Transparency of the Regulatory System
In the past eight years, Guinea has made its laws and regulations more transparent, but draft bills are not always made available for public comment. Ministries do not develop forward-looking regulatory plans and publish neither summaries nor proposed legislation. Laws in Guinea are proposed by either the President or members of the National Assembly and are not always presented for public comment. Once ratified, laws are not 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 to ensure each authority is aware of expectations and responsibilities on both sides. Guinea has had an independent Supreme Audit Institution since 2016. The institution is charged with making available information on public finances. The institution presented its first activities report in January 2018.
Since 2010, the Guinean government has initiated more than 80 reforms to update and make more transparent government codes related to mines, administration, investment, and customs.
Guinea’s 2013 amended Mining Code commits the country to increasing transparency in the mining sector. In the code, the government commits to awarding 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. There is a public database of mining contracts designed by the Natural Resource Governance Institute (http://www.contratsminiersguinee.org/ ).
The Extractive Industries Transparency Initiative (EITI) ensures greater transparency in the governance of Guinea’s natural resources and full disclosure of government revenues from its extractives sector. The EITI standard aims to provide a global set of conditions that ensures greater transparency of 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 manage effectively the businesses, 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 an EITI country, Guinea must disclose the government’s revenues from natural resources. Guinea completed its most recent report in August 2018 for the 2016 reporting period. The report is located at : https://eiti.org/files/documents/rapport-itie-02-guinee-2017-version-signee-3.pdf .
While Guinea’s laws promote free enterprise and competition, there is often a lack of transparency in the government’s application of the law. Business owners openly assert that application procedures are sufficiently opaque to allow for corruption, and regulatory activity is often instigated due to personal interests.
Every year Guinea publishes budget documents and debt obligations. The yearly enacted budgets are published online https://mbudget.gov.gn/ .
International Regulatory Considerations
Guinea is a member of 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 for assessing import duties at Guinea’s land border crossings, however, sometimes it is difficult to get the required certificates to export under these ECOWAS exemptions. Guinea is a member of the WTO and is not party to any trade disputes.
Legal System and Judicial Independence
Guinea’s legal system is codified and largely based upon French civil law. However, the judicial system is reported to be generally understaffed, corrupt, and opaque. Accounting practices and bookkeeping 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, in practice the judicial system lacks independence, is underfunded, inefficient, and is portrayed in the press as corrupt. Budget shortfalls, a shortage of qualified lawyers and magistrates, nepotism, and ethnic bias contribute to the judiciary’s challenges. 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. There are few international investment lawyers accredited in Guinea and it is a 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.
Despite dispute settlement procedures set forth in Guinean law, business executives complain of the glacial pace of the adjudication of business disputes. Most legal cases take years and significant legal fees to resolve. In speaking with local business leaders, the general sentiment is that any resolution occurring within three to five years might be considered quick.
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 is 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, Guinean and foreign business executives have publicly expressed concern over the rule of law in the country. In 2014, high-ranking members of the military harassed foreign managers of a telecommunications company because they did not renew a contract. In 2017-2018, American businesses experienced long delays in getting the required signatures and approvals through government ministries. Some businesses have been subject to sporadic harassment and demands for donations from military and police personnel.
Laws and Regulations on Foreign Direct Investment
The National Assembly ratified an Investment Code regulating FDI in May 2015. Developed in cooperation with the Work Bank and IMF, the code harmonizes Guinea’s FDI regulations with other countries in the region and broadens the definition of FDI. The code also allows for direct agreements between investors and the State. Other important legislation related to FDI includes the Procurement Code, the BOT (Build Operate Transfer, now Public Private Partnership or PPP) Law and the Customs Code.
The government of Guinea states it will let the legal system deal with domestic cases involving foreign investors. However, the legal system is weak, in the process of implementing much needed reforms, and is subject to interference. Although the constitution provides for an independent judiciary, in practice the judicial system lacks independence and is underfunded, inefficient, and is perceived by many to be corrupt. APIP launched a 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:// https://apip.gov.gn/ . APIP has 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 take any steps to expropriate or nationalize investments made by individuals and companies, except for reasons of public interest. 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 several joint ventures—including a canned food factory and processing plants for peanuts, tea, mangoes, and tobacco—with no compensation to the private sector partner. Each of these facilities was privatized under opaque circumstances in the late 1980s and early 1990s. By expropriating these businesses, which the government deemed to be corrupt and/or ineffective, and putting them to public auction, Guinea hoped to correct past mistakes and put the assets in more productive hands. During the 1990s, a U.S. investor acquired a 67 percent stake in an explosives and munitions factory from a Canadian entity. The Guinean government owned the remaining 33 percent. From 2000 to 2008, the government halted manufacturing at the factory. In 2010, the Guinean government nationalized the factory.
While there have not been recent large-scale expropriation cases, some mining concession contracts have had their initial award revoked and were sold to another bidder. In 2008, the previous regime of Lansana Conde stripped Rio Tinto of 50 percent of its concession of the Simandou mine and sold it to another company.
The government has had difficulties managing SMEs and would prefer that the private sector take the lead in managing this sector. 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 cognizant of its international image and does not want to risk losing possible foreign investment.
ICSID Convention and New York Convention
Guinea is a member of the International Center for the Settlement of Investment Disputes (ICSID), an autonomous institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of other States (https://icsid.worldbank.org/en/Pages/about/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. Guinea has no specific domestic legislation providing for enforcement of awards under the 1958 New York Convention and/or under the ICSID Convention. (http://www.newyorkconvention.org ).
Investor-State Dispute Settlement
The Investment Code states that the competent Guinean judicial authorities shall settle disputes arising from interpretation of the Code in accordance with the law and regulations, and provides several avenues by which to seek arbitration. In practice, however, fair settlements may be difficult to obtain. 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 agree 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
Guinea is 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 harmonize 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 held personally liable for corporate wrongdoing. See the OHADA website for specific OHADA rules and regulations (http://www.ohada.com ).
Guinea, as a member of OHADA, has the same bankruptcy laws as most West African francophone countries. OHADA’s Uniform Act on the Organization of Securities enforces collective proceedings for writing off debts and defines bankruptcy in articles 227 to 233. The Uniform Act also distinguishes 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 OHADA’s Uniform Act define which creditors are entitled to priority compensation. Bankruptcy is only criminalized when it occurs due to fraudulent actions, and leaves criminal penalties to national authorities. Non-fraudulent bankruptcy is adjudicated though the Uniform Act.
In the World Bank’s 2020 Ease of Doing Business Report on Resolving Insolvency, Guinea placed 118 out of 190 countries ranked. According to the report, resolving insolvency takes an average of 3.8 years and costs 10.0 percent of the debtor’s estate, with the most likely outcome being that the company will be sold piecemeal. The average recovery rate is 19.4 cents on the dollar.