Republic of Sudan: Greener pastures
Mahmoud Salah Bassiouny and Yassir Ali of Matouk Bassiouny in association with AIH Law Firm review Sudan’s investment framework and the impact that the lifting of US sanctions has had on doing business in the jurisdiction
The Republic of the Sudan has undergone a complex development process since achieving independence in 1956. Though Sharia was originally the main source of Sudanese law, the constitutional document for the transitional period of 2019 (the Transitional Constitutional Document) is anchored in common law principles. As a result, the legal system today is a mixture of Sharia law and common law principles. However, this transitional period expires 39 months after the signing of the Transitional Constitutional Document in August 2019. A new constitution is expected to be issued following this date.
Key authorities and the legal framework
Sudan issued its Transitional Constitutional Document in the aftermath of the revolution of December 2018. In parallel to the judiciary authority, three transitional governmental authorities govern Sudan: the Sovereignty Council, the Council of Ministers and the Transitional Legislative Council. It is worth noting that the Legislative Council is not yet established and that accordingly its competence is jointly assigned to the Sovereignty Council and the Council of Ministers.
The governance structure is a federal system and the national government exercises power to protect the sovereignty of Sudan, guarantee the safety of its lands and enhance the welfare of its people.
The legislative branch is represented by the Transitional Legislative Council. Though not yet established, is should in theory be composed of no more than three hundred members, with a 40% quota for women, and represent all the forces that contributed to the change in the 2018 revolution. The judicial branch comprises a Constitutional Court that handles issues relating to constitutional law as well as cases of human rights. The judicial system in Sudan is independent from the executive and legislative authorities.
The Sudanese judicial system hierarchy is: the Supreme National Court, the highest court in the land; the courts of appeal, which hear cases from lower courts; and the several different courts of first impression. The executive branch comprises the executive authority, embodied by the Sovereignty Council. The Council represents the position of head of state and is comprised of 11 members chosen by the Transitional Military Council and the Forces of Freedom and Change, a large Sudanese political coalition, along with the Council of Ministers. The prime minister is appointed by the Sovereignty Council based on the choice of the Forces of Freedom and Change.
Below the federal level, the 18 states of Sudan oversee and govern public services at the local level.
Sudan has entered into several bilateral investment treaties (BITs) with different countries, some of which are in full force while others have only been signed. The BITs that Sudan has fully implemented include those with China (1999), Egypt (2001), Ethiopia (2000), France (1978), Germany (1963), India (2003), Islamic Republic of Iran (1999), Netherlands (1970) and Switzerland (1974). The signed BITs, which are not yet in force, include those with Algeria (2001), the Belgium-Luxemburg Economic Union (2005), Italy (2005), Kuwait (2001), Malaysia (1998) and Turkey (2014).
Sudan has also entered into several multilateral investment treaties. The Investment Agreement for the Comesa Common Investment Area in 2007 has not yet been ratified, but the Interim Economic Partnership Agreement between the European Union and ESA (Eastern and Southern Africa) became effective in 2012. The Agreement on Investment and Free Movement of Arab Capital among Arab Countries in 1970 was later followed by the Agreement on Promotion, Protection and Guarantee of Investments amongst the Member States of the Organization of the Islamic Conference in 1988.
Sudan has signed and ratified the ICSID convention, which was entered into force in Sudan in 1973 and grants foreign investors the right to subject any dispute involving the Sudanese government to arbitration under ICSID rules.
The Investment Disputes Court has been established in accordance with the Investment Law to settle the investments related matters. All such investment-related disputes will be referred to this specialised court unless the parties have agreed to refer the matter to arbitration or reconciliation. Additionally, disputes governed by one of the following treaties to which Sudan is a party are also exempt from referral to the investment courts to settle their issues:
the Unified Agreement for the Investment of Arab Capital in Arab States 1980;
the Agreement for Settlements of Investment Disputes among Arab States 1974;
the Agreement for Settlement of Investment Disputes between States and citizens of other States 1965; or
the General Agreement for Economic, Technical and Commercial Co-operation among Member Sates of Islamic Conference 1977, and any other agreement to which Sudan is a party.
Sudan is a party to the New York Convention on the enforcement of foreign arbitral awards. Furthermore, Sudan issued the new arbitration act in 2016 that allows Sudan to enforce national and international arbitral awards, as long as they are in compliance with the applicable law. In order to be enforceable, the arbitral award cannot contradict a decision previously issued by the Sudanese courts and there must be reciprocal enforcement between Sudan and the country where the arbitral award was issued.
The right to arbitrate outside of Sudan, does not prejudice the purview of Sudanese courts to review the validity of an arbitral award prior to its enforcement.
History behind the sanctions
The sanctions on Sudan were first initiated in 1997 when US President Clinton issued Executive Order (EO) 13067, which imposed a comprehensive trade embargo on Sudan and blocked the assets of the Government of Sudan. In 2006, under the Bush administration, EO 13400 was issued, targeting those involved in the conflict in Sudan's Darfur region. This was followed by EO 13412, which exempted the then-regional Government of Southern Sudan, as well as certain specified areas, from most of the prohibitions under the Sudan sanctions programme.
On January 13 2017, President Obama issued EO 13761, "Recognizing Positive Actions by the Government of Sudan and Providing for the Revocation of Certain Sudan-Related Sanctions". This stipulated that if the Government of Sudan continued its positive actions to reduce violence in the region, sanctions would be lifted. On October 12 2017, the Trump administration revoked EO 13067, lifting the comprehensive trade embargo on Sudan and unblocking the assets of the Government of Sudan. It is also worth noting that Sudan is no longer on the US Department of State's list of countries certified as not cooperating fully with US counterterrorism efforts.
Because of the revocation of the US sanctions, the Sudanese market is now open to US persons to engage in trade. However, the Treasury Department's Office of Foreign Assets Control (OFAC) still requires licensing for certain exports and re-exports to Sudan involving agricultural commodities, medicine and medical devices as a result of Sudan's inclusion on the State Sponsors of Terrorism List. Other licenses are required for export to Sudan in different sectors such as software and technology. Furthermore, US and non-US persons still need to obtain any licence required by the Department of Commerce's Bureau of Industry and Security to export or re-export to Sudan certain items (including commodities, software and technology) that are on the Commerce Control List and if those transactions implicate certain end-use or end-user concerns.
The legislative framework in Sudan provides several incentives for investments.
The National Investment Encouragement Act of 2013 (Investment Act) aims to facilitate foreign investment by introducing into legislation the concept of fairness and equal treatment for both domestic and foreign investors, whether for public or private sector investments. The Investment Act creates a "one-window" system in which all the competent investment-related authorities are located on the same premises. It is also worth reiterating that Sudan has signed and implemented several bilateral and multilateral investment treaties.
According to the approved list of applicable investments issued by the National Authority for Investment (Authority), capital imported to fund the establishment of projects is exempt from VAT. The Authority can grant a project an exemption from customs duties on the capital required for the setup and preparations of a project and on transportation, excluding administrative vehicles (as defined under the Investment Act). We note that customs duties exemptions are currently suspended as per the decision of the Supreme Committee for Economic Emergencies on April 24 2020.
The Investment Act also provides that:
Assets and properties of a project will not be subject to nationalisation, seizure, confiscation or appropriation, unless for public policy or unfair compensation reasons;
Funds of a project will not be subject to seizure, confiscation, appropriation, freezing, attachment or receivership, unless with a judicial decree or order;
Invested capital will be repartitioned in the event that a project is either not executed, liquidated or subject to disposal by any means after obtaining the approval of the Authority and all legal obligations are met;
Machinery, equipment, goods, apparatus, transport conveyances or other ancillaries imported on account of the project will be re-export sold or assigned in the event that the project is not executed, whether wholly or partially, after all legal obligations are met;
Transfer of profits and financing cost of foreign capital or loans in the currency by which the Central Bank of Sudan deals or the loan on maturity date, will be allowed after payment of all legally due obligations of the project;
Importation of raw materials needed for the project and its products will be allowed.
Furthermore, investors enjoy the right to import and recruit foreign labour, according to the terms and conditions stipulated by the relevant laws and regulations. Foreign labourers, and their families, can obtain work and residence permits throughout the term of execution and operation of a project. However, it should be noted that the wages and allowances of foreign labourers on the project are subject to social insurance.
The Investment Act provides that relevant state authorities will register lands for industrial, service and agricultural projects. They will carry out detailed technical planning and surveys, and prepare maps, which they then pass onto the Authority. The Authority can then allocate investors the land they need to undertake national and strategic projects at an attractive rate and quickly. Investors will receive the land within a month of registering the purchase.
It is worth noting that mineral concession agreements are undertaken by the executive authority without requiring parliamentary approval. Typically, mineral concession agreements in Sudan are valid with the signature of the Minister of Minerals or his/her representative.
Dealing in foreign currencies is regulated under the parliament-issued Sudanese law of 1981, together with its regulation issued in 1999 (Foreign Currency Regulation). The Foreign Currency Regulation stipulates that direct investments into Sudan using foreign currencies must be actioned through a certified banks. The Foreign Currency Regulation states: "it is allowed to enter into any direct investment transaction from abroad without restrictions regarding the movement of the foreign currency […]". Investors are allowed to re-transfer any foreign currency exploited in the direct investment referred to above, provided that the foreign currency is registered with the Central Bank of Sudan in accordance with the requirements and circulars issued in this regard.That being said, the Foreign Currency Regulation sets a limit and provides that "the banks, entities, and persons certified to deal with the foreign currency are not allowed to sell it to their customers for the purpose of investment in financial instruments abroad."
Open for business
Since the Sudanese Revolution and the ousting of President Al Basheer, Sudan has embarked on several reforms primarily aiming to attract foreign direct investment and facilitate doing business in Sudan. Due to its unique geographical assets, which include red sea access, large tracts of arable land and a position as a gateway in between the Middle East and Africa, the Republic of Sudan is now very much open for business.
Mahmoud Salah Bassiouny
Regional managing partner and regional head of finance and projects, Matouk Bassiouny
Tel: + (202) 2796 2042 (ext.103)
Mahmoud Bassiouny is the regional managing partner of Matouk Bassiouny and heads the firm's finance and projects practice. His experience in trade and project finance and in the energy and infrastructure sectors has earned him the trust of international commercial banks, export credit agencies and the key players in the energy industry.
Mahmoud advises major energy and oil and gas players, public and private parties, lenders and consultancy firms on various issues related to their business. He also has extensive experience in matters of security creation and perfection. His sector expertise includes energy, aviation, real estate development, heavy industries, and power and infrastructure.
Partner and head of Sudan corporate and M&A, Matouk Bassiouny in association with AIH Law Firm (MBAIH)
Tel: +249 183 483344 /485566/ 487272
Yassir Ali is a partner in Matouk Bassiouny's office in Sudan and heads the office's corporate and M&A group. Yassir works frequently with corporate entities, banks and financial institutions. He has considerable expertise in setting-up joint-ventures and new projects in Sudan, as well as ensuring compliance with local laws and corporate governance standards. He advises various local and international clients on transaction documents, deal negotiations and due diligence in the context of mergers and acquisitions involving public and private companies. Yassir also has extensive experience in IP, as a registered patent and trademark attorney, in addition to the promotion and liquidation of all types of companies and legal matters related to investments in Sudan.