Transparency of the Regulatory System
The GOR generally employs transparent policies and effective laws largely consistent with international norms. Rwanda is a member of the U.N. Conference on Trade and Development’s international network of transparent investment procedures. The Rwanda eRegulations system is an online database designed to bring transparency to investment procedures in Rwanda. Investors can find further information on administrative procedures at: https://businessprocedures.rdb.rw/. Rwandan laws and regulations are published in the Government Gazette and/or online at http://primature.gov.rw/index.php?id=97. Government institutions generally have clear rules and procedures, but implementation can sometimes be uneven. Investors have cited examples of receiving conflicting information from different officials in one or more government departments. Investors have also cited breach of contracts and incentive promises, and the short time given to comply with changes in government policies, as hurdles to comply with regulations.
For example, the GOR submitted a 2019 draft law to Parliament banning single use plastic containers. Investors in the beverage and agro-processing sectors expressed concern that the law would have a serious impact on their operations, that alternative packaging was not available in some cases, and that the GOR did not consult effectively with stakeholders before submitting it. The law would build on a ban on the manufacture and use of polyethylene bags introduced in 2008.
There is no formal mechanism to publish draft laws for public comment, although civil society sometimes has the opportunity to review them. There is no informal regulatory process managed by nongovernmental organizations. Regulations are usually developed rapidly in an effort to achieve policy goals and sometimes lack a basis in scientific or data-driven assessments. Scientific studies, or quantitative analysis (if any) conducted on the impact of regulations, are not generally made publicly available for comment. Regulators do not publicize comments they receive. Public finances and debt obligations are generally made available to the public in reasonable time but only after budget enactment. Finances for SOEs are not publicly available but may be requested by civil society organizations with a legitimate reason.
There is no government effort to restrict foreign participation in industry standards-setting consortia or organizations. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms, but are not always enforced. The Rwanda Utility Regulation Agency (RURA), the Office of the Auditor General (OAG), the Anticorruption Division of the RRA, the Rwanda Standards Board (RSB), the National Tender Board, and the Rwanda Environment Management Authority also enforce regulations. In recent years, the OAG’s annual reports to parliament have prompted criminal investigations of alleged misconduct and corruption. Consumer protection associations exist but are largely ineffective. The business community has been able to lobby the government and provide feedback on some draft government policies through the PSF, a business association with strong ties to the government. In some cases, the PSF has welcomed foreign investors which organized other investors to positively affect government policies. However, some investors have criticized the PSF for advocating to businesses about government policies rather than advocating business concerns to the government.
International Regulatory Considerations
Rwanda is a member of the EAC Standards Technical Management Committee. Approved EAC measures are generally incorporated into the Rwandan regulatory system within six months and are published in the National Gazette like other domestic laws and regulations. Rwanda is also a member of the standards technical committees for the International Standardization Organization, the African Organization for Standardization, and the International Electrotechnical Commission. Rwanda is a member of the International Organization for Legal Metrology and the International Metrology Confederation. RSB represents Rwanda at the African Electrotechnical Commission. Rwanda notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
The Rwandan legal system was originally based on the Belgian civil law system. However, since the renovation of the legal framework in 2002, the introduction of a new constitution in 2003, and the country’s entrance to the Commonwealth in 2009, there is now a mixture of civil law and common law (hybrid system). Rwanda’s courts address commercial disputes and facilitate enforcement of property and contract rights. Rwanda’s judicial system suffers from a lack of resources and capacity, including well-functioning courts, with some cases allegedly backlogged up to five years. Investors occasionally cite what they perceive as the government’s casual approach to contract sanctity and say the GOR sometimes fails to enforce court judgments in a timely fashion. In August 2018, the GOR created a Court of Appeal in an attempt to expedite the appeal process without going to the Supreme Court and to reduce backlogs. The new Court of Appeal arbitrates cases handled by the High Court, Commercial High Court, and Military High Court. The Supreme Court continues to decide on cases of injustice filed from the Ombudsman Office and on constitutional interpretation.
A Tax Court is yet to be established in Rwanda. The RDB announced the government’s intent to create a commercial division at the Court of Appeal to fast-track resolution on commercial disputes.
Laws and Regulations on Foreign Direct Investment
National laws governing commercial establishments, investments, privatization and public investments, land, and environmental protection are the primary directives governing investments in Rwanda. Since 2011, the government reformed tax payment processes and enacted additional laws on insolvency and arbitration. The 2015 Investment Code establishes policies on FDI, including dispute resolution (Article 9). The RDB keeps investment-related regulations and procedures at: http://businessprocedures.rdb.rw.
According to a WTO policy review report dated January 2019, Rwanda is not a party to any countertrade and offsetting arrangements, or agreements limiting exports to Rwanda.
A new property tax law was passed in August 2018. The new law removes the provision that taxpayers must have freehold land titles to pay property taxes. Small and medium enterprises (SMEs) will receive a two-year tax trading license exemption upon establishment. Under the new law, the income threshold reserved for maintenance and upkeep of rented property has increased from 30 percent to 50 percent, and interest rates on loans are subtracted in the calculation of the taxable value. For residential houses (in excess of the first family home), owners pay 0.25 percent in the first year, 0.5 percent in the second year, 0.75 percent in third year, and graduate to 1 percent from the fourth year onwards. Commercial buildings are taxed 0.2 percent of the property market value in the first year, 0.3 percent in the second year, 0.4 percent in the third year, and 0.5 percent from the fourth year onwards. For industry, the rate is maintained at a flat rate of 0.1 percent of their market value to support the “Made in Rwanda” campaign to promote local manufacturing.
In April 2018, the GOR passed a new law to streamline income tax administration and to clarify the law. A number of items were added to the list of activities giving rise to taxable income. For example, the sale, lease, and free transfer of immovable assets allocated to the business now constitute taxable income. All payments made by a resident of Rwanda on services performed abroad, other than those consumed abroad, constitute taxable income. New articles were added to address transfer pricing rules, preconditions to participate in public tenders, and taxation rules for liberal professionals and consultants. The new law can be accessed here: http://www.primature.gov.rw/media-publication/publication/latest-offical-gazettes.html?no_cache=1&tx_drblob_pi1 percent5BdownloadUid percent5D=464.
Competition and Anti-Trust Laws
Since 2010, a Competition and Consumer Protection Unit was created at the Ministry of Trade and Industry (MINICOM) to address competition and consumer protection issues. Rwanda has legislation in place to regulate competition. The government is setting up the Rwanda Inspectorate and Competition Authority (RICA), a new independent body with the mandate to promote fair competition among producers. The body will reportedly aim to ensure consumer protection and enforcement of standards. RICA will serve as a regulatory body to enforce technical regulations and laws related to trade, while the RSB will continue to set quality standards for goods. To read more on competition laws in Rwanda, please visit: http://www.minicom.gov.rw/index.php?id=136.
Market forces determine most prices in Rwanda, but in some cases, the GOR intervenes to fix prices for items considered sensitive in Rwanda. RURA, in consultation with relevant ministries, sets prices for petroleum products, water, electricity, and public transport. MINICOM and the Ministry of Agriculture have fixed farm gate prices, or the market value of a cultivated product minus the selling costs, for agricultural products like coffee, maize, and Irish potatoes from time to time. On international tenders, a 10 percent price preference is available for local bidders, including those from regional economic integration bodies in which Rwanda is a member.
Some U.S. companies have expressed frustration that while authorities require them to operate as a formal enterprise that meets all Rwandan regulatory requirements, some local competitors are informal businesses that do not operate in full compliance with all regulatory requirements. Other investors have claimed unfair treatment compared to ruling party-aligned or politically connected business competitors in securing public incentives and contracts.
More information on specific types of agreements, decisions and practices considered to be anti-competitive, or abuse of dominant position, in Rwanda can be found here: https://rura.rw/fileadmin/Documents/docs/ml08.pdf
Expropriation and Compensation
The 2015 Investment Code forbids the expropriation of investors’ property in the public interest unless the investor is fairly compensated. A new expropriation law came into force in 2015, which included more explicit protections for property owners. Though Rwandan law is clear that private property will be expropriated only in the public interest and after appropriate compensation following market rates, property owners have complained about the definition of “public interest,” valuation procedures, payment levels, and timing of payments. A number of property owners have protested expropriation of their property by the City of Kigali and claimed that the compensation offered was below market value and not in accordance with the expropriation law.
A 2017 study by Rwanda Civil Society Platform argues that the government conducts expropriations on short notice and does not provide sufficient time or support to help landowners fairly negotiate compensation. The report includes a survey that found only 27 percent of respondents received information about planned expropriation well in advance of action. While mechanisms exist to challenge the government’s offer, the report notes that landowners are required to pay all expenses for the second valuation, a prohibitive cost for rural farmers or the urban poor. Media have reported that wealthier landowners have the ability to challenge valuations and have received higher amounts.
Political exiles and other embattled opposition figures have been involved in taxation lawsuits and “abandoned properties” that led to the auctioning of properties, allegedly at below market values.
ICSID Convention and New York Convention
Rwanda is signatory to the International Center for Settlement of Investment Disputes (ICSID) and the African Trade Insurance Agency (ATI). ICSID seeks to remove impediments to private investment posed by non-commercial risks, while ATI covers risk against restrictions on import and export activities, inconvertibility, expropriation, war, and civil disturbances.
Rwanda ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2008.
Investor-State Dispute Settlement
Rwanda is a member of the East African Court of Justice for the settlement of disputes arising from or pertaining to the EAC. Rwanda has also acceded to the 1958 New York Arbitration Convention and the Multilateral Investment Guarantee Agency convention. Under the U.S.-Rwanda BIT, U.S. investors have the right to bring investment disputes before neutral, international arbitration panels. Disputes between U.S. investors and the GOR in recent years have been resolved through international arbitration, court judgments, or out of court settlements. Judgments by foreign courts and contract clauses that abide by foreign law are accepted and enforced by local courts, though they lack capacity and experience to adjudicate cases governed by non-Rwandan law. There have been a number of private investment disputes in Rwanda, though the government has yet to stand as complainant, respondent, or third party in a WTO dispute settlement. Rwanda has been a party to two cases at ICSID since Rwanda became a member in 1963; one of these cases is an ongoing case brought by an American investor against Rwanda. SOEs are also subject to domestic and international disputes. In 2018, SOEs party to a suit both won and lost several judgments by the Supreme Court, while other cases were settled under arbitration.
International Commercial Arbitration and Foreign Courts
In 2012, the GOR launched the Kigali International Arbitration Center (KIAC). According to press reports, the KIAC has reviewed 100 cases worth USD 50 million in claims involving petitions of 18 different nationalities since 2012. Some businesses report being pressured to use the Rwanda-based KIAC for the seat of arbitration in contracts signed with the GOR. Because KIAC has a short track record and the location of its domicile, these companies would prefer arbitration take place in a third country, and some have reported difficulty in securing international financing due a KIAC provision in their contracts.
Rwanda ranks 58 out of 190 economies for resolving insolvency in the World Bank’s 2019 Doing Business Report. It takes an average of two and a half years to conclude bankruptcy proceedings in Rwanda. The recovery rate for creditors on insolvent firms was reported at 19 cents on the dollar, with judgments typically made in local currency.
The 2009 Insolvency Law clarified standards for beginning insolvency proceedings, preventing the separation of the debtor’s assets during reorganization proceedings, setting clear time limits for the submission of a reorganization plan, implementing an automatic stay of creditors’ enforcement actions, introducing provisions on voidable transactions and the approval of reorganization plans, and establishing additional safeguards for creditors in reorganization proceedings.
In April 2018, the GOR instituted a new Insolvency and Bankruptcy Law. One major changes is the introduction of an article on “pooling of assets” allowing creditors to pursue parent companies and other members of the group, in case a subsidiary is in liquidation. Article 121 states that “On application of the liquidator, creditor or shareholder, the court may order that:
1) any company that is or has been a related company of the company in liquidation must pay to the liquidator the whole or part of any or all of the claims made in the liquidation; 2) where two or more related companies are in liquidation, the liquidations in respect of each company must proceed together, as if they were one company, to the extent the court so orders and subject to such terms and conditions as the court may impose.”
The new law can be accessed here: http://org.rdb.rw/wp-content/uploads/2018/06/Insolvency-Law-OGNoSpecialbisdu29April2018.pdf