlement can be difficult. The judicial system remains weak and unpredictable in its application of the law, due in part to the training judges receive in two separate and distinct legal systems: Shari’a law and laws modeled after the French legal system. Judges remain undercompensated and susceptible to tribal pressures and bribery. Specialized commercial law courts exist, but judges lack training and experience in commercial and financial law. Some judges may only have formal training in the Shari’a legal system, while others are only familiar with the French civil law system. A lack of standardization of applicable legal knowledge in the judiciary leads to inefficiency in the execution of judgments in a timely and efficient manner.
Many laws and decrees related to the commercial and financial sectors are not readily available and therefore not well understood. Access to laws and legal texts that have been published can be equally challenging. Other laws, in particular some governing the financial sector, are out of date. Most judgments are not issued within prescribed time limits and records are not always well kept. Judgments of foreign courts are recognized by local courts, but enforcement is limited. During the last few years, the government has taken steps to provide training to judges and lawyers as an attempt to professionalize the system.
Laws and Regulations on Foreign Direct Investment
There are no new major investment laws or judicial decisions ratified last year. The investment Code, last updated in June 2012, was designed to encourage direct investment, by enhancing the security of investments and facilitating administrative procedures. The code provides for free repatriation of foreign capital and wages for foreign employees. The code also created free points of importation and export incentives. Small and medium enterprises (SME), which register through OPPS (one-stop-shop), do not pay corporate taxes or customs duties. The Code also created Special Economic Zones to encourage regional development. Separately, the Nouadhibou Free Zone was created with its own regulatory scheme more favorable to foreign investment. The Civil and Commercial Codes protect contracts, although court enforcement and dispute settlement can be difficult.
Competition and Anti-Trust Laws
The Ministry of Economy’s office of “Commission de Passation des Marches des Secteurs de l'Economie et Finance” (www.cmsef.mr) is the government agency that reviews tender bids in accordance with the law and regulations. Suppliers for large government contracts are selected through a tender process initiated at the ministry level. Invitations for tenders are publicly announced in local newspapers and on government websites. After issuing an invitation for tenders, the Ministry of Economy’s commission in charge of reviewing tenders selects the offer that best fulfills government requirements. If two offers, i.e., one from a foreign company and one from a Mauritanian company, are otherwise considered equal, statutes require that the government award the tender to the Mauritanian company. In practice, this has resulted in tenders being awarded to companies that have strong ties to government officials and tribal leaders, regardless of the merits of an individual offer. Preferential treatment remains common in government procurement, despite the government’s recent efforts to promote transparency in the public sector. Government officials and tribal leaders reportedly receive frequent favors, such as unauthorized exemption from taxes, fishing licenses, special grants of land, and favorable treatment during bidding on government projects.
Expropriation and Compensation
The revised Investment Code provides more property guarantees and protection. The Code protects private companies against nationalization, expropriation, and requisition. However, if a foreign enterprise is facing difficulties, the Mauritanian government can propose an expropriation plan in order for the company to avoid bankruptcy and to protect jobs of local employees, with fair and equitable compensation, which is exempt from duties and taxes (per Article 4 and 5.1.c.)
The only known case of expropriation since Mauritania’s independence in 1960 was the nationalization of the French mining company MIFERMA in November 1974, the largest employer and hard currency earner in the country. In that case, the two parties agreed on a compensation plan.
The Mauritanian government guarantees companies that the tax, custom, and legal regulations in force at the time of issuance of an Investment Certificate will remain applicable to them for a period of 20 years. Likewise any favorable changes to the corporate tax or customs laws during that guaranteed period of time will be applied to the investor.
ICSID Convention and New York Convention
In 1966, Mauritania ratified the Convention on the settlement of investment disputes between States and nationals of other States. In 1997, Mauritania became a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). However, there is no specific legislation to ensure enforcement.
Investor-State Dispute Settlement
Mauritania does not have a bilateral investment agreement with the United States. The most recent investment dispute between the Mauritanian government and a foreign investor occurred in 2006 over production-sharing contracts (PSC) signed in 2003 with former President Taya’s government. A successor government lodged a dispute over four amendments to the original PSC involving oil revenues and environmental issues. An international arbiter was brought in and ruled in the government’s favor.
Judgments of foreign courts are accepted by the local courts, but enforcement is inadequate.
International Commercial Arbitration and Foreign Courts
Judgments of foreign courts are not consistently applied. The government accepts international arbitration of investment disputes between foreign investors and government authorities. Judgments of foreign courts are accepted by the local courts, but enforcement is limited. There are also domestic mechanisms for arbitration, both through traditional religious institutions and through the courts. Previously, issues were referred to the International Center for Settlement of Investment Disputes (ICSID), of which Mauritania became a contracting state in 1965.
Settling a dispute through the courts remains a long and complicated process. Inadequate laws and poor administration remain the key source of legal disputes encountered in the country. The duration of investment disputes are subject to numerous appeals before reaching a final verdict. Though the government is looking for ways to streamline the system by providing training to judges and lawyers, the court procedures are currently long and complicated.
In 2017 the government passed a new small claims law specifically for cases valued at less than USD 11,000. This new law aims to reduce the backlog and work through cases in a more efficient manner.
Though there are no recent reports on disputes involving State-Owned Enterprises (SOE), the likelihood that domestic courts would favor SOEs during a dispute remains of eminent concern.
The country has bankruptcy laws which carry the potential for criminal penalties. Mauritania’s bankruptcy laws were last updated in 2001. The bankruptcy law allows for the reorganization or restructuring of a business. There are very few reported cases of these laws being applied.