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21 July 2003
In February 2003 the National Bank of Angola, the country's foreign exchange authority, issued Order 2/2003, setting forth the foreign exchange rules applicable to the mining sector. The new regime imposes important restrictions on foreign exchange operations and may have an impact on the acquired rights of existing diamond mining companies.
Foreign exchange operations carried out by companies doing business in Angola are subject to a number of restrictions and requirements. These aim to prevent resident companies from receiving payments outside Angola and to keep their profits, at least temporarily, in local banks. However, companies operating in specific sectors, such as the oil and mining industries, typically enjoy special privileges in connection with their foreign exchange transactions.
In October 1999 the National Bank of Angola issued Order 13/99, which established a specific foreign exchange regime for the mining sector. Order 13/1999 included restrictions and requirements that were very similar to those applicable to all other companies engaged in business in other sectors of activity in Angola. The order specifically stated that the restrictions and requirements set out therein would apply to all mining companies, including those enjoying special foreign exchange privileges. However, as a matter of practice the order was not fully enforced by the Angolan authorities, as companies and joint ventures engaged in diamond-related activities continued to benefit from more favourable foreign exchange rights.
The new Order 2/2003 reproduces almost entirely the restrictions and requirements set forth in Order 13/1999. It also expressly provides that mining companies enjoying special privileges will be subject to the restrictions and requirements established therein. It seems, therefore, that the National Bank of Angola is now strongly committed to enforcing foreign exchange restrictions within the mining sector.
The main restrictions and requirements provided for in Order 2/2003 may be summarized as follows:
The only special privilege afforded to mining companies is the prerogative of opening escrow accounts abroad exclusively for purposes of servicing debt arising from loan agreements approved by the National Bank of Angola.
Hitherto, all diamond mining companies operating in Angola have enjoyed certain foreign exchange privileges, which in some cases are reflected in agreements approved by the Angolan government. Such privileges were an important element in the decision of those companies to invest in Angola's diamond industry. Should Order 2/2003 be enforced by the National Bank of Angola, it will frustrate the expectations and acquired rights of these companies, which could well challenge the bank's decisions before the Angolan courts.
For further information on this topic please contact Alberto Galhardo Simões at Miranda, Correia, Amendoeira & Associados' Lisbon office by telephone (+351 21 781 4800) or by fax (+351 21 781 4802) or by email (Alberto.GalhardoSimoes@mirandalawfirm.com).
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Alberto Galhardo Simões