Doing business in the Congo will be easier now the country has embraced the pan-African Ohada code
It’s official: after years of speculation the Democratic Republic of Congo (DRC) has gone all out to improve its legal investment framework in a bid to encourage investors into the country by finalising its ratification to the Organisation for the Harmonisation of Business Law in Africa (Ohada).
Ohada was established in 1993 to harmonise business laws between west and central African nations. Ohada laws currently apply to 16 African countries: Benin, Burkina Faso, Cameroon, Central African Republic, Congo Brazaville, Chad, Comoros, Equatorial Guinea, Ivory Coast, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo.
The Ohada ratification documents were signed by DRC president Joseph Kabila on 27 June, finalising the process. They were then deposited in Senegal (the official depositary state). In less than two months the Ohada laws will be in full force and effect in the DRC.
Lawyers and their clients alike will welcome the prospect of more legal certainty in the troubled DRC. Ohada has many similarities to the trusted European legal system. Similarly to the EU, Ohada laws apply uniformly to member states.
There is also a supranational court of justice like the European Court of Justice, ensuring uniform application of the shared laws. However, Ohada only covers the core business areas of law (such as commercial, corporate, security interests, insolvency and arbitration) and, unlike EU directives, is directly applicable in member states.
The DRC’s archaic laws (based on 19th century Napoleonic laws) were overdue for a revamp and moving towards Ohada makes sense. It instantly provides modern business laws, remains faithful to its Napoleonic roots and boosts predictability and security, as no single member can unilaterally change the Ohada law.
For example, it will now be possible to set up a company in a few days, use a security agent to hold the security of a pool of lenders and enforce security without going to court in some cases. However, care will need to be taken as Ohada comes with some restrictions the DRC did not have before, such as financial assistance, which is strictly prohibited under the Ohada regime.
Ohada will signal a change in the country and provide a more secure and cost-effective legal framework, thus facilitating business formation and growth. The reform also aims to facilitate regional integration by providing businesses with a common legal framework to foster economies of scale and boost competition.
With a low ranking on the World Bank’s ‘ease of doing business’ scale, there is no doubt that the government will benefit from the Ohada laws.
This follows the move of several African countries that have already changed their laws to ensure they are up-to-date and attractive for investors. For example, in 2009, Rwanda switched from a civil law system to English common law, winning an award from the World Bank as one of the most improved countries for doing business. No doubt the current 178th position of the DRC will dramatically improve in the next publication of World Bank’s report.