Transparency of the Regulatory System
The government has adopted laws that have attempted to further 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 1999, the government created a regulatory authority charged with overseeing the privatization process and ensuring that transparent policies and laws are used to foster competition in the bidding process for government contracts. 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 2016 Doing Business profile, Mauritania ranked 176 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 2017, these orders are inconsistently followed and were not enforced by the government.
International Regulatory Considerations
Mauritania is a member of the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) economic block. 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 WTO requirements.
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 in 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 economic incentives to encourage importation and exportation to and from regions outside of Nouakchott and Nouadhibou. 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 the Government Procurements (“Commission de Passation des Marchés 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.
In 2003, the Mauritanian government annulled a major contract with a British company for petroleum supplies and management of storage and refining facilities in Nouadhibou. In this case, the two parties negotiated a mutually agreed upon settlement and the Government provided compensation to the British company.
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 existing 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.
In 2014, another international services company stopped its activities, claiming the government had not made payments per its contract. As of April 2017, the issue had not been fully resolved.
Kinross Gold suspended work at Tasiast mine in Mauritania, for one month, following a dispute over local employment requirements and expat work permits. The dispute was eventually resolved and the company fully resumed its activities.
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. The revised Investment Code anticipates a local International Chamber of Mediation and Arbitration of Mauritania (ICMAM) to be housed at the Chamber of Commerce, although as of April 2017, the ICMAM is awaiting approval from the Mauritanian Chamber of Commerce and the Ministry of Justice. 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 all legal disputes. Investment disputes traditionally span numerous lengthy appeals before reaching a final verdict. Though the government is looking for ways to streamline the system by providing training to judges and lawyers, court procedures are currently long and complicated. The implementation of a small-claims (less than USD 11,000) law in June 2017 provided the legal framework to for judges to handle such cases in less than one month and should alleviate some of these issues.
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 an area of concern.
The country has bankruptcy laws which carry the potential for criminal penalties. In 2015, the Central Bank revoked the operating license of Maurisbank, a national bank, after it declared bankruptcy. The director was arrested, and all holdings by bank customers were returned by the Central Bank in a manner deemed fair and just. 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.