By Tochukwu Onyiuke
The African Continental Free Trade Area Agreement (AfCFTA) was signed by African countries in Kigali, Rwanda on March 21, 2018. It became effective on May30, 2019.
Up till July 1, 2019, 54 countries in Africa have signed the AfCFTA Agreement, leaving only Eritrea who has not appended her signature. Ratification by 22 countries was required for the AfCFTA Agreement to enter into force.
AfCFTA Agreement was created to enhance the economic integration of the whole of Africa where goods and services between the countries that make up the African Continent can move from one bloc to another without any restraints or bottlenecks.
It aims to promote agricultural development, food security, industrialisation, and economic transformation where a single continental market that ensures the free movement of goods and services is created
The ratification of the AfCFTA gives the agreement the force of law, thus becoming enforceable in the event of actions that are not within the contemplation of the agreement.
The 22-country target was achieved on April 29 2019 when Sierra-Leone and the Saharawi Republic deposited their instruments of ratification with the depositary.
Though Nigeria is a signatory to the AfCFTA agreement, she is yet to ratify the AfCFTA agreement while other African states like Rwanda, Ghana, Niger, Senegal, and Kenya have ratified theirs. Being a signatory does not create a binding legal obligation but demonstrates a country’s intention to examine the treaty within and develop its regulatory framework by domesticating it as a local law.
The ratification process will be completed when the National Assembly enacts an Act domesticating the treaty. This act of domestication creates a legal obligation with the force of the law.
The operations of AfCFTA will ensure that goods and services move freely within the African Continent, most importantly amongst others, not subject to taxes in the destination countries of these goods
The economic integration and the likely growth in international trade relationships that will arise from the integration will undoubtedly lead to a rise in cross border disputes. As goods and services move freely amongst countries in the African Continent, cross border issues of insolvency are likely to rise. To be ready for these challenges, African countries must enact the treaty as an internal law and develop a legal framework for cross border insolvency within the continent.
When these disputes arise out of operations of AfCFTA, questions such as which courts would have jurisdiction, how could a non-final order or final orders be registered in other countries without initiating a fresh proceeding? how can an insolvency Practitioner be allowed to carry out his duties in other jurisdictions where the Debtor has assets in other jurisdictions?
The concept of insolvency in a modern competitive market economy characterises the global economy where business operations increasingly rely upon credit, insolvency is an inevitable aspect. The true meaning of insolvency can be simply be put at a corporation not being able to pay its debt or its liabilities exceed its assets.
A pan African insolvency regime as an instrument of economic development can only aid in an effective operation of AfCFTA. If the idea of an effective common market is to materialize, African Countries must embark on a comprehensive look at unifying their insolvency laws. This is by the adoption of any of the models on cross border insolvency etc. the UNCITRAL Model Laws on cross border insolvency or adopting the model under Regulation (European Union) 2015/848 on cross border insolvency.
It is noted that South Africa has adopted the UNCITRAL Model Law as the cross-border insolvency Act 42 of 2000.
The non-adoption of the model law on cross-border insolvency by most African States under AfCFTA will pose a great obstacle to international trade and cross-border economic transactions. To this end, all Member states of AfCFTA must strive towards the adoption of the model law on cross-border insolvency.
This will ensure that insolvency orders from one jurisdiction can be enforced or recognised in another jurisdiction within the continent in addition to the recognition of the insolvency Practitioner.
The idea behind this is to enable any entity that has obtained an insolvency order to be able to register same without initiating a new proceeding in another jurisdiction within the Continent. This ultimately makes asset realisation easy for foreign corporations operating within the AFCFTA regime. With these unified cross-border laws within the African Continent, it becomes easy for any court within the Continent to easily give recognition to insolvency orders emanating from any of the African states.
The adoption of the UNCITRAL Model Law on cross border insolvency (like it is in South Africa) will bring the desired harmonisation of insolvency laws thereby forming a uniform standard. This will help promote equal treatment and protection of citizens of an economic community as well as other economic actors transacting or litigating in the internal market by subjecting them to a uniform and certain legal regime,
The aim as observed by the author of this article is to avoid as far as possible the multiplication of the bases of jurisdiction in relation to the same legal relationship and to reinforce legal protection by allowing the Plaintiff easily to identify the court before which he may bring an action against the Defendant with the legal framework which will assist the insolvency Practitioner to go after assets in other jurisdictions distinct from the jurisdiction where the court proceedings originated.
With the open market policy within the African States and an integrated economy revolving around one central market, there will be more susceptibility to cross-border insolvency issues as an insolvent Company may have assets in multiple jurisdictions.
The diversified state of the insolvent entity’s activities may be such that conditions for opening insolvency proceedings are simultaneously met with regard to more than one country, giving rise to the possibility of multiple proceedings in different jurisdictions. Harmonisation will reduce the incidents and associated costs involved in the multiplicity of insolvency proceedings, ensure unified treatment of creditors and easy administration/ registration of insolvency orders with the African States.
Perhaps, African Countries should look at the insolvency regime created under the UNCITRAL Model Laws (as done by South Africa) as a guide to harmonising their insolvency laws. The easy recognition of the cross-border insolvency orders across jurisdictions under the South African cross border insolvency law is the innovation brought by the UNICTRAL Model Law on Cross Border Insolvency. African states are in dire need of this legal certainty.
Onyiuke is a partner at Accendolaw, a full-service commercial law partnership in Lagos.
