The World Bank’s Doing Business Report 2018 found persistent challenges in enforcing contracts in Cameroon. Globally, Cameroon stands at 163 out of 190 economies on the ease of enforcing contracts, with one being the easiest. However, the report also indicates that Cameroon made enforcing contracts easier by creating specialized commercial divisions within its courts of first instance, the Francophone equivalent of trial courts. In principle, Cameroon has transparent policies and effective laws to foster competition on a non-discriminatory basis. Officials argue that these represent clarity and fairness, but in practice, the courts have severe logistical and other challenges. For example, court data is 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, deterioration, and tampering.
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). Unfortunately, enforcement is weak in part 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 face 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. GAAP and suitable international standards, and another set to address the OHADA standards and GRC reporting requirements.
In view of dysfunctions and weaknesses in the courts, arbitration is becoming an increasingly common solution to business disputes. It is possible in Cameroon to solve some complex legal disputes through arbitration; and OHADA corporate law includes arbitration as an alternative to courts. Since OHADA is a supranational law, Cameroon must abide by its decisions, which follow international norms.
The National Assembly is the source of regulatory power, recognizing that the National Assembly, like the Senate and the Judiciary, are subservient to the President. Ministries initiate draft legislation and review some laws on a yearly basis. The public finance law is subject to scrutiny annually. Institutions and groups can also initiate legislation. In rare cases, draft bills or regulations are available for public comment. The National Institute of Statistics provides quantitative analysis that may be used during the review. However, public involvement is limited and enforcement mechanisms are weak, leading to poor oversight of administrative processes. Appeal and pressure mechanisms are limited, as the government does not consider the observations of civil society groups in final draft legislation. Consequently, the executive branch is responsible for 98 percent of laws, including the most relevant texts for businesses. President Paul Biya’s Cameroon Peoples’ Democratic Movement holds an overwhelming majority in the legislative body and draft legislation from the executive branch is rarely challenged.
Approved legislation is recorded in the Official Journal, a paper-based record system. The GRC does not have an electronic or online version of laws. The legislation process is completed when the President issues an implementation decree, which generally details the ways in which the law will be implemented. The power to issue decrees gives a high level of influence to the Executive branch. Individual ministries and bodies in the civil administration, all components of the executive branch, are responsible for the implementation of laws and regulations.
In recent years, with the support of donors, Cameroon has undertaken reforms to improve the efficiency of the legal system and public finance procedures. The budget reform process, for example, is ongoing. If fully implemented, 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 Economic and Monetary Community of Central Africa (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 since December 1995 and a member of GATT since May 1963.
Legal System and Judicial Independence
The Cameroonian legal system is a blend of French civil law and English common law. This dynamic creates tension within the judicial system, as lawyers and judges are rarely competent in both systems. Courts are structured in a pyramid system, with the Supreme Court functioning as the highest court in the land. Regulations and enforcement actions may be appealed and 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 President of the Republic is also the supreme head of the judiciary. This constitutional status gives the executive branch immense power over the judiciary. 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 is unpredictable. The outcomes of the legal process are uncertain because judges are not immune from political pressure. Simple logistical challenges, such as the lack of computers to digitally process court documents, can create serious delays.
Laws and Regulations on Foreign Direct Investment
Law No. 2013/004 of 18 April 2013 defines incentives for private investment in Cameroon and makes explicit that government’s stated commitment to protect investors’ rights. The law is valid for domestic as well as foreign investors. Additional laws and regulations are available on the website of Cameroon’s Ministry of Finance http://www.minfi.gov.cm/index.php/en/documents). Cameroon’s Investment Promotion Agency (CIPA) offers a one-stop-shop website for investment, with relevant laws, rules, procedures, and reporting requirements for investors. The National Competition Commission of the Ministry of Commerce is the official body in charge of competition regulations.
Expropriation and Compensation
Decree No.85-9 of July 4, 1985 and the subsequent implementation of Decree No.87-1872 of December, 16 1987 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 No005/I/Y.25/MINDAF/D220 of December 29, 2005.
In the name of public interest, the State may expropriate from any person or entity previously 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 GRC expropriated private property for 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, serious corruption schemes have marred several compensation cases. These incidents have diluted public trust in the expropriation process.
ICSID Convention and New York Convention
Cameroon ratified the International Centre for Settlement of Investment Disputes (ICSID) Convention on January 3, 1967, and the New York Convention on February 19, 1988. There is no specific domestic legislation providing for enforcement under the 1988 New York Convention and for the enforcement of awards under the ICSID Convention.
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, when 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.
There have been cases of disputes between Cameroonian partners and U.S. companies, but they are often solved through arbitration. Misunderstandings between partners about contractual commitments tend to cause conflicts, though such cases have been infrequent over the past ten years. Issues related to a Bilateral Investment Treaty or a Free Trade Agreement 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 engaged key government officials for some cases in which U.S. companies faced disputes or harassment. In practice, the duration of dispute resolution will depend on the complexity of the case, and no standard timeline exists. 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. The Groupement Interpatronal du Cameroon, the country’s most powerful business lobbying group, has an arbitration center based in Douala.
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) is both an arbitration institution and a judicial court, with a remit covering all the OHADA states. Judicial processes are bureaucratic, expensive, and time-intensive. 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 taxes or mislead investors. Globally, Cameroon stands at 122 in the ranking of 190 economies for 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 piecemeal. The average recovery rate is 15.8 cents on the dollar.