Transparency of the Regulatory System
The Sierra Leone Parliament is the country’s supreme legislative authority. Generally, Parliament enacts bills that the President signs into law. The judiciary interprets and applies the laws to ensure impartial justice and provides a mechanism for dispute resolution. However, the regulatory system is not entirely consistent with international norms. Laws and regulations are developed at the national level, and the Constitution requires publication of proposed laws and regulations in a government journal, the Gazette, for 21 days.
A series of legislative reforms have been carried out since the second trade policy review in 2017 to create a conducive business environment and attract FDI. These include the Arbitration Act, Environmental Protection Agency Act, Anti-Money Laundering Act, the Banking Act, the Bank of Sierra Leone Act, the Extractive Industries Revenue Act, and several Finance Acts, to name a few. To strengthen the legal, regulatory, and institutional frameworks, Sierra Leone established the National Investment Board, the Credit Reference Bureau, the Corporate Affairs Commission, revised the legislation of company activities, and developed the Local Content Policy.
Also, Sierra Leone has taken steps to promote and improve regulatory transparency. The Right to Access Information Commission was established in 2014 to make government records available to the public and imposes a penalty for failure to make information available. Sierra Leone joined the Open Government Partnership (OGP) in 2014, an initiative that empowers citizens to fight corruption and promotes transparent and accountable governance. The OGP, now led by the National Council for Civic Education and Development (NaCCED), made significant progress in access to justice, gender, education, and open Parliament, thereby assuring citizens of government’s commitment to provide for the public and to consolidate democracy. In 2020, Parliament passed the Independent Commission for Peace and National Cohesion law and repealed Part 5 of the Public Order Act of 1965 that criminalized libel. In 2021, the government enacted the Cyber Security and Crime Act, signed the abolition of the death penalty, created a fast-track court to try sexual offenders, and in 2022 signed into law the Gender Equality and Women’s Empowerment Act.
The Audit Service Act of 1998 established the Audit Service Sierra Leone (ASSL) and further strengthened to carry out audits of all government entities, including statutory corporations and organizations by the Audit Service Act of 2014.
Sierra Leone became a member of the Extractive Industries Transparency Initiative (EITI) in 2008, established the Sierra Leone Extractive Industries Transparency Initiative (SLEITI), and became compliant with EITI rules in 2014. In 2019, the EITI Board agreed that Sierra Leone had made meaningful progress in implementing the EITI Standard but should undertake corrective actions before the second validation in December 2020. However, in 2020, recognizing the challenges associated with the COVID-19 pandemic, the EITI Board introduced flexible measures in EITI implementation and tasked the multi-stakeholder group (MSG) to focus on ensuring EITII’s commitment to transparency and accountability. In 2022, SLEITI achieved an overall score of 87.5 percent in implementing the 2019 EITI standard comprising stakeholder engagement, transparency, and outcomes and impacts.
The Public Financial Management Act of 2016 reformed the budget process and improved transparency in the expenditure of public funds. The Fiscal Management and Control Act of 2017 directed government ministries, departments, and agencies (MDAs) to transfer all revenues into the Treasury Single Account, domestically referred to as the Consolidated Revenue Fund (CRF).
International Regulatory Considerations
Sierra Leone joined the General Agreement of Tariff and Trade (GATT) in 1961 and the World Trade Organization (WTO) in 1995. Sierra Leone is committed to the multilateral trading system and has not notified the WTO of any inconsistent measures with the WTO’s Trade-Related Investment Measures (TRIMs) obligations. It acceded to the Kyoto Protocol in 2006 and the International Convention on the Simplification and Harmonization of Customs Procedures, otherwise referred to as the Revised Kyoto Convention in 2015. It became a contracting party to the International Convention on the Harmonized Commodity Description and Coding System (HS Convention) in 2015. It replaced its pre-shipment inspection with a destination inspection in 2009 and notified the WTO of the Agreement on Trade facilitation in May 2017. The Customs Act of 2011 upheld the WTO Customs Valuation Agreement, which prohibits the use of arbitrary or fictitious values. However, it has not notified the WTO of its sanitary and phytosanitary legislation required for the international movement of any plant materials or products or any state-trading activity.
Sierra Leone is not a signatory to any plurilateral agreements concluded under the WTO but established a mission to the WTO in 2011. It ratified six multilateral investment agreements, including the International Center for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA) Conventions, so that foreign investments in Sierra Leone are covered against non-commercial risks such as currency transfer risks, expropriation risks, risks of war and civil disturbance, and repudiation risk.
Legal System and Judicial Independence
The legal system is derived from the English common law system, but local courts apply customary law to many disputes outside of the capital, Freetown. The courts provide a venue to enforce property and contract rights. The country does not have a consolidated written commercial or contractual law, and disparate pieces of legislation sometimes lead to the uneven treatment of commercial disputes.
The Superior Court of Judicature consists of the Supreme Court, the Court of Appeal, and the High Court, while the lower courts consist of the magistrate court and the local courts. In 2010, Sierra Leone created a Fast-Track Commercial Court to reduce the duration of commercial cases to as low as six months. In 2017, Sierra Leone hosted a commercial law summit to address gaps in the justice system, resulting in concrete recommendations in critical areas, including arbitration, anti-corruption and bribery, public-private partnerships, and reform of the court process. The Judiciary established a special court in 2019 to sit on cases of noncompliance with National Social Security and Insurance Trust (NASSIT) Act and to try corruption indictments.
Foreign investors have equal access to the judicial system, which is slow and often subject to financial and political influence. However, Sierra Leonean courts may acknowledge foreign judgment from specific jurisdictions with reciprocal enforcement arrangements with Ghana, Nigeria, Guinea, and the Gambia. Generally, Sierra Leonean courts do not apply foreign law, but foreign judgment can be enforced when registered with the high court. However, the registration may be refused when enforcement is contrary to public policy.
On depositing its instrument for accession to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), Sierra Leone became the 166th state party to the Convention, which came into force in January 2021. The Arbitration Act of 1960 was repealed and replaced the Arbitration Act of 2022, which incorporated the New York Convention regarding awards made in Sierra Leone. Recommended during the inaugural Commercial Law Summit of May 2017, the accession will promote FDI by resolving disputes by arbitration without interference from local courts and will enforce arbitral awards consistently and predictably.
Laws and Regulations on Foreign Direct Investment
The Companies Act of 2009, the Registration of Business Act of 2007, and their subsequent amendments are the primary laws governing the registration of all businesses before commencing operations. The Corporate Affairs Department of the National Investment Board deals with the incorporation of companies. In contrast, the Office of the Administrator and Registrar General (OARG) deals with sole proprietorships and partnerships, with the process streamlined into a one-stop shop.
Sierra Leonean law 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 for customs exemptions, allows investors to repatriate proceeds and remittances freely, and protects against expropriation without prompt and adequate compensation. The law establishes a dispute settlement framework that will enable investors to submit disputes to arbitration under the UN Commission on International Trade Laws (UNCITRAL). Furthermore, the Arbitration Act of 2022 provides for enforcing and recognizing arbitral awards, an important tool to protect investors and promote foreign direct investment in Sierra Leone.
Sierra Leonean authorities do not screen, review, or approve foreign direct investments. Companies must register to do business in Sierra Leone, and there are no reports that the registration process has blocked investments or discriminated against investors. In the case of investment guarantees, the government established specific procedures with the U.S. government in agreements signed on December 28, 1962, and November 13, 1963, whereby Sierra Leone authorities approved external investment guarantees in Sierra Leone. Additional information about the laws and regulations applicable to foreign investments is available on the SLIEPA website: https://www.sliepa.gov.sl/.
Competition and Anti-Trust Laws
Sierra Leone does not have a competition law. The European Union and the United Nations Conference on Trade and Development (UNCTAD) have supported the Ministry of Trade and Industry’s attempt to develop a competition policy. This ministry oversees the regulation of anti-competitive practices. Whereas consumer protection has been passed, the cabinet has approved a competition policy but awaits parliamentary ratification.
Expropriation and Compensation
The Constitution authorizes the government to confiscate property only when necessary, in the interest 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 other independent authority to consider legality, determine the amount of compensation, and ensure prompt payment.
ICSID and New York Convention
Sierra Leone became a party to the International Convention on the Settlement of Investment Disputes (ICSID) in 1966 to arbitrate investment disputes and enforce ICSID awards.
Additionally, Sierra Leone became the 166th state party of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in January 2021. In September 2022, Parliament repealed and replaced the Arbitration Act of 1960, with the Arbitration Act of 2022 to incorporate the New York Convention.
Investor-State Dispute Settlement
Investment disputes in Sierra Leone can take a long time to resolve, given the slow pace of bureaucracy and substantial court backlogs. The Embassy is aware of several past investment disputes involving U.S. companies, but all cases that have been brought to the Embassy’s attention have been resolved.
International Commercial Arbitration and Foreign Courts
Sierra Leone acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in 2020. In 2022, the Convention was domesticated when the Arbitration Act Chapter 25 of the Laws of Sierra Leone 1960 was repealed and replaced with the Arbitration Act No.18 of 2022, which included the New York Convention.
The Investment Promotion Act 2004 allows investment disputes to be referred to arbitration following 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 Public-Private Partnership Act of 2014 also provides for international arbitration in 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 public offices and practicing certain professions. The Bankruptcy Act 2009 also encourages and facilitates reorganization as an alternative to liquidation.
After passing the Credit Reference Act in 2011, Sierra Leone established a Credit Reference Bureau within the Bank of Sierra Leone, mandating all financial institutions to give all information regarding loan applications for credit history checks. The credit history checks will detail all outstanding loans, when and where a loan was taken, and the repayment history guiding financial institutions in their loan decision. The Bureau now operates a digital identification system to control credit information and ensure citizens have secure and complete ownership of their data and information, transforming the financial inclusion landscape.