Transparency of the Regulatory System
The Government of the Republic of Equatorial Guinea publishes Equatoguinean labor laws for public consumption; however, officials do not consistently apply laws or regulations. Officials expect foreign companies to follow every detail of the labor law or face penalties. However, some report that enforcement of compliance with the labor laws by national companies is far less strict. U.S. businesses have complained that bureaucratic procedures are neither streamlined nor transparent, and can be extremely slow for those without the proper political or familial connections. Many regulations are created within ministries. Some regulations are the result of laws passed by the legislature. Although most regulations are created at the national level, some decisions may be taken at the municipal level (such as decisions about permits for construction).
Proposed laws and regulations are not published in draft form for public comment, but are there have been reports of informal sharing with representatives of specific industries for comment. Regulations and laws are generally not published online and are available in hardcopy for a fee.
The industry informs that accounting, legal, and regulatory procedures are generally neither transparent nor consistent with international norms.
According to the 2018 Fiscal Transparency Report, Equatorial Guinea does not meet the minimum requirements of fiscal transparency and more information is available at: https://www.state.gov/2018-fiscal-transparency-report/ .
The government recently made some progress on fiscal transparency of its public finances and debt obligations. Although available to the public several months after the start of the fiscal year, the 2018 budget did include information on debt obligations for the first time in several years. The 2019 budget also included the public debt obligations. The government is working on fiscal transparency as part of the International Monetary Fund (IMF)’s staff monitored program.
Regulation are generally not reviewed on the basis of scientific or data-driven assessments.
International Regulatory Considerations
Equatorial Guinea is a member of Central African Monetary and Economic Union (CEMAC), which includes a regional central bank, the Bank of Central African States (BEAC), and various regulations.
Equatorial Guinea is not a member of the World Trade Organization (WTO) and is listed as an observer government. The General Council of the WTO established a Working Party to examine the application of Equatorial Guinea on February 5, 2008. Efforts to join have faltered, as Equatorial Guinea has not submitted a Memorandum on the Foreign Trade Regime. Equatorial Guinea is not a signatory to the Trade Facilitation Agreement (TFA).
Legal System and Judicial Independence
Equatorial Guinea’s legal system is a mixed system of civil and customary law. Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts. Either party can also submit the dispute to international arbitration. Foreign investors are asked to declare their desired international arbitration venue in their initial application to invest in the country. Arbitration must take place in a neutral location and Spanish will be the official language of the arbitration.
Equatorial Guinea was ranked 101 of 190 in the World Bank’s Doing Business Report 2018 for “enforcing contracts.”
Labor law is meant to protect workers, including a requirement for written contracts and regulation of labor by minors. Labor courts exist for matters related to employment. Several companies have complained that cases are rarely decided on the merits and penalties are excessive. Appeals generally proceed to the supreme or constitutional court. The court system and staff are generally considered under-resourced and unprepared, according to companies and public statements by the President of Equatorial Guinea.
The judicial system is not independent of the executive branch. The President is officially the head of the court system, with the power to appoint or remove judges at will.
Laws and Regulations on Foreign Direct Investment
Law No. 7/1992, Law No. 2/1994, Decree No. 54/1994, and Decree 127/2004 regulate foreign investment. Certain industries have additional regulations. The enforcement of laws and judicial decisions has not shown a pattern of reliably or consistency, according to investors. The executive branch heavily influences the judicial branch, as the president is also the chief magistrate of the Republic of Equatorial Guinea. While the government has made efforts to streamline inward investment procedures and simplify business registration processes, they have not yet implemented all these processes. Decree 72/2018 of April 2018 revised decree 127/2014 of September 14, 2014, and eliminated the mandatory national participation in foreign companies, except for the hydrocarbons sector. The implementation of the “one-stop-shop” or single window, which launched in January 2019, has simplified the registration process and reduced the timelines (to seven business days according to the government). The centralized administrative procedure clarifies the rates to be paid and the procedures to follow. At least sixteen companies have registered through the single window in the initial months. The Ministry of Finance and Economy along with the Ministry of Commerce plan to evaluate the system from July-September 2019 to determine its effectiveness. There is a webpage with information (https://www.ventanillaempresarialge.com/en/welcome/) but businesses cannot register online.
Competition and Anti-Trust Laws
Equatorial Guinea does not have an agency that actively enforces any competition laws. Equatorial Guinea became a member of the Organization for the Harmonization of Business Laws in Africa (OHADA) in 1999, and any OHADA competition laws should apply in Equatorial Guinea.
Expropriation and Compensation
Law No. 7/1992 states that the government will not expropriate foreign investments except when acting in the public interest with fair, just, and proper compensation. The Government of the Republic of Equatorial Guinea does not generally nationalize or expropriate foreign investments, although in 2013 a Spanish investor had his property confiscated. The Government of the Republic of Equatorial Guinea does have an extensive record of expropriating locally owned property, frequently offering little or no compensation. The government has also withdrawn blocks for hydrocarbons exploration when companies failed to invest within an allotted period, though this generally appears to follow the terms of published tenders.
ICSID Convention and New York Convention
Equatorial Guinea is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention — also known as the Washington Convention), although Law No. 7/1992 states that international arbitration may utilize ICSID as the basis of procedure. Equatorial Guinea is not a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Investor-State Dispute Settlement
Recent investment disputes have centered on non-payment to investors or contractors by the Government of the Republic of Equatorial Guinea or state-owned enterprises. Few established local mechanisms compel the Government of the Republic of Equatorial Guinea to pay investors, and the Embassy has limited capacity to intervene. U.S. and foreign enterprises from France, Cote d’Ivoire, Lebanon, Egypt, China, Morocco, and Turkey, operating in the Republic of Equatorial Guinea, have been subject to non-payments or severely delayed payments and have had no recourse in payment disputes. This, along with the downturn in the economy, has led many foreign-led operations to pull out of the country completely or downsize substantially.
A Spanish businessperson, Francisco Hernando Contreras, signed a joint venture agreement with President Obiang in 2009 to build 36,000 social homes in Equatorial Guinea. President Obiang allegedly pulled support for the project at the last minute, leaving the Spanish citizen ruined and bankrupted. In March 2012, Mr. Hernando Contreras submitted a claim before the International Centre for Investment Dispute Settlements (ICSID). After unsuccessful attempts with the ICSID, in August 2017 Madrid’s provincial court ordained a magistrate to revise the claim, acknowledging the Spanish competency to rule the case because of the bilateral investment treaty between the countries. The case was ongoing at the start of 2019.
In at least one case in late 2018, a company that had payment arrears from a state-owned enterprises for over a year was able to make an alternate arrangement to receive payment and ensure timely payment for the future. This required an amendment to the contract rather than a judicial solution.
International Commercial Arbitration and Foreign Courts
The OHADA (“Organisation pour l’harmonisation en Afrique du droit des affaires”,or Organization for the Harmonization of Corporate Law in Africa) Uniform Act on Arbitration rules would apply where the Court has its seat in Abidjan, but it may sit in any other place on the territory of one of the seventeen Member States of the Organization. It has already held hearings in several member states of the OHADA in recent years. As of March 27, 2019, the Common Court of Justice and Arbitration of the OHADA has included the Equatorial Guinean lawyer, Dr. Sergio Esono Abeso Tomo, on the list of arbitrators of the Arbitration Center of the Common Court of Justice and Arbitration of the OHADA for three and half years term. He is the first Equatoguinean added to the OHADA list.
Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts. Either party can also submit the dispute to international arbitration. Foreign investors are asked to declare their desired international arbitration venue in their initial application to invest in the country. Arbitration must take place in a neutral location and Spanish will be the official language of the arbitration.
Firms have alleged that court actions are sometimes not transparent and discriminatory, and tend to favor local parties rather than foreigners or foreign companies.
The Government of the Republic of Equatorial Guinea has adopted the business laws of the Organization for the Harmonization of Business Laws of Africa (OHADA), including the law pertaining to bankruptcy.
The Republic of Equatorial Guinea currently ranks in last place for processes related to resolving insolvency, according to the World Banks’s Doing Business Report’s ranking of “Resolving Insolvency.” The Republic of Equatorial Guinea received the World Bank’s ‘no practice mark,’ due to the lack of cases, in the past five years, involving a judicial reorganization, judicial liquidation, or debt enforcement. This is interpreted to mean that creditors are unlikely to recover their money through a formal legal process.