Transparency of the Regulatory System
The Government of the Republic of Equatorial Guinea publicly publishes labor laws; however, officials do not consistently apply laws or regulations. Officials expect foreign companies to follow every detail of the labor law or face penalties. Some companies report less strict enforcement of compliance with the labor laws by national companies. 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, while others 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 there have been reports of informal sharing with representatives of specific industries for comment. Regulations and laws are generally not published online but are available in hardcopy for a fee.
Private industry representatives report that accounting, legal, and regulatory procedures are generally neither transparent nor consistent with international norms.
According to the 2019 Fiscal Transparency Report, Equatorial Guinea does not meet the minimum requirements of fiscal transparency. More information is available at: https://2017-2021.state.gov/2019-fiscal-transparency-report/
The government recently made some progress on transparency of its public finances and debt obligations. Although not available to the public several months until after the start of the fiscal year, the 2018 budget included information on debt obligations for the first time in several years, including both public and private debt obligations. The 2019 budget also included debt obligations. The government has been working on fiscal transparency as part of its International Monetary Fund (IMF) program and another program with the African Development Bank that began in 2019. The Ministry of Economy, Finance, and Planning announced plans to move customs to an electronic system to improve transparency and prevent corruption. The Automated Customs System (Sistema Aduanero Automatizado or SIDUNEAWorld) was implemented on April 30, 2020, upon the Ministry’s announcement. By late May 2020, it had already registered 49 shipping manifests via http://siduneage.com .
In April 2020, the Ministry of Economy, Finance, and Planning issued an official communication on restructuring internal arrears. An internal arrears audit was conducted to evaluate the government’s obligations to construction companies. The African Legal Support Facility financed the process of regulating those arrears, which was carried out by McKinsey law firm. As stated in the memorandum of understanding, adopted by Decree No 136/2019, the next step includes the process of securitization to be conducted by an international financial agency.
International Regulatory Considerations
Equatorial Guinea is a member of the Central African Monetary and Economic Union (CEMAC), which includes a regional central bank (the Bank of Central African States, or BEAC) and various regulations including lower tariffs on intra-regional trade.
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 country’s application to join in February 2008, but the country never submitted a Memorandum on the Foreign Trade Regime (MFTR). The government is working on its application. According to the WTO’s 2019 Report, published February 20, 2020, Equatorial Guinea’s accession process is likely to become active, with the first meeting of its working party in 2020. At the request of the Government of Equatorial Guinea, the WTO Secretariat undertook a technical assistance mission to Malabo in March 2019 to assist in preparing the MFTR and to enhance the negotiating team’s understanding of the WTO Agreements, with a strong focus on the accession process. Equatorial Guinea participated in regional WTO dialogues as recently as February 2020.
Equatorial Guinea is not a signatory to the Trade Facilitation Agreement (TFA).
Legal System and Judicial Independence
Equatorial Guinea’s legal system is a mix 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 105 of 190 in the World Bank’s Doing Business Report 2020 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 President Teodoro Nguema Obiang Mbasogo. Both the Labor Law and the Penal Code were set to be updated in 2020, with drafts submitted to the Legislature, which was suspended amid the COVID-19 pandemic.
The judicial system is not independent of the executive branch as 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
Most investment is focused in the extractive industries and infrastructure development. Laws No. 7/1992 and 2/1994 and Decrees No. 54/1994 and 127/2004 regulate foreign investment. Certain industries have additional regulations. The enforcement of laws and judicial decisions has not been reliable nor consistent, 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 foreign investment procedures and simplify business registration processes, these processes have not all been implemented. Decree No. 72/2018 of April 2018 revised No. 127/2014 of September 2014 and eliminated mandatory 35 percent national participation in foreign companies, except for in the hydrocarbons sector. The implementation of the “one-stop shop” for business registration in January 2019 simplified the registration process and reportedly reduced the time to complete it to seven business days, according to the government. The centralized one-stop shop clarifies the rates to be paid and the procedures to follow. The Ministries of Economy, Finance, and Planning and Commerce plan to evaluate the system in 2020 to determine its effectiveness. There is a webpage with information (https://www.ventanillaempresarialge.com/en/welcome/ ) but businesses cannot yet register online. Investors work with the relevant government ministries to negotiate contracts.
The government published Decree 45/2020 in April 2020, reducing the minimum capital needed to register a limited-liability company from 1 million XAF (USD 1713) to 100,000 XAF (USD 171).
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 a Spanish investor had his property confiscated in 2013. 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
In October 2018, Equatorial Guinea announced the resolution of litigation begun in 2014 over Orange Group’s ownership stake in the incumbent fixed line and mobile operator Guinea Ecuatorial de Telecomunicaciones Sociedad Anonima (Getesa). Agence Ecofin cited a statement from the Embassy of Equatorial Guinea in France, confirming that on September 26, 2018, the government signed an agreement with Orange Middle East & Africa under which it paid EUR 50 million (USD 57.5 million) to the French-based telecoms giant in return for relinquishing Getesa shares. The final payment followed Equatorial Guinea’s initial share payment to Orange of EUR 45 million in October 2016, thereby settling the balance of an agreed EUR 95 million-redemption price for Orange’s 40 percent stake. TeleGeography’s GlobalComms Database says that Equatorial Guinea’s government lost a Paris Court of Appeal case against a fine imposed in July 2014 by the International Court of Arbitration for reneging on a 2011 agreement to buy Orange’s Getesa stake in the event of a new entrant launching (a clause it failed to honor after the 2012 launch of majority state-owned cellular company GECOMSA). In October 2016, the government agreed to pay EUR 150 million, including interest, to Orange.
A Spanish businessperson signed a joint venture agreement with President Obiang in 2009 to build 36,000 homes in Equatorial Guinea. President Obiang allegedly pulled support for the project at the last minute, leaving the Spanish citizen bankrupted. In March 2012, the Spanish businessperson submitted a claim before the International Centre for Investment Dispute Settlements (ICSID), which ruled in favor of Equatorial Guinea in 2015. 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 2020, but it is unclear if it will continue as the claimant died of COVID-19 in April 2020.
In at least one case in late 2018, a company that had not been paid by a state-owned enterprise for over a year was able to make an alternate arrangement to receive payment. This required an amendment to the contract rather than a judicial solution.
International Commercial Arbitration and Foreign Courts
The Organization for the Harmonization of Corporate Law in Africa (OHADA) Uniform Act on Arbitration rules would apply where the Court has its seat in Abidjan, but it may sit in any one of the seventeen Member States of the Organization. The Court has already held hearings in several OHADA member states in recent years. As of March 2019, the Common Court of Justice and Arbitration of the OHADA included an Equatoguinean lawyer on the list of arbitrators of its Arbitration Center of the Common Court of Justice and Arbitration. This lawyer 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. In their initial application to invest in the country, foreigners must declare their desired international arbitration venue. Arbitration must take place in a neutral location with Spanish as the official language.
Firms have alleged that court actions are sometimes discriminatory, not transparent, tending to favor local parties rather than foreigners or foreign companies.
In 2015, the government closed a microfinance institution founded by a member of an opposition party. He reportedly appealed to the CEMAC court, which recommended arbitration. We have no information on the outcome.
The Government of the Republic of Equatorial Guinea adopted the business laws of the Organization for the Harmonization of Business Laws of Africa (OHADA), including that pertaining to bankruptcy.
The Republic of Equatorial Guinea is tied for last place in the World Banks’s 2020 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 over the past five years involving judicial reorganization, judicial liquidation, or debt enforcement. This suggests that creditors are unlikely to recover their money through a formal legal process.