Political instability has been increasing across Francophone Africa for a number of years, notably as a result of a string of coups d’état across West Africa. Recent takeovers by the military in Niger and Gabon have further elevated concerns about further instability across the continent.

On 6 October, the Johannesburg office of Herbert Smith Freehills (HSF) hosted a seminar to discuss the increased political instability across the region as well as how investors can navigate the legal risks if they are operating within those and other African jurisdictions. The session was led by HSF partners Patrick Leyden (from the Johannesburg Office) and Paris-based partners Laurence Franc-Menget and Paul Morton.

The HSF team was also joined by Shawn Duthie, an associate director at Control Risks, who provided an update on the political and security situation across the region. This has included coups d’état or other unconstitutional changes of regime in several jurisdictions over the past three years, including in Burkina Faso, Mali, Guinea, Chad, Niger and most recently Gabon. Each of these events has specific causes or triggers, but there are a number of common themes across the different jurisdictions. These include frustration with established political elites and a failure to improve economic conditions and (particularly across the Sahel) tackle a deteriorating security situation.

These changes in regime result, by definition, in significant changes to government stakeholders and interlocutors, as well as (to varying degrees) instability in the legal framework for investors. In this increasingly complex political landscape, how does an investor navigate the legal risks that accompany these sudden changes?

The panel discussed a range of investor tools to address the legal implications of unconstitutional regime changes. These centered on the importance of a contractual relationship with the State and the benefits that this provides to investors, including notably guarantees to maintain the stability of legal and fiscal regime applicable to an investment. Where there is an increased risk of a dispute with a host State, access to international arbitration, as well as bilateral and multilateral investment treaties, are key protections.

In addition to examining these legal tools, the panel also discussed the importance of considering any sanctions applied as a result of these events and any impact these may have on investments in the country.

Many of the structural factors leading to these events show little sign of improvement in the short-to-medium term. In addition, the response from regional bodies, such as the Economic Community of West African States (ECOWAS) and the African Union (AU) has been limited. The risk of ongoing political instability therefore remains high in many parts of the continent. As a result, investors will need to ensure that they are well prepared and equipped with as many of the legal tools as possible for protecting their investments.

 

Key Contacts

 

Paul Morton
Paul Morton
Partner
+33 1 53 57 76 76

Laurence Franc-Menget
Laurence Franc-Menget
Partner
+33 1 53 57 73 70

Patrick Leyden
Patrick Leyden
Partner
+27 10 500 2625