Transparency of the Regulatory System
In general, the laws of the country are transparent, including those to foster competition. However, the legal and regulatory environment is underdeveloped, and at times opaque and unpredictable. For instance, Swaziland does not have an approved trade policy, investment policy, or industrial policy.
There are no regulatory processes managed by nongovernmental organizations or private sector associations. Foreign investors coming into the country can join the Federation of Swaziland Employers and Chamber of Commerce (FSE&CC) on an equal basis with nationals of the country. This association is the link between the private sector and the government. There are no informal regulatory processes that apply to foreign investors. Local businesses who wish to establish trading infrastructure on Swazi Nation Land (SNL) must be members of the Swaziland Commercial Amadoda (who have had exclusive rights on trade and transport on SNL since 1947). Investors wishing to establish trade on SNL are normally facilitated by government through SIPA or the line ministry.
The rule-making and regulatory authority lies with the central government and may be allocated by the relevant line ministry to a department, parastatal, or board. The primary custodian of policy and regulation is the minister responsible for the relevant law. All laws, regulations, and policies are applied at a national level.
Proposed laws and regulations are published in the government Gazette and have a public comment period of thirty days prior to a bill’s presentation to parliament. Ministries sometimes consult with selected members of the public and private sectors through stakeholder meetings. Most draft regulations are not available online, but can be acquired in hard copy through the government printing office.
International Regulatory Considerations
Swaziland is part of four distinct economic blocks: the Common Monetary Area (CMA), the Southern African Customs Union (SACU), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). The standards of membership in these blocks are primarily based on British law and have been domesticated accordingly into each context.
Swaziland is also a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
Swaziland has a dual legal system consisting of a set of courts that follow Roman-Dutch law and a set of national courts that follow Swazi law and custom. The former consists of a Court of Appeals (Supreme Court) and a High Court, in addition to magistrate’s courts in each of the four districts. The traditional courts deal with minor offenses and violations of traditional Swazi law and custom. Sentences in traditional courts are subject to appeal and review at the Court of Appeals and High Court. The western-style court system enforces contracts and property rights.
The country has various written commercial and contractual laws. Commercial and contractual disputes are handled in the magistrate court or High Court depending on the magnitude of the case. There are no specialized commercial courts, however, the government is in the process of incorporating a Small Claims Court as an additional resource in the judicial system. There is an Industrial Court that hears industrial relations matters.
The courts are generally independent of executive control or influence, however the judiciary has been subject to some criticism in recent years. The current judicial process is procedurally competent, fair, and reliable, although the capacity of the judiciary to handle cases in a timely manner is extremely limited and case backlogs are prevalent.
Enforcement of laws and regulations is appealable up to the Supreme Court.
Laws and Regulations on Foreign Direct Investment
The Swaziland Investment Promotion Act of 1998 established SIPA and provides for the freedom of investment, protection of investment, and non-discrimination on the part of the government with respect to investors. The Competition Act of 2007 stipulates anti-competitive trade practices, requirements for mergers and acquisitions, and protection of consumer welfare. The Economic Recovery Strategy identifies the need to promote further reforms in order to facilitate investment.
The Swaziland Investment Promotion Authority (SIPA) helps navigate the laws, rules, procedures, and registration requirements for foreign investors and is meant to be a “one-stop-shop” for investors, although in practice that it not a reality. SIPA’s website is: www.sipa.org.sz .
Competition and Anti-Trust Laws
The Competition Act came into force in 2007 and the Competition Commission Regulations came into effect in 2011. The Swaziland Competition Commission (SCC) is a statutory body charged with the administration and enforcement of the Swaziland Competition Act of 2007. However, it is still at the formative stage and currently only regulates mergers and acquisitions. It does not yet have the capacity to prosecute anti-trust and anti-competitive behavior.
Expropriation and Compensation
The law prohibits expropriation and nationalization. There have been no known cases of foreign-owned businesses being expropriated and generally, when disputes have arisen, there has been due process to the level of international tribunals. However, the land tenure system in Swaziland can pose challenges to foreign investors. There are two major categories of land tenure: Swazi Nation land and title deed land, with each subject to different rules and procedures.
In 2010, there was a dispute on a 99-year lease on title deed land with a joint South African/Swazi company developing a tourist business in the southern part of Swaziland bordering South Africa. The disputed facility was a lodge and was supposed to be a trans-frontier park between Swaziland and South Africa housing wildlife. The King tried to cancel the 99-year lease agreement with the foreign investor and the owners of the facility appealed to the High Court, but a settlement was never reached.
In 2014, a dispute emerged involving a foreign investor in the iron ore mining business. The investor was accused of misrepresenting his operational costs and complained he was driven out of the country by the king’s advisors. He accused the government and king of destroying the business to avoid repaying a loan the company had provided to the king. The mining business closed after three years in operation and the company complained that they lost tens of millions of USD in investment and lost earnings. The closure of the company also left many Swazi contractors with unpaid compensation amounting to over E40 million (approximately USD $3 million).
ICSID Convention and New York Convention
Swaziland is a member state of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Swaziland is not a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
There is no specific legislation providing for enforcement of awards under international conventions, but the Swazi legal system has effectively enforced court decisions and international arbitration awards in the past.
Investor-State Dispute Settlement
Swaziland is a member state of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the Multilateral Investment Guarantee Agency (MIGA). As a member of SACU, Swaziland signed a Trade, Investment and Development Cooperative Agreement in 2008 with the U.S. There have been no claims under this agreement.
There have been at least two major investment disputes involving foreign investors in the past ten years, as described in the Expropriation and Compensation section above, but none involving U.S. citizens.
The Swaziland government accepts binding international arbitration of investment disputes between foreign investors and the state. Any agreement with international investors/parties includes a clause stating where arbitration will take place and which laws will apply. Local courts recognize and enforce foreign arbitral awards issued against the government, but do not have jurisdiction against the King, as he is constitutionally protected. This has become an issue in the few disputes that have arisen involving companies that are partly owned by the King and the GKOS that have invested in natural resources.
International Commercial Arbitration and Foreign Courts
The only alternative dispute resolution (ADR) mechanism available to settle disputes between two private parties is in the labor sector. The Conciliation, Mediation and Arbitration Commission (CMAC), which is governed by the Industrial Relations Act of 2000, resolves employer-employee disputes. This is the only domestic arbitration body; Swaziland does not have a domestic arbitration body to deal with investment or commercial disputes.
Local courts recognize and enforce foreign arbitral awards and judgments of foreign courts.
State-owned enterprises (SOEs) are not often involved in investment disputes. In the last 10 years, there has been only one case involving an SOE (telecommunications) and it was a restraint on trade dispute in which the SOE lost the case. There have not been any complaints about the court processes as their records are available for public scrutiny as well as further appeal.
The Insolvency Act of 1955 is the law that governs bankruptcy in Swaziland. The insolvent debtor or his agent petitions the court for the acceptance of the surrender of the debtor’s estate for the benefit of his creditors. Creditors need to petition with the court and provide documents supporting their claim.
Bankruptcy is only criminalized if the debtor, trustee, or sole owner does not comply with the requirements of the creditor. For example, if he/she fails to submit documents, declare assets, or if he/she obstructs or hinders a liquidator appointed under the Act in the performance of his functions, then he/she could be found guilty of an offense.
In the World Bank’s 2017 Doing Business Report, Swaziland’s ranking in the category of Ease of Resolving Insolvency dropped to 95 from 91 the previous year, out of 190 economies.