THE HARMONIZATION OF BUSINESS LAW IN AFRICA: POSSIBILITY OR FANTASY?

by Herbert A. Igbanugo & Fred Adiyia
June 2009
The African Counsel, Volume I, Issue 2

Sub-Saharan African countries over the past five years have reinforced the fact that more, not fewer, of them are becoming welcoming places to run a profitable business. In fact, the current performance of Africa's economy - 30% to 50% return on investment - is becoming quite attractive to international investors. They do not just have modern investment codes; they recognize that they must provide political micro-economic stability to ensure a steady and predictable flow of profits back to shareholders, and due process of law to protect their investment when contractual issues are in dispute. There are a number of regional initiatives on the Continent with regard to law, which will in time form part of the Continent-wide policy.
Underway in most regions of Sub-Saharan Africa is the development of harmonized commodity and transactional laws, which will foster both intra-African and international trade. Until recently, most Sub-Saharan African nations suffered from outdated legal systems. Economic groupings within the Continent are now in the process of advancing to integrated trade protocols and modernized legal infrastructure. The Common Market for Eastern and Southern Africa (COMESA), which embraces 20 countries and most countries in the Southern African Development Community (SADC) region, is looking at similar initiatives.

The Organization pour l'harmonisation en Afrique du droit des affaires or the Organization for Harmonization of Business Law in Africa (OHADA) was founded on October 17, 1993 by sixteen (16) West and Central African countries; namely, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Cote d'Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo. These countries essentially decided to abandon the judiciary systems they inherited during colonization by executing the Port Louis (Mauritius) Treaty. Almost all the member countries are Francophone (French speaking and/or former French colonies) countries and the language and civil law of the organization are French.

Since its creation in 1993, OHADA has designed, enforced and applied through the courts a substantial body of uniform commercial laws. Pursuant to Article 53 of the Treaty, any member state of the Organization for African Unity (OAU) may become a member, if it wishes to do so. The present-day prevalence or even dominance of the French language and civil law within OHADA is expected to change over time as OHADA embraces Anglophone African countries. Although OHADA was conceived on the Francophone side of Sub-Saharan Africa, all dynamic African leaders have now come to realize that this priceless tool of economic integration should be extended to English-speaking African nations.

OHADA courts operate with statutes or Uniform Acts that apply directly in contracting states and do not require ratification by the legislature of each contracting state, which is quite similar to the way governing regulations apply in the signatory nations of the European Union. OHADA is a crucial legal tool specifically designed to serve the purpose of regional integration and economic growth, as well as providing a secure legal environment, on the Continent.

Many countries are giving active consideration to joining the OHADA common business legal system so that they can begin to enjoy a single modern, flexible and reliable business law, adapted to each country's economy; arbitration as an appropriate and trustworthy way to settle disputes; and an opportunity for training judges and judiciary staff and ensuring their specialization. Presently, OHADA includes four institutions: (1) the Council of Ministers of Justice and Finance, which is the legislative body; (2) the Common Court of Justice and Arbitration, based in Abidjan, Ivory Coast; (3) the Permanent Secretariat, based in Yaoundé, Cameroon, which is the administrative body; and (4) the Regional Training School of the Judiciary, based in Porto Novo, Benin, which offers an initial and a continuing education to judges and lawyers on the new uniform law.

The common court of justice and arbitration advises on the uniform application and interpretation of the common OHADA law; reviews decisions rendered by Courts of Appeal of the member states in cases involving application of the OHADA law; and monitors the arbitration proceedings conducted pursuant to the OHADA Uniform Arbitration Act. The OHADA Council of Ministers has already adopted Uniform Acts pertaining to: general commercial law; corporate law and rules concerning different types of ventures; laws concerning secured transactions (guarantees and collaterals); debt recovery and enforcement; bankruptcy law; arbitration law; and accounting law. Under Article 2 of the Treaty, labor law, sales law, and ground transportation law are also to be harmonized. The Council of Ministers have also indicated an intention to pursue additional business regulations in the areas of competition law, intellectual property law, banking law, laws related to unincorporated forms of business, contract law and law of evidence.

Particularly relevant to foreign business ventures are the debt recovery and enforcement legal regime of OHADA. The Uniform Act sets out the legal process that a creditor can rely upon to compel his debtor to "make good" on his commitments, such as payment of money due or fulfilling an obligation to deliver goods. The text deals with the simplified debt recovery and seizure of property proceedings that institutes quick, inexpensive and efficient methods of debt collection such as the injunction to pay (writ of execution issued by a judge against a debtor in favor of a creditor) and a restitution procedure, which will be a strong protection for an unpaid creditor. The website www.ohada.com is dedicated to the OHADA legal environment and contains OHADA's texts, case law and doctrine. It is intended to eventually become a one-stop shop for valuable legal information for corporations, business people and legal practitioners operating in the Continent.

In recent times, the organizers of this commendable venture have worked hard to broaden the reach and goals of OHADA. As aforementioned, although membership is still heavily comprised of Francophone countries, the organization has implemented innovative changes that makes it easier for non-Francophone neighbors and members who are not French-speaking to feel comfortable, and for non-members to take advantage of, or avail themselves of the benefits of OHADA. In October 2005, the organization amended the original treaty to include English, Portuguese, and Spanish in addition to French as the working languages of OHADA. The language amendment makes sense since most African countries utilize at least one of those languages as its lingua franca or official language. The amendment to the working language has communicated to non-members, non-French speaking and/or Anglophone neighbors that they are welcome to use OHADA to create uniformity of laws in their business transactions at home and throughout Sub-Saharan Africa. The October 2005 amendment also created an additional institution, the conference of heads of government or heads of states.

Another significant development by OHADA since its formation is the realization by member countries through its heads of state institution that the organization needs to be financed independently by member state finance ministers to ensure its success. To this end, on October 17, 2008 at a conference in Quebec, Canada, the heads of state of member countries signed an amendment and charged finance ministers of member states to do everything possible to finance OHADA independently rather than as an appendage of their departments. OHADA laws are becoming integral parts of business transactions in the local business of member countries. Local judges in OHADA signatory nations take the laws into consideration when deciding cases involving business transactions. Significantly, lawyers from both OHADA member countries and non-member countries, including Anglophone countries, are taking advantage of the training offered by the OHADA institution charged with training judges and practitioners.

An OHADA conference was for the first time held in Accra, Ghana - a non-member of OHADA and an Anglophone country - on February 24, 2008. The theme of the conference was to discuss arbitration under OHADA as a byproduct of the civil law system against the Common Law practiced by most English-speaking, Sub-Saharan African countries. The same discussions have been ongoing in the academic arena since OHADA came into being. Some critics have stated that any economy based on the French civil law system rather than the English common law will not spur development. Of course, there are many disagreements on that contention. Regardless, most of the participants at the conference in Accra favored a working relationship between the OHADA arbitration system and the one used in the common law judicial system with a goal to one day achieve uniformity in the Sub-Saharan Africa region as embodied in OHADA.

While the effort to achieve uniformity of business law in Africa will take some time because of lack of homogeneity in language, culture and general legal background, OHADA's progress after almost twenty-six (26) years is quite commendable. At least it is championing a dialogue about unifying business law in Sub-Saharan Africa. Just like the success of the European Union was followed by the successful introduction of the single European currency ("euro"), with concerted effort, Sub-Saharan African nations can also get to this "promised land" both in terms of common commercial laws and common currency, especially in the wake of the formation or founding of the African Union (AU) and its economic development vehicle, the New Partnership for Africa's Development (NEPAD). One thing is certain - it will favorably change the face of business in Africa and ease investors' concerns about conflicts of laws on the continent.

Boiled down, the principal benefits of the harmonization process is the modernization and standardization of business law across the member nations to create a uniform legal and judicial system that is more conducive to intra-African trade, direct foreign investment and international trade in the nations of Sub-Saharan Africa. The OHADA Treaty and the Uniform Acts thus far go a long way towards harmonizing business law in Francophone Africa. If and when the common law jurisdictions generally or pervasively adopt the treaty as their laws, the prospect of African economic integration and monetary union will become more of a probability, thereby creating substantial impetus for significant foreign direct investment and much needed capital infusion into this region, appropriately dubbed an economic "sleeping beauty."