Madagascar - Dispute SettlementMadagascar - Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Madagascar's legal system is based on French civil law, and its provisions contain protections for private property rights. Local commercial law consists largely of the Code of Commerce and annexed laws, which are reportedly applied in a non-discriminatory manner.

The following courts in each of the country’s six provinces have standing to hear intellectual property cases: the Commercial Courts in Antananarivo, Tamatave, Mahajanga, and Diego Suarez and the Courts of First Instance in Fianarantsoa and Tulear. Claims of unfair labor practices are heard by specialized Labor Courts. The Malagasy judicial system is slow and complex and has a reputation for opacity, corruption, and executive influence.

Madagascar is a member state to the International Center for the Settlement of Investment Disputes (ICSID) Convention and under the Investment Law (2007-036), disputes between foreign investors and the state are handled through arbitrage proceedings administered by this institution. If the foreign investor is the initiator of the proceedings, he or she may also choose to submit the dispute to the Commerce Tribunal, the competent Malagasy jurisdiction.

Bankruptcy

Madagascar has a bankruptcy law (2003-042). According to the latest World Bank Doing Business report, creditors have the right to initiate insolvency proceedings only when seeking liquidation of the debtor, but not when seeking reorganization.

In reorganization proceedings, all creditors have the right to vote on the reorganization plan, not just those whose rights are modified or affected by the plan. Creditors are not divided into classes for the purpose of voting on the reorganization plan. Dissenting creditors are not required to receive as much under the reorganization plan as they would have under liquidation.

Creditors have the right to object to a decision of the court to approve or reject claims against the debtor brought by the creditor itself or by other creditors. The insolvency framework does not afford creditors the right to participate in the selection of an insolvency representative, to approve the sale of substantial assets of the debtor, nor to access information about the insolvency proceedings.

Law 2003-042 removed bankruptcy offenses from the Penal Code, but maintained them in the bankruptcy law itself. Bankruptcy offenses are punishable by fines and imprisonment, depending on the nature of the offense - ranging from simple, to negligent, to fraudulent bankruptcy, though the associated prison sentences were softened with respect to the insolvency framework previously in place.

Investment Disputes

Over the past 10 years, there have been no major investment disputes involving a U.S. person, aside from a 2010 attempt to expropriate oil blocks from an international oil company, which had substantial U.S. investment. The company initiated a request for arbitration through the Paris-based International Chamber of Commerce, but eventually negotiated an out-of-court resolution with the authorities at that time – the de facto coup regime. Madagascar has been involved in three investment disputes with German and Mauritian entities mediated by ICSID. The first two, in 1982 and 1994, were resolved between the parties before recourse to an arbitral award, while the third, lodged in 2013, has yet to result in an arbitral award.

International Arbitration

Madagascar is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention), and also accepts international arbitration as means of resolving investment disputes. Based on the obligation of the New York convention, domestic courts recognize and enforce foreign arbitral awards. Their enforcement is the jurisdiction of the Antananarivo Court of Appeals. International arbitration is also accepted as a means of settling commercial disputes between private parties.

Madagascar has no bilateral investment treaty or free trade agreement with the United States.

The Malagasy Arbitration and Mediation Center (known by its French acronym, CAMM) was created in 2000 as a private organization to promote and facilitate the use of arbitration to resolve commercial disputes, both international and domestic, and to lessen reliance on a court system that is, at a minimum, overburdened. As a result, many private contracts now include arbitration clauses, which allow the CAMM to mediate eventual disputes. The CAMM mediated eight cases in 2014 and four cases in 2015.

ICSID Convention and New York Convention

Madagascar is a party to both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Madagascar ratified the ICSID in 1966 and the New York Convention in 1962.

Duration of Dispute Resolution – Local Courts

According to a workshop held by EDBM and the International Finance Corporation in 2015, the average duration to obtain a resolution of an investment/commercial dispute in the local court system was 841 days.

The principal problems related to the resolution of disputes through litigation within local courts are: the excessive length of the procedures, corruption and a lack of transparency, and inadequate training of judges. In addition, the average costs associated with judicial resolution average to 42 percent of what was at stake in the dispute, according to the CAMM, the local alternate dispute resolution mechanism. Slowness and corruption are also encountered during the subsequent enforcement of the court decision or arbitration award.

The average duration of arbitration cases handled by the CAMM over the last two years is one and a half months for arbitrations and five and a half months for mediations, according to representatives from the institution.