1. INSOLVENCY IN THE MIDDLE EAST AND AFRICA
Bob Wessels
Professor International insolvency law, University of Leiden
2010/2011 INSOL Scholar for the Europe, Middle East and Africa region
bwessels@bobwessels.nl
On the African continent OHADA is a known acronym for Organisation pour
l’Harmonisation en Afrique du Droit des Affaires or Organization for the Harmonization of
Business Law in Africa. The OHADA Treaty was signed in 1993 and, having received the
required number of ratifications, came into effect in 1995. The contracting countries to
OHADA are: Benin, Burkina Faso, Central-African Republic, Comoros, Equatorial Guinea,
Gabon, Guinea, Guinea-Bissau, Ivory Coast, Cameroon, Congo, Mali, Niger, Senegal, Chad
and Togo. These countries represent an economic market of far over 100 million people.
OHADA aims to add to, to renew or to harmonize national law of the aforementioned
countries on certain topics such as general trade law, company law, securities law, collection
of accounts, arbitration and insolvency proceedings. On January 1999 as a part of its
legislative framework the Uniform Act Organizing Collective Proceedings for Wiping Off
Debts came into effect. OHADA’s sixteen members mainly are West and Central African
countries that have the French language and legal tradition in common. The OHADA Treaty
generally aims to further economic collaboration and integration by means of harmonization
of laws, laid down in standardized Acts. OHADA has its own institutional framework, based
on public law, with a permanent secretariat (in Cameroon) and a Common Court of Justice
and Arbitration (in Ivory Coast). The ‘Standard Acts’ or ‘Uniform Acts’ are immediately
binding for the associated States. The Acts are seen as carriers of the common law of the
contracting States and a uniform interpretation will be encouraged by the Common Court.
The ‘Uniform Insolvency Act’ contains 258 articles. In most of the associated States this Act
has replaced ancient French colonial law, the Code de Commerce (Commercial Code) of
1808, setting aside later changes and renewals in some of the OHADA-countries. In its key
points the Uniform Act reflects French national insolvency law as it was in the mid 1990s.
The Act contains three proceedings: (i) pre-insolvency proceedings (règlement préventif),
aimed at avoiding the cessation of payments or the cessation of activity by a company or
making possible the extinguishment of debts through a preventive composition agreement,
(ii) reorganization proceedings (redressement judiciaire) aimed at safeguarding a company
and at extinguishing debts through composition with creditors, and (iii) liquidation
proceedings (liquidation des biens) aimed at selling the assets of a debtor in order to pay his
debts (Article 2). The framework for these three proceedings has been clearly laid down in the
Act. The Act excludes from its scope debtors who do not act in the course of a profession or a
business. Furthermore, the Act excludes farmers and craftsmen.
In June 2008, during a seminar, Evelyn Mandessi Bell underlined the aim of OHADA’s
insolvency provisions, being the avoidance of economic and social setbacks resulting from the
defaults of insolvent debtors and allowing them the recovery of their undertakings. The most
notable implementation issues still are (i) the lack of publicity of some rulings granting the
benefit of a insolvency status to insolvent debtors, (ii) voluntary reorganization agreements
used by some debtors to stop their creditors’ legal proceedings, and (iii) the ‘the dictatorial
management’ of such proceedings by receivers.1
Another issue relates to the possible
enlargement of OHADA (to Cameroon, which is partly common law oriented). As often in
mixed jurisdictions obstacles arise, such as dealing with the integration or alignment of
1
www.ohada.com

2. concepts of civil law and those of common law, the translation of civil law concepts and
norms, but also the limited availability of legal information regarding the Acts and their
application by courts (if there are any).2
Very interesting are OHADA’s international
insolvency law provisions, based on Article 10 of the OHADA Treaty making the Uniform
Acts directly applicable in all Contracting States. The ‘Uniform Act Organizing Collective
Proceedings for Wiping off Debts. Part VI. International Collective Proceedings’ comprises
Articles 247 to 256. Its model is based on automatic recognition of a decision initiating or
closing collective proceedings pronounced in a Contracting State in the other States. Receiver
may exercise, within the OHADA territory, all the powers conferred on him by this Uniform
Act as long as no other collective proceedings have been initiated in any Contracting State.
The ‘main’ proceeding will have universal, whilst collective proceedings are initiated on the
territory of a Contracting State where the debtor has ‘his main place of business or the
corporate body its registered office’, these shall be called ‘principal collective proceedings’;
where these proceedings are initiated in the territory of a Contracting State where the debtor
‘does not have his main place of business or the corporate body its registered office’, these
proceedings shall be referred to as ‘secondary collective proceedings’. Directly following the
introduction of ‘principle’ and ‘secondary’ collective proceedings, Article 252 introduces for
the receivers in these proceedings a duty of reciprocal information: ‘They shall communicate,
without delay, all information which may be useful for other proceedings, in particular the
statement of production and verification of claims and measures aimed at putting an end to the
collective proceedings for which they are appointed’. In addition the receiver in secondary
collective proceedings shall enable the ‘principle’ receiver to present proposals relating to the
liquidation of property or to any use of assets of the secondary proceedings. Secondary
collective proceedings by preventive composition agreement or by composition with creditors
or by liquidation of property may be terminated only after consent is given by the receiver of
the principal collective proceedings, to which Article 254 provides certain periods and
criteria. Four provisions relate to the position of creditors: (i) he must return what he has
obtained through payment of his claim in the secondary proceeding (Article 250(1)), (ii) he
will be discharged when he has paid his debt to the debtor, before the publication of collective
proceedings initiated in another Contracting State (Article 250(2)), (iii) he may lodge his
claim in the principle and in all secondary proceedings (Article 253), and (iv) the ‘hotchpot-
rule’ is applicable: a creditor who obtained, in collective proceedings, a dividend on his claim,
shall take part in distributions opened in other proceedings only where the creditors with the
same rank have obtained, in the said other proceedings, an equivalent dividend (Article 255).
The similarities with the EU Insolvency Regulation are striking: (i) the principle of automatic
recognition, (ii) the rules on publication in the other State, (iii) the possibility of two
proceedings (main proceedings and secondary proceedings), (iv) cross-border communication
between receivers, and (v) the pari passu treatment of creditors. The EU Insolvency
Regulation seems to have proven its status as providing a benchmark for other regional
initiatives with regard to cross-border insolvency. On the other hand, within the European
Union harmonization of domestic insolvency laws has proven to be almost impossible, where
OHADA with some 250 Articles spells out in great detail the collective proceedings which
are available in the OHADA States, the functions and roles of participants – including the
principle of equal treatment of creditors – in these proceedings and the procedural measures to
ensure harmonization in all the Contracting States.
A rather fresh initiative has been presented under the abbreviation MENA, Middle East and
North Africa. MENA is formed by Egypt, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar,
2
See Marc Frilet, Implementing the Rule of Law in Sub-Saharan Africa: Appraisal of the OHADA Model after a
Decade, in: 8 Business Law International, no. 3, November 2007, p. 254ff.

3. Saudi Arabia, the United Arab Emirates and Yemen. MENA can be seen a regional
benchmarking project to assess all topics of insolvency and creditor rights and its possible
necessity for reform. The project was undertaken by the Hawkamah Institute for Corporate
Governance, with the assistance, amongst others, of and INSOL International. A survey of
these countries’ insolvency law has been published late 2009.3
The survey shows that most
laws in this region (with the exception of Dubai International Financial Centre, DIFC)4
are
amongst the least developed in the world with respect to the re-organisation of troubled
companies. Examples are given of the lack of incentives for debtors, creditors and trustees to
enter into the insolvency process and of the general ineffectiveness of the enforcement of
insolvency systems. Some illustrations: debtors can be deprived of their civil and political
rights, debt-discharge is not available, payment to workers and tax claims must be paid before
the secured creditors are compensated, and a high level of court involvement with a
multiplicity of possibilities of appeal.5
This is the main reason that Hawkamah and its
international partners agreed to establish a regional forum to drive the reform of insolvency
and creditor/debtor regimes and to establish an efficient design of ‘insolvency laws and the
related procedural and administrative steps involved in the insolvency process for businesses
can strengthen financial markets, promote investment and credit flows, protect the rights of
various stakeholders, and assist MENA countries in adjusting to external and domestic
shocks.’ On the agenda of dialogue for reform will be:
(i) within the MENA region existing law should be tested against international standards and
practices, in particular in the area of reorganisation of companies;
(ii) that although Gulf states seem to have stronger insolvency laws than the other MENA
countries, they need to improve creditor information systems and a clear legal system of
international insolvency law to deal effectively with cross-border cases. At the moment
Kuweit recognises and enforces foreign final insolvency judgements, based on reciprocity,
whereas Lebanon is using a procedure of exequatur. DIFC and Egypt offer forms of assistance
to foreign administrators.
As in other parts of the world, practitioners can help to elevate and advance MENA’s
insolvency and debtors rights agenda, including assisting in training programmes for judges
and their peers, insolvency practitioners.
3
Available via www.hawkama.org.
4
The well known case of Dubai World’s restructuring is based on a specific Decree, see Patrick Bourke, Dubai
World – The Legislation and How it May Work, INSOL World, Second Quarter 2010, p. 10ff.
5
See Omneia Helmy, The Need for Insolvency Systems Reform in the MENA Region, Chapter 5 in the Report.
For practical experience, see Mahesh Uttamchandani, Operational Restructuring in the MENA Region, report of
a technical session during the INSOL Dubai conference, 21-23 February 2010, INSOL World, Second Quarter
2010, p. 22.