Category: Legal and tax news about morocco and western africa

Since the adoption of Law 95-17 on arbitration in Morocco, the country has undergone a significant reform of its legal system for dispute resolution. This law will have a significant impact on the investment climate in Morocco by encouraging the resolution of commercial disputes through arbitration, thus offering a fast, confidential, and effective alternative to civil courts.

The legislature has attempted to catch up with arbitration through this reform, thus filling the gaps and omissions of Law 08-05.

An independent arbitration code separate from the civil procedure code

Arbitration now has a separate code, independent of the civil procedure code. For the first time in Morocco, Law 95-17 has made it possible to organize arbitration and conventional mediation in a text independent of the Civil Procedure Code.

The new code has 150 articles, a significant increase from the old one, which had only 100.

An extension of the scope of arbitration

Law 95-17 significantly extends the scope of arbitration and restricts the use of state support judges.

For example, if a state judge becomes aware of an act or mutual agreement on recourse to arbitration, he immediately withdraws from the case. The arbitration agreement may also have been given by a simple exchange of emails or when one party raises the competence of the arbitral tribunal but the other does not contest it.Appointment of arbitrators and composition of the arbitral tribunal

One of the most notable changes is the consecration of the principle of independence by establishing a regime in which the arbitrator is not subject to a list established by the prosecutor.

Previously, the legislator required persons exercising the duties of arbitrator to make a declaration to the prosecutor general near the court of appeal. After examining their situation, the prosecutor general issued a receipt for the declaration and entered the interested parties on a list of arbitrators near the relevant court of appeal.

Now, the list of arbitrators will be set by a regulatory text, thus escaping any control of the prosecutor, who, due to his functions, unrelated to the practice of arbitration, is not the appropriate authority to designate competent arbitrators. This list will be established on the basis of the criteria of (i) scientific competence and (ii) experience.

In addition, the new law does not consider as grounds for challenging designated arbitrators:

• Professional links between the arbitrator and the representative of one of the parties to the dispute;
• Existing links between the arbitrators members of the arbitral tribunal;
• Disputes arising between the arbitrator and one of the parties in the context of a completed dispute submitted to arbitration.

Unfortunately, the existence of prior professional links in the arbitration procedure is not sufficient to guarantee the neutrality of the arbitrators designated by the parties. It would have been desirable for this new law to prohibit any professional links between the party and the arbitrator. In practice, each party will designate one of its counsels to represent it before the arbitral tribunal, and there could be confusion between the function of arbitrator, which requires total neutrality, and that of lawyer or counsel, which requires defending the interests of his client.

Extension of the scope of the law to the state, local authorities, and public companies:

When the contracting party is a public enterprise, a local authority, or the State, foreign investors may be apprehensive about designating the state court as the competent court to resolve a dispute. In fact, many foreign investors simply refuse to submit a contract signed with a public entity to the state court. As a result, many investors could not contract with public entities and organizations.

One of the contributions of this law is the possibility for disputes relating to contracts concluded by the State, public enterprises, or local authorities to be subject to an arbitration agreement in compliance with the special provisions relating to control, provided for by the legislative or regulatory texts in force concerning these contracts.

Previously, public entities needed authorization from the supervisory authority to resort to arbitration. Many procedures were held without this authorization. Today, the law specifies that in the absence of this authorization, the arbitration procedure is still valid. This is a disruption of the theory of administrative acts to provide more legal security for arbitration agreements. Litigants or Moroccan entities will have every interest in resorting to arbitration in their relations with the administration and public enterprises. By way of comparison, French law does not allow this (except for international trade), and Moroccan law is more advanced on this point in terms of arbitration.

Public enterprises in the form of commercial companies (OCP, RAM…) can resort to arbitration with the agreement of their board of directors or supervisory board. However, disputes relating to unilateral acts of the State, local authorities, or other entities enjoying public power prerogatives cannot be subject to arbitration under any circumstances.

Restriction of the jurisdictional competence of the state support judge:

Regarding the legal uncertainty surrounding the question of the competent state jurisdiction (commonly known as the “support judge”) to which the arbitral tribunal can refer-if this has not been the subject of an arbitration agreement between the parties- competence has been given to the president of the court of first instance, the president of the administrative court, the president of the administrative chamber within the TPI, or the president of the commercial chamber of the court of first instance.

Furthermore, when a dispute submitted to an arbitral tribunal under an arbitration agreement is brought before the support judge, he must declare the inadmissibility until the arbitration procedure is exhausted or the arbitration agreement is canceled.

If the dispute has not yet been brought before the arbitral tribunal, the state jurisdiction must also declare the inadmissibility of the claim.

The state jurisdiction must rule on the plea of inadmissibility raised under the provisions of this article by independent judgment, and this, before ruling on the merits. This independent judgment is only subject to appeal with the judgment ruling on the merits.

Arbitration proceedings:

Law 95-17 provides that prior to any examination on the merits, it is up to the arbitral tribunal to rule by order, either on its own initiative or at the request of one of the parties, on the validity or limit of its jurisdiction and on the validity of the arbitration agreement.

A period of fifteen (15) days from the day the order was rendered is granted to the parties to appeal against it, before the president of the state jurisdiction who, after summoning the parties, renders an order that is not subject to appeal.

It is now possible for arbitrators or the arbitral tribunal to request the production of original documents when parties refer to them. If the concerned party refuses or fails to produce the documents, the arbitral tribunal can refer the matter to the competent court president for a decision, within a contradictory procedure, compelling the party to produce the documents under penalty.

Moreover, the arbitral award must be reasoned, unless the parties have agreed otherwise in the arbitration agreement or during the arbitration procedure, or if the law governing the arbitration procedure does not require the award to be reasoned. However, the arbitral award to which one of the parties is a public entity must always be reasoned.

It is important to mention that now all rendered arbitral awards have the authority of res judicata with respect to the dispute they settle and are enforceable.

Limitation of abusive appeals:

Abusive appeals to civil courts could be used to hinder the arbitral procedure and serve as a delaying tactic for the party that had been condemned by the arbitral tribunal.

Thanks to the provisions of Law 95-17, if it is found by the competent appellate court that an appeal is abusive, the court shall order the appellant to pay compensatory damages to the respondent, which cannot be less than 25% of the amount awarded in the arbitral award.

Thus, this amount will likely deter abusive appeals filed against arbitral awards before state courts.

Introduction of electronic communication means:

Finally, it is now possible to use electronic communication means for the conclusion and implementation of arbitration clauses. Law 95-17 provides for the possibility for arbitrators who cannot attend hearings to hold virtual meetings with the parties’ agreement. Procedural exchanges may be conducted electronically, and the arbitral award may be in electronic form.

Recognition of arbitral awards in Morocco:

Unless they are contrary to national or international public policy, international arbitral awards are recognized and enforceable in Morocco. If the international arbitral award is rendered in Morocco, the competent authority for the request for enforcement is the president of the commercial court of first instance in whose jurisdiction it was rendered.

If the seat of the arbitration is located abroad, the president of the commercial court of first instance at the place of execution has jurisdiction.

In summary, the impact of Law 95-17 on the investment climate in Morocco has been significant. Foreign investors can now rely on a more predictable and transparent arbitral procedure to resolve commercial disputes. This increased legal certainty helps to strengthen foreign investors’ confidence in the Moroccan market, which is essential for stimulating foreign investment and promoting economic growth.

This article was published in the economical newspaper Les Eco

The CFC regime has been strongly revised by The Decree Law 2-20-665 of 30 September 2020 and its implementing decree Decree No. 2-20-841 of 8 Jumada I 1442 (23 December 2020) to meet international standards in terms of international taxation and in particular the notion of substance of companies.

The notion of Regional Headquarters is replaced by the notion of Technical and Administrative Service Provider, they can now invoice intra and extra-group services and no longer only intra-group. Companies with the status before the entry into force of the decree-law have one year after the entry into force of the implementing decree, i.e. on 24 December 2021, to comply with the following provisions provided for in Article 2 and 3 of Implementing Decree No. 2-20-841:

ART. 2.– In order to assess the effectiveness and substance of the proposed activity in the light of the criteria laid down in Article 1 above, the financial and non-financial undertakings provided for in Articles 4 and 5 of Decree-Law No 2-20-665 above must:

• have their effective headquarters at CFC;

• be directed and managed from CFC. As such, they must have at least one director residing in Morocco;

• allocate a minimum of operating expenses in line with the nature and volume of essential income-generating activities;

• have among its staff, highly qualified persons, including at least one senior executive with professional experience, in this capacity, including at least three (3) years of international experience for providers of technical and administrative services and ancillary service providers, as well as for trading companies, and one year for other activities;

• contribute to the promotion of technical and technological expertise and the development of the place, particularly with regard to trade and financing for development in Africa.

ART. 3.– The providers of technical services and the providers of administrative services referred to in paragraph 2 of Article 5 of Decree-Law No 2-20-665 cited above, must, in addition to the requirements laid down in Article 2 above, provide at least three services among the following services to at least three entities of the same group or with which are associated by virtue of commercial relations, technical or capitalistic:

– the supervision and coordination of the activities carried out, by the entities of the group to which the aforementioned service provider belongs, on the national territory or in one or more foreign countries;

– the direction and management of those entities;

– the provision of services on behalf of those entities;

– the provision of services on behalf of third parties;

– invoicing goods and services on behalf of those entities or to third parties;

– any other administrative, management or coordination service relating to regional and international headquarters.

The new CFC regime now focuses on the effectiveness and substance of the planned activity, particularly with regard to the number of staff recruited (or to be recruited), operating budgets and the business model to the detriment of the criteria of the old CFC regime which focused on commitments to achieve a certain turnover internationally.

Below you will find a summary table comparing the old and new CFC regimes applicable to regional headquarters (now called technical and administrative service providers).

The creation of the CNDP an imperative for morocco’s attractiveness on an international scale

The promulgation of Law 09-08 is part of the modernization of the Moroccan legal system relating to the protection of personal data in order to consolidate and strengthen its system of citizen protection against new technologies, and so that Morocco is up to the new challenges posed by digital, and in particular electronic commerce. The security of personal data has become a central issue for investors who before transferring their data to a target country no longer hesitate to conduct a very thorough due diligence of the standards and rules applicable to their client’s personal data and the security of their data.

It is in this spirit and in accordance with international conventions and in application of European directives, precisely by virtue of Morocco’s accession to Convention No. 108 of the Council of Europe, that Law 09-08 created in accordance with Article 27, the National Commission for the Control of the Protection of Personal Data, its main objective is to ensure the implementation of the provisions of this law, to be the first institution responsible for ensuring the application of the rules on the protection of personal data.

Despite these efforts, Morocco to date, does not appear in the list of states recognized by the European Union as ensuring sufficient protection of personal data, which represents a certain obstacle for companies wishing to establish themselves in Morocco, as well as Moroccan subcontractors of European companies.

The CNDP has significant investigative powers

To carry out its missions, the CNDP has powers of investigation and investigation allowing it to control and verify that the processing of personal data is carried out in accordance with the provisions of Law 09-08 and its implementing texts. To this end, its agents can directly access all the elements involved in the processing processes (data, equipment, premises, information media, etc.). Such checks may give rise to administrative, pecuniary or criminal penalties.

This power of investigation conferred by Article 30 of Law 09-08 appears to be a discretionary power, not subject to judicial review. Indeed, Law 09-08 does not mention the need to obtain the authorization of the prosecutor or the investigating judge to conduct an investigation on the premises of a company. A simple prior information of the prosecutor is required and only the seizure of material requires the authorization of the public prosecutor in accordance with article 21 of Decree 2-09-165.

Section 30 of the Act allows the CNDP to conduct four separate measures to ensure compliance with the Act, its Orders in Council and the deliberations of the CNDP.

The first step is to conduct an investigation. CNDP officers may visit the premises, request access to the data being processed and enter any information or documents necessary to carry out the monitoring mission.

The second measure is to order that documents be communicated to him within a certain period of time and to set penalties in the event of failure to communicate.

The third measure is the possibility of making any modification of the data to allow processing in accordance with the Law.

Finally, the CNDP may order the blocking, destruction or erasure of data and the prohibition of data processing.

In view of this power of investigation, complying with Law 09-08 may appear to be a necessity for Moroccan but also foreign companies.

Offences introduced by Law 09-08

Chapter VII of Law No. 09-08 sets out the facts that constitute offences. We can summarize them as follows:

• Any treatment that undermines public order, safety, morality and morality;
• The implementation of a treatment without the required authorization or declaration;
• Refusal of the right of access, rectification or opposition;
• Any incompatibility with the declared purpose;
• Failure to comply with the data retention period;
• Failure to comply with the security measures of the treatments;
• Failure to comply with the consent of the data subject, in particular when it comes to direct marketing for commercial purposes, with increased penalties when it comes to sensitive data;
• Any transfer of personal data to a country that is not recognized as ensuring adequate protection;
• Any obstacle to the exercise of the CNDP’s control missions;
• Any refusal to implement the decisions of the CNDP.

Sanctions against natural persons

Law 09-08 provides for various penalties for data controllers who do not comply with the provisions of this law aimed at protecting personal data. These sanctions and their amounts can be substantial in order to play a deterrent role. They have been designed in such a way as to oblige controllers to act with greater transparency in the collection of personal data, but above all to use them while respecting the rights and freedoms of data subjects.

Against the natural persons responsible for the processing of personal data, and without prejudice to their civil liability towards persons who have suffered damage as a result of the offence, the penalties vary according to the seriousness of the acts complained of, with regard to imprisonment between three months and two years in prison, and with regard to fines between 10,000 and 300,000 dirhams. These penalties may be doubled in the event of a repeat offence.

Tougher sanctions against legal persons

Where the offender is a legal person, and without prejudice to the penalties that may be applied to its managers, the fines shall be doubled. The legal person may have its property confiscated and its establishments closed.

This part is dealt with by article 64 of Law 09-08 which provides:

Where the perpetrator of one of the offences provided for and punished under this Chapter is a legal person and without prejudice to the penalties which may be applied to its directors who commit any of the offences provided for above, the penalties for a fine shall be doubled.

In addition, the legal person may be punished by one of the following penalties:

• the partial confiscation of his property;
• confiscation of the property that is the subject of the offence;
• the closure of the establishment or establishments of the legal person where the offence was committed.

Victims’ remedies in the event of an offence

The legislator has given victims the possibility of filing a complaint if their rights are not respected by the controller, either with the courts or with the CNDP agents, not to mention that the latter have the possibility of seeking and establishing facts constituting offences under Law 09-08.

Natural persons who consider themselves “victims” of a breach of their personal data may address their complaints to the judicial police or to CNDP agents who are authorized to investigate and record the offences. The minutes they draw up in this capacity are transmitted, within five days of the search and finding operations, to the public prosecutor. Victims may also address their complaints to the latter.

Remedies in the interest of public order or the law

The officers of the judicial police and those of the CNDP are also responsible for investigating and ascertaining breaches of public order or the provisions of Law No. 09-08. In this case too, they send their minutes to the public prosecutor who studies the advisability of initiating proceedings against the offender.

What are the rights and procedure to follow in the event of an investigation by the CNDP?

Although the CNDP has sovereign power to conduct an investigation, this investigation must obey strict rules that are for the most part internal rules of the CNDP that are derived from its internal regulations.

Law 09-08 does not introduce a real legal framework for the investigation but sets out an important principle in Article 31, the principle of adversarial proceedings and respect for disciplinary proceedings guaranteeing the rights of the defence.However, Law 09-08 has unfortunately excluded on-site investigation procedures and the data modification measure from compliance with its principles. These principles only apply in the event of a document check (request for disclosure of documents) and a request for deletion, blocking or prohibition of data processing. This partial application of the principles of respect for the rights of the defence and adversarial proceedings may come as a surprise. Perhaps the legislator wanted to reserve its principles to measures of documentary control and deprivation of the right to carry out processing because they are accompanied by sanctions, which is not the case for other measures (on-the-spot control and right to modify data).

Decree 2-09-165 (the “Decree”) as well as the cndp’s internal regulations (resulting from the Prime Minister’s decision No. 3-33-11) provide guarantees to the citizen subject to a control measure.

Thus, the control operation must be the subject of a decision by the CNDP. This decision is voted by a majority of the present members of the CNDP (with a quorum of two-thirds of the members). The members of the CNDP are the Prime Minister, the President of the CNDP, the two members appointed on the proposal of the House of Councillors, two members appointed on the proposal of the House of Representatives, and two members appointed on the proposal of the Prime Minister. This decision must mention the name of the controller, the name of the agent commissioned (or agents commissioned) to carry out the on-the-spot check, and the duration and purpose of the check.

Thus the control operation is strictly framed by this decision of the CNDP and the agents will have to comply with the letter of the decision and will not be able to go beyond the framework set by the CNDP.

This operation shall be the subject of an investigation by the competent Prosecutor at least 24 hours in advance. This notice must state the time, date, purpose and place of the inspection.

The agents will have to present their authorization and their order of mission.

Finally, detailed minutes will have to be drawn up. This trial must include the nature, day, time and place of the control carried out. It must indicate the object, the persons met, the CNDP agents present, the statements of the persons checked and the difficulties encountered. In annex, an inventory will have to list the documents and documents so copy has been taken and countersigned by the agent of the CNDP and the person in charge on the spot.

CNDP officers may apply to the prosecutor for permission to seize equipment. The request must state the reasons on which it is based and contain all the information necessary to decide on the authorisation.

Agents may also interview any person of their choice by summoning him or her by registered letter at least seven days before the date of the hearing. The summoned person may be accompanied by the person of his choice. In case of refusal to respond to the summons, it must be mentioned on a report.

Overview of sanctions imposed by the CNDP to date.

It can be seen that the legislator wanted to be strict about the penalties provided for in Law No. 09-08. The obvious objective is, as a first step, to deter persons who handle personal data from contravening the legal provisions and to encourage them to be extremely vigilant during the processing carried out. Secondly, the aim is to apply exemplary penalties to offenders so that they avoid further infringing on citizens’ rights.

The legislator has provided for a repressive arsenal against any controller, whether a natural or legal person, who does not comply with the provisions of Law 09-08.

According to the latest CNDP report published to date, the number of complaints received by the CNDP continues to increase and reached 584 units in 2016, an increase of 47% compared to 2015.

Regarding sanctions, feedback shows that formal notices and reminder letters, sent by judicial officer to public bodies and private actors are quite effective means in terms of compliance with Law 09-08.

Of the 584 complaints received in 2016, 51 were the subject of a formal notice, of which 43 concern direct prospecting and 8 relate to video surveillance. In total, 65 files were transmitted by judicial officer in 2016 against 8 in 2015.

However, we are still waiting for the publication of more recent annual reports because in recent years the CNDP has considerably increased the pace of control missions.