Investment protection in Angola
Despite a negative outlook, Angola is seeking structural reform to promote investment.
It is not surprising that Angola’s economy, which is heavily reliant on oil exports for its revenue, is suffering in light of sustained global oil prices. Despite this, the Angolan government is pushing ahead with infrastructure development, notably in energy, where the country intends to increase its power production capacity from its current 1,800MW to 9,000MW by 2015, and transport, with the construction of the new Chinese-built airport in Luanda, which is expected to be completed in 2017. We look at the methods in place for investment protection in the country.
Angola’s gloomy economic outlook
According to the IMF, GDP growth in Angola is expected to decelerate to around 3 per cent in 2015, dramatically down from reported annual GDP growth of 11.1 percent for the period from 2001 to 2010. Inflation has spiked, while the Kwanza has fallen to record lows against the US dollar. This has, in turn, caused a liquidity crisis, and the supply of US dollars, so vital to keep imports flowing, is now being rationed by the central bank. The World Bank’s 2015 Doing Business report ranked Angola 181st out of 189 economies, and 185th in the area of contract enforcement, with an estimated 1,296 days to bring a legal claim to finality, at an average cost of 44.4 per cent of the value of that claim. Foreign direct investment has also declined significantly and the country has been forced to turn to international lenders, to the tune of around $1 billion, to help stabilize the economy. In the midst of this outlook, the government is implementing structural reforms in an attempt to improve the business climate and attract much-needed foreign investment.
New Private Investment Law
Angola’s New Private Investment Law (NPIL) came into force earlier this year, setting out the rules applicable to investments made in Angola. It provides that private investment contracts may be referred to arbitration, with proceedings taking place in Angola and Angolan law being the applicable law to the contract and the arbitration proceedings. Both domestic and international arbitration proceedings are governed by the 2003 Voluntary Arbitration Law (VAL). The VAL is largely based on the 1985 UNCITRAL Model Law on International Commercial Arbitration. These are important structural reforms in the context of investment protection in Angola.
Further reform necessary
There is, however, much room for further reform to encourage investment. Notably, the VAL allows for the appeal of domestic arbitral awards on the merits of the decision, unless the parties agree otherwise. This is not in line with international best practice, as it may subject investors to the local courts. In respect of international arbitration, the general rule under the VAL is that decisions are final and are not subject to appeal. This is laudable. However, in terms of enforcement, Angola is unfortunately not a signatory to the New York Convention and parties are forced to look to Angolan law and its courts for the enforcement of foreign arbitral awards against assets in Angola. Further, Angola is not a party to the ICSID Convention, and therefore foreign investors do not have the right to refer disputes arising out of contracts with State entities to ICSID arbitration. During the oil boom, these risks were generally swallowed by investors. In today’s climate, and while the perception of the Angolan courts remain unfavourable, Angola would be wise to consider further reform to attract more foreign investment.