Transparency of the Regulatory System
The World Bank Doing Business 2017, found persistent challenges in enforcing contracts in Cameroon. Globally, Cameroon stands at 160 in the ranking of 190 economies on the ease of enforcing contracts. However, the report also indicates that Cameroon made enforcing contracts easier by creating specialized commercial divisions within its courts of first instance. Cameroon has transparent policies and effective laws to foster competition on a non-discriminatory basis. Officials argue that these are indicators of “clear rules of the game.” But operationally and in practice, the courts have severe logistical challenges. For example, courts data are manually recorded because the legal system is not computerized. In many courts around Cameroon, court records are filed in paper and stored in folders, which make them subject to fire and deterioration.
In terms of standards, Cameroon’s commercial legal system follows the OHADA rules which are supposed to be aligned with International Financial Reporting Standards (IFRS). But enforcement is weak partly because of lack of capacity. Cameroon does not train enough specialized judges in the commercial and economic fields. Consequently, poor enforcement of laws and accounting standards tends to create confusion for foreign investors. Despite efforts to align OHADA standards to international norms, GRC accounting regulations remain obsolete in the context of rapid developments in international finance and capital markets. To circumvent the problem, U.S. enterprises and investors often maintain two sets of accounting records, one in accordance with U.S. Generally Accepted Accounting Principles (GAAP, the U.S. accounting standards) and suitable international standards, and another set to address the OHADA standards and GRC reporting requirements.
In view these dysfunctions and weaknesses in the courts, arbitration is increasingly becoming the solution of choice to solve business disputes. It is possible in Cameroon to solve some complex legal disputes through arbitration. In fact, arbitration exists in the OHADA corporate law. Since OHADA is a supra national law, Cameroon is bound by its decisions which follow international norms.
The Parliament of Cameroon is the source of all regulatory powers. The ministries initiate draft laws for different areas of the national life. A few laws are reviewed on a yearly basis. This is the case for the public finance law, which was just revised and published in both English and French in 2017. Institutions and groups can also initiate legislation. In rare cases, draft bills or regulations are made available for public comment and there is some level of consultation process. The National Institute of Statistics provides quantitative analysis that may be used during the review. However, public involvement in Cameroon is limited and oversight or enforcement mechanisms are weak, and therefore do not ensure that governments follow administrative processes. Appeal and pressure mechanisms are limited if the government does not consider the observations of civil society groups in the final draft. Consequently, the executive branch is responsible for 98 percent of laws, including the most relevant texts for businesses.
Typically, the legal texts submitted to parliament by the executive are voted unchallenged because of the powerful majority of the ruling party in the legislative body. After voting, the texts are recorded in the Official Journal, which is the official register of the Cameroonian government. The Official Journal is a paper-based record system. The State does not have an electronic or online version. The legislation process is completed when the President of the Republic issues an implementation decree (Executive power), which generally details the ways in which the law will be implemented. The power to issue decrees grants a high level of influence to the Executive branch, on the final version of the laws because the decree may either strengthen or weaken the implementation of law. This is because individual ministries and bodies in the civil administration, which are parts of the executive arm, are responsible for the effective implementation of individual laws and regulations. In some cases, as the execution of the laws evolves from the center (the executive and the legislative) to the lowest level of administration, or from urban cities to the rural areas, their strength, effectiveness and understanding tend to weaken.
Over the past few years, with the support of donors for capacity building, Cameroon has undertaken reform to improve the efficiency of the legal system and of public finance procedures. Some of the reforms are supported and funded by multilateral and bilateral donors. The reform of the budget process, which helped Cameroon to introduce “Program Budget,” for example, is now in full swing. If fully implemented, many areas of the public finance reforms could have a positive impact on foreign investors, create a better investment climate and lead to more broad-based inclusive growth.
International Regulatory Considerations
Cameroon is a member of the CEMAC. The treaties of this regional body supersede the laws of the member states. Cameroon is also a member of the United Nations system and a party to many international conventions. Cameroon has been a member of World Trade Organization (WTO) since 13 December 1995 and a member of GATT since 3 May 1963.
Legal System and Judicial Independence
The Cameroon legal system is a blend of Roman or common law and Cameroonian judges are fluent, well-trained and competent in the two systems. Courts are structured in a pyramidal way with the Supreme Court functioning as the highest court in the land. Regulations and enforcement actions are appealable and can be adjudicated in the national court system. Contracts are enforced through the courts or through arbitration. The country’s commercial law is the OHADA law.
The head of the executive power, namely the President of the Republic is also the Supreme Head of the Judiciary. This constitutional status gives the executive branch immense powers to influence the functioning of the judiciary matters. This influence can be exerted through his power of appointment. The President of the Republic can appoint and demote judges, and he can decide on the internal and territorial deployment of legal institutions such as courts. In the absence of proper checks and balances the current judicial process in unpredictable. The outcome of legal processes are uncertain because judges are not immune from pressure or from simple logistical challenges such as the lack of computers to electronically and digitally process court documents.
Laws and Regulations on Foreign Direct Investment
The Law No. 2013/004 of 18 April 2013 defining incentives for private investment in Cameroon proposes common and special incentives while indicating the State’s commitments with regard to private investors in Cameroon. This important law remains valid for domestic and foreign investors. Additional laws and regulations are available on the website of the Cameroon ministry of finance (http://www.minfi.gov.cm/index.php/en/documents ). In addition to these sources, the Investment Promotion Agency offers a “one-stop-shop” website for investment, with relevant laws, rules, procedures, and reporting requirements for investors http://www.investincameroon.net/home2/ ).
Competition and Anti-Trust Laws
The National Competition Commission (of the Ministry of Commerce) is the official body in charge of competition regulations.
Expropriation and Compensation
Decree N°.87-1872 of 16 December 1987 and the subsequent implementation decree N°.85-9 of 4 July 1985 lay down the procedure governing expropriation for public purposes and conditions for compensation. Some of the provisions of these legal texts were repealed by Instruction n°005/I/Y.25/MINDAF/D220 of 29 December 2005. Essentially, for the general public interest, the State may expropriate any person or entity from privately owned land. The laws also lay down the formalities to be observed within the context of the procedure, both at the central and local levels. In recent years, the government of Cameroon generally expropriated in the context of the construction of large infrastructure projects such as roads and hydroelectric dams. The government has a compensation process in place to meet the losses of those affected by such decisions. In practice, over the past 10 years many cases of compensation procedures have been marred in serious corruption schemes masterminded by civil servants in charge of the process. These incidents have significantly diluted the trust in the whole process throughout the country.
ICSID Convention and New York ConventionInternational
Cameroon ratified the “International Centre for Settlement of Investment Disputes” (ICSID) Convention on 3 January, 1967 and the New York Convention on 19 February, 1988. But there is no specific domestic legislation providing for enforcement under the 1958 New York Convention and for the enforcement of awards under the ICSID Convention.
Investor-State Dispute Settlement
The OHADA-signatory nations adopted a uniform act on arbitration (the Uniform Act) on March 11, 1999. The Uniform Act sets out the basic rules applicable to any arbitration, where the seat of arbitration is located in an OHADA member state. The Uniform Act is based on the United Nations Commission on International Trade Law (UNCITRAL) model law. It supersedes the national laws on arbitration of the OHADA states. Cameroon’s arbitration law is contained in its code of civil and commercial procedure in the third volume, Articles 576 to 601.
International Commercial Arbitration and Foreign Courts
There have been cases of disputes between Cameroonian partners and U.S. companies, but they tend to be solved through arbitration. General misunderstandings between partners about contractual commitments tend to cause conflicts. But such cases have been infrequent over the past 10 years. Issues related to Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States, have thus far not emerged in claims by U.S. investors. Local courts may recognize foreign arbitral awards issued against the GRC, but they are not well equipped to enforce such decisions. In general, foreign investors complain more about administrative harassment or bottlenecks, and less about extrajudicial actions.
The Embassy has been successful in engaging and reaching out to key government officials when U.S. companies face disputes or harassment. In practice, the duration of dispute resolution will depend on the complexity of the case, and no standard timeline exists or can be estimated. This alternative approach can be further complicated by the inherent dysfunctions within the public administration, such as bureaucratic red tape, corruption, and lack of technical expertise on modern commercial contracts.
Additional alternative dispute resolution may involve mediation and negotiations, also possibly through third-party binding arbitration. The OHADA system serves both as domestic and primary reference legislation. However, the Groupement Interpatronal du Cameroon (GICAM), the country’s most powerful business lobbying group, has an arbitration center (Centre d’arbitrage du Groupement interpatronal du Cameroun), which is based in Douala. Douala is Cameroon’s largest city and trade hub, and the arbitration center is modern and well-equipped.
As a treaty, the OHADA prevails over domestic laws. An international arbitration award can prevail especially if operating through the OHADA framework. The Common Court of Justice and Arbitration (CCJA) enforced under OHADA are both an arbitration institution and a judicial court, with a remit covering all the OHADA states. Judicial processes are bureaucratic, expensive, time-intensive and lengthy to pursue. This is true even for domestic and state-owned companies which, like their foreign competitors, also suffer from the weaknesses of the legal system and are not guaranteed any better treatment in case of dispute.
Cameroon has bankruptcy laws, which recognize the right of creditors, the equity of shareholders and other types of liabilities. Bankruptcy is not criminalized, if it is not a deliberate collusion to avoid tax or mislead investors. Globally, Cameroon stands at 122 in the ranking of 190 economies on the ease of resolving insolvency. According to data collected by Doing Business 2017, resolving insolvency takes 2.8 years on average and costs 33.5 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 15.8 cents on the dollar.