Transparency of the Regulatory System
Cabo Verde is a model for much of Africa because of its transparency and good governance. The government is committed to improving the conditions for foreign investment and to encouraging a more transparent and competitive economic environment. In 2018, Cabo Verde ranked 45th on Transparency International’s Corruption Perception Index, making it third among African nations, behind Seychelles and Botswana.
Laws to promote exports, incentives to export, and free-zone enterprises stress the government’s commitment to encouraging investment in export-oriented industries. The tax regime encourages entrepreneurial activity, and government policies support free trade and open markets. Although bureaucratic procedures have been simplified in a number of cases, there is still room for improvement.
International Regulatory Considerations
Cabo Verde is a member of UNCTAD’s international network of transparent investment procedures [http://caboverde.eregulations.org/ ]. Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations, including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.
In January 2008, four years after the United Nations’ Resolution 59/210 recommendation, Cabo Verde graduated from Least Developed Country status to Lower Middle Income Country status. On May 26 of the same year, five months after the World Trade Organization (WTO) approved its application, Cabo Verde’s legislature unanimously ratified the agreement and formally acceded to the WTO. Cabo Verde has not notified the WTO of any measures that are inconsistent with its TRIMS obligations.
Legal System and Judicial Independence
Cabo Verde was a Portuguese colony until 1975; consequently, its legal system is based on the civil law system of Portugal, and it has systematic codification of its general law. The 1992 constitution provides for a judiciary independent from the executive branch. The judicial system is composed of the Supreme Court, the Constitutional Court, and the regional courts. There is no interference from the government, and judges cannot be affiliated with political parties.
The Supreme Court of Justice has a minimum of five members, one appointed by the president, one appointed by the National Assembly, and three appointed by the Supreme Council of Magistrates. The Ministry of Justice and Labor appoints local judges. The judiciary generally provides due process rights; however, the right to an expeditious trial is constrained by a seriously overburdened and understaffed judicial system. Criminal defendants are presumed innocent and have the right to counsel, to a public, non-jury trial, and to appeal. Cabo Verde has modern commercial and contractual laws. The judicial system in Cabo Verde is widely seen as transparent and independent. There is no government interference in the court system, but judicial decisions are often delayed by years.
The right to private ownership and establishment is guaranteed under the constitution. Property rights are recognized and guaranteed by several Cabo Verdean laws, as well as by the constitution. There is a legal entity that records secured interests in property, both chattel and real estate. The legal system also protects and facilitates acquisition and disposition of all property rights.
Laws and Regulations on Foreign Direct Investment
Foreign Direct Investment (FDI) has greatly influenced the recent economic history of the islands. The continued implementation of sound macroeconomic policies have fostered solid inflows of FDI particularly in the tourism sector. Cabo Verde has adopted open if scattered FDI legislation.
Law n. 13 / VIII / 2012, “the Investment Law,” of July 11, 2012, applies to both foreign and domestic investors, and it preserves the principle of freedom of investment. The law clearly states that investors of any nationality are welcome to invest, reflecting the government’s commitment to creating a dynamic business environment. The Industrial Development Statute regulates granting incentives and simplifies the investment approval process.
Other relevant legislation includes Law n. 41 / 2016 of July 26, 2016, which defines the mandate of Cabo Verde TradeInvest as the one-stop shop for external investors.
In Cabo Verde, there is free online access to all laws through the government’s official register website. This is viewable at: https://kiosk.incv.cv/ .
Regulations on economic activity sectors can also be viewed on the CaboVerde TradeInvest website: http://cvtradeinvest.com/ .
Competition and Anti-Trust Laws
Different regulatory agencies (depending on the sectors) are in charge of and responsible for competition-related concerns.
The law establishes the regime of protection of competition applicable to all economic activities, carried out on a permanent or occasional, in private, public and cooperative basis.
Decree Law 53/2003 substituted Decree-Law Nº 2/99 of February 1
Issue date: 24/11/2003
Date of Entry into force: 23/01/2004
Expropriation and Compensation
The investment law protects against direct and indirect expropriation. Private property is protected against requisition and nationalization, except for public interest reasons (Investment Law, art. 6.1). In the event of expropriation, the government will compensate the owner on the basis of prevailing market prices or the actual market value of the property on the day of expropriation. Compensation may be repatriated at the exchange rate in effect on the day of expropriation. The Investment Law provides for the right to seek constitutional guarantee or other forms of dispute resolution provided by any agreement between the investor and the Government. There has been no reported case of unlawful expropriation, and the government has never shown any pattern of discriminatory behavior against foreigners.
Legislative Decree No. 3/2018 approved the new legal regime for economic and financial operations with foreign countries and foreign exchange operations in Cabo Verde. It liberalized economic and financial relations with the outside world, especially capital transfers which are no longer subject to verification and prior authorization by the central bank. Only in exceptional circumstances will the government be able to impose temporary restrictions on economic and exchange transactions
ICSID Convention and New York Convention
In 2011, Cabo Verde became a contracting state to the International Centre for the Settlement of Investment Disputes (ICSID convention). Cabo Verde is not a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
Investor-State Dispute Settlement
In March, representatives from the Brazilian telecommunications company Oi and the government of Cabo Verde reached an agreement to resolve a dispute regarding telecommunications company Cabo Verde Telecom (CVT). The Cabo Verdean government settled out of court, agreeing to buy back the equivalent of forty percent of Cabo Verde Telecom (CVT) for USD 29.4 million. Cabo Verde believed that the previous owner, a Portuguese company, had violated agreements by agreeing to sell shares held in CVT to Oi without the prior permission of Cabo Verdean authorities.
International Commercial Arbitration and Foreign Courts
Disputes between the government and investors concerning the interpretation and application of the law which cannot be resolved amicably or via negotiation are submitted for resolution by the judicial authorities, in accordance with Cabo Verdean laws. Disputes between the government and foreign investors on investments authorized and made in the country, if no other process has been agreed upon, are settled by arbitration.
The law favors arbitration as a mechanism for settling investment disputes between the government of Cabo Verde and foreign investors, under national and international dispute resolution rules, and the courts recognize and enforce foreign arbitral awards. Generally, arbitration will be carried out in Cabo Verde and in Portuguese unless the parties agree on another location and language. Arbitration is generally accepted as a dispute resolution mechanism. The decision of the single referee or the arbitration committee is final and there is no appeal.
Law 108 / VIII / 2016 approved the legal regime of tax arbitration, through Decree-Law no. 20/2018, of April 23, 2018, and regulates the arbitrators’ performance, appointment, the requirements to be an arbitrator, and the reasons for refusal, replacement, and removal. In 2018, the Tax Arbitration Center was created to promote the resolution of disputes regarding tax matters, and its statutes were approved (Decree-Law no. 25/2018, of May 24).
- The principal national arbitration statute in Cabo Verde is the Arbitration Law No. 76/VI/2005 of August 16, 2005.
- Law No. 89/IV/93 of December 13, 1993, provides that disputes between the State of Cabo Verde and foreign investors shall be resolved through arbitration and conciliation subject to Cabo Verde arbitration law.
- Decree-Law No. 35/2010 of September 6, 2010, provides that disputes related to the validity, interpretation, and non-fulfillment of insurance agreements may be addressed by arbitration.
- Decree No. 8/2005 of October 10, 2005, provides for institutional arbitration.
Cabo Verde made major developments in resolving insolvency by adopting a law that introduces a reorganization procedure and simplifies continuation of the debtor’s business during insolvency proceedings. The law provides a framework that allows creditors more involvement in important resolutions regarding the insolvency proceedings. The law was published in December 2015, entered into effect in September 2016, and is expected to contribute to improving Cabo Verde’s ranking in the Doing Business Report in the near future (2018 Resolving Insolvency ranking: 168).
Bankruptcy is not criminalized in Cabo Verde.