ECOWAS Law on Establishment – a test for Ghana, Nigeria relations?

By accident of geography, Ghana and Nigeria find themselves living close to each other along the West African coastline of Gulf of Guinea. This has resulted in a relationship, with exchanges between the two countries, that countries, which dates back to long before recorded history began.

This relationship is evidenced in the many commonalities between the two people in culture, language, religion, colonial experience, politics, and social life.

One characteristic of such relationships is the occasional tension that rears its head every now and again. It is, therefore, no wonder that the two countries, regarded as more prosperous among the 15-member Economic Community of West African States (ECOWAS), have had their fair share of tension and competition.

The latest in their long history of conflicts was the recent agitation in the retail trade which reignited the age-old animosity between the two countries. In June and August last year, Nigerian retail traders in Ghana complained of unfair treatment by their local counterparts.

Again, in June this year, some aggrieved local retailers in Kumasi forcefully removed Nigerian traders from their stores. The stores were later reopened following intervention by the security forces and the culprits reprimanded.

What has come to show their resentment is a petition that the Nigerian retail traders sent to the head office of ECOWAS in Abuja last year. In the petition, they sought ECOWAS’ intervention in what they claimed was wrongful eviction from their businesses in Ghana, which they alleged infringed on their rights under the provisions of the ECOWAS Treaty and protocols.

Following these incidents, the President of the Association of Nigerian Traders in Ghana, (NUTA), Chief Chukwuemeka Nnaji, has called for a review of the Ghanaian laws that prohibit foreigners from engaging in retail trade to synchronize it with the ECOWAS protocols on trade.

ECOWAS Treaty and Protocols

The Nigerians based their claims on Article 4(1) 1990 of the ECOWAS Supplementary Protocol on Free Movement of Persons, Right of Residence and Establishment which provides that “in matters of establishment and services, each Member State shall undertake to accord non-discriminatory treatment to nationals and companies of other Member States.”

The term “right of establishment" is defined in Article 31 as “the right granted to a citizen who is a national of the Member State to settle or establish in another Member State other than his State of origin, and to have access to economic activities, to carry out these activities as well as to set up and manage enterprises, and in particular companies, under the same conditions as defined by the legislation of the host Member State for its own nationals.”

Article 2 of the ECOWAS Protocol expands the definition and explains that the term “right of establishment” includes “access to non- salaried activities.” Furthermore, “the exercise of such activities as well as the creation and management of enterprises and companies which comply with the definition contained in Article 3 ... are subject to the same conditions stipulated by the laws and regulations of the country of establishment for its own nationals.”

In this context, Article 3 of the ECOWAS Protocol states that “...companies which are formed in accordance with the laws and regulations of a Member State with their headquarters, central seat of administration or principal establishment within the Community shall be considered in the same category as individual nationals of Member States.”

Thus, a company registered in Nigeria with its headquarters in Nigeria would be entitled to the right of establishment in Ghana and can participate in domestic economic activities under the same conditions stipulated for Ghanaians under Ghanaian laws and regulations.

Significantly, as exceptions, it is provided in Article 4(3) that the provisions of the ECOWAS Protocol are “without prejudice to the application of legislative and administrative provisions, which provide a special treatment for non-nationals and are justified by exigencies of public order, security or public health.”

GIPC Law

In Ghana certain economic sectors have been reserved for Ghanaians. Under Section 27(1) of the Ghana Investment Promotion Centre (GIPC) Act: “a person who is not a citizen or an enterprise which is not wholly owned by a citizen shall not invest or participate in ... the sale of goods or provision of services in a market, petty trading or hawking or selling of goods in a stall at any place.”

Other sectors reserved for Ghanaians are the operation of taxi or car hire services in an enterprise that has a fleet of less than twenty-five vehicles; the operation of a beauty salon or a barber shop; the printing of recharge scratch cards for the use of subscribers of telecommunication services; and the production of exercise books and other basic stationery.

The rest of the sectors prohibited to non-Ghanaians are the retail of finished pharmaceutical products; the production, supply and retail of sachet water; and all aspects of pool betting business and lotteries, except football pool.

GIPC Act Section 28 provides that “(1) A person who is not a citizen may participate in an enterprise other than an enterprise specified in Section 27……. ....where the enterprise is wholly owned by that person, invests a foreign capital of not less than five hundred thousand United States dollars in cash or capital goods relevant to the investment or a combination of both by way of equity capital in the enterprise.” In addition, the enterprise must employ at least twenty skilled Ghanaians. [Section 28(4)].

It is further provided that “a person who is not a citizen may engage in a trading enterprise if that person invests in the enterprise, not less than one million United States dollars in cash or goods and services relevant to the investments. [Section 28(2)]. For purposes of the GIPC Act, “trading” includes the purchasing and selling of imported goods and services. [Section 28(3)].

This then seems to be the crux of the matter: i) were Ghanaian authorities acting in accordance with the GIPC Act violating the ECOWAS Protocol on Freedom of Establishment? ii) was it wrong for the Ghanaian retailers to forcefully removed their Nigerian counterparts from their shops.

In the first instance, the Ghanaian authorities would appear justified in their action as Article 3 of the ECOWAS Protocol clearly states that only “...companies which are formed in accordance with the laws and regulations of a Member State …shall be considered in the same category as individual nationals of Member States. The GIPC Act, it could be argued, constitutes a valid exception to the ECOWAS Protocol as legislation which provides “special treatment for non-nationals” that can be justified under the grounds specified in Article 4(3) of the ECOWAS Protocol.

It could be further advanced that the Ghanaian officials acting to safeguard the fundamental right of Ghana, as a sovereign state to enact laws distinguishable from those of the ECOWAS Protocol and applicable exclusively to Ghanaian citizens under the relevant GIPC law, cannot be faulted.

It was definitely wrong for the Ghanaian retailers to close down Nigerian shops without recourse to the law in the second instance, and it was right that the security agencies quickly intervened to restore calm.

The Nigerian traders caught in the web of the exercise by the Ghanaian authorities were engaging in petty trading in stark contravention of the GIPC law which prevents non-nationals from engaging in such activity.

The traders had clearly violated the laws of Ghana for so long and it was quite disingenuous of them to storm the ECOWAS headquarters to try and disparage the image of the country which still accommodates large numbers of Nigerian business people as well as other nationals from other ECOWAS countries and beyond, who are operating in accordance with the laws of the nation.

Nigeria

Ghana is not the only ECOWAS-member country that has laws that have reserved certain types of trading activity to only their nationals.

Section 17 of the Nigeria Investment Promotion Commission Act, Chapter N117 (Decree No. 16 of 1995) Laws of the Federation of Nigeria, provides that:

“except as provided in section 18 of this Act and subject to this Act, a non-Nigerian may invest and participate in the operation of any enterprise in Nigeria.”

Section 18, however, notes: “the provisions of this Act shall not apply to the ‘negative list’ as defined in Section 31 of this Act.” In turn, Section 31 defines the “negative list” as the list of those sectors of investment prohibited to both foreign and Nigerian investors ... and such other items as the Federal Executive Council may, from time to time, determine.”

Significantly, Section 31 of the Act defines “enterprise” in the following terms: “enterprise... means an industry, project, undertaking or business to which this Act applies or an expansion of that industry, undertaking, project or business or any part of that industry, undertaking, project or business and, where there is foreign participation, means such an enterprise duly registered with the Commission.”

From the definition, it is apparent that Ghanaians and other non-Nigerians who wish to operate businesses in Nigeria must register them with the Nigerian Investment Commission, but that condition would not apply to Nigerians wishing to operate their businesses in Nigeria. Therefore, the law could be argued to be discriminatory.

Moreover, the Nigerian legislation does not identify the criteria that would be used for registering businesses that have foreign participation, opening up the possibility that supporting regulations or administrative measures could set out criteria that would effectively bar foreigners from certain sectors of the Nigeria economy.

In this manner, the Act could enable the Nigerian authorities to reserve some economic sectors to its citizens albeit in an indirect manner that contrasts sharply with the more specific and express style adopted in the Ghanaian statute to protect part of its domestic sector.

Another issue with the Nigerian law is that the reference to a “negative list” could potentially be used to protect the Nigerian domestic sector inasmuch as it allows for inclusion in the list of “such other items as the Federal Executive Council may, from time to time, determine.”

Nothing in the law appears to prevent the Nigerian Government from including an economic sector or activity in the negative list which would serve to bar the participation of non-Nigerians in the sector or activity.

Cote d’Ivoire

Similarly, Cote d’Ivoire has legislation which on face value appears not to be discriminatory but would provide adequate policy space to protect parts of the country’s domestic sector.

Article 4 of the Ordinance No. 2012-487, dated June 7, 2012 on the Investment Code of Cote d’Ivoire provides as follows. “This Code shall apply to all private investments made in Cote d’Ivoire by an individual or legal entity, with the exception of investments eligible for specific aid schemes established by the General Tax Code or specific laws.”

It is submitted that in accordance with Article 4, some domestic sectors could be identified as eligible for ‘specific aid schemes’ under other Ivorian laws and benefit from measures of protection which may include provisions barring the participation of non-Ivorian nationals in those sectors.

Conclusion

Ghana, after all, is not the only country where certain aspects of the trade are preserved for nationals. Any attempt to repeal the law restricting certain aspects of the trade to its citizens must be on a reciprocal basis where similar laws in member-ECOWAS states are also removed.

As the sub-region and the whole of Africa seek greater interaction and integration among its people, as evidenced by the coming into force of the Africa Continental Free Trade Area, it is important that the gray areas between domestic laws and the international protocols reached among the countries are streamlined and carefully defined.

This will give clarity and point out all the non-negotiable areas in trade not included in the greatly liberalized multi-lateral agreements coming into force soon and help put an end to such disturbances as in the recent past.