Republic of Congo - 3-Legal RegimeRepublic of Congo - Legal Regime
Transparency of the Regulatory System
Transparency is an ongoing concern in the government’s economic management system. Lack of transparency arguably presents the greatest hurdle to FDI as investors must navigate an opaque regulatory bureaucracy. Companies that have successfully navigated the bureaucracy, including with Embassy support, have helped new prospective investors overcome this challenge, but Republic of Congo government policies and practices have not helped to establish “clear rules of the game.” Instead, personal contacts remain the most important resource for prospective investors.From 2006 to 2009 the Republic of Congo, working with the International Monetary Fund and the World Bank, designed and began implementation of significant changes in public finance and the management of Republic of Congo’s natural resources. A forestry code was adopted, a government procurement system was designed and implemented, major changes were made in the management of revenue from oil production, a national anti-corruption commission was established, new debt management procedures were adopted, and a system for monitoring public spending was developed. Continuing into 2013, the Republic of Congo government has worked with technical advisors from the European Union to put in place an improved business framework, including an arbitration system. In spite of these efforts, those who do business in the Republic of Congo have not yet noticed significant improvements in the business environment, primarily because the rules seem to exist more on paper than in practice.
Proposed laws and regulations are not published in draft form for public comment. Non-governmental organizations and intra-governmental task forces have sought to improve government transparency with little success to date. Ministries or regulatory agencies are supposed to give notice of proposed regulations to the general public, but these drafts are not published or communicated formally.
International Regulatory Considerations
The Republic of Congo is part of the Central African Economic and Monetary Community (CEMAC), which is a regional economic block of six countries (Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, Gabon, and Chad) that use a common currency, the Central African CFA Franc (XAF). Much of the national regulatory system is inspired or controlled by regional regulatory bodies, in particular for economic, financial, and monetary regulations, which are controlled by the Central Bank of the Central African States (Banque des Etats de l’Afrique Centrale, BEAC).Francophone African regulatory norms, such as those promulgated by OHADA, are frequently incorporated into the Republic of Congo’s regulatory system for business disputes and regulations governing company registration structure and incorporation.
The Republic of Congo is a member of the World Trade Organization (WTO), though it is unclear if the government notifies the WTO Committee of all draft regulations relating to Technical Barriers to Trade.
Legal System and Judicial Independence
The Congolese legal system is largely inspired by the French legal system, and thus French Common Law.OHADA, the French Commercial Law common to all francophone countries, serves as the country commercial law but it is also subject to specific Congolese laws. There is a Commercial Court in Republic of Congo, but it rarely meets. The last time the Commercial Court convened was more than three years ago.
In theory the judicial system is independent; however, in practice the executive branch regularly intervenes in the judicial system. Judges face high pressure to rule in favor of the executive branch and the ruling party or system.
Enforcement actions, when ruled by a court, can be appealed in an appellate court.
Public Law 6-2003, which established the country’s Investment Charter, states that investment disputes will be subject to settlement under Congolese law. However, independent settlement or conciliation procedures can be enacted by either party. These procedures are governed by:
-The convention which regulates the Community Justice Court;
-The treaty of October 17, 1993, implementing the Organization for the Harmonization of Business Law in Africa (OHADA);
-The International Center for the Settlement of Investment Disputes (ICSID).
In practice, judgments of foreign courts are difficult to enforce in the Republic of Congo. Though the government does not outright deny the judgment, it proposes meetings and solutions that prolong the matter without resolution. There is a known case of a foreign-owned company that has a judgment on money owed by the Republic of Congo government for past work done that has not been paid for over 25 years. Despite judgments by U.S. and French courts in favor of the foreign-owned company, the Republic of Congo government still claims that the company has been insolvent in the Republic of Congo and has not fulfilled its tax obligations.
-The treaty of October 17, 1993, implementing the Organization for the Harmonization of Business Law in Africa (OHADA);
-The International Center for the Settlement of Investment Disputes (ICSID).
In practice, judgments of foreign courts are difficult to enforce in the Republic of Congo. Though the government does not outright deny the judgment, it proposes meetings and solutions that prolong the matter without resolution. There is a known case of a foreign-owned company that has a judgment on money owed by the Republic of Congo government for past work done that has not been paid for over 25 years. Despite judgments by U.S. and French courts in favor of the foreign-owned company, the Republic of Congo government still claims that the company has been insolvent in the Republic of Congo and has not fulfilled its tax obligations.
Laws and Regulations on Foreign Direct Investment
No major laws, regulations, or judicial decisions related to foreign investment have come out in the past year. Additionally, no primary or “one-stop-shop” website for investment exists to provide relevant laws, rules, procedures, and reporting requirements for investors.
Competition and Anti-Trust Laws
No agencies review transactions for competition-related concerns, whether domestic or international in nature. Each Ministry monitors a particular industry and reviews industry-related transactions.
Expropriation and Compensation
The government can legally expropriate if there is a public need for a given public facility or infrastructure (e.g. roads, hospitals, etc.).
There is no recent history of expropriation regarding private companies; however, the Republic of Congo government has expropriated private property from Congolese citizens to build roads and stadiums. The claimants were promised fair market value compensation but payment has not been issued after almost 4 years.
Claimants that lost their houses to the Kintele project that erected a state of the art sports complex complained that they have no way to sue the government or follow up on this expropriation case. The government has not offered any explanation and the process appears to be completely non-transparent.
There is no evidence that foreign investors are discriminated against in any fashion or have been subjected to expropriation of assets, which would violate the constitution. Foreign and national firms established in the Republic of Congo operate on an equal legal basis.
There is no recent history of expropriation regarding private companies; however, the Republic of Congo government has expropriated private property from Congolese citizens to build roads and stadiums. The claimants were promised fair market value compensation but payment has not been issued after almost 4 years.
Claimants that lost their houses to the Kintele project that erected a state of the art sports complex complained that they have no way to sue the government or follow up on this expropriation case. The government has not offered any explanation and the process appears to be completely non-transparent.
There is no evidence that foreign investors are discriminated against in any fashion or have been subjected to expropriation of assets, which would violate the constitution. Foreign and national firms established in the Republic of Congo operate on an equal legal basis.
Dispute Settlement
ICSID Convention and New York Convention
The Republic of Congo is party to the ICSID Convention. The Republic of Congo government has not ratified the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Investor-State Dispute Settlement
The Republic of Congo is a party to the OHADA treaty for harmonization of commercial law throughout francophone Africa. OHADA provides for binding international arbitration of investment disputes.
The Republic of Congo has a Bilateral Investment Treaty (BIT) with the United States that includes an investment chapter. There were no recent claims by U.S. investors under the agreement.
About 10 years ago, a Vulture fund bought a Congolese default commercial bond, and they forced the Congolese authority to negotiate after they sued Congo in a U.S. court. The Congolese accepted arbitration and paid an agreed amount to settle the claim. Currently, COMMISSIMPEX has won a case in a U.S. court against the Congolese government. However, the Congolese judiciary ruled against COMMISIMPEX in 2013, in which it was found insolvent and owing back taxes to the Republic of Congo government.
The local courts have rarely recognized and enforced foreign arbitral awards issued against the government.
There is no known history of extrajudicial action against foreign investors.
The Republic of Congo has a Bilateral Investment Treaty (BIT) with the United States that includes an investment chapter. There were no recent claims by U.S. investors under the agreement.
About 10 years ago, a Vulture fund bought a Congolese default commercial bond, and they forced the Congolese authority to negotiate after they sued Congo in a U.S. court. The Congolese accepted arbitration and paid an agreed amount to settle the claim. Currently, COMMISSIMPEX has won a case in a U.S. court against the Congolese government. However, the Congolese judiciary ruled against COMMISIMPEX in 2013, in which it was found insolvent and owing back taxes to the Republic of Congo government.
The local courts have rarely recognized and enforced foreign arbitral awards issued against the government.
There is no known history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
The Republic of Congo abides by international arbitration for any treaty or international convention or organization of which it is a member. In practice arbitral judgments are difficult to enforce as explained above.
Bankruptcy Regulations
The Republic of Congo does not have a specific law that governs bankruptcy.
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