Mozambique

Over the past years and in particular since 2010 Mozambique has recorded very high levels of foreign direct investment. According to the statistics released by the World Bank, in 2015 the net foreign direct investment in Mozambique amounted to nearly US$3.9 billion, ranking third as destination for foreign investment in Africa (after Angola and Egypt). The existence of these high levels of foreign direct investment is critical to understand the role that arbitration has been given by the Mozambican government as the preferred dispute resolution method in international contracts with foreign investors and, more generally, in the legislation that regulates some of the most important sectors for the Mozambican economy.

Arbitral tribunals are nowadays expressly recognised by the Constitution of Mozambique as part of the judicial organisation. Though arbitration received constitutional recognition only in 2004, references to arbitration in the Mozambican legal system already existed by then. The Civil Procedure Code of 1961 had already regulated arbitration by admitting arbitration agreements on matters that were not related to inalienable rights.

The legal framework regarding arbitration

The legal framework regarding arbitration evolved from the mentioned initial recognition and is currently based primarily on the following legislation:

  • the Arbitration, Conciliation and Mediation Law (ACML), approved by Law No. 11/99, of 8 July; and
  • the Administrative Procedure Law, approved by Law No. 7/2014, of 28 February.

The main principles applicable to arbitration in Mozambique are aligned with those widely accepted in modern arbitration laws worldwide and although the ACML is not based on the UNCITRAL Model Law, it is clear that a large number of the legislative solutions are inspired by that Model Law.

Those two pieces of legislation share a cross-sector approach in arbitration matters, regulating its essential aspects, but there is also separate sector legislation that recognises arbitration as the appropriate mechanism for the resolution of certain disputes in specific sectors. In this regard, three specific regimes should be noted as particularly relevant to international investors.

The Investment Law

According to the Investment Law (approved by Law No. 3/93, of 24 June), the final resolution of any dispute involving the state and foreign investors in the context of investments authorised and carried out in Mozambique shall be made by means of arbitration, unless otherwise agreed.

The legal framework of public-private partnerships

Another example of the importance of arbitration in Mozambique is the legal framework of public-private partnerships (approved by Law No. 15/2011, of 10 August), which includes specific provisions allowing for the use of arbitration for the resolution of disputes arising in such matters.

The Petroleum Law

With relevance in the oil sector, the Petroleum Law (approved by Law No. 21/2014, of 18 August) provides that disputes arising from agreements or concessions falling within its scope, if not resolved through amicable means, must be submitted to arbitration or to the competent state courts, depending on what is set forth in the relevant contractual terms.

The existence of special arbitration legal regimes is perhaps the most distinctive feature of Mozambican arbitration and is one that should be carefully considered when drafting arbitration agreements in view of some degree of overlap that sometimes exists between some of the existing regimes and also in view of some ambiguities caused by mechanisms of mandatory arbitration in some sectors.

The importance of arbitration as a dispute resolution mechanism in Mozambique is undoubtedly clear and results immediately from the existence of cross-sector legislation applicable to large investment projects that are taking place in the country and that clearly indicate a preference for arbitration as a method of resolving disputes. The favourable approach of the Mozambican state in relation to arbitration is also confirmed by the fact that it has ratified the New York Convention in 1998 and the Washington Convention in 1995.

International, domestic and administrative arbitration

In light of the legislation currently in force, arbitration in Mozambique can be categorised into three types: domestic, administrative and international arbitration.

Domestic arbitration corresponds to arbitration proceedings that have connection elements only with the Mozambican state and covers the majority of disputes that do not show specificities that justify their inclusion in the remaining categories. In this context, Mozambican legislation provides for a wide range of disputes that may be resolved by arbitration, opting therefore for a general rule of admissibility that has only two exceptions:

    (1) disputes that are subject to special regimes that set aside the rules provided for in Law No. 11/99, of 8 July; and

    (2) disputes relating to inalienable or non-negotiable rights, as this limitation can be primary or supervening. This means that if the dispute involves inalienable or non-negotiable rights, it cannot be brought to arbitration at any stage. If questions of such nature are raised during the dispute, the arbitral tribunal should refrain from issuing a decision and refer the parties to the state courts for resolution of this particular issue.

 The use of arbitration under the above-mentioned law is available to private and public entities. The latter, however, can only resort to arbitration in relation to private law or private contractual disputes. For any other disputes, public entities may only enter into arbitration agreements if allowed by law. And it is in this field that administrative arbitration becomes relevant, as discussed below.

Differently, international arbitration includes all disputes relating to international trade interests, namely (1) when parties to an arbitration agreement have, at the time of conclusion of that agreement, their business domicile in different countries, (2) the place of arbitration or the place in which a substantial part of the obligations resulting from the underlying agreement is to be performed outside the country in which the parties have their place of business or the place with which the subject matter of the dispute is deemed to be closely connected is also located outside the country in which the parties have their place of business or (3) the parties have expressly stipulated that the subject matter of the arbitration agreement has connections with more than one country.

Unless otherwise agreed by the parties, the provisions applicable to domestic arbitration are also applicable to international arbitration. The arbitral tribunal shall decide in accordance with the rule of law chosen by the parties or, failing such provision, the rule of law determined by the conflict of law rules deemed appropriate by the arbitral tribunal. In any case, the arbitral tribunal shall take into account the usages of the trade applicable to the transaction.

Finally, regarding administrative arbitration, the respective legal framework (approved by Law No. 7/2014, of 28 February) is applicable to the resolution of disputes arising from administrative decisions, which typically are executed with the intervention of the state or of legal entities subject to a public law regime. In this context, administrative arbitration does not cover all disputes that can arise within the mentioned administrative legal relationships, but surely does cover disputes of central importance in the economic activity. In fact, and with greater relevance, disputes that have as their object administrative contracts, such as contracts for public works, public service concessions or public works concessions, and concessions for the exploitation of particular economic activities, are included within the scope of this type of arbitration procedures.

Main features

Legal principles

In one of its initial provisions, the ACML identifies and defines the set of core principles applicable to arbitration. These are the principles of liberty, flexibility, privacy, integrity, promptness, equality and due process and these are the main pillars of arbitration in Mozambique.

In this regard, a special reference should be made to the principle of integrity as an overarching principle for the functioning of the arbitral tribunal. It applies to arbitrators and seeks to capture the well-established pre-requisites of arbitrators’ independence and impartiality throughout the dispute. It is on the grounds of this principle that arbitrators are required to remain in a position of equidistance from the parties and from the interests underlying the dispute and position of each of the parties, observing the ethical rules set forth in Law No. 11/99, of 12 July, and fulfilling any requirements laid down in the arbitration agreement. And it is also in this same context that the same piece of legislation ensures procedural mechanisms for refusal of arbitrators that are enforceable by either party along the course of the arbitral proceedings, with the possibility of appeal to the state courts.

Mention should also be made to the relevance that the principles of equality and due process are given by the ACML, which requires that parties are given, throughout the process, equal treatment, with identical possibilities of intervention and of presenting their case. The ACML expressly provides that both parties should be given the possibility of intervening, both in oral hearings and in writing, before a decision is made by the arbitral tribunal. These are structural guarantees of a fair trial, which are applicable to any decision of a jurisdictional nature and its non-observance may compromise the validity of the arbitration award.

Arbitration agreement

The submission of any dispute to an arbitral tribunal requires an arbitration agreement, that can have the nature of an agreement to arbitrate, with regard to an already existing and specific dispute, or of an arbitration clause, when covering disputes that could potentially arise in the context of an existing legal or contractual relationship.

In the light of Mozambican law, the arbitration agreement should always be executed in writing, otherwise it is considered to be null and void. It shall be executed in any document signed by the parties, including an exchange of letters, telex, fax or any other means of communication that prove its existence, or in which the existence of an agreement has been alleged by one party and has not been challenged by the opposing party. The agreement can also be incorporated by reference to another document that includes an arbitration agreement, as long as the reference is made in (and to) a written document and in terms which make the intention clear to incorporate the arbitration agreement in the contractual instrument at stake.

Arbitral procedure

Beginning of the proceedings

Arbitration is triggered by a written communication sent by (at least) one of the parties in the arbitration agreement to the other(s). This communication must accurately describe the object of the dispute and, where appropriate, designate the arbitrator to be appointed by the requesting party.

The regime will be different if the arbitration agreement so provides for or if autonomous rules providing for a different mechanisms of constitution of the arbitral tribunal are expressly incorporated into the arbitration agreement.

Arbitrators’ appointment

The arbitral tribunal may consist of a sole arbitrator or of several, in an uneven number. Should the parties fail to agree on the number of members of the arbitral tribunal, it shall be composed of three arbitrators. In case of a collective tribunal, the appointment of the first arbitrator must be accompanied by an invitation to the counterparty to carry out the respective appointment of the second arbitrator, failing which this appointment shall be made by the appointing authority identified by the parties as competent for that purpose or, in the absence of such indication, by the state courts.

Following the appointment of the second arbitrator, directly by the counterparty or a different entity, the two appointed arbitrators will appoint the third arbitrator (or the arbitrators already appointed will appoint the presiding arbitrator), concluding as such the constitution of the arbitral tribunal. From that moment on, the deadline for the arbitral tribunal to render an award begins.

The two legal regimes described above, related to the ACML and to the law applicable to administrative arbitration, also differ in terms of the deadline to issue a decision. Both are consistent with regard to the supplementary nature of the regime provided for in such pieces of legislation, allowing the parties to agree on specific deadlines. However, in the absence of such agreement, the rules are distinct. In the case of administrative arbitration, the deadline for a decision is six months, although in can be extended by a period corresponding to half of its initial duration. In contrast, under the ACML framework the deadline is also of six months but its extension can be determined by the arbitral tribunal or agreed between the parties for a period up to twice the initial term.

Procedural rules

In terms of the applicable procedural rules, parties are free to approve the procedure they wish to adopt for their arbitration. In case the parties fail to provide for such rules, the arbitral tribunal will be given the power to determine the applicable procedural rules.

Although parties are given significant freedom when approving the rules applicable to the arbitration, those rules must comply with the structural principles mentioned above. In terms of evidence, any means of evidence that are accepted by civil procedure law are admissible in arbitration, which means that, in the context of arbitration, all means of evidence that are not prohibited by an imperative legal provision may be used. In general, the rule is that the admissible evidence is always presented within the context of an adversarial hearing.

State court intervention

Although arbitral tribunals are constitutionally recognised as courts, there are several circumstances in which state courts intervention is required regardless of the existence of an arbitration agreement. The ACML provides for the following typical cases of state court intervention in the context of arbitration:

Injunctions and provisional measures

In the context of interim remedies, the parties may request state courts to order interim measures in respect of a dispute covered by an arbitration agreement. In this respect, it should be noted that the request before the state courts and its subsequent decision in no way interferes with the competence of the arbitral tribunal to decide the underlying dispute, nor implies the waiver by the requesting party of the arbitration agreement entered into previously. In fact, where there is an arbitration agreement, it is to the arbitral tribunal to issue the first binding decision in matter of competence (Kompetenz-Kompetenz). As a consequence, the filing for interim measures before state courts, which may also be required within the arbitration, has no impact on the scope definition of the arbitration agreement. As a result, the choice of the appropriate court to ensure preventive remedies is influenced only by the specific circumstances of the case and the stage at which said dispute is.

State court assistance in taking of evidence

Intervention of the state courts may also take place during the presentation of evidence, by way of assistance to arbitral tribunals where one of the parties or a third party is resistant or unwilling to observe the duty of collaboration with the arbitral tribunal. If this posture is followed by any of the parties, such resistance should not mean the impossibility of access to relevant means of evidence and that is the reason why, in these situations, state courts may be requested to assist in taking evidence under their coercive powers, if necessary. To such effect, it is only required that this request is made by the relevant arbitral tribunal or authorised by it in cases where the request is made by one of the parties.

Setting aside and enforcing an arbitral award

Following an arbitral award, state courts may also be called on to intervene. In this case, intervention may relate to two different realities: an action for annulment of the arbitral decision or for the purposes of its enforcement.

On the first point, the award is in principle final. Its respective challenge is only permissible by way of an action for annulment, the grounds of which are quite limited and do not involve the examination of the merits of the arbitral award (except for one specific situation). In this sense, an action for annulment (setting aside) of the award can only be based on the following grounds:

•   the parties to the arbitration agreement were under some incapacity;

  • the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under the law of the Mozambican state;
  • a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case;
  • the award deals with a dispute that is not referred to in the arbitration agreement or is not contemplated in the submission to arbitration or contains decisions on matters beyond the terms of the arbitration agreement or of the submission to arbitration. it should be noted that if the provisions of the award in respect of matters submitted to arbitration can be separated from those not so submitted, only that part of the award that contains decisions on matters not submitted to arbitration may be set aside;
  • the composition of the arbitral tribunal or the arbitral procedures that were followed are not in accordance with the agreement of the parties, unless such agreement is in conflict with a provision of the ACML that the parties cannot derogate from; and
  • the subject matter of the dispute is not capable of settlement by arbitration under the laws of Mozambique.

Apart from these grounds for annulment, the ACML also admits the challenge of an award that is contrary to the public policy of the Mozambican state.

In terms of enforcement, an arbitral award is considered to have the same degree of enforceability as a state court decision. Enforcement procedures should be brought before state courts, under the terms of the specific procedure provided for in civil procedural legislation.

Closing remarks

Mozambican law does promote, and for several years now, arbitration as an effective dispute resolution mechanism. In fact, the Mozambican state acceded to international conventions that recognise in their essence the relevance of arbitration as an alternative dispute resolution mechanism, in particular in what concerns international contracts and the relationship with international investors. Similarly, the procedural legislation currently in force is favourable to arbitration and in the context of implementing it one may find several pieces of sector legislation in strategic areas that identify arbitration as a central mechanism, and surely one with a very significant margin for growth in resolving disputes.

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