Legal Issues for Trading to Africa

1
Legal Issues for Trading to Africa How to
protect your Business from the Pitfalls

• Jeremy Sivyer
• Partner
• Corporate Group
• 08 July 2008

2
Introduction

• Contracting with importers/exporters in Africa
  sometimes requires a cautious approach
• Risk of non-performance/non-payment
• Potential for delay due to bureaucracy of
  import/export or customs clearance
• Corruption and Scams Problems include not just
  loss of money but unwitting involvement in
  criminal activity
• Problems not unique to Africa, but potentially
  more acute
• Various ways to minimise risk of legal exposure
  if contract not performed
• Legal documentation not a panacea

3
Export transactions into Africa

• Payment Mechanisms
• Letter of Credit
• Becomes documentary transaction
• Which bank is to give it?
• London branch of international bank?
• Third party guarantee
• Trustworthy trading partner background checks
  also desirable for money laundering compliance

4
Export transactions into Africa

• Risk
• Damage to goods in transit
• Problems at customs level
• Ss 12-14 Sale of Goods Act 1979
• If goods not legally compliant in destination
  country seller liable for breach of implied
  warranties (satisfactory quality/fitness for
  purpose)

5
Export transactions into Africa

• Minimising the suppliers exposure
• Free on Board transaction to ensure customer
  bears primary risk of shipping and customs
• Place customer under obligation to disclose local
  legal issues and specify packing requirements
• Use reputable shipping line with local knowledge
• Control of local agents and documentation

6
Import transactions from Africa

• Quality of Goods
• Specify pre-shipment inspection by reputable
  third party
• Documentation
• Obtain specific warranties as to quality/fitness
  for purpose importance of contract description
• Require performance guarantee or retention from
  purchase price until delivery and post-delivery
  inspection

7
Import transactions from Africa

• Delivery
• Contract for goods on Fully delivered basis
• Opportunity to inspect goods before acceptance
• Liquidated damages for late delivery
• Right to cancel if goods not delivered by agreed
  cut-off date

8
Import transactions from Africa

• Other Points
• Factoring
• Non-transferable contracts
• Foreign systems of law

9
Other Issues

• Money laundering
• Corruption
• Governing law and conflict of laws
• Arbitration as a method of dispute resolution
• Currency of account

10
Attempts to Stem Criminalisation of the business
world in Africa

• Some African governments (supported by ECOWAS)
  have attempted to deal with corrupt trade
  practices
• Impact of local legislation on cross-border trade
• UK anti-corruption laws specifically targeting
  bribery - Extra-territorial in effect
• Need to be vigilant in trading with Africa (and
  elsewhere)

11
Attempts at harmonising business law in Africa
OHADA

• An organisation of 16 African states,
  predominantly Francophone
• Created with the idea of having a single,
  unified, flexible business law
• Emphasis on arbitration as an appropriate and
  effective dispute resolution mechanism
• Contrast with EU harmonisation measures and
  European Contract Law proposal

12
Attempts at harmonising business law in Africa
OHADA

• Challenges facing OHADA
• To establish the reputation of the OHADA Tribunal
  outside Africa
• To make itself attractive to non-Francophone,
  non-civil law jurisdictions
• To meet competition from the courts and the
  executive of some of its Member States
• Good attempt at unifying business law in Africa
  but can its objectives be achieved by
  harmonisation and arbitration, rather than by the
  more radical OHADA solution?

13
Conclusions

• Know your trading partner and be vigilant
• Secure payment
• Certification of quality
• Be careful with documentation and alive to
  foreign law issues

14
Legal Issues for Trading to Africa How to
protect your Business from the Pitfalls

• Jeremy Sivyer
• Partner
• Corporate Group
• 08 July 2008