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The importance of the new article 37, paragraphs 4 and 5 of the Angolan Constitution: Non-conviction-based (NCB) asset forfeiture

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1–Introduction. The Angolan constitutional review, the limits to the right to property and the fight against corruption

One of the main themes of the Angolan constitutional review underway was the delimitation of the right to property, a issue that has become controversial in light of the developments in the processes of combating corruption.

Recently, as an example, we listed the following concrete measures that in some way put the property right of private entities in question. Regarding the “freezing” of assets, assets of Manuel Vicente and Generals Dino and Kopelipa, Jaoquim Sebastião, Manuel Rabelais, among others, were seized or handed over. About Generals Dino and Kopelipa, it is noted that, as representatives of the companies China International Fund Angola — CIF and Cochan, SA, they handed over the shares they held in the company Biocom-Companhia de Bionergia de Angoala, Lda., in the network from Kero Supermarkets and at Damer Gráficas-Sociedade Industrial de Artes Gráficas SA. In relation to Manuel Vicente, the President of the Republic determined the nationalization of 60% of the shareholdings of the commercial company Miramar Empreendimentos, SA”, which covers “43% of the shares belonging to Sociedade Suninvest — Investimentos, Participações e Empreendimentos, SA” and “17% of shares owned by Sommis, SGPS. These shares will belong to Manuel Vicente. Obviously, it is also worth mentioning the restraint of assets referring to Isabel dos Santos and her associates in civil proceedings in Luanda and in criminal proceedings in Lisbon, in addition to the nationalization of Efacec in Portugal[1].

The legal formulas for the seizure of assets were diverse, generally provisional, although in some cases definitive and with the apparent acquiescence of the interested parties. Here the exception is Efacec, whose nationalization in Portugal was equally definitive, but without agreement from the interested party, Isabel dos Santos.

In one way or another, in Angola the procedures have become somewhat confusing, not realizing exactly the global legal effect of the voluntary delivery of goods and its legal stability, and in cases of provisionally seizure, problems arise in the management and maintenance of assets. It is also essential not to let these temporary situations prolong for too long, especially when the fundamental interests of the economy are at stake or jobs at risk.

In view of these events, a clear definition of the constitutional and legal regime for public seizures in Angola became urgent, to provide legal and economic security to the several movements for the recovery of assets described and in progress. This is the meaning of the text that eventually emerged in the constitutional review and that we are going to describe, adding the legal possibilities that this new text opens in terms of legislation with a view to making the asset recovery process faster, more understandable and solid.

2-Article 37 of the Angolan Constitution (ARC)

The 2010 version of the ARC, still in force, guaranteed the property right and defined the conditions for requisition and expropriation in its article 37.º. There, it was established in nº. 1 that: “Everyone is guaranteed the right to private property and its transmission, under the terms of the Constitution and the law.”. Nº. 2 stated that “The State respects and protects the property and other real rights of individuals, legal entities and local communities, only temporary civil requisition and expropriation for public utility being allowed, upon fair and prompt compensation, in the terms of the Constitution and the law.” And number 3 tightened the loop, demanding that “The payment of the compensation referred to in the previous number is a condition of effective expropriation.”

This was an article clearly framed in a liberal and absolute vision of property, not even foreseeing the possibility of nationalization or confiscation, admitting only the expropriation for public utility subject to the payment of compensation, to be effective. On paper, it would be difficult to have a more absolute guarantee of the right to property, and so the current activities of Angola’s National Asset Recovery Service (ANARS) could often touch the constitutional margins, with many of the seizures carried out lacking constitutional validity. Naturally, this fact must have been alerted to the President of the Republic, who took charge in his proposal for a constitutional review to remedy this grey area that was being created by the action of the ANARS. Thus, the President proposed the addition to article 37 of the Constitution of paragraph 4, which would have the following wording:

4. A specific law defines the conditions under which the nationalization of private assets may occur for ponderous reasons of national interest and confiscation for serious offense against laws that protect the economic interests of the State.

This version expressly established the possibility of nationalization or confiscation when there were fundamental reasons for this to happen. It would be up to the law to define the reasons. Thus, the constitutional regularity of asset recovery activities that had previously raised doubts was enshrined.

However, several Angolan jurists raised the problem that this presidential formulation could frighten potential foreign (and national) investors, so necessary for economic recovery by allowing a broad and indeterminate basis for proceeding with the nationalization and confiscation of assets. This possibility would be overstated and without adequate safeguards. That must have been why article 37, after analysis and deliberation in the National Assembly (NA), ended up with two more numbers, the 4th and 5th. Thus, the following wording was defined:

Article 37

(Right and limits of private property)

1. […].

2. […].

3. […].

4. Movable and immovable goods and shareholdings of private individual and corporate persons, in whole or in part, may be subject to public appropriation, when, for reasons of national interest, national security, food safety, public health, the economic and financial system, the supply of goods or the provision of essential services are at stake.

5. Proper law regulates the regime of public appropriation, under the terms of the previous number.

We are not going to enter into a doctrinal discussion about what is meant by “movable and immovable goods and shareholdings” and whether all the possible assets are included, although a clearer formulation that would not raise any kind of doubts would have been better.

What is clear from this article is that there may be public appropriation, ie, a “situation that (…) allows an action on the ownership of the means of production, which will lead to a coercive transfer of these goods to the public sector[2]” and that this appropriation must be justified by reasons of national interest, which the Constitution exemplifies as national security, food security, public health, economic and financial system, supply of goods or provision of essential services. Note that these are mere illustrations that the constitutional norm gives us. In fact, any motive in the national interest will be grounds for public appropriation. From the entry into force of this text, there will be, without any doubt, a general constitutional framework for asset recovery. Let’s see in what terms and what perspectives unfold.

3-The concept of public appropriation

In the absence of any other reference, it seems that the Angolan legislator was inspired by article 83 of the Portuguese Constitution (PC) to introduce the concept of public appropriation instead of nationalization and confiscation. Article 83 of the PC states: “The law determines the means and forms of intervention and public appropriation of the means of production, as well as the criteria for setting the corresponding compensation.”

From the outset, a clear difference between the Angolan and Portuguese norms regarding public appropriation can be seen. In Portugal, any form of public appropriation implies compensation, This is not the case in Angola.

We will detail the regime that appears to be established in the ARC, after the review. Public appropriation will be any coercive transfer of ownership of a good or private participation to the sphere of the State. Public appropriation encompasses nationalization, confiscation, expropriation and all other possibilities of empowerment. In the specific case of expropriation for public utility, the Constitution requires that compensation be made. In other cases, there is no such constitutional requirement. That is, for reasons of national interest the State can withdraw a property from the private sphere without compensation. The fact that the ARC admits this possibility should oblige the ordinary legislator to quickly draw up a law on the basis of public appropriation to guarantee the legal certainty of these situations, as far as possible.

4- The constitutionalization of non-conviction-based (NCB) asset forfeiture

Non-conviction-based (NCB) asset forfeiture is a critical tool for recovering assets arising from corruption when a criminal conviction is not possible[3]. Examples are when the offender has died, has fled jurisdiction, is immune from prosecution or the criminal process is anticipated to be too long rendering it ineffective. The United Nations Convention against Corruption (UNCAC) and the Financial Action Task Force (FATF) support its use.

The confiscation of NCB assets is a critical tool to recover the proceeds and instruments of corruption. It is a legal mechanism that provides for the containment, seizure and confiscation of embezzled assets without the need for criminal conviction. A growing number of jurisdictions have established NCB asset forfeiture regimes and such regimes have been recommended at the regional and multilateral level by a number of organizations, notably the World Bank through the StAR Initiative and the aforementioned FATF.

Globally, there are two types of confiscation used to recover illicitly obtained assets: NCB asset confiscation and criminal confiscation. Where criminal asset forfeiture and the NCB differ is in the procedure used to confiscate assets. The main distinction between the two is that criminal confiscation requires a criminal trial and conviction, while confiscation of NCB assets does not. In fact, it can be done through a quick civil or even administrative procedure. This is the possibility that the review of the Constitution has just admitted.

5-Conclusions. Non-conviction-based (NCB) asset forfeiture and the need for a basic law

What is essential from this constitutional modification provided for in article 37 of the ARC is the opening of dynamic possibilities for the implementation in civil or administrative proceedings of the confiscation of assets obtained illegally without the need for criminal proceedings and without compensation, therefore, we have here a large and positive step in the fight against corruption.

However, the constitutional provision immediately requires, for reasons of legal security and guarantee of the right to property, the approval of a basic law on the public appropriation of assets, specifically containing specific provisions on confiscation without criminal conviction. Consequently, after the constitutional review comes into force, it will be time for a basic law on confiscation of assets without criminal conviction and compensation.

[1] https://www.cedesa.pt/2021/05/13/radiografia-do-combate-a-corrupcao-em-angola/

[2] DIOGO SARAMAGO FERREIRA, A nacionalização do Banco Português de Negócios – Análise da Lei n.° 62-A/2008, de 11 de Novembro, Revista de Direito das Sociedades, 2011-1 (169-186), 176

[3] Theodore S. Greenberg, Linda M. Samuel, Wingate Grant, Larissa Gray (2009), Stolen Asset Recovery A Good Practices Guide for Non-Conviction Based Asset Forfeiture, The World Bank, Washington DC.

https://star.worldbank.org/sites/star/files/Non%20Conviction%20Based%20Asset%20Forfeiture.pdf

The economic and financial sector in the Angolan constitutional review – In particular, the enshrining of the independence of the central bank

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1. Introduction. Constitutional review in Angola

The present Angolan Constitution (CRA) dates from 2010 and has never been revised. Recently, President João Lourenço announced that he had taken the initiative to propose a constitutional revision.

A first comment that this action raises is that the Angolan president has a courageous policy facing the several challenges that have been placed on him: combating corruption, economic reform, quick reaction to Covid-19. At the moment, the fruits of this determined confrontation are not yet reaping, and there lies some paradox, a reformist president risks being submerged by his own reforms.

The present proposal for constitutional revision is minimalist, and so it was assumed by the government. In this sense, it risks creating expectations in the population that later will not be met. However, it represents a very important step in the discussion of the Angolan political model and the fact is that the constitutional discussion will be more important even though the effective changes that will eventually be inserted in the Constitution.

The purpose of this text is to highlight and analyze the main proposals for constitutional revision in the area of ​​economics and finance.

2. The proposed constitutional review law in the economic and financial area

The first proposed modification is found in article 14 of the CRA, which concerns private property. The expression “promotes[1]” is introduced, with the meaning of being a function of the State in addition to guaranteeing and protecting private property and free enterprise, also the promotion of private enterprise. Positive State behavior is introduced, that of promoting free private initiative.

Later on, a new number 4 is added to Article 37 that regulates the “Right and limits of private property”. This number establishes the possibility of nationalization in the case of “ponderous reasons of national interest”. It also introduces confiscation as a sanctioning measure, which is permitted when there is a serious offense against laws that protect the economic interests of the State.

Naturally, it is in the Title about the Economic, Financial and Tax Organization that some modifications in the economic area are added. Article 92 will contain new paragraphs 2 and 3. The new wording proposed for paragraph 2, aims to “clarify the scope and meaning of the principle of community property, as a type of property enshrined in Article 14 of the Constitution, which defines the nature of the economic system by calling the regulation of the exercise of this type of property the rules of customary law that do not contradict the economic system, the social market regime and the fundamental principles of the Constitution ”. Paragraph 3 establishes the legal existence of the unstructured sector of the economy, i.e., it refers to the informal economy, pointing to its progressive institutionalization.

Then we have article 100 on the National Bank of Angola (BNA). In paragraph 1 of this article, it is determined that the BNA will be the “central bank and issuer of the Republic of Angola” and will have as primary functions: to guarantee price stability in order to ensure the preservation of the value of the national currency and ensure the stability of the financial system. Therefore, the BNA’s functions are limited to combating inflation and the stability of the financial system.

Then, in paragraph 2, “the new legal nature of BNA is enshrined, as an independent administrative entity, with an eminently regulatory nature, and the content of the principle of independence of this type of entities is signaled”. “Transmission of recommendations or issuance of directives to the governing bodies of the BNA on its activity, structure, functioning, decision-making” is hereby prohibited on the priorities to be adopted in the pursuit of constitutional and legally defined attributions, by the Executive Branch or any other public entity.

Subsequent paragraphs of the same article state that: “The Governor of the National Bank of Angola is appointed by the President of the Republic, after hearing in the National Assembly’s Specialized Labor Committee.” And they stipulate a detailed procedure for that appointment. There is a duty of parliamentary hearing, but the final decision rests with the President of the Republic.

Another change concerns the General State Budget (GSB). Article 104 proposes an amendment “in order to remove a current idea that the budget of local authorities is part of the GSB”. The GSB will provide for transfers to be made to municipalities, but not their income and expenses.

3-Analysis and comment on the proposed changes to the economic and financial Constitution

The articles to be amended are 14, 37, 92, 100 and 104.

ARTICLE 14

In relation to article 14, the State will be responsible for promoting private initiative. In addition to the rhetorical aspect of such a statement, in practical terms, this rule allows the State to assist the private sector in a consistent manner, for example, expanding free zones and tax benefits for the private business, subsidizing private companies, creating partnerships with the private sector. The State shouldn’t be merely passive and adopt a positive and active attitude towards the private sector. It is a good sign for the market.

ARTICLE 37

Article 37 is of a different nature and constitutes the only constitutional amendment directly related to the fight against corruption. In the face of a constitutional gap, the general principles on which nationalization and confiscation can take place will now be established. This last part is essential to achieve the recovery of assets that is underway in which it becomes very difficult to understand the legal framework.

It is now clear that the state can confiscate assets when there has been a serious offense against laws that protect its economic interests. In simple language, it is now clear that those who have been charged at the expense of public funds may be without these assets, with no need for a final criminal case, but only the conclusion that they have carried out a serious offense against the laws that guarantee economic interests of the State. This rule is to be applauded in the present context of combating corruption.

ARTICLE 92

If the promotion of private initiative and the speeding up of the recovery of assets obtained from corrupt activities are measures that deserve praise, more doubts raises the rule of article 92 regarding the informal economy. More than “its progressive framing in the structured economy system” (proposed wording of Article 92, paragraph 3), which essentially means the payment of taxes and fees, what the Constitution should advocate was the adoption of supportive policies to the informal sector of the economy, which is a real buffer from the lack of work and an incubator for potential successful small and medium-sized companies[2].

It has already been pointed out that in southern Africa, the informal economic sector is a crucial element of survival, given that 72% of all non-agricultural employment resides in the informal sector and the majority of new jobs show up there. The informal economy provides income and employment to all people, regardless of education or experience. In Angola, the majority of employed people are also involved in the informal economy, as otherwise they would not be able to support all of their expenses. To that extent, it is necessary to be very cautious in establishing rules about the informal economy because it helps the Angolan government[3].

ARTICLE 100

In terms of public opinion, the core of the constitutional change in economic and financial terms will be found in article 100 referring to the BNA. This article contains three main lines:

  1. The BNA is the “guarantee price stability in order to ensure the preservation of the value of the national currency and ensures the stability of the financial system”. Thus, the BNA’s functions related to inflation and the financial system are precisely determined;
  2. The BNA becomes an independent administrative authority and therefore “independent in the pursuit of its duties and in the exercise of public powers”. It is the famous independence of the central bank, which today is defended by most economic doctrine.
  3. The Governor of BNA is appointed by the President of the Republic, after hearing the National Assembly. It should be noted that the National Assembly has no right of veto, but of hearing.

The enshrining of central bank independence corresponds to the modern dominant trend in economic doctrine. The arguments in favor of central bank independence can easily be summed up. Governments are thought to tend making wrong decisions about monetary policy. In particular, they are influenced by short-term political considerations. Before an election, the temptation is for the government to cut interest rates, making economic cycles of expansion and retraction more likely. Thus, if a government has a history of allowing inflation, inflation expectations start to rise, making it more likely.

An independent central bank can have more credibility and inspire more confidence. Having more confidence in the central bank helps to reduce inflationary expectations. Consequently, it becomes easier to keep inflation low. Thus, there is an attempt to introduce additional credibility in monetary policy and to increase the fight against inflation. It should be noted that inflation is an evil that has endured in the Angolan economy for too long.

This measure is correct and should be considered positive.

ARTICLE 104

The last change concerns the clarification of the differentiation between the General State Budget and the Municipalities, as part of the material preparation for the installation of the municipalities.

Conclusion

Minimalist, the proposed constitutional revision in the area of economics and finance aims to reinforce the signs of the market economy and macroeconomic stability, highlighting as an essential element of this law the consecration of central bank independence and its focus on combating inflation.

*****

Attachment: New proposed wording of the norms referring to the economic and financial sector

“Article 14

(Private property and free enterprise)

The State respects, and protects the private property of natural or legal persons and promotes free economic and business initiative, exercised under the terms of the Constitution and the Law ”.

“Article 37

(Right and limits of private property)

1. […].

2. […].

3. […].

4. Own law defines the conditions under which the nationalization of private goods can occur for ponderous reasons of national interest and of confiscation for serious offense to the laws that protect the economic interests of the State ”.

“Article 92

(Economic Sectors)

1. […].

2. The State recognizes and protects the right to community property for the use and enjoyment of means of production by rural and traditional communities, under the terms of the Constitution and the law.

3. Own law establishes the principles and rules to which the unstructured sector of the economy is subject, aiming at its gradual inclusion in the structured economy system ”.

“Article 100

(National Bank of Angola)

1. The National Bank of Angola, as the central bank and issuer of the Republic of Angola, guarantees price stability in order to ensure the preservation of the value of the national currency and ensures the stability of the financial system, under the terms of the Constitution and the law.

2. As an independent administrative authority, the National Bank of Angola is independent in the performance of its duties and in the exercise of public powers to which it is concerned, in accordance with the Constitution and the law.

3. The Governor of the National Bank of Angola is appointed by the President of the Republic, after hearing the Specialized Labor Committee of the National Assembly, competent by reason of the matter, under the terms of the Constitution and the law, observing, for this purpose, the following procedure:

a) the hearing is triggered at the request of the President of the Republic;

b) the hearing of the proposed entity ends with the vote on the report in accordance with the law;

c) It is up to the President of the Republic to make the final decision in relation to the nomination of the proposed entity.

4. The Governor of the National Bank of Angola sends to the President of the Republic and to the National Assembly, a report on the evolution of monetary policy indicators, without prejudice to bank secrecy rules, the treatment of which, for the purposes of control and inspection by the National Assembly it is ensured under the terms of the Constitution and the law ”.

“Article 104

(General State Budget)

1. […].

2. The General State budget is unitary, estimates the level of revenue to be obtained and sets the authorized expenditure limits, in each fiscal year, for all services, public institutes, autonomous funds and social security and must be prepared in such a way as to that all the expenses provided for therein are financed ”.

3. The State Budget presents the report on the forecast of funds to be transferred to local authorities, under the terms of the law.

4. The law defines the rules for the preparation, presentation, adoption, execution, inspection and control of the General State Budget.

5. The execution of the State Budget complies with the principles of transparency, accountability and good governance and is supervised by the National Assembly and the Court of Auditors, under the terms and conditions defined by law ”.

[1] All citations without a specific source mentioned are from the 2021 Constitutional Review Law Proposal Rationale Report made public by the Government.

[2] Alain de Janvry e Elisabeth Sadoulet, Development Economics, 2016, p. 19

[3] Moiani Matondo, Em defesa das zungueiras e da economia informal, MakaAngola. https://www.makaangola.org/2020/04/em-defesa-das-zungueiras-e-da-economia-informal/