Firms — regardless of their size — can now sue the government in the Common Market for Southern Africa (Comesa) Court of Justice, the highest in the intergovernmental organisation, if its actions break rules of the trading bloc.
This follows a decision by the Court to hear a case brought against Government of Mauritius by a firm over payment of import taxes (customs duties) on products made in Comesa.
The Comesa Court of Justice took this decision in a unanimous ruling by five judges delivered early this month in a case called: The Republic of Mauritius Vs Polytol Paints & Adhesives Manufacturers Co Ltd, Preliminary Application No 1 of 2012.
Comesa is a regional economic grouping with 19 member states stretching from Libya to Zimbabwe formed in 1994 to replace a Preferential Trade Area which had existed since 1981.
Current Comesa members are Burundi, Comoros, Democratic Republic of the Congo (DRC), Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda Seychelles and Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
Comesa Director of Trade Customs and Monetary Affairs, Francis Mangeni, described the decision by the Comesa Court of Justice as landmark, saying it opens the door to the public to have recourse to the Court to help settle business disputes.
“This is a landmark case. First, because it has confirmed that companies can bring cases in the Comesa Court to challenge actions by Governments if the actions break Comesa rules,” he said in a statement.
Secondly, he added, it is also an agenda setting case as it has demonstrated it is feasible for even small companies to do this.
In the current case, Polytol paints, a small and medium scale enterprise (SME) based in Mauritius found itself at loggerheads with the government over imports of paints from Egypt, which it did as part of its business of manufacturing and selling automotive paints.
Since both Egypt and Mauritius are in the Comesa Free Trade Area and therefore should not levy import taxes (customs duties) on products made in Comesa.
However, according to files before the Court, Mauritius charged a 40 per cent tax on imported paints under a law adopted on November 16, 2000, but which was subsequently repealed on November 20th, 2010.
During that period, the company paid a total of Mauritian Rupees 13.28 million (Sh37.5 million) in customs duties on the product when imported from Egypt.
The company tried to challenge the law in the domestic courts of Mauritius, going up to the Supreme Court of Mauritius, but the Supreme Court decided that it could not enforce the Comesa Free Trade Area regime.
The Court said “in the absence of any specific legislation to that effect, non-fulfillment by Mauritius as a Member State of its obligations, if any, under the Treaty is not enforceable by the national courts”.
Following this decision of the Supreme Court of Mauritius, the Company brought a case before the Comesa Court. The Paints and Adhesives firm sought a declaration that the law of Mauritius under which it had been required to pay customs duties on imports from another Comesa Member State which is in the Free Trade Area, was illegal for contravening the Comesa rules, and asking for an order for refund of the taxes paid.
In the hearings before the Comesa Court, the Government of Mauritius argued that the company did not have a basis for bringing the case because the law was no longer in operation, having been repealed. It also argued the Court did not have jurisdiction to hear cases asking for monetary remedies against Governments.
However, the judicial organ established under Article 7 of the Comesa Treaty did not agree with these arguments. Citing Article 26 of the Comesa Treaty, the Comesa Court set out the three requirements to be met before a company can bring a case.
The case should be brought by a resident of a Member State, challenging the legality of a regulation in view of the provisions of the Comesa Treaty and the company should have exhausted local remedies.
The Court decided that the case was properly brought because the company was a resident of Mauritius and the case was challenging the legality of the regulation enacted by Mauritius on ground that it was illegal under Comesa rules.
Moreover, the company had tried to get remedies in Mauritian Courts, going all the way to the Supreme Court.
The Comesa Court decided that even if the regulation being challenged has been repealed and is no longer in operation, the Court can still hear the case.
“It is the considered view of this Court that prejudice connected with an illegal Act arises at the commencement of the action. If the respondent ( the company) is correct in its claim, prejudice would have arisen from the date the regulation came into operation affecting it in monetary terms on each occasion of payment of import duty,” the Court says.
The Court said subsequent repeal of a regulation by a Member State should not deprive the Court of its jurisdiction under Article 26 in so far as there is a party that claims it has been prejudiced during the time such regulation was in force.
“The repeal of the regulation may have prevented further payment of customs duties on goods imported after the repeal, but does not cure previous grievances in so far as there is no recognition of the legality of the same when it was in force,” the Court added.
On the question of exhaustion of local remedies, that is, seeking remedies in the local courts of the Member State before going to the Comesa Court, the Court decided that there is no requirement to continue pursuing local remedies if the final court in the country has already taken a decision on the matter.
“The local remedy to be pursued should be “effective and sufficient”; and it would not be effective and sufficient if the final court has already ruled against the possibility of a remedy,” the Court said in its ruling.
It said the Supreme Court of Mauritius dismissed the claim on the grounds that non-fulfillment of Treaty obligations is not enforceable by the national courts in so far as there was no specific legislation to this effect.
The Comesa Court of Justice noted that under such circumstances, one cannot reasonably expect that the Respondent (that is, the company) would get an effective and sufficient remedy from the courts of Mauritius.
“Once the Respondent obtains a decision on this matter from the final court in the land, it should not be obliged to have recourse to other courts or tribunals within the country, as such courts and tribunals being subordinate to the highest court are bound by the decision of that court,” ruled the regional court.
Mangeni said the judgment should further encourage Member States to be clear about whether their obligations under Comesa rules have been properly accepted by their respective Governmental organs and have been domesticated into the laws and the policy and institutional frameworks of the country.