Introduction
On October 17, 1993, 16 African States signed a treaty known as the Organisation pour l'Harmonisation du Droit des Affaires en Afrique (Organization for the Harmonization of Commercial Law in Africa (The OHADA Treaty)). The 16 signatories were Benin, Burkina Faso, Cameroon, the Central African Republic, the Comoros, Congo-Brazzaville, Cote d'Ivoire, Gabon, Guinea, Guinea Bissau, Equatorial Guinea, Mali, Niger, Senegal, Chad and Togo (collectively, the Member States). The signatories to the OHADA Treaty are also members of the CFA (common currency linked to the French Franc). The Treaty left open the possibility of other African countries becoming members as the central concept of the Treaty is the promotion of African economic integration. This is especially important when viewed in terms of today's global economy with regional trading blocks such as the European Union (EU), North Atlantic Free Trade Area (NAFTA), the Common Market of the South (MERCOSUR) and the Association of Southeast Asian Nations (ASEAN). Having said this, although all of the above are free trade areas, so far none have harmonized their laws. Even the EU, which is perhaps the most advanced, with its single currency the Euro, has not. Moreover, the EU is currently split on the issue of tax harmonization. Not so with OHADA.
The Treaty consists of two main components. The first of these is the enabling section which provides for the setting up of institutions charged with the realization of the terms of the Treaty. The second provides for the so-called Uniform Acts to be adopted.
Several of these Uniform Acts, covering major aspects of Commercial Law, were recently enacted. These enactments, regarding subjects such as general commercial law, debt collection, bankruptcy, and secured transactions, provide the substantive basis for the development of a rational and harmonized legal system throughout the OHADA region. This article will describe the Uniform Acts which have been enacted and the impact they will have on promoting investment in the Member States.
Institutions of the OHADA
There are three main institutions under the OHADA Treaty. They are the Council of Ministers, the Common Court of Justice and Arbitration, and the Permanent Secretariat. The Council of Ministers is the main decision-making body within the organization. It consists of the Justice and Finance Ministers of each Member State. Decisions of the Council of Ministers require a majority vote save for decisions to implement Uniform Acts, which require unanimous votes. The Common Court of Justice and Arbitration is composed of seven judges elected for a period of seven years, such period being renewable for a further seven years. The court is the final arbiter of any disputes arising between the Member States with regard to the interpretation or application of the Treaty or any of the Uniform Acts. Unlike most supreme courts, whose jurisdictions extend only to questions of law, the Common Court of Justice and Arbitration may hear appeals on the facts. In addition, where there is an arbitration clause in a contract requiring the dispute to be settled by a single arbitrator, the parties to the dispute may appoint the arbitrator by mutual agreement for approval by the Court. In the event of the failure by the parties to reach an agreement, the Court appoints an arbitrator. The Permanent Secretariat as the third institution consists of the Permanent Secretary, who is appointed by the Council of Ministers for a period of four years, with the possibility of renewal of a further term, and a support staff, subject to the staffing limits determined in the budget.
Uniform Acts
The acts used for adoption of the common rules of the OHADA Treaty are known as Uniform Acts. The Permanent Secretariat drafts the Uniform Acts. Copies are then sent to the Governments of the Member States for review. Upon review, the draft legislation together with remarks and a report from the Permanent Secretariat is submitted to the Common Court of Justice and Arbitration. The Court issues a decision within thirty days with effect from the date of reception of the consultation request. The mandate of the jurisdiction of this Court in this context is broader than the US Supreme Court in that the latter may not issue advisory opinions. After the Common Court of Justice and Arbitration renders its opinion, the Permanent Secretariat finalizes the wording of the draft Uniform Act and proposes the entry thereof on the agenda for the next Council of Ministers. At the Council meeting the draft legislation is considered and voted on. In order to become law, it requires a unanimous vote of the Council.
Pursuant to the Treaty, several Uniform Acts were recently enacted covering a broad spectrum of business laws. These include Uniform Acts on General Commercial Law, Commercial Companies and Economic Interest Groups, and Secured Transactions which came into force on January 1, 1998. Three other Uniform Acts relating to Bankruptcy, Debt Collection Procedures and Accounting Law, came into force in April 1998. Future codification of other areas of business law will include Competition Law, Labor and Social Security Law, Arbitration, Sales and Transport Law, and Law on Financial Information (reporting and control). Each of these Uniform Acts is summarized below.
Uniform Act on General Commercial Law
This Act applies to all businesses or economic interest groups which have their registered office in one of the Member States. One of its main provisions is a new definition of commerce. As revised, commerce includes the purchase of movable and immovable goods with a view to resale; banking, stock exchange, brokerage, insurance and transit transactions, and contracts between traders for the purposes of their business; the industrial exploitation of mines, quarries and all deposits of natural resources; transactions involving the rental of movable goods; manufacturing, transport and telecommunications transactions; transactions by business intermediaries; and acts performed by commercial companies. In an effort to spur lending and other forms of debt financing in the region (such as project financing), there is also an expanded section on the registration of charges (or security interests) on personal property. In addition, the existing provisions on registration of shares, hypothecation of goods, etc., have been enhanced with new provisions on the registration of retention of title clauses and the registration of leasing agreements. Like the Uniform Commercial Code in the U.S., priorities date from the date of registration.
Uniform Act on the Law of Commercial Companies and Economic Interest Groups
Under this Act, a commercial company is an agreement by which two or more persons, by means of a contract, allocate assets, in cash or in kind, to an activity for the purpose of sharing the resulting profits. The commercial company must be formed in the common interests of its members. There are detailed provisions on the articles of incorporation, such as share capital, the registered office of the company, etc. One interesting provision in the section on the articles of incorporation is that management is authorized to bind the company. Any clauses in the articles limiting such powers are not binding on third parties. This stems from the notion that the articles are a contract among the shareholders and the management and such an agreement cannot affect outsiders. Managers may be individually liable for corporate wrongs. Two types of action may be initiated, namely, an individual action by a shareholder or third party which has suffered prejudice as a result of management error or a corporate action for the repair of damages suffered by the company as a result of a fault committed by one or more of the company's managers. Mergers or spin-offs are also provided for and may take place between companies of the same legal form or between companies of different legal form. Any merger or spin-off activity is to be decided by each of the companies involved in accordance with the provisions for amendment of the articles of incorporation and according to the procedures followed in the event of a capital increase or the dissolution of a company. However, if the result of the action is to increase the undertakings of the members or shareholders of one or more of the companies involved, it may only be decided by a unanimous decision of the members or shareholders.
Uniform Act on Secured Transactions
The Secured Transactions Act provides for various forms of security interests. It distinguishes for example between personal guaranties and letters of guaranty (or counter-guaranty). The personal guaranty is a contract by which a person stands as surety for a debtor's obligation. The letter of guaranty (also called a first demand guaranty or letter of credit) is an agreement under which, at the request of instructions from the beneficiary of the guaranty, the guarantor (usually a bank) will undertake to pay a predetermined sum to the beneficiary. The letter of counter-guaranty is an agreement under which, at the request or upon instruction by the contractor or the guarantor, the counter-guarantor undertakes to pay a predetermined sum to the guarantor upon the latter's first request. The essential difference between the personal guaranty and the letter of guaranty is that the letter of guaranty is a primary undertaking of the guarantor, whereas the guarantor under a personal guaranty has a secondary undertaking. Furthermore, the legal guaranty is irrevocable once given and is autonomous of the underlying agreements.
Uniform Act on Bankruptcy
The emphasis on this legislation is to prevent liquidation of companies by providing for an amicable settlement between the debtor and the creditors. The Act also provides for the restructuring of insolvent companies.
Uniform Act on Debt Collection Procedures
This Act seeks to provide for quick and efficient methods of debt collection. It does so primarily through the remedy of an "Injunction to Pay," which is essentially analogous to an application for summary judgment. The creditor files the application with the court and has to show there are no merits to the debtor's defense on paper. Should the creditor so show, the judge grants a writ of execution in favor of the creditor. The Act also provides for a Restitution Procedure which, in disputes regarding sales of goods, allows the seller to recover the unpaid goods.
Uniform Act on Accounting Law and Accounting Standards
The aim of this Act is to provide a fair and accurate picture of the business in a simple and efficient manner. Three sets of procedures for book-keeping and the presentation of financial statements have been established and take into account the size of the business turnover at the end of the financial period.
Conclusion
The OHADA Treaty and the Uniform Acts go a long way towards harmonizing business law in West Africa. It will be interesting to see the extent to which common law jurisdictions adopt the Treaty as their law. If and when that occurs, the prospect of African Economic and Monetary Union will become a real possibility. Moreover, this unity will act as a real impetus to significant foreign investment in the region. *