PLMJ
  May 26, 2009 -

Investment Guide in Mozambique
  by Jorge Graça, Luís Sáragga Leal, Francisco Avillez, Nuno Morais Sarmento, Tiago Mendonça de Castro, Taciana Peão Lopes

 General socio-economic overview

The Republic of Mozambique is situated on the east coast of southern Africa. It is bordered to the north by the Republic of Tanzania, to the northeast by Malawi and Zambia, to the west

by Zimbabwe, to the south by Swaziland and to the south and west by South Africa. It is therefore

very strategically located, providing a gateway to six other countries.

Mozambique has an area of approximately 799,380 km2 with a population of around 19.4 million.

The currency used is the Metical (MT).

Maputo City is the capital of Mozambique and the largest city with a population of around

one million people. Situated in the south of the country on the western edge of Maputo Bay,

the city is an administrative municipality with an elected government and also has provincial

status. Other important Mozambican cities include Beira, Nampula, Chimoio, Nacala-Porto,

Quelimane, Tete, Xai-Xai, Pemba and Inhambane.

Mozambique has a vast expanse of coastline, which includes the entire 2,470km-long eastern

strip bathed by the Indian Ocean.

Mozambique is a presidential republic whose government is appointed by the political party

with a parliamentary majority. Elections are held every five years.

The economy is precarious and relies on foreign investment. The soil is rich in gold, coal, salt,

graphite and bauxite but is underexplored. Mozambique also has reserves of natural gas,

marble, wood and oil. Most of the population lives off subsistence farming but the country

exports sugar cane, cotton, sisal, tea and tobacco.

The main natural resources are hydroelectric energy, gas, coal, minerals, wood and agricultural

land, while its main exports are prawns, cotton, cashew nuts, sugar, tea and copra.

The country has enormous tourism potential, with idyllic beaches and diving areas along its

over 2,000 kilometres of coastline and nature reserves and parks in the interior.

 

- Advogados e Consultores

Como componente importante da sua estratégia nacional, Portugal não perdeu a ligação histórica

aos países que falam a língua portuguesa, entre os quais se incluem a República de Moçambique.

dynamic and competitive with regard to Africa. In 1996, it co-founded the Community of

Portuguese-Speaking Countries (CPLP).

Bearing in mind the ties created by a common language, history and culture, PLMJ has

implemented an internationalisation plan to strengthen its presence in CPLP member states

by setting up joint ventures with local law firms.

The international joint venture network set up by PLMJ comprises several reputable law firms

or offices in various countries, including Angola, Brazil, Mozambique, Macao and Central and

Eastern Europe, thus ensuring that a client in any country encompassed in the PLMJ

International Joint Venture Network can be assisted in these countries by local professionals

who share the same excellence of quality, principles and values as PLMJ in the provision

of legal services.

In October 2008, PLMJ and MGA began working together with a view to setting up

an institutional joint venture for the practice of law and the provision of legal services in the

Mozambican market.

MGA boasts one of the largest and most reputable teams of professionals practising in the

Mozambican market and is unanimously viewed as a leading firm of lawyers and consultants

in Mozambique. It is recommended as a “Leading Firm” by the IFLR 1000 Directory – The Guide

to the World’s Leading Financial Law Firms.

MGA was also distinguished by Professional Management Review Africa – a leading South

African research leader in the southern African region – for its part in the economic growth

and development of Mozambique and was ranked as “1st Overall Legal Firm” for two years in

a row (2007 and 2008).

The PLMJ joint venture with MGA is based on the similar and converging core values,

principles, capacities and practices of both firms as regards advocacy and legal advice.

The professional practices of MGA and PLMJ, when combined by the partnership in its very

own strategy for client service, provide it with a unique capacity to provide the widest range

of legal services in Mozambique, highly specialised in terms of the particularities and features

of the Mozambican legal order, so as to provide a response to the very specific needs of each

client that invests in Mozambique.

Through this joint venture, PLMJ and MGA intend to lead the field in the exercise of their

profession and the provision of legal services in the Mozambican market, combining the

highest standards of professionalism, quality of services and response capacity and a sense of

par excellence client service with the social and public responsibility MGA and PLMJ associate

with the provision of legal services.

MGA and PLMJ also intend by means of this venture to provide a significant contribution to

quality ongoing professional training for higher level Mozambican legal professionals so as to

supply the Mozambican market with new professionals of excellence with unique and distinct

characteristics which meet the highest quality standards and requirements of the clients.

By bringing together the mutual capacities and synergies of PLMJ and MGA, this joint venture

guarantees a wide specialised range of excellent legal services, not only for companies already

operating in Mozambique but also for international investors intending to set up in a country

rife with investment opportunities.

Local governments are so desirous of attracting strategic investors to local economies that

private investment by local and foreign citizens is being actively promoted, particularly in

Mozambique, through the grant of various incentives that seek to foster the development of a

very varied range of business activities, including tourism, real estate, energy, agriculture and

natural resources.

With all of this in mind, PLMJ and MGA have decided to put together this “Legal Guide to

Investment in Mozambique” with the aim of imparting to its readers a greater understanding

of the Mozambican legal system. The guide is not intended to be exhaustive and legal advice

should be sought with regard to any practical use of the information contained herein.

Investment Incentives

National or foreign companies and individuals intending to invest in Mozambique in any of

the ways permitted, which range from investment with equity or goods and machinery, rights

and loans, among others, may apply for incentives for projects in areas as wide-ranging

as industry, services, tourism, transport, public sector areas such as the production of

electricity, water supply and telecommunications, the manufacture, distribution and sale of

arms and ammunition, etc.

The investment benefits do not, however, apply to retail and wholesale trade activities except

when these are carried on in new infrastructures. Other sectors such as oil and gas prospecting,

research and production and the extraction of mineral resources are subject to specific terms

and conditions set out in the special legislation governing each of these investment sectors.

The investment incentives system in Mozambique comprises four major components, namely (i) tax

incentives, (ii) customs incentives, (iii) incentives related to the repatriation of invested capital and

profits, and (iv) the security and protection guarantee provided by the Mozambican state for private

property and investment.

Eligibility for the above incentives requires a minimum equity investment of 5,000 USD in the case

of national investment and 50,000 USD in the case of foreign investment.

The investment project or the investment contract implies the prior existence or incorporation of a

company registered in Mozambique and operating out of Mozambican territory, termed the

“Company Implementing the Project” or the prior existence or creation of a subsidiary, branch

office or agency of the foreign institution operating out of Mozambican territory.

In order to qualify for the above incentives, companies or individuals must submit an investment

project for the approval of the Mozambican state - represented by the Investment Promotion

Centre (CPI) - in the form of an Investment Project and, in return, must carry out the proposed

investments and meet certain objectives set in the approved investment project.

After the proposed investment has been submitted, the project is assessed and either approved or

rejected. Rejection may result from a lack of documents, information or details about the proposed

investment or the investors themselves (documents, information or details which are requested

from the proposers by the CPI prior to the rejection decision) or from a failure to meet the

conditions set out in the applicable legislation.

Work on the project must begin within 120 days of the approval having been notified to the

investors or the approval may be revoked.

The possible tax benefits include a tax credit for the investment, accelerated amortisation and

reintegration, costs arising from modernisation and introduction of new technologies and

vocational training and other expenses to be considered as tax costs, exemption from Stamp Duty

and a reduction of the tax rate on the transfer of real property.

It should be noted that certain sectors, projects and territories are eligible for specific incentives,

as is the case with agriculture (which is eligible for a substantial reduction in the income tax rate),

hotel and tourism activities, mining, oil, Rapid Development Areas and Industrial Duty-Free Areas

and, finally, large projects (that is to say, projects with a value of over 500 million USD).

Investors may opt to set up enterprise structures which they themselves hold, such as limited

liability companies or other types of representation, thus maintaining control over their

investment.

From among the types of enterprise provided for in the Mozambican Commercial Code,

enacted by Decree-Law 2/2005, of 27 December, the most significant are the limited liability

companies - sociedade por quotas (“S.Q”) and sociedade anónima (“S.A.”). Which of these

structures the foreign investor opts for depends on various factors, including the degree of

simplicity of structure and operating, the amounts of capital to be invested and confidentiality

issues as regards the ownership of the share capital.

Setting up a limited liability Company

Setting up a limited liability company today in Mozambique, whether it is an S.A or an S.Q.,

is a relatively simple and speedy process which involves the following formalities:

Approval of the company Name and Object - The company name must be approved by the

Companies Registry (“CREL”) by means of an application to reserve the name in question.

Depositing the Share Capital – The share capital must be deposited in a bank in Mozambique

which then issues documentary proof that the deposit was made.

The deposited share capital may be withdrawn after the company has been incorporated and

documentary proof has been presented to the banking institution of the deed of incorporation,

definitive commercial registry certificate, commercial licence and the Official Journal where

the statutes of the company were published.

Setting up the Company – The company may be set up by means of a private document

signed by the members - whose signatures must be duly certified by a notary or lawyer -

unless a more formal instrument is required, for example, to transfer the assets the members

bring into the company, in which case a deed of incorporation must be executed.

The company bodies are appointed and the statutes established during the incorporation process.

The statutes of the company must contain, among other things, the full names of the founding

members, the objects of the company, the registered office and share capital, the main

features of how its company bodies function, its structure and any other matters the members

may see fit to include. Apart from the compulsory provisions and limitations set out in the

Companies Code, the general rule is the contractual freedom of the parties.

Registration and Publication – After the company has been incorporated, it must be registered

at the relevant Companies Registry within 90 days of the date of incorporation. The commercial

registry then issues a certificate with the main details (name, registered office, members, form

of binding the company and the members of the Board of Directors).

Once the registration has been completed, application should be made to the Imprensa Nacional

to have it published in the official state journal (Boletim da República).

Subsequent formalities – This process is followed by registration for tax purposes, licensing

the activity (commercial/industrial/other) with the Ministry of Trade and the declaration of

commencement of activity at the tax office for the area where the registered office is based.

The company and its workers must also be registered with the Provincial Employment Directorate

(Direcção Provincial de Trabalho) and the National Social Security Institute (Instituto Nacional

de Segurança Social)

FAQ:

Is it compulsory to have a national member?

As a rule, under Mozambican commercial legislation it is not compulsory for a limited liability

company to be incorporated with a national member.

When is a company considered to be a foreign equity company?

Under Mozambican legislation, a foreigner is any individual who does not hold Mozambican

nationality or, in the case of a company, was originally set up in accordance with legislation

other than that of Mozambique or which, although incorporated in the Republic of Mozambique,

more than 50% (fifty percent) of the share capital is held by foreigners.

The Shares Companies - “Sociedade Anónima” (SA)

This type of company is governed by Articles 331 to 457 of the Commercial Code and is more

complex than the sociedade por quotas.

The main features of the SA are as follows:

Number of Shareholders – As a rule, the SA must have at least three shareholders who may

be national or foreign individuals or companies. This does not include companies in which

the state is a shareholder, whether directly or through a state or state-owned company or any

other legally equivalent entity, as these may have a single shareholder.

Share Capital – The commercial legislation sets no minimum capital, but the amount must

always be suitable for the pursuit of the company object and must always be expressed in the

national currency - the Metical.

The SA capital is divided into shares, which may be bearer, nominative or book-entry.

An SA may only be created when all of its share capital has been subscribed and at least

twenty-five percent has been paid up. The law prohibits the issue of shares at a value below

their nominal value and the statutes must establish the number of shares into which the

capital is divided. The nominal value of the shares, which may be paid up in cash or in kind,

must be a multiple of fifty meticals.

For the purposes of incorporation, the members must prove to the competent body that the

amount of share capital has been paid up by submitting documentary proof that the shares

are on deposit in a credit institution to the order of the company management.

As regards the paying up of capital in kind, the proof consists of a signed statement by the

directors of the company certifying that the title to the goods has passed to the company

and that these have already been delivered to the company, except in the case of deferred delivery. The goods with which the shares are paid up in kind must be identified, described

and valued by means of an auditor’s report prepared by an auditor or an auditing firm and

attached to the statutes.

Flexibility of Capital – The transfer of shares does not require any specific form and depends

on the type of shares issued by the company. Bearer shares are transferred by the delivery of

the share certificates to the purchaser while nominative shares are transferred by endorsing the

share certificate in the name of the purchaser. The company must be informed for registration

purposes. Book-entry shares are transferred by registration in the transferee’s bank account.

The company statutes may establish pre-emption rights in favour of the shareholders as well

as require the prior consent of the company for the transfer.

Liability – The liability of S.A. shareholders vis-à-vis third parties is limited to the amount of

their shareholdings.

Internal Structure – as companies, the SA have company bodies to carry out the necessary

functions: a deliberative body – the General Meeting – an executive or administrative body

– the Board of Directors – and a supervisory body – the Supervisory Board or Sole Supervisor.

i) The General Meeting is the supreme body of the company and has the power to:

− Convene within three months of the end of the financial year to deliberate on the

directors’ report and the annual accounts;

− Deliberate on the proposed use of the company results;

− Carry out a general appraisal of the company management and supervisory boards, and

− Carry out any elections within its scope of competence.

The General Meeting is where the shareholders elect the bodies to administer the company

and supervise the acts of the directors.

Resolutions are passed unanimously or as set out in the statutes. A General Meeting may

be called without any prior formalities, provided that all the shareholders are present or

represented and are willing for the meeting to be convened on a given matter, unless otherwise

provided by law or by the company statutes.

As a rule, resolutions are generally passed by a majority of the votes cast by the shareholders

present at the meeting and each share has one vote, unless otherwise stipulated by law or by

the company statutes.

The law requires a qualified majority for certain resolutions, including those related to

amendments of the statutes, merger, split, transformation and dissolution.

ii) The Board of Directors is responsible for company management and has full exclusive

powers to represent the company.

According to the Commercial Code, this body is composed of an odd number of members,

who need not be company shareholders, but must be individuals of full legal capacity. If the

share capital of the company is less than five hundred thousand meticals, a sole director may

be appointed. If a company is appointed as a director, it must appoint an individual to hold

the position in its name.

iii) The company is supervised by:

a) a Supervisory Board of 3 or 5 members, or

b) a Sole Supervisor, who must be an auditor or an auditing firm.

c) The company may also be supervised by means of an independent auditing firm.

The Quota Companies - “Sociedade por Quotas” (SQ)

The SQ are governed by Articles 283 to 330 of the Commercial Code and their main features

are as follows:

Number of Members – as a rule, the SQ must have a minimum of two and a maximum of

thirty members, all of whom must be equity partners.

It is possible for this type of company to have just one holder of the entire registered capital.

These companies are called unipessoal and this term must be included in the name.

Registered Capital – the minimum capital is twenty million meticals, which is the sum of the

nominal capital of the quotas. The capital must always be expressed in the national currency

and the value of each quota must always be a multiple of one hundred and greater than or

equal to five hundred thousand meticals. The quotas are always nominative, in the sense

that the names of those who hold them must be stated in the company statutes, as well as in

any subsequent agreement or resolution by means of which they are transferred or the share

capital increased, and also in the company’s commercial registry certificate.

Liability – The members are not liable to the creditors of the company, only to the company

itself. Each member is liable for the payment of their own contributions and, on a subsidiary

basis, is jointly liable with the others for the payment of the contributions of the other members.

Company Bodies – the SQ have company bodies to carry out the necessary functions:

a deliberative body – the General Meeting, and an executive or administrative body – the

Board of Directors. There may also be a Supervisory Board or Sole Supervisor, which is

governed by the applicable S.A. provisions

i) All the members must take part in the General Meetings. As a rule, resolutions are passed

by a majority of the votes cast by the shareholders present at the meeting, unless otherwise

stipulated by law or by the company statutes.

ii) The company is managed by one or more directors, who need not be members of the

company. The statutes of the company may establish that all the members are responsible

for the management of the company but this does not extend to those who become

managers at a later date. The duties of the directors continue until terminated by removal

or resignation, although the deed of incorporation may stipulate a certain term of office.

Legal Reserve – Commercial law requires the creation of a legal reserve. The company must

retain a portion of not less than 20% of the financial year’s profits, which must not be less than

one fifth of the registered capital.

Commercial Licensing

The objective of commercial and industrial licensing is to comply with the legal obligation that

requires state authorisation to pursue a business activity in Mozambique.

The licensing process culminates in the issue of the licence or permit, which provides

documentary evidence of the holder’s capacity to carry on the activity.

The licence to carry on the business activity may be granted to national or foreign individuals

with a fixed residence in Mozambique and companies duly registered in the Republic of

Mozambique.

The licence is usually granted within 30 days of application.

Types of Activity

Commercial activity – This includes agricultural sales agents, general trade, retail and

wholesale trade, exports, imports, service provision and external traders.

Foreign commercial registration – This covers the activities carried on in the Republic of

Mozambique through an affiliate, branch office, agency or other form of representation of a

corporate body domiciled abroad.

Rights over Land

The rights to use and profit from the land (the “DUAT”)

For any investor interested in investing in certain sectors in Mozambique, access to the land

is fundamental.

In Mozambique, the land belongs to the state and cannot therefore be sold, transferred,

mortgaged or charged.

The right to use and profit from the land (Direito de Uso e Aproveitamento da Terra, so-called

“DUAT”) is understood as the right that national or foreign individuals and companies and

local communities acquire over the land subject to the demands and restrictions imposed by

land legislation.

The Land Law sets out the terms under which the creation, exercise, alteration, transfer and

extinguishment of the right to use and profit from the land operate. The Land Law Regulation

applies to areas which are not covered by the areas under the jurisdiction of the Municipalities

that hold the Municipal Records Services, with the exception of Article 45 of the Regulation

which applies throughout the country. In turn, the Built-up Land Regulation applies to the

legally existing city and town areas and to settlements or population clusters structured

according to a plan of organisation.

With regard to individuals, only those who have resided in Mozambique for at least five years

and have an approved investment project can hold DUAT rights.

Foreign companies can only hold DUAT rights if they have an investment project duly approved

under the investment legislation, are incorporated and registered in Mozambique and have

obtained the legally prescribed formal authorisation. A foreign company is considered any

company or institution incorporated under Mozambican or foreign legislation (in the case

of representation offices) more than 50% of whose share capital is held by foreign citizens,

companies or institutions.

It should be noted that in public domain areas – those which are fully or partially protected

– no DUAT rights can be acquired, only special licences for the pursuit of certain business

activities. The special licences regime, by virtue of the absence of any specific regulation,

follows the rules laid down for the DUAT, with all the necessary changes, as regards the

duration periods and the competent bodies for the issue of such licences.

The creation, alteration, transfer and extinguishment of the DUAT must be registered at the

Land Registry.

Finally, it should be noted that DUAT rights may also be acquired by possession by individuals

and local communities, in line with customs and practices which do not breach the

Constitution of the Republic of Mozambique and ii) by individual Mozambicans who have

used the land, in good faith, for at least ten years. A failure to register the rights acquired by

possession has no adverse impact on the rights themselves.

Duration of DUAT rights

The duration of DUAT rights under the Land Law and Land Law Regulation are as follows:

Provisional authorisation – granted to the applicant by the Geographical and Records

Services for a period of two years for foreigners and five years for nationals.

Full authorisation – once the provisional authorisation period has elapsed or even before

if the interested party requests it, the land will be inspected to confirm that the proposed

undertaking has been carried out or for compliance with the exploration plan, according to

the approved schedule. Once compliance with the exploration plan or the undertaking has

been confirmed, the Geographical and Records Services will issue a full authorisation for

a period of fifty years, renewable for the same period, after which time a new application

must be made.

It should be noted that with regard to built-up land, the Built-up Land Regulation provides that

the national or foreign holder of DUAT rights has a period (provisional authorisation) of not

more than two years to begin construction. This time limit may be extended for a period of

not more than six months by means of a well-grounded application by the right holder to the

competent body. The time limit for the use of the land must be set by the competent body

upon the application of the right holder. This time limit should take into account the need to

conclude work and obtain licences of use.

Transfer of the DUAT

The DUAT rights may be transferred in two ways i) an inter vivos transfer by means of the

purchase and sale of infrastructures, buildings and improvements on the authorised land, ii) by

inheritance.

It should also be remembered that the purchase and sale of infrastructures, buildings and

improvements on parcels of land (the soil and buildings thereon are not economically

independent but function as a support for exploiting the earth and the source of income

derives mainly from the earth itself) does not imply an automatic transfer of the DUAT, which

is dependent on the authorisation of the same body which authorised it initially.

In the case of built-up land (a building is affixed to the soil and the land around it and the

source of income derives mainly from the existing constructions and not from the land itself),

the DUAT rights are transferred with the transfer of the property itself and do not require the

prior authorisation of the state

Furthermore, the holders of DUAT rights are allowed to create mortgages over the properties

and the duly authorised buildings they have erected on the land or over which they have

legally acquired title.

Extinguishment of the DUAT

The DUAT may be extinguished in one of the following ways:

i) The failure of the DUAT holder, without reasonable grounds, to comply with the

exploration plan even if the tax obligations (annual duties) are being honoured. There

are no requirements of form for the extinguishment of the DUAT rights, which extinguish

automatically as soon as the time limit elapses.

ii) Revocation of the DUAT rights on public interest grounds, preceded by payment of a just

compensation;

iii) Expiry of the time limit or the renewed time limit;

iv) Waiver by the right-holder.

Tourism Law

General overview of the legal regime

Viewed as a vital sector for the development of the country owing to its natural, ecological

and geographical diversity and wealth, the tourism sector has merited particular attention

not only from the Mozambican government but also from foreign investors and multi-lateral

co-operation agencies.

One of the sectors that has shown a higher growth rate in recent years – 17% in the last year

almost 163 million US dollars in revenue – tourism in Mozambique is one of the most stable

sectors as regards attracting foreign investment. In 2007 alone, projects in the region of 980 million

US dollars were approved, making it the third largest investment sector in the country.

Within the development context, the tourism sector has a place in the Mozambican government’s

strategy for combating absolute poverty through the Action Plan for Reducing Absolute Poverty

(“PARPA). In the first PARPA 2001–2005, tourism was one of the supplementary activities

whose strategy and plan of action helped generate income and job opportunities.

In recent years therefore the Ministry of Tourism (“MITUR”) has been reorganising the tourism

sector, reforming and modernising tourism sector legislation which has until very recently

been completely out of touch with the national, regional and international reality.

The Tourism Policy and Implementation Strategy approved by Resolution 14/2003, of 30 April,

in itself bears living witness to the above. Conscious of the important role of tourism for

economic growth in general and for generating revenue and creating jobs, the main aim of the

Tourism Policy is the “promotion and development of tourism as a driving force for economic

growth and employment in the public and private sectors and communities in making the

provision of services in this area a reality” through the “interaction and active commitment of

a wide range of partners: the state and government at central, provincial and district levels,

local government, the private sector, local communities, international, regional and national

tourists, NGOs, financial institutions, international cooperation agencies, the press and the

public”.

The Âncora Programme for Investment in Tourism in Mozambique

As regards the promotion of private sector investment, the Policy makes specific provision for

attracting direct foreign investment by means of strategic partnerships with national investors

and through the development of “Âncora projects”, which will act as catalysts.

In addition, the tourism sector in Mozambique currently has two primary mechanisms for

investment and the promotion of foreign investment. One of these mechanisms – The Âncora

Programme for Investment in Tourism in Mozambique, already approved by Resolution of

the Council of Ministers - is the largest tourism investment initiative currently in place in

Mozambique and aims to attract over one billion USD in foreign investment.

This investment programme is the result of an agreement concluded with the World Bank in 2007

for making the highest level investments in the tourism area in Mozambique. It is a joint initiative

of the Ministry of Tourism (MITUR) and the International Financial Corporation (IFC) with a view

to facilitating investment in tourism and converting the entire tourism potential of Mozambique into

a tangible quality investment.

Using a pro-active approach, the Programme focuses on creating investment opportunities in

specific “Âncora Locations”, and aims to improve the business background and environment

and substantially reduce the administrative and regulatory obstacles and constraints on

investment.

The Programme is managed and implemented by the Instituto Nacional de Turismo (the National

Tourism Institute) (INT), the IFC, MITUR and other state bodies.

The programme will run for a period of three years and will be implemented in the following

three stages:

Phase 1: Selection of the locations and preparation of a detailed programme plan;

Phase 2: Development of the “Ancora Locations”, and

Phase 3: Development of links with small and medium-sized companies (SMEs)

and local communities.

Time Sharing

Along with this project, MITUR has passed a number of legislative packages, including the

recent approval of the Periodic Residence Rights Regulation (“RDHP”).

This legislation regulates the concept of timesharing or right of periodic residence. Closely

linked with the real estate sector, the philosophy underlying this right was developed in

various schemes, but has taken on some more obvious common features such as the division

of the periods of use of the properties normally included in tourist resort development into

weeks, as these are easier to sell and use.

The RDHP sets out four types of rights:

1. Right of periodic residence – property right which allows its holder to use accommodation

located on tourist resorts or real estate properties, in return for a price, for one or more

stipulated or unstipulated periods each year for accommodation purposes.

2. Tourist residence right – consists of the use of accommodation located on tourist resorts

or real estate properties, in return for a price, for one or more periods – which are usually

stipulated - each year for accommodation purposes.

3. Right of shared residence – consists of the acquisition of a property right over a share of a

given property located on a tourist or real estate resort along with the furniture and fittings

thereon, as well as the premises and services associated with the common areas of use,

subject to a schedule established in the contract and in the regulation on the use of the

services.

4. Residential tourism – tourism based on an investment of a real estate or tourist nature which

aims to provide accommodation in tourist interest areas for certain or permanent periods.

The common denominator of all of these rights is the accommodation unit, the legal regime

for which varies according to the type of right in question.

The tourism or real estate investor who intends to develop any of these types individually or in

conjunction will have to apply to the competent bodies for a licence. This process is divided

into two stages: advance information and authorisation of the premises and the exploration

licence.

The licensing process begins with the submission of the project and the intended type to the

MITUR, accompanied by an informational document about the development and payment of

the deposit. The MITUR then issues an accreditation certificate for the project which confirms

the characteristics and capacities of the resort and the investor.

These rights may only be sold by the investors or, alternatively, duly-licensed tourism promoters.

Intellectual property in the Mozambican legal order has two main facets: industrial property

-governed by the Industrial Property Code enacted by Decree 4/2006, of 12 April, and

copyright - governed by the Copyright Law (Law 4/2001, of 27 February).

The Industrial Property Institute (IPI) was created by Decree 50/2003, of 24 December, and

is responsible for administering industrial property, while the National Book and Disc Institute

(INLD) – set up under Decree 4/91 of 3 April - is responsible for administering copyright.

Mozambique became a signatory to the following conventions and international agreements

on intellectual property:

Convention establishing the World Intellectual Property Organisation (WIPO) by means

of Resolution 12/96 of 18 June;

Patent Co-operation Treaty (PCT of 19 June 1970, amended on 28 September 1979 and

3 February 1984) by means of Resolution 35/99 of 16 November;

1981 Madrid Agreement and its 1989 Protocol on International Trademark Registration

by means of Resolution 20/97 of 12 August;

African Regional Industrial Property Organisation (ARIPO) by way of the Harare Protocol

on Patents and Industrial Designs, signed at Harare on 10 December 1982

and revised on 28 November 1997 and 26 May 1998, by means of Resolution

34/99 of 16 November.

Industrial Property

General regime

The Industrial Property Code (CPI) sets out a protective regime for industrial property rights

and obligations. Industrial property covers commerce, services and industry (agriculture

and cattle breeding, fishing, forestry, food, construction and mining as well as natural or

manufactured products).

Industrial property rights are registered by the IPI. The registration process begins when the

registration application is filed and may be followed by a challenge stage (where interested

parties can make their claims and challenges). Finally the registration is granted or rejected

(partially or wholly). Decisions on industrial property rights may be appealed, with suspensory

effect, to the administrative courts.

The duration of intellectual property rights varies according to the type of right in question:

20 years for patents, 15 years for utility models, 5 years for industrial designs (renewable up

to a maximum of 24 years), 10 years for trademarks, logotypes, business names and symbols

(renewable), and unlimited for appellations of origin and geographic indications of source.

The law provides that the rights arising from patents, utility models, trademarks, industrial

designs, business establishment symbols, business names, appellations of origin, geographic

indications, logotypes and awards may be wholly or partially transferred for valuable

consideration or otherwise, inter vivos or mortis causa. The same applies to the rights arising

from the applications. An inter vivos transfer must be made in writing. These rights may also

be the subject of an operating licence.

The principle of priority is therefore particularly important as registration is granted to whoever

files the application first. The rights are created by registration, which means that it is only by

registering that the holders can be granted the right of exclusive use.

The CPI provides a provisional protection regime whereby the applicant can provisionally

enjoy the protection conferred by the right from the time the application is published in the

Industrial Property Bulletin.

Industrial property rights can be terminated in four different ways: (i) invalidity; (ii) annulment;

(iii) expiry and (iv) waiver.

Patents

In Mozambique, patents (or utility models) can be obtained for any invention in any field of

technology, whether it is a product or a process, provided that: (i) the invention is new,

(ii) implies some inventive activity and (iii) is capable of industrial application.

However, certain things may not be patented, including discoveries, scientific theories and

mathematical methods, systems, plans, rules and methods of intellectual activities in terms of

play or in the field of business activities, computer programmes as such, surgical, therapeutic

or diagnostic treatment methods for humans or animals.

As a rule, the right to a patent belongs to the inventor or his successors. However, if the item

is invented during the course of an employment contract which envisages inventions, then the

right to the patent belongs to the employer.

Anyone who has incurred liability to another may be deprived of the patent while a patent

may also be expropriated for public use. Compulsory licences may be granted in respect of a

given patent on the grounds of (i) insufficient exploration of the patented invention, (ii) patent

interdependency, or (iii) public interest reasons.

Trademarks

A trademark is a sign that distinguishes a company’s products or services. It may consist

of a sign or set of signs capable of being represented graphically, that is to say, in words,

including personal names, designs, letters, numerals, sounds or the shape of the product or its

packaging, which are capable of distinguishing the products or services of one company from

those of other companies. Advertising slogans may also be trademarks.

There are specific provisions for free trademarks, collective trademarks (association or

certification), well-known trademarks and renowned trademarks. The same trademark

destined for the same product or service may only be registered once. Only after the

registration has been accepted and for the duration thereof can the holder of the trademark

use the works “registered trademark”, the initials TM or ®. Apart from minor changes that do

not affect the identity of the trademark, the trademark must remain unchanged as any change

will trigger the need for a new registration.

Every five years from the date of registration, a declaration of intention to use the trademark

must be filed with the IPI. Any trademarks for which this declaration is not filed cannot be

enforced against third parties and the IPI will declare the lapse of the registration, at the request

of any interested party, or when rights are seen to be prejudiced at the time other registrations

are granted. If the expiry of the registration has not been requested, it will again be considered

fully enforceable if the holder files a declaration of intention to use the trademark and provides

evidence of actual use of the trademark.

Unfair Competition and Trade Secrets

Under the CPI, unfair competition is any action that is contrary to the honest customs and

uses of any field of business activity. The law also lists examples of typical unfair competition

acts, which can be divided into four categories:

(i) acts designed to create confusion,

(ii) acts designed for the purposes of discrediting,

(iii) acts designed to bring about an unfair gain, and

(iv) acts designed to deceive.

A breach of trade secrets also constitutes unfair competition, that is to say, acquiring, disclosing

or using a competitor’s trade secrets without its consent in a manner that is contrary to honest

business practices, provided that this information i) is secret in the sense that it is not generally

known or easily accessible in its entirety or in its exact shape and setting to persons outside

the circles who usually deal with such information, ii) is commercially valuable due to its

secrecy, iii) has been the subject of reasonable precautions, in view of the circumstances, by

the person that legally controls it to keep it secret.

Infringements

In Mozambique, industrial property is afforded the guarantees that are available to property

rights in general, as well as the protection specifically provided for in the CPI. This means that

an interested party can resort to the protection against civil wrongs that is available under the

civil law, more specifically under the law of tort. Recourse may also be had to the provisions

of the CPI which penalise infringements with fines or penalty payments.

Copyright

The Copyright Law (Lei dos Direitos de Autor, so-called “LDA”) provides protection for

literary, artistic and scientific works and the rights of the authors, artists or performing artists,

record and video producers and broadcasting organisations. It seeks to stimulate the creation

and production of intellectual work in literature, article and science.

The personal and territorial scope of the LDA applies to:

i) Works whose author or other copyright holder is Mozambican or a foreigner whose

habitual residence or registered office is in Mozambique;

ii) Audio-visual works whose producer is Mozambican or a foreigner whose habitual residence

or registered office is in Mozambique;

iii) Works published in Mozambique or works published for the first time aboard and

subsequently in Mozambique;

iv) Architectural works erected in Mozambique;

v) Works protected under an international treaty to which Mozambique is a signatory.

Copyright is a subjective right that confers upon its holder the power to use a work exclusively,

in whole or in part, according to the types of use prescribed by law. Works are intellectual

creations in the literary, scientific or artistic fields, expressed in any medium. What is protected

is the form of expression of the work (an intangible asset), which may be reproduced in several

formats. These formats are separate from copyright.

The right to copyright begins the moment the work is expressed and it is recognised irrespective

of registration, deposit or any other formality. Copyright registration is therefore merely a

declaration. The fundamental requirement for the existence of a work is its originality, whereas

merit, for instance, is considered irrelevant, and ideas, processes, systems, operational

methods, concepts or discoveries are not afforded copyright protection.

Copyright encompasses both economic and personal rights, the latter of which are known as

moral rights. Moral rights cannot be assigned or encumbered.

The LDA also provides for the protection of neighbouring rights, which are those of artists

or performing artists, record and video producers and broadcasting organisations. These

neighbouring rights are separate from copyright but the copyright regime applies to such

rights on a supplementary basis.

As a rule, copyright lapses 70 years after the death of the intellectual creator of the work when,

with the exception of the safeguarding of moral rights, the work enters the public domain.

In principle, copyright belongs to the intellectual creator of the work but there are some

special regimes. For example, copyright on a work done to order or on behalf of another,

whether under a duty or an employment contract, is determined according to the agreement

of the parties. There are also specific provisions covering multiple authorship, such as those

connected with collaborative, composite or collective works.

The owner of the work and his or her successors or assignees are entitled to: (i) authorise the

use of the work by a third party; or (ii) transfer or encumber, wholly or partially, the financial

component of the copyright over the work.

An infringement of copyright law may give rise to liability in tort as well as for criminal offences

such as usurpation, counterfeiting and infringement of moral rights, all of which are punishable

with a term of imprisonment.

The Mozambican tax system has the following taxes:

National taxes:

(i) Direct taxation (on income):

- Personal Income Tax (Imposto sobre o Rendimento das Pessoas Singulares, so-called “IRPS”);

- Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Colectivas, so-called “IRPC”);

- Inheritance and Gift Tax; and

- Special Gambling Tax.

(ii) Indirect taxation (on spending):

- Value-Added Tax (Imposto sobre o Valor Acrescentado, so-called “IVA”);

- Customs;

- Specific consumption tax (Imposto sobre Consumos Específicos, so-called “ICE”);

- Tax on property transfer and title (so-called “SISA”);

- Stamp Duty

Local government taxes:

- Local Government Personal Tax (Imposto Pessoal Autárquico, so called “IPA”);

- Local Government Land Tax (Imposto Predial Autárquico, so called “IPRA”); and

- Business Activities Charge (Taxa de Actividades Económicas, so called “TAE”).

Corporate Income Tax (“IRPC”)

Scope and incidence

This direct tax is levied on the revenue (profit) of companies even if it derives from unlawful acts.

IRPC is levied on the entire revenue, including revenue from abroad, of companies and other

entities whose registered office or management and effective control is based in Mozambique,

while those which do not have a registered office or effective control in Mozambique are only

liable for IRPC on any income obtained in Mozambique.

There are no exemptions from IRPC except for the state itself and non-profit organizations

Taxable profit

The taxable profit is computed from the sum of the net financial year result and the positive

and negative asset variations in the same tax period, with the necessary corrections in

accordance with the law.

The normal tax year runs concurrently with the calendar year, however, it is possible to obtain

authorisation to use a different tax period, by means of an application to the Ministry of

Finance, which will imply that tax obligations need be complied with at different times.

The taxable profits attributable to the permanent establishment (branch office) are calculated

as if it were a company governed by Mozambican law, with all the necessary changes.

The taxable profit attributable to non-residents is calculated by applying the withholding rates

(between 10% and 20%) or the different types of income liable to Personal Income Tax

(IRPS), as the case may be.

The law sets down certain rules on transfer pricing and thin capitalisation which confers broad

powers upon the tax authority to adjust and correct the taxable income.

As a rule, the income paid to non-resident bodies is taxed at 20%, except for income deriving

from the provision of international transport and telecommunications services and income

from the assembly and installation of equipment for such bodies, which is taxed at 10%.

For instance, services agreements entered into with non-resident bodies and individuals and

interest owed on loans and dividends paid to non-resident shareholders are taxed at 20%.

Carrying forward Tax Losses

Tax losses may be deducted against taxable profits up to the fifth financial year after they were

computed.

International Double Taxation

The lower of i) the income tax paid abroad and ii) the portion of the IRPC taxable income

prior to deductions which is equivalent to the taxable income in the country in question can

be deducted from the amount of IRPC due.

If the country has a tax treaty with Mozambique, the deduction described above cannot

exceed the tax paid abroad under the treaty.

The payment of IRPC

IRPC is paid on account (in three annual instalments) and corrected at the end of the tax year

upon the filing of the annual return, if necessary.

Companies that make no profit during the financial year are obliged to make a special payment

on account (in three annual instalments), calculated on turnover and subject to a minimum of

30,000 MT ($1,200) and a maximum of 100,000 MT ($4,000).

Value-Added Tax (IVA)

Scope and incidence

IVA is charged on paid transfers of goods and provisions of services in Mozambique and on imports.

Exemptions

Generally speaking, there are no exemptions from IVA, with the exception of the state and

state companies - when they carry on activities for the public good, even if these activities

are paid for -and taxable persons – who are neither obliged to keep organised accounts nor

involved in import and export transactions – who did not reach a turnover of over 750,000 MT

($30,000) in the previous year.

There are, however, some objectively applicable exemptions to the transfer of some goods

and certain service provisions, including i) primary goods, ii) banking and financial operations,

and (iii) lease of property for residential, commercial or industrial purposes in rural areas.

There are also some IVA exemptions on the import of goods used for certain activities, such

as oil and mining activities.

Rate and payment

The IVA rate is 17%.

In order to calculate the amount of tax due monthly to the state, the taxpayer must deduct the

amount paid on purchases from the amount charged on sales.

Sisa

Sisa is levied on paid transfers of property title or similar rights over real property. The general

rate is 2% but if the transferee is resident in a country with a more favourable tax regime than

the Mozambican regime, the rate is 10%.

Stamp Duty

Stamp Duty is charged on all documents, contracts, books, papers and acts as set out in the

General Table of the Stamp Duty Code.

The rates are prescribed in meticals for each act/document and in percentages on the acts/

documents.

Double Tax Treaties

Mozambique currently has treaties with Portugal, Italy, Mauritius, the United Arab Emirates

and Macao.

Tax Benefits and Special Tax Regimes

Mozambican law establishes some special tax regimes such as for mining and oil activities as

well as various tax benefits granted under the Investment Law.

 

The current employment legislation introduced at the end of 2007, mainly by Law 23/2007, of

1 August – the Employment Law – aims to facilitate employer investment and development,

and is therefore protective of businesspeople and more open to the trade union movement. It

has been hailed as a more wide-ranging, liberal and flexible law than its predecessor.

The following are some of the main features and principles of Mozambican employment

legislation, with particular emphasis on the following:

- Terms and conditions of work.

- Discipline in the workplace.

- Social security.

Terms and Conditions of Work

Employment contracts

The following types of employment contract are possible:

i) fixed-term employment contract.

ii) non fixed-term employment contract.

iii) permanent employment contract.

The fixed-term contract may only be used for short-term tasks and for the period strictly

necessary for the purpose, such as:

to substitute a worker who is temporarily unable to work;

in response to an unusual increase in production and for seasonal activities;

to carry out a certain or temporary project or other activity.

Fixed-term contracts may only be used for a maximum period of two years and are limited to

a maximum of two renewals.

The non fixed-term contract is allo ill last, particularly in civil construction, public works

and other works contracts.

The permanent contract has no stipulated term and is designed for hiring workers for

permanent positions at the company.

All these contracts must:

Be written and signed by the parties.

State the names of the contracting parties.

Indicate the duties and responsibilities of the parties.

State the date on which the employment contract comes into effect.

State the amount of pay and payment intervals.

The employment contracts must also stipulate:

The place of work.

The length of holiday leave.

The daily and weekly working hours,

Restrictive covenants such as exclusivity and non-competition clauses.

The circumstances and formal requirements for amending the employment contract.

The governing law.

Trial period

The law provides that workers may be required to undergo an initial trial period designed for

the parties to adapt and get to know each other in order to decide whether or not to continue

the employment contract.

The contract can be terminated by either party during the trial period without just cause by

providing 7 days’ written notice.

Hiring Foreign Workers

The employment law has established specific provisions on the hiring of foreign nationals who

come to work for a company in Mozambique, even if on an unpaid basis.

These rules apply to those who enter into employment contracts or provide services, including

directors, and agents of foreign companies who carry out non-subordinate work in a company

in Mozambique.

The following two situations, however, should be considered:

i) Hiring a foreign worker within the quota: the employment law sets quotas for foreign

workers where admission is automatic on the basis of the size of the recruiting company

and must be communicated to the Employment Directorate in the area where the company

is located.

The quotas are as follows:

5% of the entire workforce of large companies (those which employ over 100 employees).

8% of the entire workforce of medium-sized companies (those which employ between 10

and 100 employees).

10% of the entire workforce of small companies (those which employ less than 10

employees).

After the hiring of the foreign national is communicated and the relevant declaration is issued

by the Employment Directorate, the foreign national will obtain a residence visa which is

stamped on his or her passport. The visa is issued by the Mozambican consulates and the

foreign national should have the visa before entering Mozambique.

ii) Authorising work outside the quota: once the company has reached its quota for recruiting

foreign workers automatically, it may apply for authorisation to contract more foreign

workers. However, in this case, admission is at the discretion of the Minister of Labour.

The application must be accompanied with the academic and professional qualifications of

the worker and the contracting company must provide evidence that no national worker has

the same qualifications. This is the only way to justify contracting a foreign national.

Working time

The normal working period may not exceed forty-eight (48) hours a week and eight (8) hours

a day.

Industrial establishments, with the exception of those which work shifts, may use a normal

working time of forty-five (45) hours a week over five (5) days.

 

Termination of the employment contract

By law, contracts may be terminated on one of the following grounds:

a) Expiry:

i) Once the term of the contract has expired.

ii) If it is impossible to work or receive work.

iii) Retirement.

b) Revocation by agreement

c) Unilateral termination with just cause:

i) On disciplinary grounds.

ii) Due to the worker’s inability to adapt, after the trial period.

iii) Arrest or imprisonment if, due to the nature of the worker’s duties, this would

adversely affect normal operating.

iv) On economic grounds.

d) Unilateral termination with notice

i) Termination by the worker, without needing to plead just cause, provided that the decision

is communicated in writing in accordance with the following periods of notice:

ii) Termination by the employer, provided that it is based on structural, technological or

market grounds.

The worker, the trade union committee and the Employment Directorate must be notified in

writing at least 30 days in advance.

iii) Redundancies: employers who implement a redundancy process (that is to say, terminate

the employment contracts of 10 or more workers at the same time) must inform the trade

unions and the affected workers as well as the Employment Directorate before beginning

the negotiation process. This information must include the grounds for the redundancy, the

number of affected workers and the measures proposed by the employer to mitigate the

consequences of the redundancy for the workers.

 

Discipline in the workplace

Disciplinary Procedure

No disciplinary sanction can be imposed without the worker having being previously informed of

all the relevant facts and given the opportunity to present his or her defence. The following stages

and time limits apply for the purposes of the disciplinary procedure:

 

Disciplinary Sanctions

The employer may impose the following disciplinary sanctions:

Verbal warning.

Written reprimand .

Suspension without pay for up to a maximum of 10 (ten) days for each infringement and 30

(thirty) days per calendar year.

Fine of up to 20 (twenty) days’ pay.

Demotion to the job category below for a period of not more than one year.

Dismissal.

Severance Pay

As regards the calculation of severance pay in respect of employment relationships, provision is

made for a transition period between Law 9/98 of 20 July (the old Employment Law) and the new

law and, depending on the level of pay of the worker, the old law will continue to apply for the

purposes of calculating severance pay for the first thirty months, five years, ten years and fifteen

years of the new law being in force.

 

Social Security

Social security is compulsory and covers employees and the self-employed, nationals or

foreigners resident in national territory and their employers. It also includes part-time workers,

workers on trial period and those on paid traineeships.

The law also considers the following as workers for social security purposes:

a) Directors and members of company bodies with an employment contract, including

unipessoal companies.

b) Individual traders with employees working for them;

c) Stevedores contracted by a stevedore company or private employment agency;

d) Professionals working for transporters;

e) Workers in state or local government institutions and state company workers not covered

by the General Civil Servants Statutes;

f) Seasonal workers;

g) Political party and trade union workers, non-governmental organisation and association

workers.

Except in the case of self-employed workers, the employer is responsible for registering the

workers.

Foreign resident workers are not obliged to register for social security provided that they are

covered by a social security system in another country.

Compulsory social security contributions are divided between the employer and the worker at

4% and 3% respectively of the monthly salary, and the employer is responsible for depositing

the contributions to the order of the National Social Security Institute.

The national social security system covers the following situations:

a) Illness - sick pay and hospitalisation allowance;

b) Maternity – maternity allowance;

c) Disability – disability allowance;

d) Old age – senior citizen’s allowance;

e) Death – death benefit, funeral allowance and survivor’s pension.

 

General overview of the dispute resolution mechanisms

Arbitration

The possibility of settling disputes by arbitration, subject to the legally prescribed limits, came

into force in Mozambique in the latter half of 1999 with the Arbitration, Conciliation and

Mediation Law (Law 11/99 of 8 July), adding this new modern means of settling disputes to the

usual ways of settling disputes via the judicial or administrative courts under the civil procedure

law in force in Mozambique (1966 Civil Procedure Code and the many amendments it has

undergone over the years).

The disputes that arise from legal commercial relationships in the broad sense, including

those arising from investment can, as a rule, be settled by arbitration. The parties (individual

businesspeople or companies) to these conflicting relationships can opt for arbitration in

accordance with the Arbitration, Conciliation and Mediation Law, either in advance by means

of an arbitration clause in the contract or subsequently by means of an arbitration agreement,

which should be drawn up expressly.

Arbitration in commercial relationships can be either domestic or international. Domestic

arbitration is designed to settle disputes about commercial relationships that fall under

Mozambican jurisdiction. The creation and operation of the arbitration tribunal and the

arbitration award are governed by the Arbitration, Conciliation and Mediation Law.

International arbitration is designed to settle disputes involving international commercial

relationships, in other words, disputes that arise from legal business relationships connected

with more than one national jurisdiction in terms of nationality, residence, registered office or

establishment of the parties, the place of contract or performance of the obligation and the

place where the fact or the damage takes place.

International institutional commercial arbitration may be used particularly in the case of

conflicts in foreign investment relationships. In investment relationships between a foreign

investor and the Mozambican state, if there is no agreement between them or there are

compulsory legislative provisions to the contrary, the Investment Law (Law 3/93, of 24 June)

expressly allows for any disputes arising from this relationship to be settled, based on a prior

agreement, in accordance with the international commercial arbitration rules below:

(a) the Washington Convention, of 15 March 1965, on the Settlement of Investment Disputes

between States and Nationals of Other States and the International Center for the

Settlement of Investment Disputes between States and Nationals of Other States (ICSID),

(b) The Additional Facility Rules approved on 27 September 1978 by the Administrative

Council of the ICSID if the foreign company does not fulfil the nationality conditions set

out in Article 25 of the Washington Convention; or

(c) the International Chamber of Commerce based in Paris.

 

It is known that very few disputes in investment relationships are resolved by recourse to

international arbitration, and it is likely that many of these disputes have been settled by

negotiations.

It is becoming increasingly frequent to include a national or domestic arbitration clause in

contracts, which will foster the growth and consolidation of arbitration in Mozambique in

the short term.

These clauses opt for the ad hoc arbitration tribunal (that is to say, expressly created for

the purpose of settling a dispute) and also institutional arbitration, which means creating

arbitration tribunals from a panel of arbitrators run by an arbitration institution whose rules

are applied to the arbitration process. At this time, there is only one commercial arbitration

institution in Mozambique - the Maputo-based Arbitration, Conciliation and Mediation

Centre.

Arbitral awards are final and enforceable and may only be appealed to a court on the

points of form or procedure established by law, which essentially mean a failure to comply

with the formalities, thereby affecting the exercise of the rights of defence, particularly the

right to be heard.

In the event that the losing party does not comply voluntarily with the arbitral award, the

injured party may apply to a court to have the decision enforced under civil procedure law.

It should be noted that an investment is not limited to the investment relationship in the

strict sense of relationships governed by the legislation that applies to national and foreign

investments. Investments form part of a much wider range of relationships, and such

relationships may fall within the different spheres of legal relationships governed by specific

legislation.

This is the case, for example, in relationships between private individuals and the state in

which the latter is vested with state prerogatives or jus imperi or which are governed by

administrative law.

In such cases, particularly as regards administrative contracts, including concession

contracts, the law only allows recourse to the special state form of administrative arbitration,

presided over by an administrative court judge and governed by administrative law.

There are cases where the law allows the state to participate in terms that bring in under the

umbrella of the private law regime, such as in oil contracts for example.

Another example is the case of employment relationships, with regard to alienable

employment rights, where disputes arising from collective agreements and individual

employment contracts can be settled by means of labour arbitration based on the provisions

of the Employment Law.

 

The innovative though general reference to the tax contract in the 2006 tax legislation (Law

2/2006 of 22 March) must be mentioned, even though it does not express legally the possibility

of recourse to arbitration for settling the disputes arising from such contracts.

Litigation

For disputes where the parties have not agreed to go to arbitration or the law itself requires

otherwise, as is the case with inalienable rights, the procedure stipulated by the procedural

law to apply in state courts is reserved for the use of the state courts.

The courts have the exclusive jurisdiction to settle disputes by judicial means and according

to the principle of the separation of powers are classified as sovereign bodes under the

Constitution of the Republic (Article 133 in conjunction with Articles 70 and 212). The law

differentiates between judicial courts, administrative courts and other special courts set up

by law.

The judicial courts include the Supreme Court, the Supreme Appeal Courts, the Provincial

Courts and the District Courts (Law 24/07 of 20 August – The Judicature Law).

The provincial courts are divided into specialised jurisdiction courts and sections such as the

family court and the civil, commercial, labour or criminal courts, while the district courts have

general jurisdiction.

The administrative court has special jurisdiction since it hears claims arising from disputes

in legal administrative relationships, litigation appeals lodged against the decisions of state

bodies and agents and appeals lodged against tax and customs court decisions.

Efficiency of the Mozambican judicial system

The periods indicated below are only estimates and vary according to the procedural

requirements and complexity of each case. However, experience shows that in the

Mozambican court system disputes are settled on average within the following periods:

At first instance;

(a) Civil cases take around 1 to 3 years for the decision;

(b) Commercial cases, because of the sections that have been created recently, are decided

on average within one year;

(c) Employment cases usually take around one to 3 years for the decision.

At second instance:

If a decision is appealed to the Supreme Court, the ruling takes around 4 to 5 years on average.

Recognition of foreign judgments

In Mozambique, foreign judgments are recognised and confirmed in the Supreme Court,

after which they may be enforced in Mozambique.

The rules of the New York Convention, date of 1956, on the recognition and execution

of foreign arbitral decisions (adopted by Mozambique on 10 July, 1998, with reciprocity

reserve) are fully applicable to the revision and confirmation of Arbitral awards decided by

foreign arbitration courts or arbitrators.

 

Public Procurement

I. Background

The legal regime on public procurement in Mozambique is currently set out in Decree

54/2005, of 13 December, which enacted the “Regulation on Procurement for Public Works,

Supply of Goods and Provision of Services to the State”(1).

A cursory analysis of this legislation immediately shows an importance in terms of state

procurement which in itself merits discussion, albeit a necessarily brief discussion, in this

Guide.

On a preliminary basis, it should be pointed out that this is a legal instrument which –

successfully – proceeds to provide unitary treatment of the more significant issues involved

in public procurement. In short, it could be said that the decree in question embodies an

extremely useful codification of this very complex theme.

II. Subjective Scope, core Principles and Rules of Public Procurement

The regime in question applies to all state bodies and institutions, including local government

and state-owned companies (2)(3).

The decree enshrines the traditional guiding principles of administrative action, notably the

principles of legality, proportionality, transparency, equality and good faith, all of which are

duly set down and explained.

It should, however, be pointed out that along with these basic principles which should guide

the behaviour of the state as set out above, express provision is made for other specific

principles for adjudicatory issues, including, inter alia, the principles of stability, competition

and good financial management.

Further, it should be highlighted that under Article 4 of the Decree(4), there is an express

reference to the “remaining public law principles”, which means that when applying the

decree we should not lose sight of the provisions of Articles 4 to 14 of Decree 30/2001, of 15

October, which establish the “Rules of Functioning for the Public Services”.

The regime that encompasses the public works contracts and the acquisition of goods and

services is the public tender procedure (cf. Article 7).

As opposed to the “general public tender regime”, there is the “special public tender regime”

(which allows for provisions other than those of the decree to be used in specific public

procurement cases for which some treaty or other international agreement has established

distinct procedure rules) and also the “exceptional regime” (which allows the contracting state

body, on public interest grounds, to choose one of the following pre-contractual procedures:

pre-qualification tender, limited tender, two-stage tender, tender by bids and direct adjustment (5)).

 

Essentially, those who are “eligible” to bid for public works contracts and the supply

of goods and services are national or foreign individuals or companies with the legal,

economic, financial and technical capacity and whose tax affairs are in order as set out in

the decree (cf. Articles 18 to 28).

The bids must be accompanied by the following documents: commercial registry certificate

and current statutes, a declaration stating that none of the many common “impediments”

apply (cf. Article 19) which must be signed by the bidders, the consortium project or

agreement to create a consortium (in the case of company groupings), periodic statement

of income and annual accounting and tax statement, certificate of the registration of

a professional activity compatible with the subject-matter of the contracts in question,

licence or equivalent document issued by the relevant body (for activities that require a

licence).

It is important to highlight here that “foreign bidders” can submit documents that are

“equivalent” to those required of “national bidders”. Similarly, the decree provides

that “foreign bidders” must demonstrate their legal, economic, financial and technical

competence and regular tax affairs in their country of origin. However, they must have

an “attorney” resident and domiciled in Mozambique with special powers for the service

of notices and summons and to respond administratively and judicially for their acts (the

instrument conferring the powers must also be enclosed with the bid for the public tender

or other type of pre-contractual procedure).

In this respect, it should also be noted that the contracting public bodes may restrict the

participation of “foreign bidders” in significant tenders such as those with an estimated

value of under five billion, two hundred and fifty million meticals in the case of public

works contracts and two billion, six hundred and twenty-five million meticals in the case

of the acquisition of goods and services (cf. 24 and 88)(6).

This type of restriction requires the prior reasoned authorisation of the minister in charge

of finance and the minister for the sector in question.

With regard to the assessment criteria, it should be pointed out that the criterion is the

“lowest price”(7). As a result, the bid chosen is generally the lowest and in the event of a

tie, it is determined by means of a tiebreaker lottery (cf. Article 36).

On rare occasions, the adjudication criteria may be a “considered criterion”, which

means a criterion that takes into account the technical assessment of the bid and the

price and naturally in this case reasoned grounds are required. In the case of a tie in the

assessment of the bids, the best technical bid will win but if the tie continues, the matter

will be decided by a public “lottery”(8).

 

III. Public Works Contracts

The public works contract(9) is an administrative contract (cf. Article 38(1)), which means

that these contracts are subject to an administrative law regime at the substantive level(10)

and come under the jurisdiction of the administrative courts at a procedural level. As regards

this last aspect, it should be pointed out that the decree allows arbitration clauses in such

contracts but the proceedings must be held in Mozambique and in the Portuguese language.

A performance bond must be provided(11) as a written precondition for the public works

contract and the maximum warranty period is five years from completion of the work(12).

In general, the decree is frugal in its regulation of public works contracts and surprising for

the lack of (very common) rules regarding the formalities for the works, the rules for assessing

the works, the causes for suspending the works, chance and force majeure, special burdens,

financial rebalancing and changed circumstances.

That said, the problem can be overcome by recourse to the civil law, but we should point

out the provisions on works inspections, provisional and definitive acceptance of the work,

the prerogatives of the contracting public body, the limited cases in which contracts can be

amended, the grounds for terminating the contract and the consequences thereof.

One last mention must be made of Article 56 of the decree regarding the “register”. Brevitatis

causa, it is important not to dismiss the “single register” of public works contractors and

suppliers of goods and services that are eligible to take part in tenders. This record is open to

entities who want to register and has the very significant advantage of it not being necessary

for companies listed on the register to provide proof of the abovementioned qualification

requirements.

In conclusion, any prospective co-contracting parties of the state of Mozambique would be

well advised to consult this legislation.