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The Innovations of the Private Investment Law

The Government of Mozambique has assumed as a national priority, to make the country more attractive to investment in order to improve the business and investment environment in the country. In this respect and, in order to implement the Action Plan for the Improvement of the Business Environment, as well as, adapting the legal framework and dynamics of the national economy, the Mozambican Parliament approved Law no. 8/2023, of June 9 (which will come into force 90 days after its publishing), this Law establishes the legal framework, the bases and the principles applicable to the implementation of Private Investments, national and foreign, eligible for the benefit of guarantees and fiscal and non-fiscal incentives, and consequently, the revocation of Law no. 3/93 of 24 June, the Investment Law.

The review brings, in advance, a change in the denomination of the law, now called "Private Investment Law", as it aims to privilege and ensure a greater participation and equal treatment of private initiative investments, of national and foreign origin, emphasizes the need to ensure the respect of the guarantees granted to investors, as well as the international commitments and investment agreements assumed by the country.

The recently approved Private Investment Law removes one of the main fragilities of the legislation previously in force, establishing the public interest as the only legally accepted and determining basis for expropriations, imposing non-discrimination between national and foreign investors and the right to fair compensation that corresponds to the real market value of the expropriated investments. Additionally, this law introduces the principle of Fair and Equal Treatment, and also provides for procedural and arbitration mechanisms to ensure the payment of compensation in the event that the State does not agree on the amount to be paid.

Effectively, the Private Investments Law assumes some lines of action, with the following main innovations to be highlighted:

  • The non-discrimination and equal treatment between national and foreign investors and introduction of the principle of Fair and Equitable treatment.
  • The reinforcement of guarantees and measures to protect property rights and other property rights of investors.
  • The general and special duties of investors, distinguishing the importance of the investors' social responsibility (which relies on the investor proponent of the project) and the respective projects.
  • The introduction of the "Procedural Principles", which include the principles of the Public Administration, reinforcing the position of investors in their relationship with the State.
  • The establishment of two project treatment regimes, namely: Mere Registration (simplified regime) and the Authorization Regime, applicable to large scale projects and investments made in certain areas and sectors of a more sensitive nature.
  • The obligation to provide reasons for rejection acts and the foreseeing of the existence of hierarchical and/or jurisdictional appeal of decisions related to investment projects.
  • The introduction of new prior extra-judicial mechanisms for the resolution of disputes between the State and the Investor, stimulating the possibility of prior conciliation of the parties avoiding the appeal to arbitration or judicial courts.
  • Infringement forecasting, which consist of: (i) non-compliance with the terms and conditions defined in the act of the project approval; (ii) non-compliance with the general and specific obligations of investors; (iii) paralyzing the implementation or effective exploitation of the enterprise without prior notice; (iv) providing false statements or refusing to send information requested in the context of the monitoring and supervision of the project, among others.

Notwithstanding the innovations introduced, this law does not apply to investments carried out or to be carried out under specific legislation, namely in the areas of prospecting, research and production of oil, gas and mineral resources extraction industry, however, it is now applicable, exclusively, to the activities of processing, marketing and transport of mineral and/or oil products, when carried out by entities exclusively dedicated to the development of such activities.

Given the coverage of the new Private Investments Law to the various sectors of the economy, it is clear that there is an urgent need to harmonize it with other specific legal regimes, namely, the Land Law (Law 19/97, of October 1), the Tourism Law (Law 4/2004, of July 17), the Labor Law (Law 23/2007, of August 1) and the Regulation on the Mechanisms and Procedures for Hiring Citizens with Foreign Nationality (Decree No. 37/2016, of August 31), amended by Decree No. 45/2021 of July 2021 and Decree No. 43/2022, of August 19.

The information contained in this publication does not constitute a definitive opinion or advice and is not intended to constitute legal or professional advice.

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Thera Dai