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. It has enacted the Competition Law, Foreign Trade Law, Intellectual Property Act and the Insolvency and Restructuring Act (Chapter 8 of Commercial Code). These laws align with existing laws, statues, policies, and regulations to promote a transparent and predictable business environment, and foster competition on a non-discriminatory basis. Generally, the legal and regulatory procedures in Liberia fall below international norms in terms of transparency, application, 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 and there is no centralized online location where key regulatory actions or their summaries are published. However, the MOCI has a portal (website) of the collection of business-related laws and regulations (http://www.moci.gov.lr/2content.php?sub=164&related=16&third=164&pg=sp ). The Liberia Legal Information Institute also maintains an online repository to access legal documents including legislative acts (http://www.liberlii.org ). 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.
Significant investment, both foreign and domestic, exists in Liberia, especially in the extractive sectors, and the government continues to streamline relevant laws to align with the WTO protocols. However, ministries and agencies often have overlapping responsibilities, which can result in inconsistent application of the laws. Some officials can be arbitrary or heavy-handed when resolving conflicting regulatory issues. Regulatory agencies include the Forestry Development Authority (FDA), which regulates issues arising in 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 owns and regulates port infrastructures; 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.
The World Bank (http://rulemaking.worldbank.org/ ) provides data for 185 economies on whether governments publish or consult with public about proposed regulations.
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 continues to standardize and harmonize 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. Liberia is a new member of the WTO, having completed negotiations of its accession terms in July 2016. The government has committed to the terms and conditions of Liberia’s membership including arrangements on Technical Barriers to Trade (TBT) and sanitary and phytosanitary (SPS) measures. The government expects to use these commitments to build up crucial trade infrastructure based on international standards to encourage fair competition in line with the WTO standards.
Legal System and Judicial Independence
Liberia has three independent branches of government. The Judicial Branch of government is vested in the Supreme Court, subordinate magistrate, and county courts. 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 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 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 (https://www.documents.clientearth.org/library/download-info/regulation-2001-revised-rules-and-regulations-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. The judicial system suffers from inadequately trained and poorly compensated judicial officers that 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 a Commercial Court consisting of a panel of judges that was established to resolve commercial transactions and contractual issues. 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 the court’s effectiveness. The court does not have a mandate to hear IP claims. There is a commission that hears claims of unfair labor practices.
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 investment 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. The Public Procurement and Concessions Act and related laws theoretically provide standardized and transparent systems, and procedures for awarding concessions and public tenders. The laws provide guidelines for requests for Expressions of Interest (EOI), International Competitive Bids (ICB), and Invitations to Bid (ITB), but they are often poorly advertised, hampering the process from the onset. If a ministry or agency proposes to grant a concession, it requests a Certificate of Concession from the Ministry of Finance and Development Planning (MFDP). Upon receipt of the certificate, the concession entity requests the President of Liberia constitute an ad hoc Inter-Ministerial Concession Committee (IMCC), which is chaired by the NIC. Statutory members of the IMCC include the Ministers of Justice, Finance and Development Planning, Labor, and Internal Affairs. The IMCC is responsible for reviewing and evaluating bids as well as negotiating, approving, and awarding concession agreements in line with the Public Procurement and Concessions Act. The President of Liberia submits the IMCC-awarded concessions to the Legislature for approval and ratification. A ratified concession becomes law after having been signed by the president and printed into handbills by the Ministry of Foreign Affairs. 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, 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;
- http://www.lra.gov.lr/ : Liberia Revenue Authority (LRA) collects all lawful revenues due the government, and is the custodian of the 2000 Revenue Code;
- http://investliberia.gov.lr/new/ : 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.
- http://www.moci.gov.lr/ : Ministry of Commerce and Industry (MOCI) advises the government and designs policies and programs for the development and promotion of trade, commerce, and industry (Note: the MOCI website is temporarily inoperable.)
Competition and Anti-Trust Laws
The MOCI is responsible for inspecting and reviewing transactions for competition-related concerns. It is also responsible for the administration, investigation, and enforcement of competition-related issues in line with the Competition Law. The law was enacted in 2016 in order to allow the government to comply with the WTO requirements to encourage a free market economy by promoting fair competition. The Government of Liberia (GOL) does not have anti-trust laws.
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.” The U.S. Embassy is aware of an expropriation case (METCO vs. NPA, 2002-2015) in which the claimant (METCO) 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 could 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 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. Liberia is a signatory to the MIGA Convention that guarantees the protection of foreign investments.
ICSID Convention and New York Convention
Liberia is a member of the ICSID Convention – 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.”
See list of members of the ICSID convention at: https://icsid.worldbank.org/en/Pages/about/Database-of-Member-States.aspx
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
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; 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. The administration of 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 BIT or FTA with an investment chapter with the United States. 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. Liberia is also a signatory to the ECOWAS Treaty containing investment-state dispute settlement (ISDS) provisions. There is no recent history of extrajudicial action against foreign investors in Liberia.
International Commercial Arbitration and Foreign Courts
The 2010 Investment Act 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 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. 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 transaction, based on the model of United Nations Commission on International Trade Law (UNCITRAL). 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. The U.S. Embassy is not aware 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. The Central Bank of Liberia (CBL) runs a Credit Reference System (CRS) which provides limited credit information on borrowers’ creditworthiness to commercial banks and non-bank financial institutions, which use the system to generate credit information on potential borrowers.