The most widely read magazine for Canadian lawyers
Issue link: https://digital.canadianlawyermag.com/i/50838
The western bias is even more pro- Natural resources such as gold, diamonds, copper, and platinum, here being mined in South Africa, are the focus of much international investment in Africa. made great strides in modernizing their commercial laws and court sys- tems to accommodate the increased pace of investment, particularly with the OHADA agreement covering much of French-speaking West Africa. But political corruption spilling into the legal system is still a concern and must be guarded against, says Jean-François Mercadier, who leads Heenan's mining practice out of the firm's Paris office. "One cannot ignore corruption in Afri- ca, it is a fact that corruption is still there," says Mercadier. "It is often nec- essary to keep your contract and the disputes in a safe framework to export the particular mediation and to put it under the arbitration under the Interna- tional Court of Arbitration or any kind of recognized system of settlement." That's an observation echoed by Mer- cadier's Montreal colleague. "Despite the fact that they are adopting new laws and new codes [they] really are still very deficient," says Bouchard. "Most international investors will seek inter- national dispute resolution" as part of any foreign investment. The uncertainty that comes with Africa's still-developing and less-than- certain legal structure also affects how foreign entities structure their invest- ments, the Heenan lawyers say. Often projects or investments will include a local company that will hold the neces- sary licences and permits to operate the business but the ultimate ownership of the investment will be in a holding company that has been established out- side of Africa. For a Canadian firm to be successful in the diverse and uncertain terrain of so many countries, it needs to cultivate a large and robust roster of local lawyers on the ground, stresses Mercadier. "It is absolutely key to have a network of corresponding lawyers, and we have a network of corresponding lawyers, to back up the legal advice and helping you in the necessary lobbying that you have to do with the local administration, the local tax authorities, the local mining or telecom authorities." As well, Canadian or other foreign legal firms cannot offer legal opinions in the African countries in which they operate, so they also have to work with local lawyers licensed to practise there. Despite their necessary role in the process, local African lawyers will not be vying for work from large west- ern firms anytime soon, observes Mer- cadier. "The clients that come to us are sophisticated international companies. They want a thorough review of the law, they want due diligence to be car- ried out in the way western firms do, so they rely on us to do that work. We usually prepare the opinion, we usually prepare the legal due diligence, and we check of course our conclusion with the local lawyers, but it is not something that the local lawyers could do in the current structure of legal market." nounced when one considers that the money for investment in Africa still predominately comes from large banks or syndicates of lenders in financial centres such as London, New York, or Toronto, or indirectly from inves- tors in the form of the public markets. When it comes to staking mining and resource projects in Africa, the Canadi- an markets play an outsized role given our equity markets serve as a magnet for international mining and resource companies as a place to sell shares and seek capital from investors. Those Canadian-listed, but not nec- essarily Canadian, companies often cast their gaze hungrily on Africa. "From my client's perspective, Africa has a lot of attraction," says Mark Wheeler, a mining partner with the Toronto office of Borden Ladner Gervais LLP. "Min- ing and exploration companies have to trade off exploration risk against politi- cal risk. Africa is relatively unexplored compared to North America certainly and even arguably South America and it has a long history of very large min- eral deposits. Geologically, it is a great place for them to be and it is just a mat- ter of choosing your jurisdictions to manage your political risk." Risks and challenges for compa- nies investing in Africa go beyond the chance of a revolution, upheaval, or in the case of the Democratic Republic of the Congo, war to social issues. "Most African countries you are doing busi- ness with are very poor," says Wheeler. "You have got poverty issues, education issues, infrastructure issues, those are all challenges." Countries such as South Africa and Zimbabwe have also intro- duced indigenization requirements to ensure historically disadvantaged peo- ple have ownership interests in mining developments that add another layer of complexity to project development. BLG does not have any offices in Europe or Africa to service its clients, but instead relies on alliances with law firms in places like South Africa where it has long-standing relationships. Wheeler agrees with the prevailing view in Canada that a permanent presence www.CANADIAN Lawyermag.com OCTO BER 2011 31 PlATmiN lTd.