3. Legal Regime
Transparency of the Regulatory System
Although Liberia has a Competition Law, Foreign Trade Law, Intellectual Property Act, Public Procurement and Concessions Act, Insolvency and Restructuring Act (Chapter 8 of Commercial Code), and Commercial Code, the government does not always effectively implement these laws. It frequently does not follow transparent policies to foster competition on a non-discriminatory basis, or establish “clear rules of the game.” Generally, legal and regulatory procedures in Liberia fall below international norms in terms of transparency, application, and consistency. The Liberia Chamber of Commerce (LCC) maintains relevant resources on African Growth and Opportunity Act (AGOA) regulatory processes. It assists importers in processing import documents in compliance with AGOA procedures and Liberian customs regulations. The maintains an online repository to access legal documents including legislative acts ( ); however, this site has not been updated. Also regularly available are press releases, newspaper articles, radio talk-shows, and handouts that enable public discussions of proposed new laws or draft bills that may have a significant impact.
In Liberia, both foreign and locally-registered companies are required to adhere to the International Financial Reporting Standards (IFRS) consistent with international norms. There are no systemic oversight or enforcement mechanisms to ensure that government authorities follow administrative processes. Government ministries and agencies often have overlapping responsibilities, which can result in inconsistent application of law. Some officials can be arbitrary when resolving conflicting regulatory issues. Regulatory agencies include the Forestry Development Authority (FDA), which regulates issues arising in the forestry sector; the Civil Aviation Authority (CAA), which regulates aviation businesses; the Liberia Telecommunications Authority (LTA), which regulates telecommunications activities; the Liberia Maritime Authority (LMA), which regulates issues arising in the maritime sector; the National Port Authority (NPA), which regulates and largely owns port infrastructure; the Liberia Revenue Authority (LRA), which administers tax collections, tariffs and customs, and provides tax or customs related services; the Liberia Extractive Industry Transparency Initiative (LEITI), which monitors, reconciles, and reports on payments made by extractive companies to the government and to local communities; and the Liberia Land Authority (LAA), which has a mandate for land policy, land administration, and oversight of land management regulation and use functions. However, there is no legal obligation for ministries or regulatory agencies to publish the text or summary of proposed regulations before their enactment. Ministries or regulatory agencies are not required by law to develop regulatory plans that would be adopted or implemented within a specified timeframe. Although partially captured in national budgets, public finances and debt obligations, including explicit and contingent liabilities, are not generally transparent. Budget documents and information on debt obligations are accessible to the general public, largely online.
International Regulatory Considerations
Liberia is a member of two regional economic blocks, the Mano River Union (MRU) and the Economic Community of West African States (ECOWAS). The government has committed to and is working on laws and regulations that would align its economic and commercial relationships with those of its regional counterparts. The Liberia Revenue Authority (LRA) continues to standardize and harmonize the country’s customs and tariff systems with the ECOWAS External Tariff (CET). Judgments of foreign courts are recognized and enforceable under the Liberian courts, and foreign investment disputes are handled under Liberian legal jurisdictions. Liberia is a member of the WTO, and the government acceded to the terms and conditions of the WTO arrangements including Technical Barriers to Trade (TBT) and sanitary and phytosanitary (SPS) measures.
Legal System and Judicial Independence
Liberia has three independent branches of government. The Judicial Branch of government is vested in the Supreme Court, subordinate magistrates, and county courts. The legal system is based on Anglo-American Common Law, and although still referred to as a common law system, cannot be truly characterized as such. The system is supposed to operate in parallel with local customary law based on unwritten, indigenous practices, culture, and traditions, but the delineation between formal and traditional laws is ambiguous. All courts are sanctioned to apply both statutory and customary laws; there is a system of customary law recognized in the court system by the Judiciary Law of 1972. There is also a traditional court system in rural areas that is governed by the 2001 Revised Rules and Regulation Governing the Hinterland of Liberia ( ). These competing and disharmonized legal systems often lead to conflicts between Monrovia-based entities and communities outside of Monrovia, and within individual communities themselves. Contracts are legally enforced by the executive branch. The judicial system has no courts of appeal, and appeal cases from county courts go directly to the Supreme Court, placing a tremendous burden on the Supreme Court’s panel of five judges. The current judicial system suffers from inadequately trained and poorly compensated judicial officers that can result in flawed proceedings. The Commercial Law sets out provisions for sales, leases, financial leases, mortgages, secured transactions, and commercial arbitration. The law is backed by a Commercial Court consisting of a panel of judges that was established to resolve commercial transactions and contractual issues. The court hears commercial disputes including debt disputes of USD 15,000 and above. The court does not have a mandate to hear Intellectual Property Rights (IPR) claims. There is a commission that hears claims of unfair labor practices. In theory, the court presides over all financial, contractual, and commercial disputes, serving as an additional avenue to expedite commercial and contractual cases. In practice, weak capacity and a lack of adequate regulatory frameworks limit its effectiveness.
Laws and Regulations on Foreign Direct Investment
To obtain a new concession agreement or long-term investment contract, potential investors engage in lengthy bidding and negotiation processes. Other legal instruments relating to foreign investments include the Revenue Code, Public Procurement and Concessions Act, Competition Law, Commercial Code, Financial Institution Act (Banking Law), Foreign Trade Law of Liberia, Association Law, Special Economic Zone Act, and Liberia Intellectual Property Act. No judicial decisions pertaining to foreign direct investment were announced in the past year.
According to the Public Procurement and Concessions Act, if an entity proposes to grant a concession to investors, it first must request a “Certificate of Concession” from the Ministry of Finance and Development Planning (MFDP). Upon receipt of the certificate, the President of Liberia will constitute an ad hoc Inter-Ministerial Concession Committee (IMCC). The National Investment Commission (NIC) chairs the IMCC with statutory members including the Ministers of Justice, Finance and Development Planning, Labor, and Internal Affairs, as well as the concession-granting entity. The IMCC reviews, evaluates, negotiates, and awards a concession agreement. It then submits the concession agreement to the President of Liberia for onward submission to the Legislature for ratification/approval. A ratified concession becomes law after it is signed by the President and printed into handbills. Depending on contract clauses and stipulations, a re-negotiation and subsequent round of ratification may be necessary in certain cases, such as ownership transfers.
There is no primary “one-stop-shop” website for investment or website for investment laws, rules, procedures, and reporting requirements for investors. However, the NIC can provide sector-specific investment counseling and/or advisory services at investors’ request. The following list of websites may help foreign investors to navigate the information, laws, rules, and reporting requirements:
- National Investment Commission (NIC) ;
- Public Procurement & Concessions Commission (PPCC) prepares, monitors, and guides public procurement policies, procedures, and guidelines for awarding concessions, ;
- Liberia Revenue Authority (LRA) collects all lawful revenues due the government, and is the custodian of the 2000 Revenue Code, ;
- Ministry of Finance and Development Planning (MFDP) is responsible for the country’s fiscal policies, and is the custodian of the Public Financial Management Act of 2009, ; and
- Ministry of Commerce and Industry (MOCI) advises the government and designs policies and programs for the development and promotion of trade, commerce, and industry,
Competition and Anti-Trust Laws
The Liberia Intellectual Property Office (LIPO) under the Ministry of Commerce and Industry (MOCI) is responsible for inspecting and reviewing transactions for competition-related concerns, whether domestic or international in nature. In collaboration with the MOCI, the LIPO administers, investigates, and enforces competition-related issues in line with the Competition Law. This law incorporates WTO requirements to encourage a free market economy by promoting fair competition. Liberia does not have anti-trust laws. There were no significant competition cases that involved foreign investment over the past year.
Expropriation and Compensation
The 2010 Investment Act guarantees and protects foreign enterprises against expropriation or nationalization by government “unless the expropriation is in the national interest for a public purpose, is the least burdensome available means to satisfy that overriding public purpose, and is made on a non-discriminatory basis in accordance with due process of law.” Liberia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) Convention that guarantees the protection of foreign investments. The U.S. Embassy is aware of an expropriation case (METCO vs. NPA, 2002-2015) in which the U.S.-based claimant (METCO) was compensated in 2015 following years of legal proceeding and negotiations; the compensation amount was in a freely transferrable currency, but did not represent a fair market value at the time of the expropriation. In January 2018, Mount Bele Resources (MBR) Liberia Ltd (MBR) filed an application with the Community Court of Justice of ECOWAS seeking redress for what it termed the “arbitrary revocation of [MBR’s] Mineral Exploration License without due process resulting [in the] denial of its proprietary rights over same and the loss of USD 21 million investment in the mining industry.” In recent years there have not been any government actions or shifts in policy that would indicate possible expropriations in the foreseeable future. Currently, there are no high-risk sectors in the economy that are prone to expropriation actions and there is no indirect expropriation, such as confiscatory tax regimes or regulatory actions, that could deprive investors of substantial economic benefits from their investments. Historically, the government has favored signing non-exclusive concession agreements with major investors. This practice allows the government to sign overlapping concession agreements for different resources. For example, the government may sign an agricultural concession agreement, but also allow itself flexibility to sign a mineral and/or timber concession in the same area. As multinational investors develop concession areas, some foreign businesses buy risk insurance to mitigate against the possibility of operational disruption caused by land expropriation.
ICSID Convention and New York Convention
Liberia is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) – also known as the Washington Convention – and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards – also known as the New York Arbitration Convention. The Commercial Code is the specific domestic legislation which provides for enforcement of awards under the 1958 New York Convention and/or under the ICSID Convention. The Investment Act provides that “the courts of Liberia shall have jurisdiction over the resolution of business disputes, parties to an investment disputes may however specify any arbitration or other dispute resolution procedure upon which they may agree.”
Investor-State Dispute Settlement
Liberia is a member of the ICSID Convention and a signatory to the MIGA Convention that guarantees the protection of foreign investments. The Civil Procedure Law governs both domestic and international arbitrations taking place in Liberia, but there is no stand-alone arbitration law. It may take several years to enforce both foreign and domestic arbitration awards, from filing an application to the court of first instance to obtaining a writ of execution, with provision for an appeal. The administration of investment disputes or commercial arbitration, as well as enforcement proceedings, take place in the Commercial Court and Civil Law Court with appeal directly to the Supreme Court. Liberia does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States. As a member of both the ICSID and the New York Arbitration Convention, Liberian courts are bound to recognize and enforce foreign arbitral awards issued against the government. Liberia is also a signatory to the ECOWAS Treaty containing investor-state dispute settlement (ISDS) provisions. There is no recent history of extrajudicial action against foreign investors in Liberia. Over the past 10 years, the U.S. Embassy is aware of two investment disputes or expropriation cases involving U.S. firms: one, METCO vs. NPA, which was resolved in 2015 after the claimant received compensation following years of legal proceeding and negotiations, and another, involving Mount Bele Resources, which continues in the Community Court of Justice of ECOWAS.
International Commercial Arbitration and Foreign Courts
The Investment Act provides for settlement of trade disputes through the judicial system or via alternative dispute resolution (ADR) mechanisms for disputes between two private parties. The act states, “the courts of Liberia shall have jurisdiction over the resolution of business disputes. Parties to an investment dispute may however specify any arbitration or other dispute resolution procedure upon which they may agree.” Private entities entering into investment contracts with the Liberian government frequently include arbitration clauses specifying dispute settlement outside of Liberia. There are other codes, statutes, and legislative provisions – including the Liberian Civil Procedure Law – governing commercial arbitration and recognizing arbitration as a means of resolution between private parties in commercial transactions, based on the model of the United Nations Commission on International Trade Law (UNCITRAL model law). However, given the general weakness of the judiciary, current judicial processes are not always procedurally competent, fair, and reliable. Judgments of foreign courts are recognized and enforceable under the courts, and problems with foreign investments are handled under the same legal jurisdictions. There is no available record of investment disputes involving state owned enterprises (SOEs) and foreign investors.
Liberia does not have a bankruptcy law in place and there is no specialized court to protect the rights of creditors, equity holders, and holders of other financial contracts except the Commercial Court, which is limited in handling such specialized instruments.
6. Financial Sector
Capital Markets and Portfolio Investment
The government does not have foreign portfolio investments abroad and there is no domestic capital market or portfolio investment option, such as a stock market. Private sector investors have limited credit and investment options. The Central Bank of Liberia (CBL) uses financial instruments such as Treasury bills (T-bills) in an effort to develop a capital market. In 2018, the CBL made a CBL Bill available for purchase and started to develop regulatory guidance for the issuance of corporate bonds, commercial papers (CP), and bankers’ acceptance (BA) letters in the money market. It also facilitated nine repurchase transactions between seven commercial banks as part of its inter-bank market development. The CBL continues to promote an interbank market, money market, secondary market, and investor’s education as well as public awareness. The CBL respects IMF Article VIII by refraining from implementing restrictions on payments and transfers for current international transactions. Many foreign investors prefer to obtain credit from and retain profits in foreign banking institutions.
Money and Banking System
Banking services within Liberia are provided by nine commercial banks, branch outlets including payment windows/annexes, a development finance company, and a deposit-taking microfinance institution. Eight of the commercial banks are foreign banks. There are numerous intermediate financial services providers across the country, such as licensed foreign exchange bureaus, microfinance institutions, credit unions, rural community finance institutions, and village savings and loan associations. The CBL reported growth in the commercial banks’ balance sheets in 2018. According to the CBL, total assets, total loans and advances, total deposit, and capital increased by 44 percent, 39 percent, 38 percent, and 44 percent, respectively. The industry’s liquidity ratio was recorded at 40 percent, and all commercial banks recorded liquidity ratios above the 15 percent regulatory minimum requirement in 2018. However, these increases are partly attributed to the conversion effect of the U.S. dollar into Liberian dollars, which is the reporting currency. The CBL Annual Report 2018 can be found at: . Although not addressed in the CBL’s report, commercial banks and businesses reported considerable difficulty in accessing Liberian dollars during the second quarter in 2018, including those saved by private individuals at commercial banks and by commercial banks at the CBL. From August 2018 through late February 2019, the CBL directed banks to limit Liberian dollar withdrawals to no more than LRD 250,000 (about USD 1,500) per day per customer, including large businesses. Some commercial banks lowered their Liberian dollar deposits at the CBL by keeping more cash on hand to service customers.
The issue of non-performing loans (NPLs) remained a major challenge in the banking sector and continued to negatively impact profitability. In 2018, the ratio of NPLs to total loans stood at 13.8 percent. Commercial banks face persistent challenges in profit generation and loan repayment. There are no known restrictions on a foreigner’s ability to establish a bank account, and there is no currency control or restriction as to how much a customer can transfer out of Liberia through the banking system. Foreign banks or branches are allowed to establish operations in Liberia, and are subject to prudential measures or other regulations set out by the CBL.
Foreign Exchange and Remittances
Foreign Exchange Policies
There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g., remittances of investment capital, earnings, loans, lease payments, and royalties). Liberian law allows for the transfer of dividends and net profits after tax to investors’ home countries. The Investment Act permits the unrestricted transfer of capital, profits, and dividends “through any authorized dealer bank in a freely convertible currency.” Therefore, funds associated with any form of investment can be freely converted into any world currency. The CBL’s regulation concerning transfers of foreign currency stipulates that every business, entity, or individual wishing to make a foreign transfer of funds may do so without limitation of amount to be transferred. However, the amount to be transferred must have been in an entity’s bank account for no less than three banking days prior to the transfer. Liberia has a floating exchange rate system with both LRD, known as “Liberty” notes, and USD used as legal tender. The exchange rate is determined by market supply and demand. The CBL displays and requires commercial banks to display indicative market exchange rates of the LRD vs. USD, and the rates largely fluctuate based on demand and supply. The USD can be freely exchanged for LRD in commercial banks, licensed foreign exchange bureaus, petrol stations, and large supermarkets. It is advisable for foreign investors to conduct foreign exchange operations with commercial banks or established licensed forex bureaus. Unlicensed forex bureaus may not provide customers with a rate equal to that of the CBL.
There are no recent changes to Liberia’s investment remittance policies to affect access to foreign exchange. Generally, there are no legal time limitations on remittances or on the inflows or outflows of funds for remittances of profits or revenue. Correspondent banking relationships are limited, and bank fees related to currency exchange and wire transfers can be high. In general, corporations can remit up to USD 1 million through commercial banks. Transferring banks are required to file normal cash transaction reports with the CBL. Depending on the amount to remit and the bank(s), the wait-period to remit investment revenues ranges from a few hours to three business days. However, individuals without a bank account are limited to two over-the-counter transfers of up to USD 5,000 within a 30-day period. The CBL has instituted thresholds for suspicious transactions for which banks must exercise customer due diligence and know your customer (KYC) rules. The thresholds are USD 25,000 and above for individuals, and USD 40,000 and above for corporations. The channels through which remittances are sent in Liberia are Western Union, Money Gram, RIA Money Transfer, and wire transfer.
Sovereign Wealth Funds
The government does not maintain a Sovereign Wealth Fund (SWF) or other similar entity.