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liabilities to another enterprise in the event of one enterprise ceasing to exist or a reorganisation have to some extent been provided.221

There were no direct mentions of foreign creditors and the manner in which their interests were to be addressed and treated. It is safe to say that any cross-border issues concerning the insolvency of such state owned enterprises would necessarily ensure direct involvement of the state in so far as settlement of claims is concerned. In light of the fact that the commission responsible for the restructuring and privatisation of the enterprises was the official receiver of the financially distressed enterprises pursuant to the bankruptcy legislation, it might be argued that the provisions of such legislation and the powers, duties and responsibility of such an official receiver would necessarily include the roles that the receiver is entitled to play in relation to cross-border bankruptcy issues.

This obscure state of affairs with regard to the handling of cross-border insolvency problems involving SOEs still persists at least in theory, though in practical terms the problem has hardly been felt. This is true in view of the fact that the existing legislation still lacks clear provisions on the treatment of crossborder insolvency issues as they relate to the existing SOEs in the event of becoming insolvent. It is also not clear as to whether the relevant provisions under the CA 2002 could equally apply. Perhaps it is now high time that this vacuum was addressed given that privatisation of most of the SOEs has not only enlarged the private sector but also given way to a situation where a SOE can be owned by the government as the majority or minority shareholder and the private foreign investor as a joint shareholder.222 This corresponds with what has been happening in many jurisdictions in the developing world, as is the case with China, which had an equally huge sector of SOEs.223

221Public Corporations Act 1992 (Tanzania) ss 50 and 59

222Public Corporation Act 1992(Tanzania) ss 3 and 5. In relation to the position in Kenya, see n

12above, where it is noted that Privatisation Act (Kenya) s 29 provides that both Kenyan and non-Kenyan are eligible to participate in privatisation of SOEs.

223RW Harmer (n 10); and R Parry and H Zhang (n 24) 113

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6.7Cross-Border Insolvency Treatment in SSA Regional Groupings with Special Reference to Tanzania and Kenya

A predictable and certain arrangement for dealing with instances of cross-border insolvency has traditionally been used as one of the means of enhancing or addressing the consequences that would arise from economic co-operation among different countries. The regional groupings arrangements in SSA lack an institutionalised framework for resolution of cross-border insolvency within the context of the respective regional groupings. The OHADA, as noted in the previous chapter, is perhaps the exception.224 Notably, the presence of many regional groupings for which SSA countries are members and which overlap one another presents a potential challenge in addressing cross-border insolvency and crafting a workable and appropriate framework within the context of the regional arrangements.

6.7.1The East African Community as an Example of the General State of Cross-Border Insolvency Treatment in SSA Regional Groupings

Apart from the arrangement for reciprocal co-operation in cross-border bankruptcy between Tanzania, Kenya and Uganda (“BRR”), which traces its existence from the colonial period, the revived East Africa community225 lacks a common arrangement explicitly set for securing co-operation and co-ordination in cross-border insolvency matters, just as it unambiguously provides for cooperation in statistics, intellectual property rights, industrial development and agriculture and food security.226 Whereas the BRR arrangements do not cover

224Text to n 173 in chapter 4

225Treaty for Establishment of the East African Community (“EAC”) 1999. EAC consists of Tanzania, Kenya, Uganda, Rwanda and Burundi. The history of co-operation in East Africa dates back to the early 20th century, including the customs union between Kenya and Uganda in 1917, which the then Tanganyika (now Tanzania Mainland) joined in 1927, the East African High Commission (1948–1961), the East African Common Services Organisation (1961–1967) and the East African Community (1967–1977).

226See Protocol on Establishment of the East African Community Common Market arts 41-45. Notably, art 29 of the Protocol provides that: “1.The Partner States undertake to protect cross border investments and returns of investors of other Partner States within their territories.

2.For the purposes of paragraph 1, the Partner States shall ensure:

(a) protection and security of cross border investments of investors of other Partner States;

(b)non- discrimination of the investors of the other Partner States, by according, to these investors treatment no less favourable than that accorded in like circumstances to the nationals of that Partner State or to third parties;

(c)that in case of expropriation, any measures taken are for a public purpose, non-discriminatory, and in accordance with due process of law, accompanied by prompt payment of reasonable and effective compensation.

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Rwanda and Burundi, the on-going insolvency law reform trend is potentially phasing such a reciprocal co-operation arrangement out.

Member countries have within the context of the East Africa community harmonisation of commercial law strategy been urged to reform their respective insolvency law systems which have recently been identified as among ‘such commercial laws that require harmonisation for purposes of supporting the [East Africa] common market.’227 Other laws include, company laws, partnerships laws, and business registration laws. Indeed, harmonised insolvency systems have long been seen as one way towards attaining universalism in cross-border insolvency law.228 Apart from the obvious emphasis on the harmonisation of commercial law, there are no common best practices and priorities set forth or agreed to inform and guide the harmonisation process. This situation is likely to affect the manner in which the reform to achieve harmonisation is undertaken. It is perhaps not surprising that the undertaking has been effected without consistency in form, emphasis, thrust and substance.229 While Kenya was

3. The Partner States shall within two years after coming into force of this Protocol take measures to secure the protection of cross border investments within the Community.”

227The commencement of the common market in East Africa Community in which Tanzania and Kenya are member states means that both natural and legal persons have the right to establish themselves in any part of the community. This effectively means that since not all persons will be or are always successful in their business undertakings, the question of such persons becoming insolvents and subjected to insolvency proceedings cannot be underestimated. This is also true for foreign investments that are encouraged and attracted to take advantage of investment opportunities within the East Africa community context. EAC, ‘Council Chairperson Assures Community on Ratification of Common Market Protocol’ Press Release April 2010 < http://www.eac.int/news/index.php?option=com_content&view=article&id=226:ratification-of- common-market-protocol&catid=48:eac-latest&Itemid=69 > accessed 1 September 2010

228JL Westbrook (n 48) 468, contending that one of ‘[t]he…prerequisite to obtaining the benefits of universalism is general similarity of laws. Similar laws about distributions, avoidance, and the like are not in principle necessary to the acceptance of universalism, but in practice similarity is very important.’

229The Consultancy project on Harmonisation of the Partner States’ Commercial Laws undertaken by Eversheds and reported to have commenced in October 2009 is seemingly centred at addressing such concerns and facilitating the harmonisation process. See East Africa Community Secretariat, ‘Approximation of National Laws in the EAC Context: Harmonisation of Commercial Laws in Progress in the Region’ Press Prelease (Nairobi 18 February 2010) < http://www.eac.int/about-eac/eacnews/377-meeting-on-approximation-of-national-laws- nairobi.html > accessed 19 September 2011; and Eversheds, ‘Eversheds Wins East Africa Community Institutional Reform Appointment’ < https://www.eversheds.com/uk/home/articles/index1.page?ArticleID=templatedata%5CEvershed s%5Carticles%5Cdata%5Cen%5CFrench+newsletter%5Cen_Eversheds_wins_EAC_BM_03120

9> accessed 01September 2010. According to the Co-Head of the Eversheds’ Africa group, their

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working towards reform of its law relating to companies, insolvency, partnerships, marriage, matrimonial property, domestic violence, elections and reviewing laws on succession, evidence and land disputes; Tanzania was reported to be pursuing projects seeking to review a number of laws relating to civil procedure, agriculture, pastoralism, and a law establishing the Law Reform Commission.230

In spite of the establishment of the East Africa Court of Justice (“EACJ”), the court does not have jurisdiction to entertain matters of insolvency cutting across member states and Tanzania and Kenya in particular. This is mainly attributable to the fact that the EACJ is vested with jurisdiction to interpret the provisions of the treaty and ensure that the treaty provisions are observed.231 The East Africa community has not yet enacted a modern law to govern matters of insolvency and cross-border insolvency in particular which would otherwise be eligible for application and interpretation in the EACJ in appropriate cases involving crossborder issues among member states and beyond. This is notwithstanding the fact that it has long been acknowledged that ‘…this option is more cost effective than having to wait for [member states] to enact similar laws and then … begin the process of harmonization.’232 It follows that even though the reciprocal provisions under the respective countries’ bankruptcy laws could apply in appropriate cases, no appeal in such cases can presently lie in the EACJ. This marks a significant difference from the former East Africa Court of Appeal (“EACA”) which had, to a very large extent, jurisdiction to hear appeals from national courts of the member states in both criminal and civil matters.233

appointment is partly due to their experience of harmonising laws with respect to the "Organization for the Harmonisation of Business Law in Africa" (OHADA)

230East Africa Community Secretariat (n 229)

231Treaty for the Establishment of the East Africa Community 1999 (as amended) art 27

232AO Kinana, ‘The Role of the East African Legislative Assembly in Enhancing Popular Participation and Harmonisation of Laws in East Africa.’ (Annual Conference of the East Africa Law Society, Dar es salaam, 25 November 2005) [3]. The author was the first Speaker of the East African Legislative Assembly. He notes that the current practice leaves the responsibility of implementation of the harmonised law with each partner state. Notably, a parallel can well be drawn on this point with the EC Regulation on Insolvency.

233See n 25 above, listing a few cross-border bankruptcy cases in East Africa that involved Tanzania and Kenya and which reached the former East Africa Court of Appeal.

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Arguably, the need for extending the jurisdiction of the EACJ to cater also for cross-border insolvency issues may indeed be accommodated by article 27(2) of the EAC Treaty which provides room for extension of the jurisdiction of the EACJ as the council of the EAC may determine and through the enactment of community law to regulate co-operation in cross-border insolvency matters.234 Notably, the conclusion of a multilateral memorandum of understanding (“MoU”) on co-operation in regulation and supervision of the insurance industry between insurance regulators of the EAC partner states on 11August 2010 could be looked at as suggesting a step in the right direction towards the conclusion of a similar arrangement between judicial authorities of the partner member states.235

6.7.2SADC and the Inspiration for Adopting a Regional Cross-Border Insolvency Regime

Unlike Kenya, Tanzania is one of member states of SADC,236 a regional grouping for Southern Africa whose thrust is on the promotion of sustainable and equitable economic growth and socio-economic development through deeper cooperation and integration. Its key objectives are not different from other similar groupings. While SADC is yet to have a regional arrangement for dealing with cross-border insolvencies, consideration has long been given in this regard. Within academic circles, proposals have been made to use the UNCITRAL Model Law on Cross-Border Insolvency as a stepping stone for negotiation of transnational insolvency regime for member states.237 On the other hand the EC

234SB Bossa, ‘Towards a Protocol Extending the Jurisdiction of the East Africa Court of Justice’ (2006) 4 EAJHRD 31-38; See also Treaty for the Establishment of the East Africa Community 1999 arts 14(1)-(3)(b) and (d) and art 8(4). It is noteworthy that the Treaty under Article 8(4) grants sovereignty to community institutions and organs and elevates community law above national laws.

235The purpose of the MoU is to protect policy holders and potential policy holders of insurance companies and to promote the integrity, stability and efficiency of the insurance industry by providing a framework for cooperation, increased mutual understanding, the exchange of information and assistance to the extent permitted by laws, regulations and requirements. See EAC, ‘EAC Insurance Regulators Sign MoU’ (2010) 37 e-EAC Newsletter 3 < http://www.eac.int/news/index.php?option=com_docman&Itemid=70 > accessed 02 September 2010

236SADC is an acronym for Southern Africa Development Community.

237See generally n 16 above; and JL Westbrook and others ( n 88) 247

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Regulation on Cross-Border Insolvency has also been given academic consideration.238

Nevertheless, serious attempts to formulate and discuss proposals for such arrangements have not materialised within the SADC forums yet. This is contrasted by the increasing trend towards cross-border insolvency reform in a number of Southern African countries. An outlier is South Africa, which is unrepresentatively advanced in this regard. Notably, despite the persistent increase in cross-border trade and investment within the Southern Africa region, cross-border insolvency cases which would have inspired the need to speed up enactment of a regional cross-border insolvency framework are still not rampant. Accordingly, the perception towards the urgency and need for such a framework seems to differ markedly across the region depending on a particular country’s level of development and integration.

6.7.3OHADA as an Exceptional Case in Cross-Border Insolvency Regulation in SSA

While OHADA remains exceptional and the leading regional arrangement in SSA for making and implementing the uniform international insolvency regime in recent times, Tanzania and Kenya are neither among its 16 member states nor have they been reported, unlike Ghana and Nigeria, as considering joining the organisation.239 Its members consist of mainly Francophone SSA states. 240 The procedures governing cross-border insolvency, as reflected in the Uniform Act Organising Collective Proceedings, is based on the ECIR. The regime was made in response to the upsurge of the unavoidable effects of globalisation and the

238Ibid

239The OHADA Treaty was signed and became operational in 1995. See P Agboyibor, ‘OHADA: Business Law in Africa’ [1999] Int'l Bus LJ 228

240See text to n 16 and 17 in chapter 1 for details on the member countries and their colonial heritage. See also, CM Dickerson, ‘Harmonising Business Law in Africa: OHADA Calls the Tune’ (2005-2006) 44 Colum J Transnat’l L 17, 19 describing the arrangement as reflecting an agreement by member states ‘to give up some national sovereignty in order to establish a single, cross-border regime of uniform business laws, immediately applicable as domestic laws of each country.’ Elsewhere CM Dickerson, ‘A Comparative Analysis of OHADA’s Uniform Business Laws in West Africa: A French Civilian Structure’s Impact on Economic Development’ < http://ssrn.com/abstract=630623 accessed 12 July 2010, described the initiative as ‘a novel approach to self-determination though [its] articulated purpose is to attract foreign investment which in its turn is favourable to economic development.’

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concomitant quest for investment opportunities by ensuring security among investors and the wellbeing of trade undertakings as a whole and through the existence of a harmonised system of business laws in the region.241

The regime establishes an international framework for collective insolvency proceedings.242 It is founded on one of the fundamental principles of the treaty establishing the OHADA which makes Uniform Acts directly applicable and binding in all member states notwithstanding any conflicting provision of national law.243 The framework provides for automatic recognition of proceedings commenced in a contracting state. Accordingly, where a decision commencing or closing collective proceedings in a contracting state has become irrevocable it is rendered to be res judicata in other contracting states.244 This is effectively intended to make recognition mandatory among the contracting states.

However, despite the automatic recognition of the collective proceedings initiated in one contracting state, competent courts in other contracting states are not constrained from commencing other collective proceedings.245 Whereas the proceedings commenced in the principal place of business of the debtor are according to this framework the principal proceedings, any other proceeding in any other contracting state becomes a secondary collective proceeding. The framework provides for appointment of officeholders in relation to the collective proceedings and accords them authority to exercise their powers under the Uniform Act in the other contracting states within the OHADA region as long as

241Ibid

242This framework is found in OHADA Uniform Act Organising Collective Proceedings Part VI, art 247-256. For a discussion on this framework see B Martor and others, Business Law in Africa: OHADA and the Harmonisation Process (Kogan, London 2002) 159

243OHADA Treaty art 10. The article incorporates a policy of supranationality. It has the effect of abrogating national laws, contrary or identical to those of the Uniform Acts, and precludes the Contracting States from legislating contrary to the Uniform Acts. See B Martor and others (n 242)20; and RF Oppong ‘Re-Imagining International Law: An Examination of Recent Trends in the Reception of International Law into National Legal Systems in Africa’ (2007) 30 Fordham Int’l LJ 296, 307 and 308 quoting in support M Kone, Le Nouveau Droit Commercial Des Pays De La Zone Ohada: Comparaisons Avec Le Droit Francais 5 (2003)

244OHADA Uniform Act Organising Collective proceedings art 247

245Ibid art 251

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there are no proceedings that have been opened in any other member state.246 The decision appointing the receiver may also where necessary be published to other member states where such publication is necessary for security and the interests of creditors.247

The regime provides for pari passu treatment of all creditors.248 Accordingly, a creditor who obtains payment of their claims from the property of the debtor located in another contracting state is required to return such payment to the office holder without necessarily affecting his recovery entitlements.249 What is crucially relevant in relation to co-operation and co-ordination in cross-border insolvency is that the regime makes it a requirement for the officeholders of the principal collective proceedings and secondary collective proceedings to cooperate and co-ordinate with one another, and communicate, without delay, information relevant to the proceedings.250 In this connection, the framework mandates office holders to produce all claims of creditors that have been lodged in their respective proceedings. Consequent to settlement of the claims, the office holders are required to return any surplus asset to other proceedings in other states. In the event of the existence of many proceedings, the return shall be distributed equally among them.251

Notably, despite the niceties of the OHADA regime, it is only applicable where the cross-border insolvency matter involves contracting

246Ibid art 249

247Ibid art 248

248Ibid arts 253 and 255

249Ibid art 250

250Ibid art 252

251Ibid art 256; and JA Owusu-Ansah, ‘The OHADA Treaty in the Context of International Insolvency Law Developments’ ( LL.M Paper, University of Frankfurt 2004) < http://www.iiiglobal.org/component/jdownloads/finish/398/1555.html > accessed 19 September /2011; B Wessels, International Insolvency Law (Kluwer, Netherland 2006) 47. The only case discussed in existing literature where the mechanism was applied thus far is the liquidation of Air Afrique, established in 1961 and owned by eleven francophone African countries, the French Development Agency and some private stakeholders.

252This is the same as the Bankruptcy cooperative arrangements applicable (or was applicable) in Tanzania, Kenya and Uganda. Indeed, this regime is similar to the OHADA framework in that both provide for automatic recognition and enforcement; publication in other contracting states; possibility of concurrent proceedings; communication and co-ordination; and equality in treatment of creditors; and uniform law. However, the scope of concurrent proceedings is very

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Notwithstanding the uniform legislation in the regulation of insolvency proceedings, there is glaringly a lack of provision stipulating guidelines on court- to-court communication and co-ordination on insolvency proceedings with a non-contracting state where also an insolvent debtor may have had an establishment or assets.253 It is thus uncertain how other jurisdictions can cooperate in proceedings undertaken in the context of the OHADA Uniform Act Organising Collective Proceedings. It has in this regard been argued that this anomaly is one that exactly points to the significance of the UNCITRAL Model Law which, if implemented, could come into play when a debtor happens to have establishments in non-contracting states and provision of recognition, cooperation and assistance between courts is desirable.254 It has similarly been argued that it would also be possible to apply the Uniform Act to the case subject to any contrary mandatory provision in the laws of the third party state.255

The substantive law that characterises this framework is based on the French civil law system allegedly adopted with modification to suit the needs of the developing countries.256 It has long been contended by law and finance theorists that countries that inherit or adopt civil law systems, and in particular the French civil law system, tend to be less economically successful than the countries that inherited or adopted the common law system. However, the modern analysis suggests that the French civil system only correlates negatively with development, but does not impede development.257

restricted compared to the position in the cross-border bankruptcy co-operation arrangement under the bankruptcy legislation and BRR in Tanzania and Kenya. On this point See text to n 192 above

253JL Westbrook and others (n 88) 263

254JL Westbrook and others (n 88) 263-264; and JA Owusu-Ansah (n 251) 7

255DN Ngaundje, ‘The OHADA Bankruptcy Law: An Important Step for Regulatory Reforms in Africa’ (INSOL International Academics’ Conference, Radisson Blu Royal Hotel Dublin 11-13 June 2010)

256B Wessels, International Insolvency Law (Kluwer, Netherlands 2006) 45, indicating that the implication of the OHADA Uniform Act organising Collective proceedings in most of the OHADA member states was the replacement of an ancient French colonial law, the Code de Commerce (Commercial Code) of 1808

257CM Dickerson, ‘Harmonising Business Law in Africa’ (n 240) 31; R La Porta and others, ‘Law and Finance’ (1998) 106 J Pol Econ 1113, 1118; R La Porta and others, ‘Legal Determinants of External Finance’ (1997) 52 J Fin 1131;and PG Mahogany, ‘The Common Law and Economic Growth: Hayek Might Be Right’ (2001) 30 J Legal Stud 503; N Thompson,

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