"Businesses going abroad need to be respectful of foreign legal environments," says Julian Jackson, director and cofounder of Deneys Reitz's Africa Legal Division. "Africa has 53 countries, and there are major differences of legal approach and jurisprudence between the legal systems of former English colonies, French and Belgian codified systems, Portuguese systems and Roman-Dutch systems, to name just a few."
Jackson says the single most common mistake made by companies entering other parts of Africa is that they fail to conduct a careful legal due diligence, both in respect of the applicable legal regime and also their counterparties.
WHAT IT MEANS
 Conduct careful legal due diligence
Document deals in line with global practice
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"One client recently came to us having found out - too late - that he had bought a business in Angola which was not authorised to remit profits to SA," says Jackson. He says firms expanding into the rest of Africa, and particularly those doing so for the first time, need to ensure they are prepared for unusual issues. Also, business culture and protocol may vary.
He commends several African governments for their efforts in making their countries more appealing to foreign investors. "They are revising and relaxing many laws which can be deterrents, including introducing privatisation regimes relating to utilities or infrastructure, internationalised taxation laws, investment laws and company establishment procedures. Some countries have also made good progress improving their judicial systems, including some who have set up specialised commercial courts with appropriately skilled judges. Many countries have also enacted legislation to recognise and enforce foreign arbitral awards and foreign judgments readily, a significant concession to international business.
"It would be prudent for international companies to engage the services of international lawyers," says Jackson. "They play a vital role and make an important contribution in the oversight of local legal issues. However, this does not detract from the importance and role of local lawyers, who are often excellent, and who should be closely involved."
Another point Jackson emphasises is that companies should fully document their deals, in line with international practice. "Don't take shortcuts because you are not in London or New York. The documentation process helps the parties to manage expectations, flush out problems in advance, and ensure that risks are allocated appropriately. That said, one needs to be practical about documentation and avoid smashing a walnut with a sledgehammer."
Melanie Murcott
Jackson cautions that companies intent on expansion across Africa need to consider how to manage and operate their international operations as part of their wider group strategy. Often, clients want to replicate the business model that has worked for them at home abroad. "Each jurisdiction is unique. For example, in Mozambique, founding documents of the company which are based on SA precedents require modification to accommodate the local laws, and this can affect governance and shareholder rights in important ways. But even so, we have yet to come across a good deal that could not be done because of any perceived interference' of local law."
As with all international transactions, SA companies cannot automatically assume that their home law will govern their cross-border agreements. The other party may feel disadvantaged by that choice of law and may insist on their own or a neutral legal system.
Though parties hope for smooth contractual relationships, disputes can arise. "Some operational disputes, such as local employee dismissals, must be resolved in the national courts or tribunals. But the parties to purely commercial contracts can usually influence where disputes should be resolved, and this gives the parties a great deal of control."
Melanie Murcott of Africa Legal says international contracting parties should decide upfront if disputes should go through public court litigation or international arbitration. She says international parties tend to prefer international arbitration which is seen as a neutral choice, but they must be careful to specify the most appropriate arbitral tribunal and which international arbitration rules should apply.
"Interestingly, SA is arguably a less attractive seat for international commercial arbitration because, among other things, unlike a number of other African jurisdictions, it has not yet adopted the UNCITRAL Model Law, a framework that attempts to harmonise national laws pertaining to international arbitration. In SA, the courts also have wider discretion to reopen or interfere with arbitration proceedings."
Jackson says the overriding aim of Africa Legal when helping companies expand into the rest of the continent is to create reasonable risk profiles.
