Transparency of the Regulatory System
Guinea has accomplished much in the past seven years to make laws and regulations more transparent. While draft bills were not made available for public comment, the Presidency and National Assembly have worked closely with international partners to modernize its legal framework. However, Guinea’s legal system hampers the implementation of clear “rules of the game.”
Ministries do not develop forward-looking regulatory plans and do not publish summaries or proposed legislation. Laws in Guinea are proposed by either the President or members of the National Assembly and are not presented for public comment. Once ratified, laws are not formally considered enforceable until they are published in the government’s official gazette. All laws relevant to international investors are posted (in French) on invest.gov.gn. When investing, it is important to engage with all levels of government that will be affected to ensure each authority is aware of mutual expectations and responsibilities.
Guinea’s amended Mining Code commits the country to increasing transparency in the mining
sector. In the code, the government commits to award mining contracts by competitive tender and to publish all past, current, and future mining contracts for public scrutiny. Members of mining sector governing bodies and employees of the Ministry of Mines are prohibited from owning shares in mining companies active in Guinea or their subcontractors. Each mining company must sign a code of good conduct and develop and implement a corruption monitoring plan. Guinea has already implemented a portion of its transparency approach through the creation of a public database of its mining contracts designed by the Natural Resource Governance Institute (http://www.contratsminiersguinee.org/).
The Extractive Industries Transparency Initiative (EITI) ensures more transparency in how Guinea’s natural resources are governed, and full disclosure of government revenues from its extractive sector. The EITI Standard aims to provide a global set of conditions that ensures more transparency in the management of a country’s oil, gas, and mineral resources. EITI reiterates the need to augment support for countries and governments that are making genuine efforts to address corruption but lack the capacity and systems necessary to effectively manage the business, revenues, and royalties derived from extractive industries.
Guinea was accepted as EITI Compliant for the first time by the international EITI Board at its meeting in Mexico City on July 2, 2014. As a country implementing the EITI, Guinea regularly discloses the government's revenues from natural resources, completing their most recent report in December 2016 for the 2014 reporting period.
While Guinea’s laws promote free enterprise and competition, the government often lacks transparency in the application of the law. Business owners openly assert that application procedures are sufficiently opaque to allow for corruption, and regulatory activity is often applied based on personal interest.
International Regulatory Considerations
Guinea is a member of the Economic Community of West African States (ECOWAS), but not a member of the West African Economic and Monetary Union (UEMOA) and as such has its own currency. At the beginning of 2017, Guinea adopted ECOWAS’s Common Exterior Tariff (TEC) which harmonizes Guinea’s import taxes with other West African states and eliminates the need product taxes on Guinea’s land borders. Guinea is a member of the World Trade Organization (WTO) but is not party to any trade disputes.
Legal System and Judicial Independence
The country’s legal system is codified and largely based upon French civil law. However, the Guinean judicial system is reported to be understaffed, corrupt, and lacking in transparency. Accounting practices in Guinean courts are frequently unreliable. U.S. businesspersons should exercise extreme caution when negotiating contract arrangements, and do so with proper local legal representation. Although the constitution and law provide for an independent judiciary, the judicial system lacks independence and is underfunded, inefficient, and corrupt. Budget shortfalls, a shortage of qualified lawyers and magistrates, nepotism, and ethnic bias limited the judiciary’s effectiveness. President Conde's administration has successfully implemented some judicial reforms and has increased the salaries of judges by 400 percent in order to discourage corruption.
Despite the rights to dispute settlement set forth in Guinean law, business executives complain of the glacial pace of Guinean justice in business disputes. Most legal cases take years and numerous legal fees to resolve. In speaking with local business leaders, the general sentiment is that any resolution occurring within 3-5 years would be considered relatively fast.
In many cases, the government does not meet payment obligations to private suppliers of goods and services, either foreign or Guinean, in a timely fashion. Arrears to the private sector are a major issue that is often ignored. Guinea is currently looking for ways to finance past arrears to the private sector - possibly through issuing a public debt instrument. There is no independent enforcement mechanism for collecting debts from the government, although some contracts have international arbitration clauses. The government, while bound by law to honor judgments made
by the arbitration court, often actively influences the decision itself.
Although the situation has improved recently, business executives, Guinean and foreign, have publicly expressed concern over the absence of rule of law in the country. In 2014, foreign managers of a telecommunications company were harassed by high-ranking members of the military for not renewing a contract. Some businesses have been subject to sporadic harassment and “requests” for donations from military and police personnel.
Laws and Regulations on Foreign Direct Investment
The National Assembly ratified a new Investment Code regulating FDI in May 2015. Developed in cooperation with the Work Bank and International Monetary Fund, the new code harmonizes Guinea’s investment climate with other countries in the region and broadens the definition of FDI in Guinea. The Code also organizes avenues for direct agreements between investors and the State. Other important legislation related to FDI includes the Procurement Code, the BOT Law and the Customs Code.
The Government of Guinea states it will let the legal system deal with domestic cases involving foreign investors. The legal system is weak, in the midst of much needed reforms, and is subject to interference. Although the constitution provides for an independent judiciary, the judicial system lacks independence and is underfunded, inefficient, and overtly corrupt. Factors limiting the judiciary’s effectiveness include budget shortfalls, a shortage of qualified lawyers and magistrates, nepotism, an egregious prison system, and ethnic bias. Although the government is making an effort to better equip judges, most are poorly trained and corruption plays a role in many court proceedings. There are few international investment lawyers accredited in Guinea and it is best practice to include international arbitration clauses in all major contracts. U.S. companies have identified the absence of a dependable legal system as a major barrier to investment.
The Agency for the Promotion of Private Investment (APIP) launched a new website in 2016 that lists information related to laws, rules, procedures, and registration requirements for foreign investors as well as strategy documents for specific sectors. (http://invest.gov.gn). Further information on APIP’s services is available at (http://www.apiguinee.org). APIP is run by a largely bilingual (English and French) staff and is designed to be a clearinghouse of information for investors.
Competition and Anti-Trust Laws
There are no agencies that review transactions for competition-related concerns.
Expropriation and Compensation
Guinea’s Investment Code states that the Guinean government will not, except for reasons of public interest, take any steps to expropriate or nationalize investments made by individuals and companies. It also promises fair compensation for expropriated property.
In 2011, the government claimed full ownership of several languishing industrial facilities in which it had previously held partial shares as part of joint ventures—including a canned food factory and processing plants for peanuts, tea, mangoes, and tobacco—with no compensation for the private sector partner. Each of these facilities had been privatized under corrupt circumstances in the late 1980s and early 1990s. By expropriating these businesses from their owners, whom the government deemed to be corrupt and/or ineffective, and putting them to public auction, Guinea hopes to correct past mistakes and put the assets in more productive hands. The private partner in at least one of these joint ventures has protested the seizure of its assets and has been battling the government decision in court. As of 2016, there was no resolution of the case. Government representatives have said that this expropriation applies only to former state-owned firms; fully-owned private businesses and other joint ventures with the government will not be affected. Guinea’s previous government created another major expropriation case over the Simandou mining asset in 2008. The legal proceedings associated with the case are ongoing.
The government realizes that future expropriations carry too much risk and are not beneficial to the future economic development of the country. The country desperately needs foreign investment and policy makers are not willing to risk the negative consequences that expropriation will cause. Furthermore, the government has demonstrated that it cannot manage small and medium enterprises in a profitable manner and would prefer the private sector to manage these assets. The investment climate is welcoming to foreign and American firms and the government is working to reduce corruption and increase transparency. The current government is aware of its international image and does not want to risk losing possible foreign investment in the economy.
ICSID Convention and New York Convention
Guinea is a member of the International Center for the Settlement of Investment Disputes (ICSID), an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of other States with over one hundred and forty member states (https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx). Guinea is also a member of the New York Convention, which applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration.
Investor-State Dispute Settlement
The Investment Code states that competent Guinean judicial authorities shall settle disputes resulting from interpretation of the Code in the accordance with laws and regulations and provides several avenues to see arbitration. In practice, however, fair settlements may be difficult. The current Guinean constitution mandates an independent judiciary, although many business owners and high level government officials frequently claim that poorly trained magistrates, high levels of corruption, and nepotism plague the administration of justice. Guinea established an arbitration court in 1999, independent of the Ministry of Justice, to settle business disputes in a less costly and more expedient manner. The Arbitration Court is based upon the French system in which arbitrators are selected from among the Guinean business sector, rather than from among lawyers or judges, and are supervised by the Chamber of Commerce. All parties must be in agreement in order for their case to be settled in the arbitration court. In general, Guinea’s arbitration court has a better reputation than the judicial court system for settling business disputes.
International Commercial Arbitration and Foreign Courts
In 1993, Guinea became a member of the Organisation pour l’Harmonisation du Droit des Affaires en Afrique (Organization for the Harmonization of Commercial Law in Africa), known by its French initials, OHADA, which allows investors to appeal legal decisions on commercial and financial matters to a regional body based in Abidjan. The organization also seeks to create harmonization of commercial law, debt collection, bankruptcy, and secured transactions throughout the OHADA region. The treaty superseded the Code of Economic Activities and other national commercial laws when it was ratified in 2000, though many of the substantive changes to Guinean law have yet to be implemented. U.S. companies seeking to do business in Guinea should be aware that under OHADA, managers may be individually liable for corporate wrongdoing. See the OHADA website for specific OHADA rules and regulations
Guinea, as member country of OHADA, has the same bankruptcy laws as most West African francophone countries. The OHADA’s Uniform Act enforces collective proceedings for writing off debts and defines bankruptcy from articles 227 to 233. The Uniform Act also distinguishes from fraudulent from non-fraudulent bankruptcies. There is no distinction between foreign and domestic investors. The only distinction made is a “privilege” ranking that defines which claims must be paid first from the bankrupt company’s assets. Articles 180 to 190 of the OHADA’s Uniform Act on the organization of securities define which creditors are entitled to priority compensation. Bankruptcy is only criminalized when it occurs due to fraudulent actions. Bankruptcy is penalized though OHADA, which leaves criminal penalties to national authorities.
In the World Bank’s 2017 Ease of Doing Business Report on Resolving Insolvency, Guinea ranked 113/190. According to the report, resolving insolvency takes an average of 3.8 years and costs 8.0 percent of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale. The average recovery rate is 19.9 cents on the dollar.