Investment is a crucial part of economic growth in any country. Zimbabwe has been working to attract both local and foreign investors to boost its economy. However, disputes between investors and the government or local businesses often arise. These disputes may slow down economic progress and discourage new investments. To address these challenges, the Zimbabwean government introduced the Zimbabwe Investment and Development Agency Act (ZIDA Act) [Chapter 14:37] in 2020. This Act provides a clear legal framework for investment and sets up ways to resolve disputes quickly and fairly. This article explains the common investment disputes in Zimbabwe and how they can be resolved under the ZIDA Act.

Understanding Investment Disputes in Zimbabwe – Examines the types and causes of investment-related conflicts in the country.

Dispute Resolution Under the ZIDA Act – Explores the arbitration process and other resolution mechanisms provided by the Act.

International Arbitration and Treaty Protections – Highlights how foreign investors can use international dispute resolution mechanisms.

Investor Grievance Response Mechanism (IGRM) – Discusses the early-stage resolution process introduced by ZIDA.

• Legal Protections and Guarantees for Investors – Explains the legal assurances that safeguard investments in Zimbabwe.

1. Disputes Over Property and Land Ownership: In the past, Zimbabwe faced land reform issues where foreign-owned land was taken by the government. Investors may face disputes over land leases or ownership rights, especially when policies change. For Example, a foreign agricultural investor leases farmland for commercial farming. After a policy shift, the land is repossessed without fair compensation, leading to a dispute.

Solution: Under the ZIDA Act, the investor can seek arbitration to claim compensation or negotiate a settlement through the Investor Grievance Response Mechanism (IGRM).

2. Contract Breaches: Investors enter agreements with government entities or local businesses to develop projects. Sometimes, these agreements are broken, leading to legal battles. For example, if a company is given a contract to build roads but later finds the government has awarded it to someone else, a dispute arises. Another example, a construction company signs a contract with a local authority to build infrastructure. The authority cancels the contract without justification in the middle of the project.

Solution: The investor can initiate domestic arbitration under the Arbitration Act [Chapter 7:15], or, if a bilateral investment treaty applies, opt for international arbitration.

3. Regulatory and Policy Changes: Zimbabwe’s government sometimes changes its policies, affecting investors. For example, tax laws or foreign currency regulations may change, making it difficult for businesses to operate. Investors may feel that these changes negatively affect their investments and seek legal action. For example, a mining company invests millions in developing a gold mine. Later, mining regulations changed, imposing heavy taxes and export restrictions, making the project unprofitable.

Solution: The investor can register the dispute with ZIDA and, if needed, escalate the matter to international arbitration under the relevant BIT.

4. Expropriation Without Compensation (Seizing of Property): This happens when the government takes private property for public use. While governments can do this legally, they must pay fair compensation. Disputes arise when investors feel they are not fairly compensated. For example, A manufacturing plant is taken over by the government for public use, but the investor receives no compensation.

Solution: The ZIDA Act guarantees protection against unfair expropriation, so the investor can file for fair market compensation through arbitration or challenge the decision via the courts.

5. Foreign Exchange Restrictions: Investors sometimes struggle to send profits back to their home countries due to foreign currency controls. This creates disputes when businesses cannot access their earnings freely. For example, a tourism company struggles to repatriate profits to its parent company abroad due to sudden foreign currency control measures.

Solution: The company can file a complaint through the IGRM, and if unresolved, the investor can seek arbitration under the ICSID (International Centre for Settlement of Investment Disputes) if covered by a BIT.

6. Licensing and Permit Disputes: Investors must obtain various licenses and permits to operate. Delays, denials, or revocation of these permits can cause disputes. For example, if a mining company’s license is revoked without a proper reason, the investor may challenge this legally.

Solution: In Zimbabwe, investors facing permit or license disputes can use the Investor Grievance Response Mechanism (IGRM) under ZIDA to resolve issues like delays or revocations before they escalate. If a license is revoked unfairly, they can challenge the decision legally through judicial review or arbitration, relying on protections in the ZIDA Act such as fair treatment and due process. Investors may also negotiate with authorities to rectify compliance issues or seek compensation if their rights are violated.

The ZIDA Act provides several ways to resolve disputes fairly and efficiently. These include arbitration, mediation, and legal protections for investors.

1. Arbitration as the Primary Dispute Resolution Method

The ZIDA Act states that investment disputes should be settled through arbitration unless both parties agree to another method. But what is arbitration?

Arbitration is a process where two parties in a dispute present their arguments to a neutral third party (called an arbitrator), who makes a decision. It’s like going to court, but faster, more private, and often cheaper.

There are two types of arbitration under the ZIDA Act:

• Domestic Arbitration (within Zimbabwe):
• If both parties agree, the dispute can be resolved under Zimbabwe’s local Arbitration Act [Chapter 7:15].
• An independent arbitrator or panel listens to both sides and makes a binding decision.
• International Arbitration (outside Zimbabwe):
• If one party is a foreign investor, they may choose international arbitration.
• This is especially useful when investors fear bias in local processes.
• The case can be handled by globally trusted institutions like the International Chamber of Commerce (ICC) or the International Centre for Settlement of Investment Disputes (ICSID).

Example:

Imagine a foreign investor signs a 10-year lease for land to build a solar power plant. After 3 years, the government cancels the lease without compensation. The investor can take the dispute to international arbitration and seek fair compensation.

2. Access to International Investment Treaties

Zimbabwe has signed Bilateral Investment Treaties (BITs) with several countries. These are agreements that protect foreign investors.

If a dispute arises, an investor from a country with a BIT can take the case to international courts or arbitration panels. BITs guarantee that investors will be treated fairly and their property will not be taken without proper compensation.

However, to benefit from BIT protections, investors must:

• Register their investment with ZIDA.
• Comply with local laws and regulations.

If an investor fails to register with ZIDA, they lose the right to claim BIT protections.

Example:

A South African company invests in a Zimbabwean mining project. After a policy change increases mining taxes, the company can use the Zimbabwe–South Africa BIT to challenge the decision in international arbitration.

3. Investor Grievance Response Mechanism (IGRM)

Instead of waiting for a small issue to become a big legal battle, ZIDA introduced the Investor Grievance Response Mechanism (IGRM) in 2023. This is an early-warning system designed to solve problems before they turn into serious disputes.

Here’s how it works:

• Step 1: The investor submits a formal complaint to ZIDA.
• Step 2: ZIDA investigates the complaint and tries to mediate between the investor and the government or business partner.
• Step 3: If a solution is found, both parties sign a settlement agreement.

If the problem isn’t resolved, the investor can still proceed to arbitration or the courts.

Example:

A foreign hotel investor faces delays in getting a tourism license due to government bureaucracy. The investor submits a complaint to ZIDA through the IGRM. ZIDA helps speed up the licensing process, avoiding a costly legal dispute.

4. Legal Protections for Investors

The ZIDA Act itself offers strong protections to investors, reducing the chances of disputes happening in the first place. These protections include:

• Protection Against Expropriation (Seizure of Property):
• The government cannot seize an investor’s property without a valid public purpose.
• If property is taken, the investor must receive prompt and fair compensation.
• Equal Treatment for Foreign Investors:
• Foreign investors cannot be treated worse than local investors.
• Discrimination based on nationality is not allowed.
• Repatriation of Funds:
• Investors can transfer their profits, dividends, and other funds abroad without restrictions.

These protections make Zimbabwe a safer and more predictable place to invest, reducing the risk of disputes.

Example:

If the government takes over a foreign-owned factory to build a public hospital, the investor is legally entitled to market-value compensation. If the investor isn’t paid, they can seek justice through arbitration or international courts.

In summary, the ZIDA Act creates a fair and efficient system to resolve investment disputes. Investors can start with early mediation through the IGRM, and if that fails, they can choose domestic or international arbitration. Zimbabwe’s participation in Bilateral Investment Treaties (BITs) adds another layer of protection, and the legal safeguards in the Act itself ensure investors are treated with fairness and respect.

Investment disputes are a reality in any country, and Zimbabwe is no exception. These disputes often arise due to disagreements over land ownership, contract breaches, policy changes, and government actions. If not handled properly, such conflicts can discourage new investors from coming into the country and harm Zimbabwe’s economy.

The ZIDA Act has introduced clear and fair dispute resolution methods to address these challenges. Arbitration is the preferred method, allowing disputes to be settled efficiently without going to court. Investors also benefit from international arbitration options and protections under Bilateral Investment Treaties (BITs), ensuring fairness in case of disputes.

To further enhance investor confidence, the Investor Grievance Response Mechanism (IGRM) was established to solve complaints quickly before they become major legal issues. The ZIDA Act also provides legal protections to ensure that investors are treated fairly, their property is safe from unfair expropriation, and they can transfer their earnings freely.

By implementing these dispute resolution mechanisms, Zimbabwe is sending a strong message that it is serious about protecting investors and improving its business environment. If these measures are effectively applied, Zimbabwe can attract more foreign investment, create jobs, and grow its economy.

Frequently Asked Questions (FAQs)

1. What is the main way to resolve investment disputes under the ZIDA Act?

Arbitration is the main method. Investors can choose domestic arbitration (within Zimbabwe) or international arbitration for a fair hearing.

2. How can foreign investors protect their investments under the ZIDA Act?

Foreign investors must register their investments with ZIDA to qualify for protections under Bilateral Investment Treaties (BITs).

3. What is the Investor Grievance Response Mechanism (IGRM)?

The IGRM is a system that helps resolve investor complaints quickly before they turn into major disputes.

4. Can the government take an investor’s property?

Yes, but only for public purposes. The government must pay fair and timely compensation if it seizes property.

5. Can investors send their profits out of Zimbabwe?

Yes, the ZIDA Act guarantees the right to repatriate earnings without restrictions.