Transparency of the Regulatory System
Sierra Leone’s regulatory system is undeveloped, as legal, regulatory, and accounting systems lack transparency and are not fully consistent with international norms.
Laws and regulations are developed at the national level, but the public has few opportunities to provide input into proposed laws and regulations. The Constitution requires proposed laws and regulations to be published in a government publication, the Gazette, for a period of 21 days. However, stakeholders assert that they often do not receive notice of relevant regulatory changes, and a proposed regulation may automatically take effect unless overturned by Parliament. The business community is represented by the Sierra Leone Chamber of Commerce, Industry and Agriculture, but the private sector and civil society have a limited role in pushing for regulatory change.
In recent years, Sierra Leone has taken various steps to promote regulatory transparency. The Right to Access Information Act 2013 makes government records and information available to the public, though its implementation has been incomplete. Sierra Leone joined the Open Government Partnership (OGP) in 2014. The Office of the Auditor General produces comprehensive and credible annual audits, and recent supplemental reports have focused on the expenditure of Ebola response funds. While the audits have identified numerous serious deficiencies and challenges, most of the Auditor General’s recommendations are not implemented by the responsible ministries, departments, and agencies. Sierra Leone joined the Extractive Industries Transparency Initiative (EITI) in 2008, and after a brief suspension for insufficient disclosures the country has been EITI compliant since 2014. As discussed above, the government has attempted to simplify and streamline various business processes, including the procedures for business registration. The enactment of the Public Financial Management Act in 2016 reformed the budget process and improved transparency in the expenditure of public funds.
International Regulatory Considerations
Sierra Leone has been a member of the WTO since July 23, 1995, and a member of GATT since May 19, 1961. Sierra Leone has never been a party to a dispute case before the WTO, and it has not notified the WTO of any measures that are inconsistent with the WTO’s Trade Related Investment Measures (TRIMs) obligations.
Legal System and Judicial Independence
The legal system is derived from the English common law system, and outside of Freetown courts also apply customary law to many disputes. The courts provide a venue to enforce property and contract rights. The country does not have a consolidated written commercial or contractual law.
The Superior Court of Judicature consists of the Supreme Court, the Court of Appeal, and the High Court. Commercial disputes brought before the High Court are generally heard by the Commercial and Admiralty Division. In 2010, Sierra Leone created a Fast Track Commercial Court, in the hope of reducing the duration of a typical commercial case from 2-3 years to 6 months. To date, the court has had minimal effectiveness due to resource limitations.
Foreign investors have equal access to the judicial system, but in practice the system is slow and often subject to financial and political influences.
Laws and Regulations on Foreign Direct Investment
Sierra Leonean law generally ensures that foreign investors may compete on the same terms as domestic firms. The Investment Promotion Act 2004 protects foreign entities from discriminatory treatment. The law creates incentives and customs exemptions, provides that investors may freely repatriate proceeds and remittances, and protects against expropriation without prompt and adequate compensation. The law establishes a dispute settlement framework that allows investors to submit disputes to arbitration in accordance with the rules of procedure of the UN Commission on International Trade Laws (UNCITRAL). Export licenses are required only for certain goods and materials. While the export of gold and diamonds must comply with internationally-accepted standards such as Kimberley Process certification, the permits required to export goods such as cocoa and coffee are issued automatically and at no cost.
Foreign companies may own or invest in Sierra Leonean entities, with limited exceptions. Small mining investments require a minority partnership with a Sierra Leonean company, the Sierra Leone National Carrier Ratification Agreement of 2012 provides preferential treatment in shipping to the Sierra Leone National Shipping Company, and the Petroleum (Exploration and Production) Act 2001 restricts licenses for petroleum exploration and production to companies registered or incorporated in Sierra Leone. Sierra Leone has also identified certain restrictions on foreign investment in its Schedule of Specific Commitments to the General Agreement on Trade in Services, from August 1995, which established limited restrictions on business services, financial services, and the maritime and airport sectors. Businesses providing such services must establish local partnerships or joint ventures.
The Local Content Policy, adopted in 2012, promotes the utilization of locally-produced goods and locally-provided services, and the employment of Sierra Leonean nationals. While failure to follow the policy previously resulted only in a denial of investment incentives, the Sierra Leone Local Content Agency Act 2016 requires compliance. More information is available below in the “Performance and Data Localization Requirements” section.
Sierra Leonean authorities do not screen, review, or approve foreign direct investments. Companies must register to do business in Sierra Leone, but the Embassy is not aware of any complaints that the registration process has been used to block particular investments or discriminate against particular investors.
The Sierra Leone Investment and Export Promotion Agency (SLIEPA), http://investsierraleone.biz , can provide additional information about the laws and regulations applicable to foreign investments.
Competition and Anti-Trust Laws
Sierra Leone does not have a competition law. The European Union and the UN Conference on Trade and Development (UNCTAD) have supported the Ministry of Trade and Industry’s attempts to develop a competition policy, but the Parliament has not yet adopted relevant legislation.
Expropriation and Compensation
There is no history of expropriation in Sierra Leone. The Constitution authorizes the government to expropriate property only when it is necessary in the interests of national defense, public safety, order, morality, town and country planning, or the public benefit or welfare. In such cases, the Constitution guarantees the prompt payment of adequate compensation, with a right of access to a court or another independent authority to consider legality, determine the amount of compensation, and ensure prompt payment.
ICSID Convention and New York Convention
Sierra Leone has been a party to the ICSID Convention since 1966. Sierra Leone is not a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Section 13 of the Arbitration Act 1960 allows foreign arbitral awards to be registered in Sierra Leonean courts and enforced in the same manner as a domestic judgment or court order. However, registration of foreign arbitral awards is not automatic but instead left to the discretion of the presiding judge.
Investor-State Dispute Settlement
Investment disputes in Sierra Leone can take a long time to resolve, given heavily centralized decision-making, the slow pace of government actions, and substantial court backlogs.
In 2016, the Embassy received multiple reports of cases where U.S. companies experienced challenges in asserting their investment interests. One company reported that the government denied regulatory approval for the firm’s acquisition of a Sierra Leonean entity in part because preference should be given to Sierra Leonean buyers. Another company reported challenges in collecting payments owed by the government in a services contract. As of March 2017, both matters are unresolved.
International Commercial Arbitration and Foreign Courts
The Arbitration Act 1960 allows investors to arbitrate disputes, but the procedures set forth in the law are outdated and not in compliance with international standards. The country does not have a central arbitral institution, and instead arbitration is conducted on an ad hoc basis, including through pretrial settlement conferences and alternative dispute resolution mechanisms before the Commercial and Admiralty Division of the High Court. The Investment Promotion Act 2004 allows investment disputes to be referred to arbitration in accordance with UNCITRAL procedures or the framework of any applicable bilateral or multilateral investment agreement.
Judgments of foreign courts can be enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1960, provided the country has a bilateral or reciprocal enforcement treaty with Sierra Leone.
The Bankruptcy Act 2009 establishes a process of bankruptcy for individuals and companies. Bankruptcy is a civil matter, but it may disqualify an individual from holding certain elected and public offices and from practicing certain professions. The Bankruptcy Act 2009 also encourages and facilitates reorganization as an alternative to liquidation. The World Bank ranked Sierra Leone 148th in the ease of resolving insolvency in 2017. While the country’s regulatory framework for bankruptcy is relatively strong, secured creditors receive only 11 cents on the dollar (compared to 20 cents throughout sub-Saharan Africa) and the proceedings cost approximately 42 percent of the estate’s value.