INTERNATIONAL LEGAL FRAMEWORKS AND BUSINESS DEVELOPMENT IN MALAWI
MEANING OF LAW AND INTERNATIONAL LEGAL FRAMEWORKS
Law is defined as the various sets of rules that govern human conduct in most spheres of life, including in commerce and trade.Laws can be municipal, meaning internal laws enacted by a country’s legislature and applicable in the particular country or jurisdiction, or laws can be international, meaning binding on States and their citizens.International laws are legal rules or provisions that are binding on States and a set of these in any particular field will constitute a framework.
THE INTERNATIONAL DIMENSION OF BUSINESS
The world is becoming a global villageThis is the so- called ‘ post geography’ era, where political boundaries are less a barrier in the face of an explosive growth of global trade and investment.Local businesses must trade with foreign nations and foreign goods are prevalent within national borders and these affect business growth and development.Outside national boundaries, there are international laws that affectbusiness locally and internationallyand it is these that the presentation will focus on.
THE ROLE OF LAW IN BUSINESS DEVELOPMENT
Law plays a key role in business development in general ( as they regulate various aspects of business) and a pivotal role in the growth of private business in particular.The establishment of the rule of law at domestic level attracts private investment as it creates stability and predictability where business risk may be rationally assessed, property rights, contractual rights and court judgments respected.The rule of law also gives credibility to commitments on the part of governments and the reliability and enforceability of appropriate rules.This leads to lower transaction costs, greater access to capital and maintenance of a level playing field.Rigorous regulatory regimes also thrive where there is respect for the rule of law.
A BROAD OVERVIEW OF SOURCES OF INTERNATIONAL LAW RELEVANT TO BUSINESS
Inthe field of commerce and trade, at international level, there are the following sources of law:(a) The law merchant orlexmercatoria.(b) International and regionalinstruments.(c) bilateral treaties(d) harmonizedlaws and model laws(e)contractually incorporated rules and trade terms promulgated by international organizations,e.gUniform Customs and Practice for Documentary Credits ( UCP 600), ICC’s Incotermsetc
THE LEX MERCATORIA
As indicated above, these are trade customs and usages in the international business sphere.Establishedby a pattern of repetitive behavior among merchants and have acquired normative force in that the merchants believe they are legally binding.They can be implied into international contracts as implied terms in such contracts.They can be likened to the customary international law in the area of trade and commerce.Theytake a lot of time and consistent user and practice to develop but they exist in the first place because of their functionality in easing international trade and business.They are doubtlessly part of the legal framework at an international level that govern the conduct of business and as they have been created by need based on functionality,and doplay a role in business promotion and development.
KEY AREAS OFFOCUS
Thispresentationwill focus on key international treaties in the area of trade or business development to which Malawi is a party and those which Malawi must seriously consider signing. The following key issues will be tackled:To what extent is the business community involved in trade negotiations at regional and multilateral levels that impact on firms, business and commercial practice in Malawi?How national and inclusive are the discussions and negotiationsIs the business community aware of international and multilateral legal frameworks that affectthem?How visible are these to ourbusinessmen?Why have we notacceded to some key ones likethe New York Convention and CISG?
MAJOR INTERNATIONAL TREATIES AFFECTING BUSINESS DEVELOPMENT IN MALAWI
TheMarrakesh Agreement creating the WorldTrade OrganizationRegional Economic Treaties like COMESA and SADC, The TripartiteFTA, theAfCFTABilateral andplurilateraltradeagreements ( Mw/Moz, Mw/Zim, Mw/ RSA, EU/ACPetcThe Convention on the International Sale of GoodsThe 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral AwardsThe UNCITRAL Model Law on Cross Border InsolvencyUN Human Rights Treaties and ILO Conventions
ESSENTIAL ELEMENTS OF A LEGAL FRAMEWORK THAT WILL PROMOTE BUSINESS GROWTH
INTERNATIONAL TREATIES-THE MARRAKESH AGREEMENT CREATING THE W.T.O.
The W.T.O. started off as the General Agreement of Trade and Tariffs duringand inthe aftermath of the second world war in 1947.It is an intergovernmental organization aimed at the progressive liberalization of trade and for the negotiation of global trade agreements.Trade liberalization is aimed at promoting economic growth and development.The W.T.O., formed in 1994 operates a system of international trade rules and also settles trade disputes.Malawi is a member state and so are 164 other countries.There are23 observer countries and a number of international organizationsThe purpose of observer status for international intergovernmental organizations in the WTO is to enable these organizations to follow discussions therein on matters of direct interest to them.Seehttps://www.wto.org/english/thewto_e/igo_obs_e.htm
•Administering WTO trade agreements• Forum for trade negotiations• Handling tradedisputes ( dispute settlement)•Monitoring and reviewingnational trade policies• Technical assistance and training for developing countries• Cooperation with other international organizations
OBJECTIVES OF THE W.T.O
To raise living standardsTo ensure full employmentTo ensure a large and steadily growing volume of real income and effective demand.Expand production of and trade in goods and services whilst allowing for optimal and sustainable use of world resources.All this through international trade. International trade promotion leads to:Better utilization of resourcesIncreased competitionBroader variety of goods and servicesInnovation and technologytransferBusiness growth
THE W.T.O AGREEMENTS
There are three main agreements in the WTO framework:The General Agreement on Tariffs and TradeThe General Agreement on Trade in ServicesThe agreementonTrade Related Aspects of Intellectual Property Rights ( TRIPS)The main aim of all these agreement is to promote international trade through the reduction or elimination of barriers to trade such as tariffs and quotas.
FUNDAMENTAL PRINCIPLES OF THE WTO AGREEMENTS
NON DISCRIMINATION-Members shall not discriminate between trading partners ( MOST FAVOURED NATION PRINCIPLE) or between national and foreign like products, services or nationals ( NATIONAL TREATMENT PRINCIPLE)MORE OPEN TRADE-reducing or eliminating barriers or obstacles to tradeTRANSPARENCY AND PREDICTABILITY-Traders and Member States need to know what are the trade rules around the world ( TRANSPARENCY) and that trade measures will not be raised arbitrarily ( PREDICTABILITY)SPECIAL TREATMENT FOR LDC’s (egAGOA)
THE MOST FAVOURED NATION PRINCIPLE
Ensures equal access to international marketsMaximizes efficiency by ensuring that each country will import from the most efficient supplierReduces the cost of administration of trade rulesMinimizes the cost of trade negotiationsThere are exceptions to this principle:Regional Trade Agreements or Customs UnionsForLDC’c
THE NATIONAL TREATMENT PRINCIPLE
Ensures non discrimination between domestic and foreign products, services and nationals.Principle applies only as regards internal measures taken after the goods are lawfully within the importing member state. It does not apply to border measures. Hence it applies to internal taxation measures, transportation, packaging and other internal laws and regulations that are different from those applied towards like products or substitutable products.There are exceptions with regard to Government procurement, subsidies to domestic producers, internal maximum price control measures and cinematographic films.
ADVANTAGES OF W.T.O MEMBERSHIP – WHY JOIN THE W.T.O.
Promotion of peace and stability through robust trading and the aversion of trade wars/ disputesAvoiding protectionismIncreasing market sizeInsurance againstunfavourabletrade policies in other countries.These advantages translate into local business growth potential in member states through increased market access in other member states.
ELIMINATION OF TRADE BARRIERS BY THE W.T.O.
Reduction and binding of import tariffsReduction of other barriers to trade, such as excessive customs formalities, technical barriers to trade, and arbitrary application of trade regulations.General elimination of quantitative restrictions like bans and quotasReduction of excessive customs formalities
EXCEPTIONS TO THE NON DISCRIMINATION PRINCIPLE
some measures can be deployed to counter dangers to the health of animals, human and plants and of the environmente.gphytosanitary measures, internal securityetcRTA’sBalance of Payments and securityTrade defence remedies like anti – dumping measures, subsidies and countervailing measures, safeguards measuresetcLDC’s
TRANSPARENCY AND ACCOUNTABILITY UNDER WTO
DSUMembers to submit their tariff data to WTO annuallyTrade Policy Review Mechanism
MAJOR WEAKNESS OF WTO REGIME
Lack of individual business access to its dispute resolution mechanisms. Only state actors are parties.Percolation or dissemination of knowledge about its role is limited. SME’S mostly unaware of its existence.
MAJOR QUESTION: IS MALAWI DOING ENOUGH TO REAP BENEFITS OF W.T.O MEMBERSHIP?
To what extent todoes the business community in Malawi monitorothercountries’ restrictionson the access of our products to their markets? Are they all accorded MFN treatment and NT?( Does MCCCI have an ‘International Trade’ department or committee?) ( Does Government have an International Trade legal department?) ( To what extent is International Trade mainstreamed in undergraduate and post graduatetraningin Malawi?)Do we ever police our market against dumping and influx of subsidized products? ( think ofKaunjika, cheap products from some eastern country(ies)etc)Havewe as a country deliberately created a cadre of WTO experts and negotiators?As businessmen engaged intradein goods / or services or IP, do we have a policy to produce for the foreign market and take advantage of the robust international trade promotion regime that exists in the WTO?To what extent is production of goods services geared towards taking advantage of bilateral or multilateral trade treaties to which Malawi is a party?
THE COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA: COMESA
Its forerunner was the Preferential Trade Area of the Eastern and Southern Africa.It is a form of a Regional Trade Agreement, duly recognized by the WTO and enjoying the exemption from application of the MostFavouredNation Treatment principle in so far as its members can enjoy lower tariff levels that they need not extend to other WTO members who are not within COMESA.Comprises: Angola, Burundi, Comoros, DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.Having started life as a preferential trade area and developed into a common market, the eventual expressed aim is to end up as an Economic Community
AIMS AND OBJECTIVES
Full market integration seems the watchword.The sustainable growth and development of member states through more balanced and harmonious development of their production and marketing structures.Joint development in all fields of economic activity.Creating an enabling environment for foreign, cross border and domestic investment,Peace, security and stability as conditions necessary for economic developmentetcStrengthen relations between the common market and the rest of the world.
It has specific undertakings in the fields of:Trade liberalization and customs cooperationTransport and communicationsIndustry and energyMonetary affairs and financeAgricultureEconomic and Social Development( this includes the undertaking to harmonize or approximate laws required for the proper function of the common market)
DECISIONS OF COMESA
Through the Council of Ministers it acts through:RegulationsDirectivesDirectionsRecommendations andOpinions
It has a Consultative Committee of the Business Community whose role is to ensure that the interests of the business community are taken into consideration;( Is private sector in Malawi aware of and part of this CC?)TheTreaty has a Chapter dedicated to Cooperation in the Development of the private sector, which includes the issue of promoting entrepreneurial involvement in policyformulation.It has a court of justice at firstinstanceand appellate levels, which court is accessible even to individuals resident in member states after exhaustion of domestic remedies and the judgments of the court can be domesticated and enforced as localjudgments. The court ensures Member State accountability for treaty violations.
THEMATIC CHAPTERS IN THE TREATY INCLUDE THE FOLLOWING:
Trade liberalization and development ( elimination of import duties, barriers to trade, non tariff measuresetc)CompetitionCustoms CooperationRe- exportation of goodsMonetary and financial cooperationCooperation in development of transport and telecommunicationsCooperation in industrial development…
THEMATIC CHAPTERS, CONTD
Cooperation in development of energyCooperation in healthStandardization and quality assuranceDevelopment of Natural Resources, the environment and wildlifeDevelopment of science and technologyDevelopment of agriculture and rural developmentDevelopment of TourismInformation systems
THEMATIC CHAPTERS CONT’D
Cooperation in Social and Cultural Affairs ( ironically includes employment conditions and labor laws)Assistance to LDC’sDevelopment of the Private SectorWomen in Business and DevelopmentHuman Resources Development and CooperationInvestment Promotion and Protection ( includes encouragement to conclude DTA’s and accede to ICSID)Regional peace and securityFree movement of persons,labour, servicesetc
IMPORTANCE OF COMESA TO BUSINESS DEVELOPMENT AND IMPORTANT QUESTIONS
Notably, the COMESA Treaty covers more important areas that affect business development in any country than does the WTO agreements.Whilst under theWTO,membership is for countries and individuals can only access its legal dispute resolution mechanism through member states, under the COMESA regime, individuals in members states can gain access in their own right to the court to enforce breaches of the treaty by member states after exhausting domestic remedies and the court can also serve as an arbitral chamber.The COMESA Treaty is more focused on private sector and business developmentThe question is: to what extent do individuals and businesses pause toanalyseMember State obligations under the Treaty, question whether these have been fulfilled and if not, take member states or the council to task or to court for breach of treaty provisions?Polytolv MauritiusMAJOR WEAKNESS:Nourgent drive to harmonize lawsega common sale of goods law, a common cross border insolvency law, a common recognition and enforcement of foreign judgments law.
SOUTHERN AFRICA DEVELOPMENT COMMUNITY TREATY
Treaty by Southern African States: Angola, Botswana,Comorros, DRC, Lesotho, Madagascar, Mauritius, Malawi,Moozambique, Seychelles,Eswatini, Namibia, Tanzania, Zambia, Zimbabwe.Primarily aimed at regional integration, eradication of poverty, sustainable and equitable economic growth and socio- economic development.Develop economic ties among member states and elimination of obstacles to free movement of capital,labour, goods, services and people
BUSINESS GROWTH RELEVANCE OF SADC
Has Sectoral and Cluster Ministerial Committees on Trade and Industry, finance and investment, infrastructure and services,Has protocols on, among others, energy, finance and investment, mining, trade, trade in services, transport, communications andmeterology, tourism, shared water resources etc.The protocol on trade seeks to eliminate barriers to trade, ease customs procedures, harmonize trade policies, prohibit unfair business practices etc.Annexes to the protocol on trade cover rules of origin, customs cooperation, simplification and harmonization of trade documents, transit trade, trade development etc.The national treatment principle finds manifestation in the trade protocol too, and so does elimination of trade barriers, quantitative barriers to trade etc.Effectively, one has a regional economic block, a common market of sorts in SADC and this works to boost trade and business
POINTS OF CONCERN IN SADC
Access to the SADC Tribunal was removed for individuals. Only Member States can access same. Difficult for businesses to enforce duties of member states when breach occurs.No common ADR seat like an arbitral tribunaletcNo singular effort to harmonize laws for member states. No common sale of goods law, no common cross border insolvency laws, no common recognition and enforcement of foreign judgments law and no protocol on the subjectetc
THE TRIPARTITE FREE TRADE AREA
So far Africa’s largest free trade zone.Created in 2015Comprised of COMESA, SADC and EAC countries27 countries involved.Covering Customs Cooperation, Simplification and harmonization of trade documentation and procedures, rules of origin, trade remedies, non tariff barriersetcBenefits include: spurring west African economies to follow suit and eventually lead an Africa wide FTA; It has created a much larger market for goods and services which will spur economic growth; impetus for investment in cross – border infrastructure; will spur industrial development, job creation, technological advances and stimulate trade in services
IMPROVEMENT POINTS FOR THE TRIPARTITE FTA
Need for a harmonized sale of goods lawNeed for a common cross border insolvency lawNeed for a common law on the recognition and enforcement of cross border judgmentsNeed for a common arbitration and formal dispute resolution apparatus with access thereto by business persons.Common regulations and protocols on trade aspects?
THE AGREEMENT ESTABLISHING THE AFRICAN CONTINENTAL FREE TRADE AREA
Signed on 21stMarch 2018 by 49 African countries including Malawi.Will come into force when 22 countries ratify it. So far only 6 have.Aims to:Create a single market for goods, servicesCreate a liberalized market for goods and servicesContribute to the movement of capital and facilitate investmentsCreate a common customs union (africawide)Promote industrial developmentResolve challenges of multiple and overlapping membership in REC’s and expedite regional and continental integrationEliminate tariffs and non tariff barriers to trade in goods and services
Liberalize trade in servicesCooperate on investment, intellectual property rights and competition policyCooperate on all trade related areasEstablish mechanism for settlement of disputes.Has REC’s as building blocksMFNNTReciprocity.Transparency
Will have to harmonize laws like sale of goods law, cross border insolvency laws, recognition and enforcement of foreign judgments, competition lawsetcWill have to rely on a strong DS mechanism that will have to embrace ADRStill a work in progress. After ratification, negotiations begin on major issues. This is tricky.However, best way to go for Africa.
OTHER BILATERAL AND MULTILATERAL TRADE AGREEMENTS
The Malawi Zimbabwe Preferential Trade AgreementACP- EUCotonouAgreementPreferential Trade Agreement between Malawi and MozambiqueMalawi / RSA Bilateral Trade Agreement
BENEFITS OF FREE TRADE AGREEMENTS
Lowering trade barriers and increase in welfare gains to consumers from increases in variety and quality and lower prices of goods and servicesIncreased economic growthLower government spending on subsidiesForeign direct investmentTechnology transferBetter expertize
ATTRACTING FDI – HOW ARE WE FARING?
Not many IPPA’s ( BIT’s) signed. ( In ICSID/ World Bank database, only 5 signed, Zambia 9, Zimbabwe 22?)Not many DTA’s signed.Yet to ratify the Convention on International Sale of GoodsNot ratified the 1923 New York Conventiononthe Recognition and Enforcement of Foreign ArbitrationAwardsHowever, we have incorporated the UNCITRAL Model Law on Cross Border on Recognition and Enforcement of Cross Border Insolvency into our local Insolvency ActWe are signatories to ICSID.