Worldwide: Commercial Law - Regional Arrangements

Last Updated: 21 December 2018
Article by Adams & Adams

COMMERCIAL HARMONISATION IN EASTERN AFRICA

EAC COMMON MARKET

The East African Community (EAC) is a regional intergovernmental organisation entered into force on 1 July 2010 with the following members: Burundi, Kenya, Rwanda, Tanzania and Uganda. The protocol was signed on 20 November 2009.

The establishment of the East African Community Common Market (EACM) is in terms of the provisions of the EAC and provides for the free movement of goods, labour, services, and capital which aim to significantly boost trade and investments and make the region more productive and prosperous.

The protocol provides for the institutional framework for the EACM, approximation and harmonisation of policies, laws and systems, safeguard measures, measures to address imbalances, monitoring and evaluation, regulations, directives and decisions, annexes, amendment of the protocol, settlement of disputes, entry into force and depository and registration.

The annexes provide guidance for the (EACM). To date the following annexes are in place:

  • Free movement of persons.
  • Free movement of workers.
  • Right of establishment.
  • Right of residence.
  • Schedule of commitments on the progressive liberalisation of services.
  • Schedule on the removal of restrictions on the free movement of capital.

A monitoring process began in the member states in 2012, regarding the implementation of the EACM. To date, two reports have been before the Council of Ministers, expressing concern over delay in the protocols implementation. The Council accordingly issued a directive, in terms of which all member states have now established a National Implementation Committee in the member territories.

MONETARY UNION PROTOCOL

The East African Community Monetary Union Protocol was created to harmonize monetary and fiscal policies and establish a common central bank for the EAC. To date, it has been ratified by Burundi, Rwanda and Tanzania. The rationale behind the Monetary Union Protocol is for the establishment of a monetary union, with reduced currency risk and thus creating incentives for trade.

OHADA

The Organisation pour l'Harmonisation en Afrique du Droit des Affaires (OHADA) aims to harmonise commercial law of its member states by the development of common and simple rules in line with the member states' economic climates. Furthermore, OHADA aims to implement the appropriate judicial procedures and encourages the use of arbitration for the settlement of disputes.

The member states of OHADA are: Benin, Burkina Faso, Cameroon, Comoros, Republic of Congo, Ivory Coast, Gabon, Guinea Bissau, Guinea, Equatorial Guinea, Mali, Niger, Central African Republic, Democratic Republic of Congo, Senegal, Chad and Togo. With the exception of Guinea, all the current members of OHADA are also members of the Franc Zone. Furthermore, OHADA represents a common legal background in that all the OHADA members, with the exception of Cameroon who has a common law system, all the member states have a civil law system.

OHADA issues unified legislation called Uniform Acts. These Acts are directly applicable to all member states and supersede the previous national legislation on the same topic. Currently there are eight Acts on various areas of law including company law, commercial law, securities, insolvency and arbitration. In relation to company law, the Acts regulates the different stages of business transactions, from starting up a company to obtaining credit, protecting investors and resolving bankruptcy.

Amongst the institutional achievements of OHADA is the creation of its supranational Common Court of Justice (CCJA) which will aim to achieve a uniform judicial interpretation of the OHADA founding treaty, any regulations thereto and the Uniform Acts.

SADC

The main objectives of the Southern African Development Community (SADC) is to "achieve development, peace and security, and economic growth, to alleviate poverty, enhance the standard and quality of life of the peoples of Southern Africa, and support the socially disadvantaged through regional integration, built on democratic principles and equitable and sustainable development."

The member states of the SADC are Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia, and Zimbabwe.

The SADC Treaty establishes a series of institutional mechanisms, including the following:

  • Summit of Heads of State or Government is responsible for the overall policy direction and control of functions of the community, ultimately making it the policymaking institution of the SADC.
  • Council of Ministers oversees the functioning and development of the SADC and ensures that policies are properly implemented.
  • Standing Committee of Officials is a technical advisory committee to the Council of Ministers. It consists of one Permanent or Principal Secretary, or an official of equivalent rank from each Member State from a ministry responsible for economic planning or finance.
  • The SADC Tribunal ensures adherence and proper interpretation of the provisions of the SADC Treaty and subsidiary instruments, and adjudicates upon disputes referred to it.
  • The SADC Organ on Politics Defence and Security is managed on a Troika basis and is responsible for promoting peace and security in the SADC region.
  • SADC National Committees have been assembled to provide input at national level in the formulation of regional policies and strategies, as well as to coordinate and oversee the implementation of programmes at national level.

The SADC seeks to achieve regional integration and to eradicate poverty. The Protocols are legally binding documents committing the member states to the objectives and specific procedures stated within it. In order for a Protocol to enter in to force, two-thirds of the Member States need to ratify or sign the agreement, giving formal consent and making the document officially valid.

A provision for any disputes arising from the application or interpretation of a Protocol is made by referring grievances to the SADC Tribunal if they cannot be resolved amicably through regular diplomatic channels.

Currently, the SADC has 26 Protocols, including those that have not yet entered into force.

COMESA

The Common Market for Eastern and Southern Africa (COMESA) is a regional body, governed by the Treaty Establishing the Common Market for Eastern and Southern Africa. It is aimed at promoting, inter alia, economic co-operation between member states, and to this end a free trade association was established during 2000.

COMESA has 19 member states, namely: Burundi, Union of Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Seychelles, Uganda, Zambia and Zimbabwe.

Of particular importance is COMESA's Competition Commission, which became operational on 14 January 2013. The Competition Commission regulates certain aspects of competition between firms in member states, for example, anti-competitive business practices and mergers.

The Competition Commission Regulations provide for compulsory notification of mergers where both the acquiring and target firm operate in 2 or more member states. The financial thresholds for notification are currently set at zero, which means that all mergers will have to be notified to the Competition Commission. The Competition Commission has, however, recently published guidelines in which the Commission puts forth its view that a merger will only be notifiable if:

  • At least 1 merging party operates in 2 or more Member States (an undertaking "operates" in a Member State if it has annual turnover in that Member State exceeding USD 5 million).
  • A target undertaking operates in a Member State.
  • It is not the case that more than two-thirds of the annual turnover in the Common Market of each of the merging parties is achieved or held within 1 and the same Member State.

It is, however, important to note that although the Guidelines refer to a minimum annual turnover in a Member State of USD 5 million prior to a merging party being considered as operating in that Member State, the monetary notification threshold is still set at zero – thus, should a merging party's annual turnover be less than USD 5 million, the monetary threshold will still be met (as it is set at zero) but notification will not be required as a result of neither merging party 'operating' within a Member State.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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