LAW, JUSTICE AND DEVELOPMENT WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT November 14-17, 2011 Washington DC LJD LAW JUSTICE and DEVELOPMENT C233 cn Conf

Legal Harmonization as a Tool for Regional Integration: The OHADA Experience Marc FRILET  Managing Partner – Frilet Société d’Avocats,  DRBF Country Representative for France,  Secretary General of the French Association of International Legal Experts (IFEJI),  Chair of the PPP Working Group of the Paris Bar,  Advisory member of the World Organisation Committee (IBA), Visiting Professor,  University Paris V-René Descartes 2LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT FRILET _______________ Société d’Avocats Private Sector View and Perspective from Legal Practitioners

Genesis : Need of a reliable legal framework  As a veteran international lawyer advising international investors in Africa, I remember the old time of African Company Law.  Company law in what has become the “OHADA Region” was based on a French Act of 1867, which was no longer in force in France for many years.  It was often critical to ascertain the interpretation of the old law for developing the corporate activities or completing a particular transactions or investments.  The interpretation by local courts was often hazardous and few reliable precedents could be used.  This was an opportunity for international law firms like ours to deliver “authoritative interpretation” often based on a documentation not available in Africa. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT3

Genesis : Need of a reliable legal framework (Cont.)  The “MEISSONIER Treatise of Company Law” virtually unknown in Africa and old French case law were gold mines for us.  This example demonstrates the difficulties for the international investors and the African business community to ascertain applicable legal principles in company law leading to disputes and often punitive financial consequences.  Such legal uncertainties have been one of the rationale for the ambitious OHADA project, which so far is unique in the world. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT4

Evaluation of OHADA: The Positive Features  Several OHADA Uniform Acts have replaced the old business regulations (inter alia for company law).  This move has been welcome by the international and local business community at least for the ones interested to develop their business in a secure framework and with good governance.  This community has also recognized that the Uniform acts are well- born. – Thanks to the “African Fathers” of the Mauritius treaty, the process of drafting, approving, and promulgating the Uniform Acts have been very efficient by all modern standards. – Problems often found in other countries or regions for drafting and adopting new pieces of legislations have been minimized. – The major problem of striking an appropriate balance between principles and concepts and the specific provision has been well resolved : the Acts are worded in plain language. – This has been facilitated by the fact that the Acts are limited to some key areas of business laws and as such not too much politically sensitive. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT5

Evaluation of OHADA: The Positive Features (cont.)  The Acts are conductive to good governance and economic development – Various features induce the informal sector of the economy to develop its activities in the formal sector: Registrar of commerce and movable credit (RCCM) Disclosure of corporate documentation Accounting Progressive access to line of credits through mortgages, pledges, etc Simple forms of company and including mandatory provisions for their organization and operations facilitating the understanding of the new players, etc  The surveys carried out with the business community over the years are globally positive. CIAN surveys, local chamber of commerce/IFEJI surveys, etc.  Very early, the international legal community has also evaluated positively the OHADA Acts (in particular a landmark IBA Conference in Cameroon in 1999, where a distinguished ABA panel conducted by Bill Hannay made a thorough evaluation of the Acts and proposed useful guidance in various areas.) LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT6

Evaluation of OHADA: The Negative Features: The implementation Challenge  As any new law/legal system, the understanding and compliance is an issue and implementation on the ground is a real challenge.  In Africa, this is compounded by the low level of income, the poor state of the judiciary, the size of the informal sector, and lack of governance.  Some key challenges for the business community and investors are well illustrated by the issues of enforcement of the Acts, which are a condition for their actual implementation. -THE JUDICIARY INTERPRETATION AND ENFORCEMENT OF THE ACTS is and will remain for a long term a major problem, which deserves to be well appraised. o At the highest level, the OHADA Supreme Court track record is impressive. o CCJA renders very authoritative judgments on interpretation of the Act. The landmark cases are published : 50 cases reported in a reference book. However many decisions are on procedure and jurisdiction and few on the substance. o CCJA is also providing advice to the State or judiciary: they are very authoritative but so far limited in number. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT7

Evaluation of OHADA: The Negative Features: The implementation Challenge (cont.) o The real issues in a nutshell o CCJA location (only Abidjan) and limited resources do not permit to CCJA to play the role it deserves. o Resistance for the State Courts and Supreme Court to the CCJA ultimate jurisdiction. o Little knowledge of the OHADA by local judiciary - THE ALTERNATIVE TO JUDICIARY INTERPRETATION: ARBITRATION - OHADA arbitration system is comprehensive and quite unique: o CCJA arbitration: CCJA has a dual authority to administrate arbitration and to rule on the administrative issues. So far not much confidence by the private sectors and few awards. o OHADA arbitration rules for traditional arbitration: those rules are modern according to international standards, but they need to be implemented by good administration centers. So far limited track record. o The real issues in a nutshell: o Arbitration is not organized and adapted yet for being user friendly for the private sector. OHADA should design and promote simple arbitration organization and proceedings, affordable, and results oriented. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT8

Evaluation of OHADA: Several Legal or Regulatory Areas are not regulated  A typical risk matrix designed for evaluating the risks of a large investment projects in the OHADA region shows that many of the investment risks are not covered by OHADA Uniform Acts. Examples: – Tax: certainty and conditions of implementation: particular issues of parafiscality – Customs and related costs certainty and procedure – Exchange control and currency fluctuation issues – Private contract law content and interpretation – Permitting risks: (risks deriving from governmental or bureaucracy attitude for clearances, non objection, approval and other permits) LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT9

Evaluation of OHADA: Several Legal or Regulatory Areas are not regulated (cont.) – Land availability and land use risks including the expropriation process and related issues – Environmental impact studies and related permits – Public contract law content and interpretation – Administrative or Judicial review of adverse bureaucratic decisions – Public private partnership issues – Employment law risks  In practice and for large international investment projects, which are essential for economic development such as public service infrastructure projects and mining projects the benefits of OHADA remain in practice limited : most of the major risks are outside of the OHADA radar screen. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT10

The Future of OHADA: A View from the Business Community Expectations  Better and efficient implementation of the existing Acts: three main directions: 1)Reinforcing the program of training of the judiciary 2)Promoting aggressively arbitration after having designed a user-friendly system taking into account the particular issues of the region and the capacity of the players. Providing comfort to the business community on the followings: – Guarantee of the appointment of an arbitral tribunal independent, professional, and efficient – Guarantee of simple and well understood proceedings in line with local traditions for dispute resolutions – Guarantee of issuance of a fair and enforceable award within a reasonable time – Guarantee to have an arbitration administration center efficient, reactive, fair, and cheap – Possibility to evaluate in advance costs and duration of the proceedings. 3)Promoting the development of uniform implementation regulation and procedures for the OHADA Acts LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT11

The Future of OHADA: A View from the Business Community Expectations: Examples (cont.)  Considering additional Acts: Priority areas for securitizing the most needed international investments in Africa 1)Designing the institutional framework permitting to facilitate long term public private relationship in the core public service sector with appropriate guaranties for the stakeholders with limited impact on future State budgets or development aid. (This is in line with the conclusion of the G20 Summit) 2)Designing public contract law and procedures providing all reasonable guaranties of fair implementation of the various types of contracts to be entered into between the private and the public sectors (together with efficient procedures). LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT12

Conclusion  OHADA is no more an experience, it is a reality with many positive features. For us, it is clearly an example for other regions in the world.  The existing Uniform Acts deserve to be better understood and promoted and this will contribute substantially to the improvement of investment climate and to the securitization of current transactions.  However, this is not sufficient since entire regulatory sectors essential for the economic development of Africa are not regulated by Uniform Acts.  Those sectors are not well regulated so far by national laws or regional organizations.  It is important therefore to consider also new Uniforms Acts in some key areas where a good regulatory framework has proven to be essential for the success of the investments or other transactions. LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT13

Thank you! Me Marc Frilet Frilet - Société d’Avocats 94, boulevard Flandrin Paris, France Tel : Fax : LJD WEEK 2011 INNOVATION AND EMPOWERMENT FOR DEVELOPMENT14