This piece highlights issues for consideration when starting a foreign business in Sierre Leone in four areas: 1) foreign business start-up, 2) access to industrial land, 3) foreign ownership issues across sectors, and 4) commercial dispute arbitration.
Foreign Business Start-Up
It takes 8 procedures and 43 days to establish a foreign-owned limited liability company (LLC) in Freetown, Sierra Leone. This is in line with the IAB global average and slightly faster than the IAB regional average for Sub-Saharan Africa. In addition to the procedures required of domestic companies, a foreign company establishing a subsidiary in Freetown must authenticate the documents of the parent company abroad. It must also, if it wants to engage in international trade, obtain a trade license from the Ministry of Trade and Industry, which takes about 30 days if all documents are in place. No investment approval is required. The business registration process is not yet available online. Of the 21 Sub-Sahara African countries surveyed by IAB only Mauritius allows electronic registration. Foreign investors may open and maintain commercial foreign currency bank accounts in Sierra Leone. Sierra Leone does not impose a minimum capital requirement on investors, except for investments made in specific sectors such as banking and telecommunications. Sierra Leone does not have any restrictions on the composition of the boards of directors of wholly foreign-owned companies.
Access to Industrial Land
The law in Sierra Leone prohibits the ownership of land by foreign entities. Foreign companies seeking to acquire land may lease privately or publicly held land. The process of leasing private land is lengthy due to a burdensome process of acquiring land-related information for due diligence purposes. Public land is leased subject to approval by the relevant public authority. The approval process may take a number of months to complete. The maximum duration of leases is a renewable term of 21 years. Lease contracts offer the lessee the right to transfer, subdivide, or sublease the leased land, subject to approval from the Ministry of Lands. Mortgaging the leased land and/or using it as collateral requires approval from the relevant ministry. There are no restrictions on the amount of land that may be leased. Land-related information can be obtained from either the Office of the Registra General or from the Ministry of Lands, Country Planning, and Environment Direction of Surveys and Mapping. Much of the information is out of date and in some cases inconsistent.
Foreign Ownership Issues across Sectors
In Sierra Leone, the Investment Promotion Act (2004) provides for equal treatment of foreign and domestic investors with respect to ownership of local companies. Most business sectors covered by the report are fully open to foreign equity ownership. Overt statutory ownership restrictions are imposed on only a small number of industries. Foreign capital participation is prohibited in the airport and port operation sectors, in particular, as these facilities are owned and operated directly by the government through the Ministry of Transport.
Commercial Dispute Arbitration
Sierra Leone’s Arbitration Act was enacted in 1960 and was based on the English Arbitration Act of 1950 rather than on the UNCITRAL Model Law. It makes no distinction between international and domestic arbitration. Although Sierra Leone has ratified the ICSID Convention, it is not a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. As a consequence, foreign arbitration awards are not, as a general rule, entitled to recognition and enforcement by the courts of Sierra Leone. Arbitration in Sierra Leone is conducted on an ad hoc basis, as there is no arbitral institution. The courts have adopted a general policy in favor of enforcing arbitration agreements and awards in Sierra Leone. There is no express limit to the grounds for refusing recognition and enforcement of awards in the act. This suggests that the courts in Sierra Leone could rely on further grounds than those contained in the UNCITRAL Model Law, including, for example, error of law or a lack of substantial evidence. Given the lack of practice, private practitioners found it difficult to estimate the length of time for enforcement proceedings, but suggested it would take a minimum of 6 months for awards rendered in Sierra Leone or in a foreign country.