A low-tax jurisdiction
The tax exemptions that may be available to a company incorporated in Mauritius depends on the residency of that company. A company incorporated in Mauritius is considered non-resident if it is centrally managed and controlled outside of Mauritius. Under Mauritian law, income from capital gains, dividends or interest arising in Mauritius and paid to non-resident companies are tax exempt whereas royalties paid to a non-resident company are taxed at 15%. In contrast, companies resident in Mauritius may benefit from:
- a maximum tax rate of 15% on foreign-source income; and
- an 80% tax exemption in respect of certain income including dividends from a foreign source or profits that are attributed to a foreign permanent establishment such as a mine, quarry or other place for the exploration or extraction of natural resources.
Mauritius is also a signatory to double tax treaties with over 40 countries including 16 African countries and, most notably, China, India and the United Kingdom. For Africa's major producers of metal and mineral commodities such as Congo, South Africa, Namibia and Zimbabwe, this means that a tax treaty rate of as low as 0%, 5% or 10% may apply on dividends, interest and royalties that are paid to non-resident entities.
A jurisdiction for international dispute resolution
Regardless of which jurisdictions may be involved, every cross-border investment comes with a risk of potential dispute. Mauritius is a sensible jurisdiction to resolve not only financial and corporate disputes but also mining disputes as it:
- has a relatively stable political system and low crime rate and with tourism being a main contributor to its economy, it is a culturally diverse and one of the safest, African countries to do business in; and
- is located off the southern-east coast of Africa with numerous direct flights to Australia and Asia and a facility dedicated to administer and support international dispute resolution processes: the Mauritian International Arbitration Centre (MIAC). The MIAC offers a state-of-the-art arbitration suite on the waterfront of Port Louis (that is free of charge for MIAC administered proceedings), making it a convenient and practical venue for international conferrals, mediations and arbitrations.
The MIAC, as an administering institution, operates under its own modern set of arbitration rules independently from the Government and the Mauritian International Arbitration Act (MIAA). The Secretary-General of the Permanent Court of Arbitration is entrusted with the role of appointing authority under both the MIAC Rules and the MIAA.
Parties who wish to resort to arbitration in Mauritius should consider implementing the MIAC model arbitration clause in their contracts, or if a dispute has already arisen, agreeing to submit to the MIAC Rules.
The ultimate right of appeal to the Privy Council
Mauritius is one of the few independent republics within the Commonwealth for which the Judicial Committee of the Privy Council still operates as the highest court of appeal against decisions of the Supreme Court and the Court of Appeal. The hybrid legal system in Mauritius is comprised of the French Civil Code and English common law practices. A great benefit of this system is that litigants that are unsuccessful at first instance are afforded an ultimate right of appeal.
Unlike in Australia, where all appeals to the High Court are subject to the grant of special leave, the Constitution of Mauritius prescribes litigants with an opportunity to appeal "as of right". This direct and automatic right of appeal to the Privy Council can be exercised in broad circumstances including where the matter in dispute on appeal from a final decision in any civil proceeding is simply of the value of 10,000 Mauritian Rupees or more. This right also extends to decisions in respect of applications to set aside or challenge the enforcement of awards issued under MIAA.
Since 2019, the Privy Council has decided on 24 Mauritian appeals. Of those appeals, 67% were dismissed and of the dismissed appeals, two related to a decision to set aside or challenge an award issued under the MIAA. Not only does this indicate a high rate of satisfaction in the international arbitral process in Mauritius but it also acts as a reminder that courts (including the Privy Council) will generally uphold an arbitral tribunal's decision.
There are some practical concerns about the right of appeal that prospective litigants ought to be aware of. Contrary to the objective of the Model Law and the MIAA accordingly, there is always a risk that a successful party to an arbitral award may become embroiled in protracted and costly court proceedings. Furthermore, the right of appeal may be exercised by a disgruntled litigant to test a meritless case of appeal before the Privy Council.
A notable example that caused the Privy Council to reflect on the potential need to tighten the appellate process in the MIAA by legislative reform is Peepul Capital Fund II LLC and another v VSoft Holdings LLC (Mauritius) [2019] UKPC 47. In this case, after receiving an award of USD $23 million following only seven months of arbitral proceedings, private equity investors were then subjected to five years of appeal proceedings until a final judgment was handed down by the Privy Council. The Privy Council ultimately dismissed the appeal against the Supreme Court's rejection of the application to set aside the award and in postscript, observed that this was an appeal which would have been unlikely to withstand a substantive requirement for permission in another jurisdiction.