Introduction to the Country
Mozambique nossa terra gloriosa! Pedra a pedra construindo o novo dia!
(Mozambique, our Glorious Land! Rock by rock constructing the new day!)
(From the National Anthem of Mozambique)
The legal system is based on the Portuguese civil law system and customary law and Mozambique has not accepted compulsory ICJ jurisdiction.
Mozambique was one of the worlds poorest countries when it achieved indepdence in 1975. It suffered further due to socialist mismanagement and a brutal civil war from 1977-92 which further exacerbated the situation. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the governments revenue collection abilities. Nevertheless Mozambique is heavily reliant on international assistance for a lot its annual budget, and the vast majority of the population are impoverished.
Subsistence agriculture and farming provides the main source of employment for the majority of the working population.
Mozambiques foreign debt has been reduced through forgiveness and rescheduling under the IMFs Heavily Indebted Poor Countries programme. Further, in July 2007, the Millennium Challenge Corporation signed a Compact with Mozambique that will focus on improving sanitation, roads, agriculture, and the business regulation environment with the aim of improving economic growth in the country.
Finance and Tax matters
(a) Financial assistance
(i) Are there prohibitions or restrictions on the ability of a company to guarantee and/or give security to support borrowings incurred to finance the direct or indirect acquisition of shares of a project company; or any company which directly or indirectly owns shares in a project company; or shares in a sister subsidiary?
No. Nevertheless, please note that for the approval of both the Concession and the investment project, evidence of the companys financial capacity is required.
(b) Lending restrictions/banking monopolies
(i) Please indicate whether there are any restrictions or requirements applicable to the importation of capital by lenders to the Project.
The legal regime in force does not prevent the importation of capital by lenders to the Project. However, the relevant loan is subject to prior approval and registration with BoM for forex control purposes.
(ii) Is there a requirement for the lenders/security agent to be registered in the jurisdiction?
(iii) Can foreign lenders lend into the jurisdiction?
Yes, provided that the relevant loan is duly approved by BoM.
(c) Restrictions relating to repatriation of dividends
(i) Are there any restrictions relating to repatriating dividends?
Pursuant to the legal regime in force there are no restrictions on repatriating dividends, provided that (i) the distribution of dividends is deemed legal, (ii) all legal redemptions are made and taxes are paid and (iii) the above mentioned BoMs authorization for forex purposes is approved.
(i) Are there any restrictions on the convertibility of the jurisdictions currency?
Yes. Pursuant to the Foreign Exchange Regulations, the convertibility of currency qualifies as a foreign exchange operation. As a rule, such operations are subject to BoMs prior authorisation and registration therewith. Moreover, with respect to accounts in Metical (MZM), while non-resident entities are allowed to open and operate such bank accounts in Mozambique through a local financial institution, the balance of such accounts cannot be converted and transferred abroad.
(e) Interest payments
(i) Are there any restrictions on the payment and compounding of interest? If so, does this also affect both local and foreign lenders?
Compounding of interest is a common practice in Mozambique and specific provisions pertaining to same are often included in loan agreements. However, pursuant to the Mozambican Civil Code, so as to be enforceable compounding of interest requires either the parties to enter into an agreement when the interest is due or a court notice.
Further, as loan agreements between forex residents and foreign lenders are subject to approval by BoM, interest provisions must satisfy BoMs requirements.
(i) Withholding tax: are there any withholding tax issues in relation to interest payments and fees to foreign lenders on loans used by a project company; payment of principal on debt; or payments received under any agreements (other than any referred to above)?
Yes. Except as otherwise provided by a double taxation treaty existing between Mozambique and the lenders home country a 20% withholding tax is levied on both interest and fees paid to foreign lenders.
Moreover, where applicable, VAT is also due and levied by the rate of 17% upon the total income in connection with services rendered for consideration in Mozambique.
(ii) Double taxation treaties: please note the existence of any double taxation treaties.
Mozambique has double taxation treaties with Portugal, Macau, South Africa, Italy, Mauritius, and UAE.
(iii) Lender issues: are there any risks that lenders should be aware of in respect of tax liabilities/tax domiciliation as a result of providing debt to the project or project company and/or taking/enforcing security interests?
In principle, foreign lenders are not required to establish a presence in Mozambique, thus tax domiciliation in Mozambique is not required.
In Mozambique, a Permanent Establishment (PE) for IRPC purposes is deemed to exist whenever a non-resident company has in the country a fixed facility or permanent representation through which a commercial, industrial or agricultural activity is carried on. The existence or non-existence of a local PE is rather important in view of the different taxation regime that may apply. In fact, while foreign non-resident entities with no PE in Mozambique may benefit from a final IRPC reduced withholding, a foreign non-resident having a local PE does not benefit from such a withholding regime and is subject to the general IRPC rate of 32% on year-end profits. The foreign entity deemed to have a local PE is required to register for tax purposes and obtain a so-called NUIT â stands for Single Identification Tax Number. The PE would be required to keep organised accounts in Mozambique, file the IRPC annual return and pay IRPC directly to the tax authorities.
This said, lenders shall assess whether or not their activity in Mozambique is deemed as having a local PE. While not having a PE in Mozambique, no liabilities/tax domiciliation issues arise besides those mentioned in respect of withholding tax and VAT payment, if applicable.
(iv) Repayment and enforcement: please advise whether loan repayment / enforcement proceeds could be treated negatively from a tax perspective for the lenders.
No tax issues arise in connection with repayment and enforcement proceeds further other than those mentioned herein in respect with withholding tax, VAT and/or stamp duty, if applicable.
(g) Stamping costs
Please advise whether stamp duty or similar applies in respect of finance and security documents and security interests (and if so advise on the rate thereof), including the registration of immovable property or vehicles; security documentation; or transfer of assets on enforcement of security; or increase in share capital.
Amongst others, some finance, security, corporate and transfer documents are subject to stamp duty. The rate at which stamp duty is levied varies depending on both (i) the nature of the relevant document books, papers or legal acts and (ii) the value of the respective operation therewith.
Security, Enforcement and Insolvency
(a) Overview of security regime
(i) Can a security interest be obtained over a companys assets, e.g.:
(A) accounts receivable (book debts);
(B) inventory (stock in trade);
(C) shares of a company (issued and authorised);
(E) real property;
(F) insurances; and
(G) project contracts.
Yes, in principle, the law does not prevent to obtain security interest over a companys assets. However, that project documents and/or certain rights or property assets may be subject to prior authorisation for transfer purposes and/or may not be granted as security (e.g. land use rights). Thus, securities to be granted shall be analysed on a case-by-case basis.
(ii) Can shares of a project company validly be pledged and enforced under an English law share charge?
No. If the company is incorporated under the Mozambican Law, this is the Law that shall be applied.
(iii) Can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility?
(iv) If the borrowings to be secured are under a revolving credit facility, are there any special priority or other concerns?
(v) Can the relevant security interests be granted to a security agent or trustee on behalf of the lenders from time to time?
As a preliminary note, even though an entity such as a security trustee is not expressly provided for in the law, powers may be granted for someone to act as security agent/trustee by means of a Power of Attorney (âPoAâ).
Although, in principle, the transfer of lenders interests in credit facilities may be possible, certain consents or authorisations may be required considering each particular case, including (i) BoMs approval or (ii) the Ministry of Finances approval.
In fact, certain restrictions may arise (i) in the law, (ii) by way of the Financing Agreements entered into and/or even, in certain circumstances, (iii) the terms and conditions set out in the power production Concession Contract itself. Thus, such transfers shall always be analysed on a case-by-case basis.
(vi) Please indicate the claims that would have priority over the relevant security interests.
In principle, and in certain circumstances, only the State and local authorities would have priority over the relevant security and interests thereunder.
(vii) Is there a public security registry?
In Mozambique, there is no central registry comprising information on security documents or other alike. The Commercial Code makes reference to a mandatory book of charges and encumbrances but in practice virtually no company in Mozambique has such a book. Nevertheless, depending on the type of security placed and the relevant asset/right upon which same is granted the registration with the relevant Registry Office is mandatory (e.g. securities granted over immovable property shall be registered with the Real Estate Registry Office and securities placed upon companys shares shall be registered with the Legal Entities Registry Office).
(viii) Formalities in respect of security creation:
(A) Statutory perfection requirements;
The expatriation of monies and interest in connection with security interest in case the payee is a non-resident entity has to be approved by the Ministry of Finance and registered with BoM. The documentation to be filed with the exchange authorities typically comprises a copy of the relevant agreement and relevant security which are subject to previous approval. Moreover, and despite the above prior authorization is obtained, the permission to expatriate interest must be requested each time such payment is to be made.
(B) Any other formalities.
The law sets out specific formalities for each type of security depending on the relevant asset/right upon which same is granted. As a rule, (i) shareholder approval, (ii) notary deed, (iii) registration in the share registry book, with the Legal Entities Registry Office and/or with other relevant Registry Offices, if applicable, are required.
(C) Steps for perfection and length of time taken
Bearing in mind our response above, the steps required so as to perfect securities and/or register same with the relevant Registry Office shall also depend on the specific asset/right upon which the security is granted. As a general rule, an application to the relevant Registry Office is required and a registration fee is due.
(D) Any significant financial costs or significant time delays required to create and perfect the relevant security interest?
Yes. As previously mentioned, the law sets out specific formalities for each type of security depending on the relevant asset/right upon which same is granted. Nevertheless, as a rule, amongst others, notarial fees, registration fees and stamp duty shall apply.
(b) Insolvency and enforcement regime
(i) Is there a court or similar register that can be searched in respect of proceedings and insolvency actions?
There is no central registry, meaning that one would have to this information on a court-by-court basis upon request of the interested parties. This said, insolvency proceedings need to be registered with the Legal entities Registry and therefore a search with such Registry should provide information on the insolvency status of the company.
(ii) Summary of the different options for an insolvency related process.
Pursuant to the Civil Procedure Code, a company that is unable to fulfill its commercial obligations is deemed bankrupt. The bankruptcy status must be declared by a court. Bankruptcy proceedings may be initiated by the company itself, by its creditors or by the Attorney-General Office.
Prior to filing for bankruptcy, it is possible for the company to apply to the court having jurisdiction to convene its creditors so as to try recover from its financial distress situation. Such application must detail the causes for the bankruptcy condition, the payments cease date (if already applicable) and enclose documentary evidence of any factual circumstances claimed and on the existing creditors.
The judge shall issue an initial order appointing an administrator (and one or more creditors) to assist and monitor the action of the companys management in the running of its business and in the administration of its assets and set a date, time and place for a credits verification meeting. The main consequence of the order is the stay or suspension of most ongoing enforcement proceedings against the applicant.
After recognition of the credits, a creditors final assembly will be held, in which the creditors may agree on a composition â which may consist of a simple moratorium on the payment of the non-preferential credits or involve a reduction of the credits value.
Where a composition is not put forward by the applicant or any creditor or if a composition is proposed but is not approved by the creditors, the creditors have a further mechanism to avoid bankruptcy: subject to the favourable vote of a 75% majority of creditors, the creditors may decide to incorporate a new company to hold the assets of the company which do not secure any preferred credits. The preferred creditors will thus be paid and the other creditors will become quotaholders of the new company. If the quotaholders wish to acquire goods securing other credits, same shall pay the corresponding credit or guarantee its payment on maturity.
If the foregoing preventive / recovery measures fail â i.e., the creditors fail to agree on a composition with the debtor or on the incorporation of a new company or if these measures are rejected by the court â, the debtor will be declared bankrupt.
Declaration of Bankruptcy
The bankruptcy petition may be filed by the company itself, any creditor and/or the Attorney-General Office. There are several circumstances allowing a creditor to apply for a debtors bankruptcy, most importantly a cease of payments. The creditors petition shall lay its grounds and justify the existence of the relevant credit, and shall enclose all the evidence on which the creditor is to rely.
A court hearing shall then be held â with or without the presence of the bankrupt â and a bankruptcy judgment will be rendered if one of the grounds for bankruptcy is proved. The judgment will include the appointment of an administrator and shall set a deadline of between 30 and 90 days for creditors to file their claims, being subject to specific publication requirements. The judgement is subject to appeal and/or challenge. Once the court declares the company bankrupt, the company is barred from administering and disposing of its assets. In addition, all ongoing enforcement proceedings against the debtor are suspended or stayed.
Suspension of Bankruptcy Proceedings
After the completion of the liabilities verification process, it is nevertheless possible for the proceedings to be suspended. This may happen if (i) the bankrupt or its representatives put forward a creditorsâ composition, and (ii) the creditors or the bankruptcy administrator request the court to convene a creditorsâ assembly to decide on the merits of such a composition or on the incorporation of a new company. These measures are very similar to those of a preventive nature available prior to filing for bankruptcy.
Liquidation and Payment
At a final stage, after the liabilities verification process is concluded and all liabilities have been determined, all assets and rights included in the bankruptâs estate are then sold. Subsequently, subject to payment of certain specific expenses and credits which enjoy a special privilege, the proceeds of the sale of mortgaged or pledged assets will be forthwith allocated to settle the claims of the corresponding creditors. If such creditorsâ claims are not fully satisfied, those creditors will then join the others as ordinary creditors for the unpaid balance of their claims. Despite the foregoing, 25% of the proceeds of sale of mortgaged or pledged assets will remain in deposit with court as security for the payment of court costs and additional expenses to be assessed at the end of the proceedings.
(iii) Are summary or expedited proceedings available?
(iv) Are any governmental or other consents required in connection with:
(A) the enforcement of a security interest in shares;
(B) the enforcement of a security interest in other assets; or
(C) the enforcement of a guarantee (sovereign or otherwise)?
As a rule, the enforcement of either security interest or guarantees does not require Governmental consent.
Nevertheless, the transfer of certain assets and/or rights may require prior authorisation (e.g. the Concession License cannot be either pledged or transferred without prior Governmental consent). Moreover, where values resulting from the enforcement of securities are to be transferred abroad BoMâs authorisation is also required for forex purposes.
(v) Do lenders inherit all environmental liabilities when they become owner of the shares upon enforcement (or at any other time)?
As a rule, any entity that causes damages to the environment as a result of its conduct and/or activity is liable towards third parties. The obligation to repair arises from the environmental risk inherent to the activity developed by same. The Environment Law sets forth a strict liability regime while everyone who causes damages to the environment as a result of its conduct shall be under the obligation to repair such damages and/or pay compensation regardless of fault. Thus, the company would be deemed liable for environmental damages, even when faultless, should there be an action or inaction on the part of the company which caused same.
The law does not provide a straight answer as regards liability for historic environmental issues. Thus, it shall be assessed on a case-by-case basis. Nevertheless, in principle, the lenders themselves would not be deemed liable for environmental damages but rather the company in which they hold shares upon enforcement.
(vi) Can security interests be enforced by both private sale and public auction, and is it necessary to appoint a court or other official to carry out the enforcement?
Yes, it is required to appoint a court to carry out the enforcement which may than be performed either by private sale or public auction as the court deem fit or as otherwise provided by the law.
Corporate, Insurance and Employment matters
(a) Corporate vehicle
(i) Project company incorporation:
(A) Type of vehicle: what is the most appropriate type of corporate vehicle for a project and can you describe its key features (e.g. limited liability, shareholding requirements, share capital requirements)?
There are two main types of companies in Mozambique: (1) the joint stock corporation Sociedade Anenima de Responsabilidade Limitada (SA) and (2) the private limited liability company by quotas Sociedades por Quotas (Lda).
Since the latest revision to the Commercial Code, there is no minimum required capital to incorporate a company. Nevertheless, as per the law, share capital should be deemed fit for the relevant activity to be undertaken. A minimum of 3 shareholders is required to incorporate a SA company, whereas Lda companies require 2 shareholders.
In practice, Ldaâs are the most widely used type of company. It is a convenient form of organization for small and/or closely-held enterprises due to its less complex administrative and supervisory structure. One of the main Lda features is the fact that its members (quotaholders) are liable not only for their own capital contributions but also, jointly with the others, for all contributions necessary to pay up the companyâs share capital.
Differently, a SA has a more complex administrative and supervisory structure. It is an appropriate form of organisation for large and widely held enterprises
Typically, a SA is an attractive structure when a large number of shareholders are involved or otherwise it is important from the standpoint of marketing to clients to show a more robust form of company. Another reason to opt for a SA is the ability to hide the identity of the shareholders through the issuance of bearer shares. This is not possible in a Quota Company as the names of the shareholders are subject to public record in the relevant Articles of Association and in the Legal Entities Registry Office.
From a tax standpoint, there are no substantial differences between the two types of company.
(B) Thin capitalisation: are there any issues relating to thin capitalisation?
Yes. Pursuant to the CIRPC provisions, where shareholderâs loans overlap twice the companyâs share capital, interest on the surplus can not be deducted as tax prejudice.
Moreover, please note that, as per the Mozambican Commercial Code, the companyâs net position be less than 50% of its share capital, the board shall propose either the companyâs dissolution or the share capital reduction, except where the shareholders decide to contribute cash to reinstate the share capital amount.
(C) Indigenous shareholdings: We have come across requirements in certain jurisdictions to have a specific percentage of shares in a project company held by nationals of the jurisdiction. Please advise whether any such requirements apply in the country. Please indicate any prescriptive requirements or limitations in respect of incorporating a special purpose company such as:
(I) Requirement for a certain amount of equity to be held by indigenous entities;
For power companies the law does not require any amount of equity to be held by Mozambican nationals.
(II) Thin capitalisation requirements;
Please see above.
(III) Can a limited liability company be established?
Yes. Please see above.
(IV) Is it possible to use a foreign company or a branch of a foreign company to act as project company?
The law does not prevent foreign companies to act as Project Company. Nevertheless, in practice, either a subsidiary or a branch shall be used so as to develop a power project. Otherwise same would hardly be approved.
(D) What is the estimated timescale for incorporation in the country? Are there any specific fees or other costs payable to governmental authorities in respect of incorporation?
It is not easy to provide an estimate timescale for companys incorporation and/or registration purposes while it will always depend on various circumstances. Nevertheless, it is worth to mention that as a result of GoMâs strategy for improving the business environment in Mozambique up until 2012, certain conditions for timescale reduction are being implemented throughout the country.
As a result, at present and in normal circumstances, incorporation and registration of companies usually takes roughly one month. However, the reduction of certain bureaucratic procedures is still required, and the extension and full implementation of GoMâs strategy abovementioned in all provinces is mandatory.
Costs payable to the relevant authorities i.e., MIC, Legal Entities Registry Office, Notary Office and Oficial Gazzette are levied both on the share capital value and on the length of the Articles of Association approved. Thus, there are not fixed costs and, should that be of interest, the applicant shall request and estimative prior to the incorporation of the company and/or registration of the branch.
(b) General corporate issues
(i) Is a private company free to lend and/or issue guarantees?
Yes, provided that the law does not prevent the relevant assets/rights to be issued as guarantees.
(ii) Are there any restrictions on dividend distribution?
Yes. Dividends may not be distributed where (i) losses from previous exercises have not yet been covered/reimbursed and (ii) where the legal or statutory reserve has not been catered for. Moreover, the distribution of dividends is subject to prior resolution of the board or the General Assembly which shall describe the profits, the available reserves and the total amount to distribute.
There may also exist dividend repatriation limitations where the foreign shareholder of Mozambican company is not covered by a duly approved investment project.
(i) Mandatory insurance: are there any insurances which the project company or the Project is required to have by law (or regulations or similar)?
Yes. The Mozambican law sets forth certain mandatory insurances applicable to the project as follows:
Power Industry The Electricity Law sets forth that power companies shall grant security by means of an insurance policy covering (i) losses and/or damages to premises, or equipment, (ii) property loss or damage or bodily injury suffered by any third party in the course of the operations (iii) liability to employees engaged in the operations, and (iv) any third party liability resulting from the operations.
Moreover, please note that Concession Contracts and/or PPAs may also include insurance clauses requiring those engaged in power projects to keep insurance of such type and in such amount as is customary for similar projects in the international power industry and in accordance with international good practices. Such insurance may cover (i) loss or damage to the machinery, equipment and other assets acquired or used in the operations, (ii) property losses or damages or bodily injuries suffered by any third party in the course of the operations, (iii) liability to employees engaged in the operations, (iv) any third party liability resulting from the operations. As a rule, the insurance shall have a minimum value which shall also be set out in the Contract.
Environment The Environmental Law sets forth that everyone performing activities bearing a high risk of environmental degradation must take out third party liability coverage.
Workers compensation The Labour Law determines that employees must have collective insurance so as to cover work-related accidents and occupational diseases and, in case of activities comprising high professional risks. The relevant insurance policy must cover all employees subject to such risks.
Motor vehicles third party liability insurance is mandatory for all motor vehicles.
(ii) Is there any minimum requirement to place the insurance with local insurers or any other similar restrictions? If so, can reinsurance be lawfully placed internationally?
As a rule, pursuant to the Insurance Law and the Insurance Regulations, only Mozambican insurance and reinsurance companies and Mozambican branches of insurance and reinsurance companies with registered offices abroad are allowed to carry out the insurance and reinsurance business in the country, provided that it has been authorised by the Ministry of Finance for such purpose and is registered with the Insurance General Directorate (Inspector General de Seguros IGS).
The above statutes also limit the execution of insurance policies abroad by an insured or the policyholder. Nevertheless, taking out insurance abroad may be authorised by IGS in the following cases (i) when it is evidenced that the local authorised insurers have refused to subscribe the policy, or (ii) when it is evidenced that the foreign insurers offered better conditions than those offered by the local insurers.
Again, please note that Concession Contracts and/or PPAs may also include insurance clauses pertaining to insurance policies placed internationally as is customary for similar projects in the international power industry and in accordance with international good practices.
(iii) Are there any restrictions in respect of granting security rights over the insurances or reinsurances?
In principle, the law does not prevent granting securities over the insurances or reinsurances. Nevertheless, certain restrictions may indeed arise including, but not limited to, (i) regulatory consents so as to grant such securities notably by way of assignment and (ii) foreign exchange authorisation where payments to non-resident entities are required. Thus, this issue shall always be assessed on a case-by-case basis.
(i) Legislative/regulatory issues: is there any legislation or regulation impacting on foreign employees, in particular the conditions relating to work and residence permits? Please give an indication of the process and costs in relation to obtaining work and residence permits.
Yes. The rendering of work in Mozambique by foreigners has both labour and immigration implications.
As a general rule, expatriate employees are only entitled to work in Mozambique under a Mozambican law employment contract entered into with a Mozambican employer (either a Mozambican company or the Mozambican branch of a foreign company) under the following regimes:
Communication (or Quota) Regime
Depending on the total number of employees (with reference to the previous calendar year), a given percentage of foreigners may be hired by means of simple notice to the Ministry of Labour as follows (i) 5% for companies having more than 100 employees, (ii) 8% for companies having between 10 and 100 employees and (iii) 10% for companies having up to 10 employees.
Under this regime, the employer is required to notify the foreign employeeâs admission to the relevant Provincial Labour Department, describing the level of implementation of the available expatriate quota after the relevant admission and enclosing both the corporate and the employeeâs documentation as required.
Whenever the employer has reached its expatriate quota, the hiring of additional foreigners is subject to a prior authorisation from the Ministry of Labour. This authorisation is granted by the Minister on a case-by-case basis, and provided that the following compulsory requirements are met (i) inexistence of Mozambican nationals qualified to carry out the work in question, and/or (ii) insufficient Mozambican nationals duly qualified to meet the demand.
Short Term Assignments (STA) Regime
Pursuant to the Expatriate Regulations, expatriates are entitled to work in Mozambique for short terms of up to thirty (30) days, renewable for a maximum of ninety (90) days per year. Thus, STAs are neither subject to the quota regime, nor to authorisation from the Ministry of Labour. In this case, the employer shall rather submit a letter to the relevant Provincial Labour Authority.
Investment Projects Regime
Investment projects duly approved by CPI may provide a specific hiring regime by setting forth either a different percentage for the quota regime or other specific rules for expatriate hiring purposes. Therefore, the expatriate hiring procedure would be simpler, for the employer would only need to attach to the communication to the labour authorities a copy of the relevant investment projects terms of authorisation expressly stating the number of foreign workers to be admitted and/or any other approved hiring conditions.
Expatriates working in Mozambique without a work permit obtained pursuant one of the foregoing hiring regimes are deemed to be illegally working in the country. If a labour inspection identifies such a situation, the relevant expatriate worker will be immediately suspended and severe fines may be applied both to the employer and to the expatriate. Under certain circumstances, the Minister of Labour may further prevent foreign workers to develop any further activity in the country and/or expel them from Mozambique.
(ii) Foreign restrictions: are there any restrictions that apply to foreign employees and foreign contractors/subcontractors and if so what do they need to do in order to comply with local legislation?
Notwithstanding the above mentioned, the Labour Law sets forth that the employer shall procure to provide national workers with work positions of high technical complexity and/or management in the company. On the other hand, the law also sets forth that foreign employees shall have equal treatment under the terms of International Rules and applicable reciprocity clauses. Please also refer to our response to (i) above.
(a) Land registry: is there a land registry (or similar) in the country that can be searched to confirm whether a project company has granted of any mortgage, charge, option assignment, lien or other encumbrance over the whole or part of the properties or assets of a company?
In Mozambique, the land is property of the State. The use and exploitation of the land required for power projects is governed by the provisions set out in the Land Law and the Land Law Regulations. As a general rule, projects requiring land use rights are subject to prior award of a land use and exploration rights (DUAT). Thus, in Mozambique there are no ownership rights in connection with land, and same cannot be sold, traded, mortgaged or otherwise disposed of.
There is a Real Estate Registry Office in Mozambique, which aims to publicize the legal situation of the real property, namely its description, ownership, mortgage, covenants or other charges concerned. Land use rights may be registered therein even though no mortgage or other charges may be granted over same. Buildings erected within the land may be granted as security though, and same shall also be registered with the Real Estate Registry Office.
(b) Landlords rights: please indicate whether there are any rights which accrue to the landlord (or the government or any other bodies) that may override the terms of a land lease or threaten the rights of a project company particularly any right of repossession or acquisition.
Please refer to our response to section above.
In Mozambique, the land is property of the State but DUATs may be granted by means of application of the interested parties. Depending on extension of land required, DUATâs shall be issued by following authorities (i) Provincial Government up to 1000ha, (ii) Ministry of Agriculture between 1000ha and 10.000ha, (iii) Council of Ministers more than 10.000ha. A public consultation shall precede the issuance of the relevant DUAT. This process is guided by the Geographic and Cadastral Services. An annual fee is due levied on the extension of the land granted.
Definitive authorizations usually are valid for fifty years, renewable. Nevertheless, the relevant authorities may revoke the DUATs granted where the investment project approved is not complied with. Under this scenario building and/or other equipment installed in the land shall revert to the State.
Finally, it is worth to mention that the Investment Law provides the obligation of the State to ensure the protection and safety of the assets and rights included within the approved investments, requiring the payment of fair compensation for nationalization or expropriation.
(c) Direct agreement: are you aware as to whether a direct agreement in respect of a lease has been previously been provided to lenders on other transactions?
Please refer to (a) and (b) above.
(d) Forfeiture rights: do relief from forfeiture rights exist and would the lenders be entitled to rely on such rights?
Please refer to (a) and (b) above.
(e) Is there any additional legislation governing property rights?
As a rule, property rights are established in the Mozambique Constitution and the Mozambican Civil Code.
Nevertheless, with regards to land issues please refer to our responses to (a) and (b) above.
(f) Are there any formalities with which lenders need to comply when enforcing security over land?
Please refer to (a) and (b) above.
International law and arbitration
(a) Supra-national treaties
(i) List all Bilateral Investment Treaties to which the country is party.
Mozambique has bilateral investment treaties and trade agreements with Portugal, USA, Zimbabwe, Malawi and China.
The country has also entered into Preferential Trade Agreements with the Republic of Zimbabwe and the Republic of Malawi.
Amongst others, Mozambique also has trade and mutual protection agreements with Angola and Brazil and is a member to the Southern Africa Development Community (SADC).
(ii) Is the country a signatory to the Energy Charter Treaty?
Mozambique is not a signatory to the Energy Charter Treaty.
(i) Requirements and restrictions applicable to the choice of arbitration roles and place of arbitration
The Mozambican legal framework governing arbitration is set forth in the Arbitration, Conciliation and Mediation Law (ACML), a fairly modern and sophisticated statute which is mainly based on the Portuguese Arbitration Law.
The main principle of the ACML is the Parties freedom to agree on (i) the composition of the arbitral tribunal, (ii) the procedural rules, (iii) the applicable law and (iv) the language of the proceedings as follows:
Constitution and Composition of the Arbitral Tribunal
As per the law, parties to an arbitration agreement may agree on the manner in which the tribunal is to be constituted, including the number of arbitrators provided however that such number is always an odd number -, notably by referring to a set of arbitration rules of an arbitral institution or by choosing an arbitral institution to conduct the proceedings.
The parties may freely agree on the rules to be observed in the proceedings. However, certain fundamental principles must always be observed, such as (i) the principle of equality between the parties, (ii) the adversarial system in all stages of the proceedings and (iii) the requirement that both parties be heard, either orally or in writing, before the final award is rendered.
Place of Arbitration
The parties may agree on the place of arbitration. The Arbitral Tribunal may hold meetings in any other place deemed appropriate, though.
Applicable Law on the Merits
The ACML authorizes the parties to permit the Arbitral Tribunal to rule on their dispute on the basis of equity or according to certain domestic or international usages and customs. In the case of international arbitration, the ACML states that the Tribunal will rule on the dispute in accordance with the law chosen by the parties to govern the merits of the dispute. The parties reference to a given law is deemed to be to the substantive provisions of such law, not to its rules on conflicts of laws.
The parties in international arbitration may freely choose the language or languages to be used in the proceedings. If no agreement is reached, it shall then be for the Tribunal to determine the language(s) of the proceedings.
The definition of international arbitration set out in the ACML follows the one adopted in the 1985 Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL). International arbitration is defined as being the one in which international trade interests are at stake. The ACML lists several situations where it deems that international trade interests are at stake, including, as in the case in hand, the circumstance of the parties to the arbitration being residents of different countries.
(ii) Are foreign arbitral awards / decisions are enforceable in the country (i.e. is the country a party to the New York Convention on the Recognition of Foreign Arbitral Awards?
Yes, Mozambique is a member to the New York Convention on the Recognition of Foreign Arbitral Awards, enacted by means of Resolution No. 22/98, of 2 June 1998.
Thus, foreign arbitral awards are enforceable. However, said judgment would first have to undergo a review and confirmation process in the Mozambican courts. The procedure to have a foreign arbitral award recognized and enforced through the Mozambican courts is made in accordance with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards â to which Mozambique is a party.