In-house counsel doing business in Africa have called for more local law instruction.
Daniel Whitehead, deputy general counsel and director, with responsibility for Citibanks agency and trust business in EMEA, said a lack of domestic lawyers was one of the biggest concerns when carrying out transactions in Africa.
Its a real concern, said Whitehead, speaking at IFLRs inaugural Africa Forum on May 31. Once you get beyond the main legal markets, you can very swiftly find yourself in a market where there are maybe two or three decent law firms, if youre lucky.
The lack of capacity to advise among often-stretched local law firms can become a problem if a deal falls over and parties need to enforce security.
Imagine a situation with a syndicated loan, most likely the big local banks are involved and have lent to a big corporate that they are now trying to sue, said Whitehead. If the lenders want to enforce security then they will require high-quality legal advice and the chances of the two or three decent firms in the area not being conflicted are remote.
Another key structural issues to consider when doing deals in Africa is whether local courts will enforce contractual terms.
There is often uncertainty around whether a court will enforce the clear terms of a contract, added Whitehead. This can be a problem in even the most sophisticated jurisdictions in Africa.
According to Brian Marcus, director, corporate finance, oil and gas, with Standard Chartered, the biggest challenge lay in understanding the security structure in a new jurisdiction.
We need to ensure that we understand how security interests have been created in the past in that jurisdiction or if there are any limitations on creating such interests at all, said Marcus.
Another issue is tax and the associated issue of currency controls.
Whitehead queried whether or not his bank would run into regulatory problems if, as security agent, it liquidated an asset and tried to get cash.
A security agent on the ground is in a different position to the offshore lender pumping money into the transaction, said the Citibank director. Security agents are very much exposed to the local environment.
Whitehead questioned whether there was demand for the services of a major international bank.
Demand could be adequately provided by local suppliers who may well be cheaper and whose due diligence process will probably take much less time, he said.
But he said it was equally feasibly that an international syndicate of lenders would want to use a big bank, if they are familiar with the institution and those within it.