There is an excellent article by Fackson Banda in The Post last Wednesday questioning whether the Development Agreements are legally binding under the Zambian Constitution. I somehow missed it, so am thankful it was picked up on by the Maravi blog. I suggest reading it there because Mr K's comment at the bottom picks up a relevant clause from the Constitution not discussed in the article. I am sure this is not the last word on the legal status of the Development Agreements, but it is a real vindication for me of the approach of posting the Agreements on this site. I have always hoped that publishing the documents, which were kept secret by the Government and companies, and were never open for inspection by the public before being handed to me by a patriotic Zambian, would have some impact on the debate and would lead to precisely this kind of legal interpretation by others more capable of it than the original researchers.
5 comments:
Alastair,
I think I have found how the stability periods are unconstitutional, making the development agreements unconstitutional as well.
According to article 100 (2) of the Constitution (1991):
Article 100 [Imposition of taxation]
(1) Subject to the provisions of this Article, no taxation shall be imposed or altered except by or under an Act of Parliament.
(2) Except as provided by clauses (3) and (4), Parliament shall not confer upon any other person or authority power to impose or to alter, otherwise than by reduction, any taxation.
In other words, the monopoly on raising taxes and introducing new taxes, lies with parliament, and cannot be conferred to any other party. (Only the right to lower taxes can be conferred, for instance to the president or the finance minister, and only through an act of parliament.)
In the development agreements, it is the Government of the day, the GRZ, which promises not to raise taxes:
15. TAXATION STABILITY
15.1 GRZ undertakes that it shall not for the Stability Period:
(a) increase any rates of Taxation (including, without limitation, corporate income tax or withholding tax rates) applicable to KCM (or change the basis of calculation which would result in a decrease of deductions, rebates or other allowances available to KCM incomputing its liability to such Taxes or change the basis of computation of such Taxes) from those prevailing at the Effective Date;
This is a promise it has no constitutional right to make, as the right to introduce new taxes, lies with Parliament, not the Government.
Obviously, parliament can change in composition, opposition parties can come to power. The government of the day had no business making multi-decade promises, on behalf of parliament and future parliaments.
In short, the Government of the day cannot promise on behalf of Parliament and future Parliaments, that taxes will not be raised or new taxes introduced.
I have just seen Mr K's comment on the unconstitutionality of the multi period promise by government not to increase taxes as per the Development Agreements.I am not sure whether there has been further comments on this one? Surely this is a momentous discovery if it really is the case and i would expect other lawyers to take this up. Kindly keep me posted as i wait with bated breath!
According the constitution, the president is the head of government, the head of state and the head of the armed forces.
However, I have another scenario to add. What if a bill to introduce new taxes was tabled by the opposition. What if the government party MPs after being instructed by the President to vote against it, instead voted with their consciences and voted to support the opposition bill.
I guess this is why so many corporations like working with dictatorships.
Although parts of the DAs may be covered by individual acts already passed by parliament, the fact that these agreements were considered 'secret' doesn't bode well, and probably means that no constitutional scholar outside of the the government and company negotiation teams has had a good look at it.
And I too would like to see further comments by someone with a background in Zambian constitutional law.
As I said in the original Post, I do think we need some help from lawyers to tackle this question. But here are my first thoughts.
Well, what we are looking for is an argument to counter the claim that a) the *reductions* from the general taxation rate which came into being under the DAs, were legal. AND/OR b) the claim that the provision of *stability clauses* was legal.
I don't think the first claim is sustainable, but the second seems to me more interesting.
On reducing taxes for the mines -two possible reasons:
A) They came under the Mines and Mineral Development Act 1995, which gave general permission for the negotiation of improved terms for investment. As far as I know, it did not specify whether the agreements which resulted from those negotiations should themselves also be subject to Parliamentary approval - since they were kept secret they obviously didn't achieve this. So what we need to know from 100 (2) is what clauses (3) and (4) say, as these presumably provide the exemption under which the Act was passed. Can you post them Mr K?
B) They don't even need these legal qualifications for the MMDA 1995, because, as in 100 (2) they only involve the *reduction* of other types of taxation that apply to all businesses and presumably do have the approval of parliament - VAT, income tax, etc.
If that's so, then I don't think your point about the monopoly on 'raising taxes and introducing new taxes' matters to the reduction of taxes. (hey, I am no lawyer, don't take this too seriously...)
BUT, the stability clauses seem to me much more vulnerable to challenge as, as you note, they seek to curb the rights of future parliaments - they are not a reduction of tax, they are a promise not to raise them in future.
Interesting stuff Mr K - anyone know a lawyer?
And does anyone have access to the text of the Mines and Mineral... 1995, which is being repealed anyway!
Last thing worth thinking about - the 'guarantee' the compnaies think they have (I think) on the stability clauses / DAs more generally is a clause written into them saying that both parties agree to refer to ICSID in case of dispute. These 'cut and paste' clauses, I seem to remember from reading somewhere else, are provided as a free service to member states from ICSID. I wonder if they have ever been challenged in another country. OK, finally, finally, I wonder if it's worth trying to get a statement from the state as to whether any of these things are the basis of the expected defence the Ministers and Attorney General repeatedly state they are ready to make. If so, would it be clever or stupid to reveal this to the companies? Would it, a) give them time to prepare a counter (in which case should we be discussing it here or sending private notes to the Attorney general?), b) put them off bringing the cases in the first place, saving us all a lot of hassle?
Alastair
PS - We don't have to worry about secrecy in all cases - the docs are on this website!
Article 4 deals with parliament's rights to bewstow on local government the right to collect taxes. Article 3 is a little more complicated, because of the gibberish sounding legalese. :)
I think Article 3 has to do with when a bill goes into effect.
This is the complete article 100:
Article 100 [Imposition of taxation]
(1) Subject to the provisions of this Article, no taxation shall be imposed or altered except by or under an Act of Parliament.
(2) Except as provided by clauses (3) and (4), Parliament shall not confer upon any other person or authority power to impose or to alter, otherwise than by reduction, any taxation.
(3) Parliament may make provision under which the President or the Vice-President or a Minister may by order provide that, on or after the publication of a bill being a bill approved by the President that it is proposed to introduce into the National Assembly and providing for the imposition or alteration of taxation, such provisions of the bill as may be specified in the order shall, have the force of law for such and subject to such conditions as may be prescribed by Parliament: Provided that any such order shall, unless sooner revoked, case to have effect --
(i) if the bill to which it relates is not passed within such period from the date of its first reading in the National Assembly as may be prescribed by Parliament;
(ii) if, after the introduction of the bill to which it relates, Parliament is prorogued or the National Assembly is dissolved;
(iii) if, after the passage of the bill to which it relates the President refuses his assent thereto; or
(iv) at the expiration of a period of four months from the date on which it came into operation or such longer period from the date as may be specified in any resolution passed by the National Assembly after the bill to which it relates has been introduced.
(4) Parliament may confer upon any authority established by law for the purposes of local government power to impose taxation within the area for which that authority is established and to alter taxation so imposed.
(5) Where the Appropriation Act in respect of a financial year has not come into force at the expiration of six months from the commencement of that financial year, the operation of any law relating to the collection or recovery of any tax upon any income or profits or any duty or customs or excise shall be suspended until that Act comes into force: Provided that --
(i) in any financial year in which the National Assembly stands dissolved at the commencement of that year the period of six months shall begin from the day upon which the National Assembly first sits following that dissolution instead of from the commencement of the financial year;
(ii) the provisions of this clause shall not apply in any financial year in which the National Assembly is dissolved after the laying of estimates in accordance with Article 103 and before the Appropriation bill relating to those estimates is passed by Parliament.
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