Harmonising law crucial for economic growth in East Africa

Over more than decade, a combination of globalisation, foreign investment and an increase in multinational co-corporations in Africa has resulted in the rise of cross border transactions taking place on the continent and the much needed foreign investment to fuel growth in Africa.

31 Jan 2018 5 min read Article

However, the growth has not occurred at the rates that one would have expected in the recent years and in order to increase commercial transactions in Africa, African economies must create an economic and political environment that is conducive to cross border commercial transactions, given foreign investors more certainty of growth and returns. One initiative that this article wishes to focus on is the East African Community's (EAC) commitment to the harmonisation of laws and legal practice within the community is essential to accessible, economic and efficient transaction making within the region.

China has been the recent the main source of infrastructure funding in East Africa, with an investment in African infrastructure, including in the Eastern region, of approximately $1 trillion in the last few years. Unfortunately, the cost of doing business in East Africa is higher than in other regional blocs as a result of the state of the transport infrastructure in the region.

The East Africa Railway project presents an opportunity to increase trade within the region by providing more efficient and economic means of transport across jurisdictions within the area. The $3.2 billion project spans from Mombasa to Nairobi with the view to later expand the railway to the borders of Uganda.

The progress of the East Africa Railway, like other cross border projects in Africa, is impeded by the lack of legal capacity within the region as well as stringent and inconsistent regulatory controls within different regions. Administrative and technical requirements of each partner state within the EAC has delayed the construction of the railway as a result of inefficient procurement procedures, poor monitoring and evaluation processes and restrictive regulatory controls of states, and inefficient bureaucratic processes at ports.                                                                                                               

It's for these reasons that the harmonisation project undertaken by the EAC requires to be fast tracked. The EAC was established in terms of the EAC Treaty in July 2000, and its membership includes Kenya, Tanzania, Uganda, Rwanda and Burundi. Among the objectives of the EAC is the creation of a common market to allow for the free movement of persons, capital, services and the rights of residence and establishment, in order to eliminate some of the barriers in executing commercial transactions in East Africa.

Article 126 of the EAC treaty provides that partner states to the EAC shall, through their appropriate national institutions, harmonise their national laws pertaining to the objectives of the community. Furthermore, Article 47 of the Protocol on the Establishment of the East African Community Common Market adopted by the EAC in 2009, made provision for partner states to undertake to approximate their national laws and to harmonise their policies and systems for the purpose of implementing a common market in the region.                                                                                                               

The harmonisation of laws within the EAC presents an opportunity for increased trade through the development of a unified system of regulatory controls across jurisdictions. Harmonisation would also facilitate the sophistication of operational practices across jurisdictions that will in turn result in cost-effective and efficient transacting within the EAC.

In conjunction with the effort to accommodate laws within the EAC is an endeavour to also harmonise legal practice within the region. The East African Community Cross Border Legal Practice Bill, 2014 is premised on Article 126 of the EAC treaty, and makes provision for the legal representatives of one partner state to render legal services in other partner states despite not practicing in that particular state. This includes a plan to harmonise legal training and certification within the region to provide for common standards across the community and to provide a common set of regulations to facilitate cross border practice.

Currently, there is insufficient legal capacity within East African to support the expanding economic growth and the transactions that flow therefrom. The harmonisation of legal practice addresses the inconsistency in the rate of growth in East Africa and the numbers of legal professionals equipped to service and execute commercial transactions within the region. The UN Economic Commission for Africa Report on Professional Services published in 2010, estimated that in East African countries such as Uganda and Tanzania the ratio of lawyers to people are 4 lawyers to every 100 000 people and 2 lawyers to every 100 000 people respectively.

The process of harmonisation of cross border legal practice will contribute to building legal capacity within the region. In addition, cross border legal practice will increase the competitiveness of East African lawyers, allow for the imports of best practices across jurisdictions and enable the ease of co-ordination of legal services across jurisdictions and the strengthening of skills integration within the region.

A Mutual Recognition Agreement between the Competent Authorities of Advocates in the East African Community (Mutual Recognition Agreement) has been signed by partner states of the EAC to facilitate the harmonisation process within the advocates’ profession. The Mutual Recognition Agreement allows for an advocate who meets the requirement set out in the Mutual Recognition Agreement to make an application to a competent authority in a partner state within which they do not practice to be recognised as a practicing advocate in the partner state in terms of the Mutual Recognition Agreement.

The harmonisation of legal practice across jurisdictions is a growing legal international trend. In as early as 2003, the International Bar Association tabled for discussion the Draft Best Practice Recommendations for the Temporary Cross- Border Commercial Practice in response to the demand to increased need for cross-border commercial lawyers.

The harmonisation of laws within the EAC is not without challenges. It is a task of great magnitude, is underfunded and the incongruence between legal systems and language differentials within the community present challenges to the process. In addition, political will and involvement is essential to ensuring that legislative and administrative measures towards harmonisation are taken by each partner state on a national level. These challenges are evidently not viewed as insurmountable by the EAC who still see value in pursuing the process of harmonisation of laws and legal practice, and are in the process of doing so. However support from the international legal community, particularly from South Africa can help facilitate a faster transition to achieving harmonisation.

A similar approach to harmonisation would assist other regions within Africa to address the issue of capacity, the economics of deal making and to ensure cross border transaction efficacy. Institutional collaboration and building sustainable partnerships are essential to meet the transactional and development objectives of the continent, and harmonisation of laws and legal practice is one mechanism to achieve this.

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