The Sunday Mail
Business Writer
The Zimbabwe Investment and Development Agency Act officially came into force on February 7, 2020. As per its preamble, the objectives of the Act is to provide for, “the promotion, entry, protection and facilitation of investment”.
The Act seeks to protect foreign investors and their respective investments within Zimbabwe, which should give foreigners the comfort to bring and or keep their capital in the country.
It must be noted that the legislation is part of concerted efforts by the administration of President Mnangagwa to protect foreign investment and give adequate legal apparatus for compensation and resolution framework where this may be required.
President Mnangagwa declared Zimbabwe open for business since assuming the reins in September 2017, setting off with widespread reform of investment laws and policies to jettison the economy on to a sustainable growth path.
Provisions of the Act reveal intention by Parliament to extend the protection beyond established investors to include prospective investors.
Corporate and commercial law experts say this was a progressive step by Zimbabwe, which is in line with the United States Model Bi-lateral Investment Treaty (BIT) of 2004 and the Canada-Peru BIT of 2006.
According to corporate lawyers Scanlen and Holderness, the ZIDA Act applies to foreign investors and investments made, being made or to be made in Zimbabwe under the provisions of the Act itself.
“It should be noted that although it is not the first country and certainly not the last to do so, given Zimbabwe’s difficult past with protecting foreign investments, this may go a long way into mending those past perceptions and issues, particularly if the country harnesses this legislation and strictly adheres to its provisions.”
At the centre of investment protection principles are the non-discriminatory requirements.
The first is the National Treatment (NT), which entails that, a host country should extend to foreign investors treatment that is as favourable as the treatment that is accorded to national investors in like circumstances.
The second principle of non-discrimination is the Most Favoured Nation principle (MFN), which mandates that a favourable treatment or advantage granted to another foreign investor should be extended to all other foreign investors.
As such, Scanlen and Holderness in their analysis found that Zimbabwe has now captured the aforementioned twin principles of non-discrimination of foreign investment in Part III of the ZIDA Act.
These twin principles prevent discrimination of foreign investors and their investments on the host market and at their core, the MFN and the NT simply perpetuate the fair and equal treatment principle.
The first instance, where the NT principle is applied is in Section 12, which provides that, foreign investors may invest in, and reinvest profits of such investments into, any and all sectors of the Zimbabwean economy on the same legal conditions imposed on Zimbabweans.
The Zimbabwean lawyers say that the other provision, which is not necessarily attached to the MFN or NT principle but substantiates the two is Section 16 of the Act.
It deals with the fair and equitable treatment principle, which provides that, every investor shall be entitled to the protection against denial of justice in criminal, civil or administrative proceedings; or breaches of fundamental due process.
This includes fundamental breaches of transparency, manifest arbitrariness and any substantive change to the terms and conditions under any licence, permit or endorsement granted by the Government or the Agency to investors and their direct investments.
“The provision is therefore, another progressive step in foreign investment protection by the Zimbabwean Government,” Scanlen and Holderness says.
Another important provision is on expropriation, “ . . . a seizure of private property for some definite public purpose and with the intention and expectation that the property would be paid for in accordance with the legal system . . . of the country.”
In the Zimbabwean context, expropriation shall be subject to the Constitution and the ZIDA Act and two basic conditions should be adhered with, “. . . namely, that the taking is for a public purpose (not arbitrary) and is non-discriminatory . . .”
Zimbabwe has seemingly followed the position used by most western countries regarding providing adequate, prompt and effective compensation upon expropriating alien property.
The lawyers say Section 17 of the ZIDA Act adequately provides for recourse in light of expropriation of any alien property. Generally, no investment shall be nationalised or expropriated either directly or indirectly.
Indirect expropriation is acknowledged in Section 17 (5) of the Act.
Several factors are considered when establishing whether indirect expropriation has occurred and dealt with in a manner that ensures adequate and fair compensation.
However, expropriation and nationalisation can occur in pursuance of a public purpose in accordance with due process of law, in a non-discriminatory manner and on payment of prompt, adequate and effective compensation.
The compensation itself, “shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place (the date of expropriation) or, where the value of the property was negatively impacted by notice of imminent expropriation, immediately before such notice.”
Another form of foreign investment protection manifests itself in Section 19 of the Act which touches on the transfer of funds acquired.
It states that investors may without restriction or delay in a freely convertible currency transfer capital, proceeds, profits from an asset, dividends, royalties, patent fees among other funds, into and out of Zimbabwe.
The only limitation to the above right is that, such funds can only be transferred after paying the relevant fiscal obligations applying to such.
Funds can also be impeded in circumstances such as bankruptcy and insolvency; or criminal or penal offences, for financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities; as well as for ensuring compliance with orders or judgments in judicial or administrative proceedings.
“Disputes arising from investments in the scope of the Act are governed by Zimbabwean laws in terms of Section 38 of the Act. Where applicable domestic arbitration and any other international arbitration agreed to by the parties can also be pursued.
“Foreign investors with BIT’s that were in force prior to the promulgation of the Act should register such agreements with the Agency within 12 months from the coming into force of the Act.
Any other investment thereafter, should be registered within 90 days after such
conclusion of the agreement,” Scalen and Holderness said. — www.ebusinessweekly.co.zw
