Transparency of the Regulatory System
The government continues to harmonize conflicting rules and regulations across ministries and agencies, and to carry out reforms in many sectors including mining, forestry, petroleum, trade and business, and electricity. The government has enacted the Competition Law, Foreign Trade Law and Intellectual Property (IP) Act in an effort to align Liberia’s existing laws, policies and regulations to promote a transparent and predictable business environment and to foster competition on a non-discriminatory basis. Generally, the legal and regulatory procedures in Liberia fall below international norms in terms of transparency and consistency. For example, there is no unified website where all proposed regulations and draft bills are published in order to make them available to the public. However, press releases, newspaper articles, radio talk-shows and handouts may be available, and public discussions are channeled through these media regarding proposed new laws/draft bills that have potentially significant impact. There is no centralized online location where key regulatory actions or their summaries are published. The only online repository to access Liberia’s legal information is the Liberia Legal Information Institute, http://www.liberlii.org/lr/legis/acts/ , developed by Liberia’s Ministry of Justice with assistance from the American Bar Association.
Significant investment, both foreign and domestic, exists in the Liberia, especially in the extractive sectors, and the government continues to streamline relevant legislation in line with its WTO obligations. However, Liberian ministries often have overlapping responsibilities which can result in inconsistent application of the law. Some officials can be arbitrary, or heavy-handed when resolving conflicting regulatory issues. Regulatory agencies include the Forestry Development Authority (FDA) to regulate issues arising in forestry sector. the Civil Aviation Authority (CAA) regulates aviation businesses, Liberia Telecommunications Authority (LTA) regulates all telecommunications activities, Liberia Maritime Authority (LMA) regulates to issues arising in the maritime sector, and the National Port Authority owns and regulates the country’s port infrastructures. Liberia Extractive Industry Transparency Initiative (LEITI) monitors, reconciles, and reports on payments made to the government by extractive companies.
Liberia’s Judicial Branch of government is vested in a Supreme Court and subordinate, magistrate and county courts, but has no courts of appeal. All appeals from county courts go directly to the Supreme Court, placing a tremendous burden on its panel of only five judges. The official legal system was originally based on Anglo-American Common Law, and although still referred to as a common law system, cannot be truly characterized as such. It 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 law is unclear. These competing and disharmonized legal systems often lead to conflicts between Monrovia-based entities and communities outside of Monrovia, and within individual communities themselves. The judicial system suffers from inadequately trained and poorly compensated judicial officers, which can result in flawed proceedings. The Commercial Code of Liberia sets out provisions for sales, leases, financial leases, mortgages, secured transactions, and commercial arbitration. The code is backed by the Commercial Court, consisting of a panel of judges, which was established to resolve issues arising from commercial transactions and contractual relationships. In theory, the court presides over all financial, contractual, and commercial disputes, serving as an additional avenue to expedite commercial and contractual cases. However, weak capacity and the lack of a regulatory framework limit Commercial Court effectiveness. The present Commercial Court does not have a mandate to hear intellectual property claims. There is a commission that hears claims of unfair labor practices.
International Regulatory Considerations
Liberia is a member of two regional economic blocks, the Mano River Union (MRU) and ECOWAS. The government continues to abide by and align its economic and commercial relationships with those of its regional counterparts. It is informed by and harmonizes its customs and tariff systems with the ECOWAS External Tariff (CET). Judgments of foreign courts are recognized and enforceable under the courts, and foreign investment disputes are handled under the same legal jurisdictions. The government completed Liberia’s membership to the WTO in July 2016 after nearly ten years negotiating its accession terms with WTO members. The government has committed to the terms and conditions of Liberia’s membership including arrangements on Technical Barriers to Trade (TBT) and sanitary and photo sanitary (SPS) measures. The government expects to use these commitments build up crucial trade infrastructure based on international standards to encourage fair competition in line with the WTO standards.
Legal System and Judicial Independence
The Liberian Constitution provides for the separation of powers whereby the judicial system remains independent of the executive branch. However, the general weakness of the overall judiciary presents a mixed picture that suggests the current judicial process is not always procedurally competent, fair, or reliable. Liberia has a commercial code which backs the commercial court in deciding on issues arising from commercial and contractual arrangements. Under the constitution, Liberia has three independent but coordinated branches of government. However, there have been some reports of the executive branch exercising undue influence within the judicial system. Critical challenges to ensuring a competent, fair and reliable judicial system in Liberia include opaque and inconsistent laws, poor administration of laws and regulations, political interferences and lack of competency of court officers and judges and instances of corruption.
Laws and Regulations on Foreign Direct Investment
Liberia’s Investment Act protects the right of investors to settle disputes either through the judicial system or through alternative dispute resolution (ADR) mechanisms. Private entities entering into investment contracts with the government frequently include arbitration clauses specifying dispute settlement outside of Liberia. The Investment Act states that, “where a dispute arises between an investor and the Government in respect of an enterprise, all efforts shall be made through mutual discussion to reach an amicable settlement.” To obtain a new concession agreement or long-term investment contract, potential investors have to engage in lengthy bidding and negotiation processes. In addition to the Investment Act and Revenue Code of 2000, the Public Procurement and Concessions Act of 2005 and the National Competitive Bidding Regulations, theoretically provide a clear, standardized, and transparent system for awarding concessions and public tenders. However, requests for Expressions of Interest (EOI), International Competitive Bids (ICB), and Invitations to Bid (ITB) are often poorly advertised, which hampers the process from the onset. An Inter-Ministerial Concession Committee (IMCC) chaired by the National Investment Commission (NIC) includes representatives from the ministries of Justice and Finance and Development Planning. The IMCC is statutorily responsible to handle bids, evaluate, award, and finalize concession agreements for the government. The President of Liberia sends the IMCC-awarded concessions to the national legislature for ratification. Concession agreements become laws after having been ratified by the legislature, signed by the president, and printed into handbills by the Ministry of Foreign Affairs (MFA). Depending on contract clauses and stipulations, a re-negotiation and subsequent round of ratification may be necessary in the case of ownership transfers.
There is no primary “one-stop-shop” website for investment that provides relevant laws, rules procedures and reporting requirements for investors. However, the National Investment Commission (NIC) can provide sector-specific investment counselling and/or advisory services at investors requests. The following list of websites may help foreign investors to navigate the information, laws, rules, procedures, and reporting requirements:
- http://www.ppcc.gov.lr/ : Public Procurement & Concessions Commission (PPCC) prepares, monitors, and guides public procurement policies, procedures, and guidelines for awarding concessions;
- https://lra.gov.lr/ : Liberia Revenue Authority (LRA) collects all lawful revenues due the government, and is the custodian of the 2000 Revenue Code;
- http://www.investliberia.gov.lr/ : National Investment Commission (NIC is the investment promotion agency of the government, and chief negotiator of all concession agreements;
- http://www.mfdp.gov.lr/ : Ministry of Finance & Development Planning (MFDP) is responsible for the country’s fiscal policies, and is the custodian of the Public Financial Management Act of 2009; and http://www.moci.gov.lr/ : Ministry of Commerce and Industry (MOCI) designs policies, programs for and advises the government on development and promotion of trade, commerce and industry.
Competition and Anti-Trust Laws
In 2016, the Liberian senate passed a Competition Law that complies with the WTO requirements to encourage a free market economy by promoting fair competition, but there are no existing Anti-Trust Laws.
Expropriation and Compensation
The Investment Act guarantees against expropriation and specifies cases under which the government can legally expropriate a property. The Act 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.” The U.S. Embassy is aware of an expropriation case in which the claimant was compensated 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 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 deprive investors of substantial economic benefits from their investments.
Historically, the government favors 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 allows 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. Liberia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) Convention that guarantees the protection of foreign investments.
ICSID Convention and New York Convention
Liberia is a member of the ICSID, and the New York Arbitration Convention. The Investment Act of Liberia 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.”
See list of members of the ICSID convention at: https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=Contractingstates&ReqFrom=Main) .
See list of members of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards at: http://www.newyorkconvention.org/contracting-states/list-of-contracting-states.
Liberia’s Commercial Code (2010) is the specific domestic legislation providing for enforcement of awards under the 1958 New York Convention and/or under the ICSID Convention.
Investor-State Dispute Settlement
Liberia is a member of the International Center for Settlement of Investment Disputes (ICSID) and a signatory to the MIGA Convention that guarantees the protection of foreign investments. Liberia’s Civil Procedure Law governs both domestic and international arbitrations taking place in Liberia, but there is no specific statue governing arbitration. 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. Administering investment disputes or commercial arbitration as well as enforcement proceedings are undertaken 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. The U.S. Embassy is aware of an expropriation case involving an American company in which the company was compensated through an out of court settlement following years of negotiations and legal proceedings. The failure of the lower court to enforce the Supreme Court’s ruling contributed to the delay in settling this case. There is no recent history of extrajudicial action against foreign investors in Liberia. As a member of the ICSID and the New York Arbitration Convention, Liberian courts are bound to recognize and enforce foreign arbitral awards issued against the government.
International Commercial Arbitration and Foreign Courts
The Investment Act of 2010 protects the right of investors to settle disputes either through the judicial system or through alternative dispute resolution (ADR) mechanisms. Concerning dispute settlement procedures, parties to an investment dispute may specify any arbitration, or other dispute resolution procedure upon which they agree. The Investment Act states that, “where a dispute arises between an investor and Government in respect of an enterprise, all efforts shall be made through mutual discussion to reach an amicable settlement.” Private entities entering into investment contracts with the government frequently include arbitration clauses specifying dispute settlement outside of Liberia. The Liberian Constitution provides for separation of powers where the judicial system remains independent of the executive branch. However, the general weakness of the overall judiciary suggests that the current judicial process is 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.
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.