Transparency of the Regulatory System
The GOM continues to undertake various reforms to ensure that tax, labor, environment, health, or safety laws do not distort or impede investment. The legal, regulatory, and accounting systems are partially transparent and consistent with international norms. However, procedural delays impede the business and investment environment.
Certain professional associations have sectorial rule-making power that amounts to regulatory power. These professional bodies include the National Construction Industry Council, Malawi Law Society, Malawi Accountants Board, and the Employers Consultative Association of Malawi. Some of these associations require the use of local labor, local contractors, or other means to achieve localization or skills transfer to Malawians. The rule-making process is not always transparent to firms that are new to the Malawi market.
The GOM uses a mix of fiscal, financial, and regulatory instruments to administer its investment policy, and thus management and responsibility spreads across multiple ministries and agencies. Development of taxation policy is the jurisdiction of the Treasury Department in the Ministry of Finance. The Malawi Revenue Authority (MRA) is the main implementing agency for tax policy. Some regulatory incentives are within the jurisdiction of their respective ministries. The RBM administers the market-based exchange rate of the Malawi Kwacha, as well as liberal exchange controls to allow free flow of capital and earnings — repatriation of dividends, profits, and royalties. The Ministry of Home Affairs’ immigration department administers the Employment of Expatriates Policy, Temporary Employment Permits (TEPs), and business residence permit. The Ministry of Lands, Housing and Urban Development is responsible for land policy administration. Relevant government Ministries, Departments, and Agencies (MDAs) develop technical regulations and forward them to the Ministry of Justice for final review and gazetting.
In 2001, the Institute of Chartered Accountants in Malawi (ICAM) adopted the International Financial Reporting Standards (IFRS), designed as a common global language so that company accounts in Malawi are understandable and comparable across international boundaries.
Almost all proposed laws, regulations, and policies (including investment laws) are subject to public consultation before submission to the Cabinet, the Parliament, or the Ministry of Justice. However, sometimes the public notice of such consultations come late, with the effect that only insiders engage. Parliamentary procedures call for debate on drafts in relevant committees before presenting the bill to the floor for a vote. Rules allow fast-tracking bills as well.
Interested parties can generally purchase copies of recent laws from the government printing office or access them at the National Library and in the High Court libraries. An increasing number of laws are also available online at www.malawilii.org . The GOM has no central repository for technical regulations. Relevant government Ministries, Departments, and Agencies (MDAs) manage regulations. The Ministries then publish the regulations in the Malawi Government Gazette after which they form part of the schedules to relevant acts. MDA websites do not usually post these laws and regulations.
Regulations and enforcement actions are legally reviewable in the national court system. However, periodic review of regulations is not a requirement. The Ministry of Justice and Constitutional Affairs provides oversight or enforcement mechanisms to ensure MDAs follow administrative processes for developing and implementing regulations. If private individuals and entities believe MDAS did not follow procedures, they can bring a case against the government in court or seek redress through the Office of the Ombudsman.
Over the past year, the Malawi Parliament enacted the Trademarks Act of 2018, which came into force in October 2018. The Act, along with subsequent regulations, will regulate matters relating to registration and protections of trademarks, well-known marks, collective marks, certification marks and geographic indicators.
Relevant government Ministries, Departments, and Agencies (MDAs) develop technical regulations and forward them to the Ministry of Justice for final review. The MDAs then present the regulations to Cabinet for final approval and gazetting. Thereafter, relevant government Ministries, Departments, and Agencies enforce regulations under their purview.
There are no specific regulatory guidelines for reviewing regulations or conducting impact assessments, including scientific or data-driven assessments. Moreover, there are no specific criteria for determining which proposed regulations are subject to an impact assessment nor is there a specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies.
Transparency on public finances and debt obligations is mixed. Publically available budget documents provide a full picture of Malawi’s estimated revenue, including natural resources revenues, off-budget donor support, and expenditures. However, the approved budget provides expenditure data at the level of ministry vote, and not beyond. End of year financial statements detailing actual revenues and expenditures are presented alongside the budget proposal for the following financial year. The government also makes public general information about debt obligations in its Financial Statement. The Financial Statement is available at: http://www.finance.gov.mw/index.php?option=com_docman&Itemid=107 . The RBM also publishes public debt information in its quarterly economic reviews, published at: https://www.rbm.mw/Publications/EconomicReviews/#Quaterly .
In contrast to the visibility into government finances, contingent liabilities are generally unknown to the public, as the financial records of State-Owned Enterprises (SOEs) generally remain closed.
The government shares additional debt information with the World Bank for debt sustainability analysis and with the IMF for evaluation of compliance with its Extended Credit Facility (ECF), and is made public through the IMF’s release of its ECF reviews.
International Regulatory Considerations
Malawi is a member of the COMESA Customs Union and the SADC Free Trade Area, governed by the SADC Protocol on Trade. The government develops all new regulations roughly in line with the regulatory policy provisions set out by COMESA and SADC, but national regulations rule if there is a conflict.
As a member of both SADC and COMESA, Malawi is bound by their respective norms and standards. One can find details on the organizations respective websites:
Since 1995, there is no record of Malawi providing notification on draft technical regulations to the WTO Committee on Technical Barriers to Trade. The last time Malawi submitted a statement on implementation and administration of the WTO Agreement on Technical Barriers to Trade was in 2007.
Malawi signed the WTO Trade Facilitation Agreement (TFA) on July 12, 2017. Malawi has made progress on implementing the TFA provisions through the launch of a trade information portal. The portal provides all regulatory information on cross-border trade including laws, regulations, prohibitions, restrictions, technical standards, applicable tariffs, fees, procedures for license and permit application and clearance, copies of all forms and plain language instructions. One can access the portal at https://www.malawitradeportal.gov.mw/ .
Legal System and Judicial Independence
Malawi’s legal system is based on English Common Law. The judiciary consists of local courts and a local appeals court in every district. The higher tiers consist of the Supreme Court of Appeal, the High Court, and the magistrates’ courts. A chief justice and four judges, appointed by the president, preside over the High Court. It has judicial authority over all civil and criminal cases. Magistrates’ courts are located throughout the country. The High Court hears appeals from the magistrates’ courts and the Supreme Court of Appeal in Blantyre hears appeals arising from the High Court. The Commercial Division of the High Court, presided over by a single judge, deals exclusively with disputes of a commercial or business nature. The Industrial Relations Court handles labor disputes and issues relating to employment. One can access more information on the judicial system in Malawi at https://www.judiciary.mw/ .
Malawi does not have written commercial law or contractual law but has legislation that governs commercial transactions, which include the Sale of Goods Act, Companies Act, Employment Act, Hire Purchase Act, Insolvency Act, Control of Goods Act, among others. By local standards, the Commercial Courts work efficiently. There is an established mediation process to promote agreements prior to court proceedings. Enforcement of judgments can be slow.
Both foreign and domestic investors have access to Malawi’s legal system. Heavy caseloads, staffing limitations, and inadequate funding, however, can contribute to delays. Critics have questioned the judicial system for the ease with which court-granted injunctions can contribute to backlogs. The judicial system is independent of the executive branch and interference is not apparent to observers.
Regulations and enforcement actions are appealable and adjudicated in the national court system. In the financial sector, regulations and enforcement actions are appealable through the Financial Services Appeals Committee. If the decision by the Appeals Committee is not accepted, local and foreign investors are free to seek judicial review through the High Court of Malawi.
Laws and Regulations on Foreign Direct Investment
Key laws implemented last year include The Trademarks Act of 2018, The Corrupt Practice (Amendment) Act of 2019, The Reserve Bank Act of 2018, The Tobacco Industry Act of 2018, and The Mines and Minerals Act of 2018. The Malawi Investment and Trade Center (MITC) operates a One Stop Center and assists foreign and domestic investors to navigate relevant regulations and procedures. MITCs website is at https://www.mitc.mw/index.php .
Competition and Anti-Trust Laws
The government established the Competition and Fair Trading Commission (CFTC, www.cftc.mw ) in 2005. Since 2013, the institution has overseen 26 applications for merger and acquisition and dismantled five cartels. The CFTC safeguards competition by regulating and monitoring monopolies, protecting consumer welfare, and ensuring fair market conditions. So far, the CFTC has approved all mergers and acquisitions. CFTC decisions may be appealed, first to the Board and subsequently to the Commercial (High) Court.
Expropriation and Compensation
Malawi’s constitution prohibits deprivation of an individual’s property without due compensation. There are laws that protect both local and foreign investment. However, measures that carry expropriation effects are occasionally imposed, including export bans (and implicit bans due to the government’s authority to require export licenses for any good at any time) for key commodities. These restrictions apply equally to foreign and domestic investors.
The government can employ land acquisition procedures set forth in the Land Acquisition Act of 2016. Accordingly, the government must justify its acquisition is in the public interest and pay fair market value for the land. If the private landowner objects to the level of compensation, it may obtain an independent assessment of the land value. According to the Act, however, such cases may not be challenged in court; the Ministry of Lands, Housing, and Urban Development remains the final judge. In most cases, land is expropriated to give way to development projects, most commonly, the construction of roads. Some have refused to relocate due to disagreements; however, these cases are usually settled amicably.
ICSID Convention and New York Convention
Malawi has not ratified the New York Convention but has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. As a member of the International Centre for Settlement of Investment Disputes (ICSID), Malawi accepts binding international arbitration of investment disputes between foreign investors and the GOM. Malawi’s current president is a former arbitrator for ICSID. The Investment Disputes (Enforcement of Awards) Act of 1966 makes provision for the enforcement in Malawi of awards of the Tribunal of the International Centre for Settlement of Investment Disputes.
Investor-State Dispute Settlement
The government is not a signatory to a treaty or investment agreement in which binding international arbitration of investment disputes is recognized, such as to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Nor does Malawi have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter within the United States. Since 1996, there have been no known major investment disputes involving U.S. companies.
The court system in Malawi accepts and enforces foreign court judgments registered in accordance with established legal procedure. There are reciprocal agreements among Commonwealth countries to enforce judgments without this registration obligation. There is no such agreement between Malawi and the United States, but judgments involving the two countries can still be enforced if the judgment is registered appropriately in Malawi. There have been no known extrajudicial actions taken against foreign investors in the recent past.
International Commercial Arbitration and Foreign Courts
With respect to litigation, cases commenced in the High Court of Malawi or a subordinate court must, where the defendant indicates an intention to defend, first go to mediation. The Assistant Registrar of the High Court maintains a list of mediators and experts. A mediator chosen by agreement of the parties conducts the mandatory mediation. If the matter is not settled during mediation, the action will proceed in the court in which it was commenced.
Malawi does not have an arbitration body. There is no statutory requirement for parties who have contractually agreed to arbitration to go through mediation. Parties will only be required to go through mediation before proceeding to arbitration if their agreement stipulates it. As in the case of Investor-State Dispute Settlements, the court system in Malawi accepts and enforces foreign court judgments that are registered locally. Statistics and information on investment disputes involving SOEs are not readily available.
The courts govern all bankruptcies under the provision of the consolidated Insolvency Act of 2016. The Act encourages alternatives to bankruptcy such as receivership and reorganization and gives secured creditors priority over other creditors. Monetary judgments are usually made in the investor’s currency. Cross-border provisions of the Insolvency Act are modeled after United Nations Commission on International Trade Law model laws.