Category: Uncategorized

It is with deep sorrow that we announce the passing of Nana Serwah Godson-Amamoo which incident occurred on March 28, 2024.

Nana Serwah was the lead partner in the firm’s Natural Resources and Extractive Industries Practice Group and a key member of the Public Sector Advisory and Government Business Practice Group. She had over nineteen (19) years’ practice experience and represented our clients on many deals and related sectors.

Nana also served on the Technical Advisory Committee of the Nuclear Regulatory Authority and on the board of United Way Ghana.

A book of condolence will be open at the firm’s Accra offices from Wednesday April 3, 2024, between 9:00 am and 4:00 pm each weekday for friends and sympathizers to pay tribute to Nana.

We will communicate the funeral arrangements as soon as the family provides the details. In the meantime, we request that her family is accorded the privacy needed in this time of grief.

AB and David Africa joins the family and sympathizers the world over in mourning her loss. Nana Serwah will always be in our hearts.

The upsurge in the number of strikes called in recent times by various cadres of workers, including teachers, doctors, nurses, and lecturers, has witnessed a common thread – an outcry for the implementation of Collective Bargaining Agreements (CBAs) between the workers and their respective employers. This has caused a natural spike in the Kenyan public’s interest in the concept of a CBA – what it is, what it entails, and what its implementation means for both the workers and the employers.

What is a CBA?

The concept of collective bargaining is entrenched in the Constitution of Kenya under Article 41 which provides for rights relating to labour relations, including the right to fair labour practices, the right to reasonable working conditions, the right to join and participate in the activities of a trade union and the right to go on strike. Article 4(d) specifically provides for collective bargaining on terms that, “every trade union, employers’ organisation, and the employer has the right to engage in collective bargaining.”

Section 2 of the Labour Relations Act, 2007 (the Act) defines a “collective agreement” as a written agreement concerning any terms and conditions of employment made between a trade union and an employer, group of employers, or organisation of employers. On the other hand, a “recognition agreement” is defined as an agreement in writing made between a trade union and an employer, group of employers or employers’ organisation regulating the recognition of the trade union as the representative of the interests of unionisable employees, employed by the employer or by members of an employers’ organisation.

Ordinarily, the employer first enters into a recognition agreement with the trade union to recognise the trade union for purposes of collective bargaining. The recognition agreement has to be in writing, in line with the provisions of section 54(3) of the Act and it sets out the terms upon which the employer recognises a trade union. Thereafter, the employer and the trade union may negotiate and enter into a CBA which sets out the terms and conditions of employment of the workers.

Simply put, the recognition agreement is the initiating document that provides the enabling environment for trade unions and employers to enter into a CBA. A CBA covers a number of issues affecting the employees concerned, including; hours of work, salaries payable percentages of salary increments, promotions of the employees and the process to be followed in case of termination of their services including redundancy.

Legal Effect of a CBA

Section 59(5) of the Act provides that a CBA becomes enforceable and shall be implemented upon registration by the Employment and Labour Relations Court (ELRC) and shall be effective from the date agreed upon by the parties. Registration of a CBA with the ELRC is therefore a mandatory requirement for it to be legally valid and enforceable. This is the main issue that plagued the 2016/2017 doctors’ strike where doctors in the public sector were seeking a three hundred percent (300%) pay increase pursuant to a CBA between the doctors’ union and the Ministry of Health on behalf of the Kenyan Government. The Government’s position was that the CBA had never been registered with the ELRC and was therefore unenforceable.

The Act further provides that once a CBA is signed, it becomes binding on the parties to the agreement, for the period of the agreement, while the terms of the CBA are incorporated into the employment contracts pursuant to the provisions of section 59(3) of the Act.

For example, during the recent doctors’ and nurses’ strikes, issues of promotions and allowances took center stage and the case advanced in support by the unions was that these were matters covered under the respective CBAs and ought therefore to be implemented as part and parcel of the employment contracts.

Applicability and Relevance

Due to changing circumstances in the world of business and financial constraints in the current world economy, many private companies have been re-structuring their businesses and cutting back on the number of employees that they maintain. As a result, there is a marked increase in the number of terminations of employment, on account of redundancy.

The challenge that these companies are facing in carrying out the redundancy processes is that whether out of omission or commission, they often times do not comply with the prescribed procedures set out in the CBA. Matters such as giving the concerned union at least one (1) month’s notice before effecting a redundancy process and the fact that the company usually has to consider compensating the employees for the number of years served for example, are issues that companies do not always take into consideration.

The concerned employees end up suing the company, whether as individuals or through their unions and the ELRC has not hesitated to apply the provisions of the Act, by finding that the terms of the CBA are binding and ought to be implemented.

Court Decisions

There have been several key decisions handed down by the ELRC in connection with CBAs. In the case of Kenya Plantation & Agriculture Workers Union v Coffee Research Foundation (2014) eKLR the Union brought that claim on behalf of ten (10) Claimants who were the Respondent’s security guards. Here, the ten (10) Claimants had worked for the Respondent for periods exceeding five (5) years, during which the Respondent had concluded a CBA with the Union. The CBA contained a thirteen percent (13%) wage increment for each year and benefits including termination benefits under the retrenchment clause, which the Respondent chose to ignore when it terminated the Claimants’ services. The ELRC found that the Respondent had discriminated against the Claimants and ordered the implementation of the CBA with respect to pay in arrears underpayment of wages and pay of redundancy benefits.

In Kenya Union of Commercial Food and Allied Workers v Kenya National Library Service (2016) eKLR, the Respondent had concluded a CBA with the Claimant union but the Respondent had partly implemented the CBA by paying new salaries, allowances, and part of the arrears. The balance that was left unpaid, it was argued by the Respondent, was an amount that had been factored into the Respondent’s 2014/2015 budget submitted to the parent Ministry, but no funds had been availed to enable the Respondent to implement the CBA. It was the Respondent’s defence therefore that they had not refused to fully implement the CBA but that its hands were tied by the unavailability of funds from the National Treasury.

The ELRC was unimpressed and held that once a CBA has been registered, as was the case in the claim before it, section 59(5) of the Act had already taken effect and therefore the CBA was binding and enforceable and failure to implement any part of the CBA gave the wronged party a remedy of specific performance. The ELRC further held the view that since the Respondent was claiming inability to pay due to acts of a third party, nothing prevented it from joining any such party/parties to the case for them to bear responsibility for the owing dues. In the upshot of its decision, the ELRC entered Judgment for the Claimant against the Respondent for specific performance of the terms of the CBA.

Cases such as the above set strong precedents for the notion that there are no shortcuts to implementing a CBA.

Way Forward?

Public bodies and private entities alike ought to appreciate that collective bargaining is a constitutionally guaranteed right, duly entrenched under the Bill of Rights and that there can be no avoiding of CBAs. All parties ought to be keen at the negotiation table of CBAs so that they fully understand what they are binding themselves to. If any terms seem complex or difficult to decipher, it is advisable to consider seeking legal advice on the same so that those provisions are well interpreted and understood by the parties prior to agreeing to the same.

Employers also need to consider the long-term financial effects of CBAs before negotiation and execution, as it is no defense to blame a third party for non-compliance with a CBA. Unions also need to be aware of the necessary steps to be taken to ensure that a CBA is legally valid and enforceable, so as not to become unstuck at the crucial time of agitating for implementation of the CBA.

On 31st December 2020, the Cabinet Secretary for Lands and Physical Planning, Ms. Farida Karoney published Gazette Notice No. 11348 of 2020 (“the Notice”) notifying the general public of the conversion of specific old land registration numbers to new parcel numbers. The Notice outlines the old registration numbers and the new parcel numbers. It also categorises the listed parcels of land under newly established land registration units, bearing various block numbers.

1. LEGALITY OF THE NOTICE

The Notice is premised on the provisions of the Land Registration (Registration Units) Order of 2017 (“the Regulations”) promulgated under Section 6 of the Land Registration Act, 2012 (“the Act”). Section 6 of the Act empowers the Cabinet Secretary to constitute an area as a land registration unit, as well as vary the unit’s limits at any time.

Under Regulation 4 of the Regulations, the office responsible for land survey is mandated to prepare cadastral maps together with a conversion list for existing titles issued under the repealed land Acts. Thereafter, the cadastral maps and conversion list are presented to the Registrar, who forwards them to the Cabinet Secretary for publication in the Kenya Gazette and two (2) national dailies within thirty(30) days of receipt. The Cabinet Secretary is required to specify in the publication, a date not exceeding four (4) months when new land registration units are to take effect.

It is on this basis that the Notice was published and specified 1st April 2021 as the effective date. All subsequent dealings in the listed parcels will be undertaken in the new registers, under the new land registration units, from that date henceforth. Likewise, all existing registers shall be closed to pave the Way for the operationalization of the new registers by that date. Nevertheless, the closed registers and supporting documents will be retained in both physical and electronic formats.

Any aggrieved person having an interest in a property listed in the Notice, may in the meantime lodge a complaint with the Registrar within ninety (90) days of the Notice’s publication. The person may also register a caution pending clarification or resolution of the complaint. There is also a further avenue for appeal of the Registrar’s decision to court.

Lastly, the Registrar will initiate the process of migration of titles for the affected properties. This will be done by advertising in two (2) national dailies and on radio stations of nationwide coverage, a notice calling upon the concerned owners to apply for new titles in the prescribed format. Each application shall be accompanied by the original title and the owners should make a complaint to the Registrar in the prescribed form (Form LRA 96) set out in the regulations regarding the conversion list or the cadastral map: Pending the resolution of any complaint, apply for registration of a caution in the prescribed form (Form LRA 67) set out in the regulations. registration documents, for proof of ownership. Once new titles are issued, the previous ones will be canceled and retained by the Registrar for safekeeping.

2. EFFECT OF THE NOTICE

From the 1st of April 2021, all transactions with the outlined parcels of land shall be carried out under the new registers. As such, the owners of those parcels should acquire new titles to enable future effective dealings in their properties. Any aggrieved person may within ninety (90) days from 31st December 2021:

• Make a complaint to the Registrar in the prescribed form (Form LRA 96) set out in the regulations regarding the conversion list of the cadastral map; or
• Pending the resolution of any complaint, apply for registration of caution in the prescribed form (Form LRA 67) set out in the regulations.

3. REGISTRY INDEX MAPS

Vide Press Statement issued to expound on the Notice, the Cabinet Secretary has indicated that the

conversion would also entail the use of Registry Index Maps(RIMs), as registration instruments to replace deed plans, with the use of RIMs expected to minimize land fraud, given that they capture all land parcels within a designated area, whereas a deed plan only captures data on a specified parcel. This would ostensibly make it easier to detect any changes or alterations.

4. CONCLUSION

It is evident that the conversion exercise is a novel undertaking with far-reaching consequences.  Therefore, the affected proprietors must be vigilant and compliant with all the notices or requirements that the Cabinet Secretary or Registrar may prescribe, to facilitate a smooth transition of their respective properties’ records. In the meantime, they should also where necessary, seek clarification or lodge complaints, to ensure that their concerns are promptly addressed.

On 7th May 2021, the Cabinet Secretary for the Ministry of Lands and Physical Planning (the “Ministry”) issued a notice (the “Notice”) informing the general public of the conversion of long-term leases that do not conform with section 54 (5) of the Land Registration Act, 2012 (the “LRA”) and section 13 of the Sectional Properties Act, 2020 (the “SPA”).

Section 54 (5) of the LRA stipulates that the Registrar shall register long-term leases and issue certificates of lease to confer ownership in apartments, flats, maisonettes, townhouses, or offices (collectively “units”). The registration and issuance of title will only be done where the units comprised are properly geo-referenced and approved by the statutory body responsible for the survey of land.

Section 13 (2) of the SPA stipulates that all long-term sub-leases that were intended to confer ownership of an apartment, flat, maisonette, townhouse, or office and were registered before the commencement of the SPA, shall be reviewed so as to bring them into conformity with section 54 (5) of the LRA highlighted above.

 

In a bid to harmonize the foregoing provisions of the LRA and SPA, the Ministry is set to embark on the conversion of long-term leases previously registered on the basis of architectural drawings, to conform with the current land regime. Further, the Ministry has stipulated that from 10th May 2021, it will no longer register long-term leases supported by architectural drawings intending to confer ownership. We however note that as of the date of this alert, the Lands Office, for the time being, continues to accept long-term leases supported by architectural drawings.

The effect of the Notice is that all sectional units shall now be required to have properly registered sectional plans. All sectional plans submitted for registration should be geo-referenced, indicating the parcel plans, the number identifying the unit, the approximate floor area of each unit, and the user of the units. The sectional plans must also be signed by the proprietor and signed and sealed by the Director of Survey.

For purposes of conversion of already registered long-term sub-leases, the owners of the property will be required to make an application in the prescribed form and attach the following documents to the land’s registry:

• a sectional plan;
• the original title document;
• the long-term lease previously registering the unit; and
• the rent apportionment for the unit.

The Registrar may however dispense with the production of the original title if the developer is not willing or is unavailable to surrender the title, for the purposes of conversion.

Upon submission of the above, the sectional plan will be registered, and the previous register closed. A new register will be opened with respect to each unit in a registered sectional plan and a Certificate of Lease issued. It is indicated that owners will not incur fresh or additional stamp duty charges upon conversion if the requisite stamp duty was paid when registering the long-term lease.

The above developments come in the wake of numerous land-related changes in Kenya, ranging from digitization to conversion of titles issued under old land title regimes to new titles. In spite of the progressive steps taken, there are still some concerns around the conversion process. These include the absence of clearly articulated procedures for conversion; regulatory gaps as the draft Sectional Property Regulations are still at the stakeholder engagement stage; and opacities in relation to ongoing transactions.

We note that the Law Society of Kenya and the Ministry are currently engaged in discussions to resolve some of the issues arising from these legislative gaps. We are, therefore, keenly following these developments and ongoing discussions and shall keep you updated

The Supreme Court of the United States has recently handed down a decision upholding Google’s use of part of the JAVA SE API Code (the SE Code) created by Oracle. Google had, in the course of creating a new Android Platform for smartphone networks, copied approximately 11,500 lines of the SE Code thereby prompting the institution of the suit by Oracle on the grounds of alleged copyright infringement. Google contested this suit, arguing that its use of the SE Code did not amount to copyright infringement as the same fell within the permitted fair use exception under copyright law.

Over the course of protracted litigation, the lower Courts had concluded that Google’s copying of the SE Code did not fall within the permitted fair use exceptions. However, in overturning the lower Courts’ decisions, the Supreme Court found that Google’s adoption of the SE Code in the circumstances of the case fell within the ambits of fair use. In particular, the Supreme Court was of the view that Google could not be deemed culpable of copyright infringement on the grounds that Google only copied what was needed to allow programmers to work in a different computer programming language, without discarding a portion of familiar programming language.

The decision, which is set to upend current thinking within the software developing community, extends the application of the fair use doctrine, in that rights held in copyright, will not be deemed to be infringed where the copied content is applied towards transformative use. Practically, the decision is poised to create wriggle room for developers to use existing codes within licensed software programs, so as to build interoperable platforms, without the risk of incurring liability for copyright infringement.

This view marks a radical shift from the exclusive protections granted under copyright and is likely to offset a multitude of renegotiations of existing multinational software licensing agreements in a bid to set out the permitted uses of licensed software.

Closer home, whereas the decision is of persuasive, rather than binding force in Kenya, the precedent is nevertheless likely to impact software developers and software companies alike, with the expanded use of the doctrine of fair use, quite consistent with the fair dealing doctrine provided under the section 26 (3) of the Copyright Act, 2001.

As such it will be critical for software developers and software companies to undertake a review of their licensing agreements including the terms and conditions to better safeguard their intellectual property.

Kirani Ayat (‘Kirani’) tweeted on 27th September 2022 that: “The president of Ghana has used my video ‘GUDA’ in this ad to promote Ghana. I was actively reaching out to the Ministry of Tourism in 2018/19 to use this video to push tourism in the North and got a ‘NO’ in reply, yet today it’s in an ad and no one has reached out to me for permission”.

Kirani’s tweet has attracted a lot of comments:

On 27th September, the Joy FM online platform published, ‘Kirani Ayat Calls Out Akuffo-Addo, Tourism Ministry after a promo video featured shots from his ‘Guda’ visuals’.

The Ghana Tourism Authority (GTA) issued a statement dismissing Kirani’s claims and argued that his rights to the content used for the promotional video by the president had not been infringed upon, since they obtained the right to use the contents from an agency.

Samsal, the creative agency mentioned by GTA, has stated that the video it created for GTA is not what has been published and that it never authorized GTA to publish the content.

BBC News Africa reported: “Ghana’s President Nana Akufo-Addo has been accused of using a musician’s work without permission or credit to advertise the country to tourists”.

The above comments raise legal issues related to copyright infringement in Ghana regarding content created by artists. This article examines regulation of copyright in Ghana and the legal issues arising in the Kirani case.

Copyright

Copyright is a right (both economic and moral) that enables creators of literary and artistic works such as writers, artists, painters, musicians, software developers, and others to receive recognition for their creative work. The rights are conferred in the expression and not dependent on registration. The right entitles the author of the creative work to:

• authorize or prohibit the use of their work by others;
• claim authorship of the work and demand mention whenever used; and
• receive compensation for the use of their work.

Effective Copyright System

The essence of copyright law is to confer rights on the author and protect his or her expression from unauthorized use. To effectively achieve that goal, an efficient copyright system must be anchored on three (3) pillars:

1. Appropriate copyright legislation – the Copyright Act, 2005 (Act 690) and the Copyright Regulations, 2010 (L.I 1962) cater to this.
2. Sufficiently developed system for management of rights. There are three (3) Collective Management Organisations (CMOs) at the moment, namely:

• the Ghana Music Rights Organisation (GHAMRO);
• the Audiovisual Rights Society of Ghana (ARSOG); and
• CopyGhana (a Reprographic Rights Organisation).

3. Enforcement – i.e. the system of sanctions to be applied when rights under the law are infringed.

Copyright Infringement

Infringement of copyright is the unauthorized use of copyrighted work in a manner that violates the copyright owner’s exclusive right to produce or perform the copyrighted work. Infringement includes piracy, plagiarism, duplication, distribution, and exhibition in public places. Most affected works are music, audio-visual work (films, music videos, etc.), books or literary work, and computer software.

Any such unauthorized use constitutes an infringement that breaches the author’s rights. Such breaches constitute an offense under the Copyright Law – which provides that offenses include reproduction, duplication, extracts, imitation, and importation (except for private use). A person found guilty of copyright infringement can face civil or criminal prosecution. The civil remedies available under the law include injunction, compensation, seizure, forfeiture, or destruction of offending materials.  In addition to civil remedies, the law provides criminal penalties for violations or infringements which include a jail-term and/or a fine.

Enforcement Measures

The system of sanctions to be applied when rights under the law are infringed are grouped as civil remedies, criminal sanctions, and border measures. A person whose copyright has been violated can approach the court for redress by way of civil action. The court may grant an injunction to prevent the infringement or prohibit the continuation of the infringement. Additionally, criminal prosecution can be initiated when a report is made to the relevant institution. In respect of imported goods, a report can be made to the Customs Excise and Preventive Service to detain the goods.

Legal Issues Arising – The Kirani Context

The issue arising in this case is that Kirani has alleged a breach of his copyright on the basis that permission was not obtained by the GTA for the use of his ‘GUDA’ video. If this allegation is true, it means Kirani can make a claim for copyright infringement. However, GTA will not be considered to be in breach where it is able to establish that it obtained the requisite permission for the use of the ‘GUDA’ video.

A number of legal issues arise based on the above facts: including whether the GUDA video is protected under law; who the GUDA video’s owner is; whether permission was granted by the owner; the rights granted and the terms on which they were granted.

Is the Material Protected Under Copyright Law?

Generally, the protection of copyright is not dependent on registration. Literary work is typically protected under law unless the work has fallen into the public domain. Work that has fallen into the public domain is work with expired protection, work of authors who have renounced their rights, and foreign work that does not enjoy protection in Ghana.

From the facts available, the GUDA video has not fallen into the public domain. Consequently, its use must be subject to permission from the author.

Identify the Owner

Identifying the work’s owner is crucial in obtaining permission. Some kinds of art, such as video content and recorded music, can involve multiple owners. The recognized organizations that currently manage copyright in Ghana are the CMOs listed above. Hence, persons who wish to use copyright work can contact the relevant CMO.

From the facts available, GTA has stated that it obtained rights from Samsal to use the GUDA video for a promotional video. The issue arising is whether the creative agency was authorized by any of the CMOs to grant GTA the right to use the GUDA video.

Rights to Use Copyright Work

Copyright holders have the right to permit others to use their work for agreed purposes. The granting of a permit can be done in one of two ways:

• Assignment – transfer ownership of the copyright to another person
• License- grant of a copyright license whereby another person (licensee) is allowed to use the work based on agreed terms.

Generally, licensing is the preferable method as it allows copyright holders to keep the copyright over their work.

1. Identify the Rights you Need

There is a need to identify the rights needed when asking for rights to use copyright work. Each copyright owner controls a bundle of rights related to the work, including the right to reproduce, distribute, and modify the work. Because so many rights are associated with copyrighted work, the rights needed must be specified.

The GTA has stated that per terms of the MoU[1] it executed with Samsal, Samsal was to “Deliver imaginative and impactful social strategies, such as content or documentaries for the use of GTA ‘as it so wishes”. It is unclear what right Samsal had that enabled it to grant GTA any rights in the GUDA video.

1. Term/ Payment Negotiation

The length of time for which you are allowed to use a work is often referred to as the ‘term’. Your rights under a license agreement will often be limited in duration.  If there is no express limitation on its use, you are allowed to use the material for as long as you want or until the copyright owner revokes the permission. In reality, the copyright owner can only grant permission for as long as the owner’s copyright protection lasts. Additionally, when negotiating permission to use copyright work, payment must also be negotiated.

From the facts, Kirani did not receive payment for the use of the GUDA video for the promotional video.

1. Get it in Writing

Relying on an oral agreement or understanding is not sufficient. The user and rights owner may have misunderstood each other or remembered the terms of the agreement differently. This can lead to disputes. It is essential that the two parties enter into a well-drafted license agreement that sets out the license’s use.

Conclusion

We must be reminded that the original intention of copyright law is not to prevent information usage but to protect against infringement. To achieve this, there must be a commitment to safeguarding the rights of both creators and the persons who seek to use their ideas. Many people who violate copyright law may do so simply out of ignorance. There is therefore a need to seek relevant advice prior to using the creative work of others. In the Kirani case, it is recommended that the parties negotiate a settlement – pursuant to which a license agreement is entered into that specifies the consideration payable to the author and terms under which GTA can use the GUDA video.

Intellectual property refers to inventions of the mind that are intangible in nature and are protected such as trademarks, Patents, Copyrights, and related rights and industrial designs.

They are a core component of most businesses in the 21st Century and valuable assets for which management efficiencies are as important as any other asset. The dynamics of globalization and the effects that it has on strategies for every business, whether national or multinational, require that businesses pay closer attention to opportunities that help maximize benefits to the company and reduce costs to free up resources for other strategic interests of the business.

Given its territorial nature, the protection of IP has often been undertaken by local, regional, and multinational entities at the national level. That means that subsidiaries or branches at the national level are left to determine and follow up on the protection and enforcement of IP rights in their respective jurisdictions. This in turn impacts the cost of protection and enforcement, quality control, and ultimately the overall business strategies of the group.

A number of regional and international frameworks for IP protection however exist that can help reduce dispersed protection measures and facilitate central management and uniform strategy formulation for the group without impacting on local peculiarities of the business. Though enforcement ultimately remains territorial, these regional and multinational processes greatly contribute to better and central control of enforcement strategies and facilitate the exchange of best practices.

The ARIPO System

In this edition, we provide commentary on the ARIPO System which is the key Africa region framework of significance to multinationals with Kenyan operations/interests.

ARIPO was the result of an idea mooted at a regional seminar on patents and copyright held in Nairobi in the early 1970s and the first draft agreement on the creation of a regional intellectual property organization was adopted in 1976 by a diplomatic conference – The Lusaka Agreement [also known as the draft Agreement on the Creation of the Industrial Property Organization for English-speaking Africa (ESARIPO)]. The idea was that the organization would serve mainly Anglophone countries. In practice that remains the case with very few exceptions. A number of lusophone and francophone countries have since joined ARIPO (The latest being the Republic of Sao Tome and Principe). Membership remains open to any member of the African Union or the Economic Commission for Africa.

The principal idea behind the establishment of ARIPO was the pooling of resources of member countries in industrial property matters in order to utilize the maximum available resources in these countries to ensure effective protection of industrial property, capacity building, and training of staff in their respective industrial property institutions, development, and harmonization of laws and general efficiencies.

Legal Framework

The Lusaka Agreement on the Creation of the African Regional Intellectual Property Organization (ARIPO)

The Lusaka Agreement was adopted at a diplomatic conference at Lusaka (Zambia) on December 9, 1976, and established ARIPO at Article 1 thereof.

Pursuant to its functions and powers under the Agreement (Article VII) the Administrative Council of ARIPO has developed protocols and regulations that form the background of the legal and operational design of intellectual property protection in member states under the system. These include:

The Harare Protocol on Patents and Industrial Designs within the Framework of the African Regional Industrial Property Organization

The Banjul Protocol on Marks; and

The Swakopmund Protocol on the Protection of Traditional Knowledge and Expressions of Folklore.

Membership to the Lusaka Agreement does not necessarily imply membership to the protocols. Each protocol applies to different aspects of intellectual property and membership to each is voluntary.

The Harare Protocol

The Harare protocol applies to the protection of patents and Industrial designs and currently has 19 contracting States, namely; Botswana, The Gambia, Ghana, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Rwanda, Sierra Leone, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe and the Democratic Republic of São Tomé and Príncipe (the latest member as at August 19, 2014).

How the filing System works: brief overview

The Harare Protocol provides a framework for the filing and protection of patents and industrial designs within member states.  The Protocol is supplemented in its provisions by administrative regulations that make further and detailed provisions for the manner in which an application is treated from the date of filing to the grant of patent or refusal as the case may be.

There are principally two regulations under the Harare protocol in this regard;

1. The regulations for implementing the protocol on patents and industrial designs within the framework of the African Regional Intellectual Property Organization (‘the regulations); and
2. The administrative instructions under the regulations for implementing the protocol on patents, industrial designs and utility models within the framework of the African regional intellectual property organization (the Administrative instructions)

The regulations are made by the Administrative Council pursuant to section 5 of the Harare Protocol and mainly deal with substantive matters relating to the content of applications filed with the ARIPO office including on the requirements for patentability, the right of priority, Appeal procedures against decisions of patent examiners and treatment of PCT applications under the ARIPO system.

Administrative instructions, on the other hand, are made by the office of the Director General of ARIPO pursuant to rule 2(5) (a) of the regulations and mainly deal with the day-to-day administrative requirements of ARIPO including the formality details in respect of applications under the protocol, filing timings, fees payable for each service, detailed steps in the filing and examination of applications up to grant, notification and communication procedures, the forms to be used for various filings etc.

Patents

In summary, the ARIPO system is registration-based and subject to notifications of refusal by national offices whereas the PCT system is a filing system.

An applicant for the grant of a patent for an invention or the registration of an industrial design can, by filing only one application, either with any one of the Contracting States or directly with the ARIPO Office, designate any one of the Contracting States in which that applicant wishes the invention or industrial design to be accorded protection.

The ARIPO Office, on receipt of the patent application, undertakes both formality and substantive examination to ensure that the invention that is the subject of the application is patentable (i.e. it is new, involves an inventive step, and is capable of industrial application).

If the application complies with the substantive requirements, copies thereof are sent to each designated Contracting State which may, within six months, indicate to the ARIPO Office that, according to grounds specified in the protocol, should ARIPO grant the patent that grant will not have effect in its territory.

For industrial design applications, only a formality examination is performed. If the application fulfills the formal requirements, the ARIPO Office registers the industrial design which has effect in the designated States. However, the same right to communicate to the ARIPO Office within six months that the registration may not have effect in the designated States concerned is reserved.

The Administrative Council, at its Second Extraordinary session held in April 1994, adopted amendments to the Harare Protocol and its Implementing Regulations to create a link between the protocol and the WIPO-governed Patent Co-operation Treaty (PCT). This link commenced operation on July 1, 1994, and has the following effects:

Any applicant filing a PCT application may designate ARIPO which in turn means a designation of all States party to both the Harare Protocol and the PCT;

The ARIPO Office acts as a receiving office under the PCT for such States; and

The ARIPO Office may be elected in any PCT application.

All current Harare Protocol Contracting States are also signatories to the PCT.

The Banjul Protocol

The Banjul Protocol on Marks, adopted by the Administrative Council in 1993, establishes a trademark application filing system along the lines of the Harare Protocol. Under the Banjul Protocol, an applicant may file a single application either at one of the Banjul Protocol Contracting States or directly with the ARIPO Office. The application should designate Banjul Protocol Contracting States as the States in which the applicant wishes the mark to be protected once the ARIPO Office has registered it.

States currently party to the Banjul Protocol are Botswana, Lesotho, Liberia, Malawi, Namibia, Swaziland, Tanzania, Uganda and Zimbabwe. (Total: 9 States.). Kenya is yet to accede to this treaty so trademark filing can only be done locally or through the Madrid system as we shall see in the next edition of the newsletter.

Since 1997, the protocol has been extensively revised in order to make it compatible with the TRIPs Agreement and to make it more user-friendly.

Conclusion

The ARIPO system is highly advised for clients with regional interests. We represent a number of clients in patent applications using the system and recommend it for cost savings and efficient management of the application process (more so for bulk applications) in several member countries.

In the next edition of the newsletter, we shall provide commentary on international filing systems to give a broader perspective for multinationals operating in Africa and beyond.

Conventional debt and equity financing models have become largely inaccessible amidst the economic slump that has been occasioned by the global financial crisis. The ramifications of this have been felt in Kenya where there has been a slow-down in lending to the private sector. This has inadvertently resulted in a deceleration of economic growth as traditional lenders have scaled back on loan disbursements. This has also been exacerbated by the capping of interest rates chargeable by banks and financial institutions which was introduced in 2016.

The decline in credit issuance and uptake has affected the recent slowdown of Kenya’s economic performance due to the general election in 2017 which greatly affected the country’s economic outlook. These are clear manifestations of a paradigm shift needed in Kenya in the manner in which capital is raised by various entities. But there is hope, with the world economy bouncing back from the global recession in 2010, reforms have been made in the traditional financing models in Kenya. Against this backdrop, companies now have the recourse to explore alternative financing models to remain competitive and profitable.

Sale and Leaseback Transactions

Sale and leaseback financing has proved to be an attractive option for some companies that seek to keep up with their growth strategies. Essentially a sale and leaseback transaction involves a sale of an interest in property with a reservation on the possessory terms. The underlying characteristic of these kinds of transactions is that the seller acts as a lessee and they raise the capital through the property that they hold by transferring the property to a buyer through the sale. This transaction enables the seller to dispose of the property and obtain capital injection for the business while maintaining the use of the same property at an agreed lease premium for a specified term. This is especially beneficial to a buyer who seeks to incur the least possible maintenance costs of the property.

Characteristics

A sale and leaseback financing model varies from traditional financing models because it typically entails:

A sale of assets by an entity that desires to raise capital from the property to an investor who seeks to achieve a low-risk, high-yield investment

Simultaneous obtaining of a long-term lease of the property by the seller-lessee from the buyer-lessor which enables the continuing possession and use of the property by the seller-lessee in exchange for payment of rentals at an agreed premium

The retention by the seller-lessee of most of the risk and rewards incident to ownership save for the right to mortgage where the lease is an operating lease

Transfer of substantially all the risks and rewards incident to ownership where the lease is a capital lease.

Classification of Leases

Whether a lease shall be classified as an operating lease or a capital lease is usually agreed upon at the inception of the transaction. It is important to classify the lease the parties intend to enter into as both have different effects on the parties.

A lease will be classified as an operating lease where the rental premiums are considered operating expenses in the seller-lessee’s book of accounts, and the property leased does not form part of the seller-lessee’s balance sheet. On the other hand, a capital lease is considered a loan to the seller-lessee and is stated as such in the seller-lessee’s books of account. Most leases in a typical sale and leaseback transaction will be operating leases. However, a capital lease would arise where there is a buyback agreement contained in the lease; there is a buyback option with a defined price in the lease; or the lease value is greater than ninety percent (90%) of the value of the property.

Advantages and Disadvantages

Certain advantages have been identified to inure with the sale and leaseback financing model. One key motivation for adopting this financing model is the tax advantages that flow from these transactions. It has been noted that in the majority of these transactions, the seller is usually motivated by the need to realize immediate loss which is used to offset the seller’s operating income. The seller in essence receives proceeds from the sale of a non-liquid asset, yet retains for a term the use and possession of the asset.

The seller in a sale and leaseback transaction obtains a greater amount of capital through a leaseback than when they opt for conventional types of borrowing.

Needless to say, this financing model is essential in providing working capital to the seller-lessee who will realize approximately one hundred percent (100%) of the market value of the property unlike debt and equity forms of financing which may not result in the same returns. This is especially important in markets experiencing fluctuations in conventional lending sources.

For the buyer-lessor, this financing model allows it to have a hands-off approach to the management of the property as it incurs no responsibility for the operational or managerial aspects of the property which is left to the seller-lessee.

A sale and leaseback transaction also comes with its fair share of challenges, a notable one being a high-interest rate on the lease that the rental property may attract. Tax implications may also be evident with recent changes in the International Financial Reporting Standards.

The fact that the property is no longer under the ownership of the seller lessee also means that the seller-lessee may have no say with regard to the interest that the buyer-lessor will charge on the leased property. This may in the long run mean that the seller-lessee has to incur higher costs in using and managing the property as this responsibility does not rest with the buyer-lessor. This denotes an inherent risk that is evident in many lease arrangements.

It is clear that the sale and leaseback financing model is an option Kenyan companies could consider in their quest to raise capital to finance their growth strategies in the market. Numerous advantages can be drawn from the adoption of this model, especially in light of the drawbacks of conventional financing models.

Moreover, this model is attractive to entities that are unable to attract a wide variety of financing. This financing model may be useful for companies that may want to accrue some capital to use for their expansion initiatives. Ultimately, these entities could benefit from unlocked real estate value, reduction in a company’s investment in non-core business assets, such as buildings and land, and freeing-up of the entity’s cash in exchange for executing a long-term lease

Mergers and acquisitions (M&A) activities have become an important channel for investment in Africa for both global & local market players.  Over the past decade, Africa’s real GDP grew by 4.7% a year, on average—twice the pace of its growth in the 1980s and 1990s. Therefore, the continued desire to purchase and acquire financial institutions in Africa is not by accident. As the continent readies itself for post-pandemic recovery, the opportunities presented by the AFCFTA across Africa and the post-pandemic focus will remain key factors in attracting valuable mergers and acquisition activity. This article examines the case of Crane Bank Uganda Limited (CBL) in Uganda and offers insights on the role of central banks as statutory liquidators and the risks businesses must avoid while doing business in Africa.

CBL was closed and placed under receivership by the Bank of Uganda (BOU) in September 2016 following an audit report that revealed insufficient capital levels, shrinking liquidity ratios, surging loan default levels, and gross mismanagement, among others. The non-performing loan ratio recorded in the bank’s credit portfolio was estimated at 30 percent, a figure higher than the overall industry loan default rate that stood at less than 10 percent during the same period. Bank of Uganda subsequently transferred assets of CBL to DFCU Bank (a rival bank in Uganda) in an acquisition transaction the subject of this article.

Dr. Sudhir Rupareila (largest shareholder) was subsequently sued by BOU as a liquidator for siphoning $111.8 million from the failed bank over three years. The Liquidator equally sought recovery of 48 properties forming CBL’s branch network across Uganda held in the names of Dr. Sudhir Rupareila and Meera Investments as shareholders of CBL.

Uganda’s auditor General’s report revealed that BOU did not carry out a valuation of the assets and liabilities of CBL but relied on the inventory report and due diligence undertaken by DFCU in accepting their bid. BOU invited DFCU to bid for the purchase of assets and assumption of liabilities of CBL on 9th December 2016 while DFCU submitted the bid on the 20^th December 2016 a day before the production of the inventory report.  It is not surprising that DFCU 2021 results showed it had lost UGX313 billion or 12% of its customer deposits. Deposits with their lending dropping by 15% from UGX1,775.3 billion to UGX1,508.4 billion affecting the value of their total assets by nearly 10%

Parliament probe into the sale of CBL revealed that there were no guidelines or policies in place to guide the identification of the purchasers of banks to determine the procedures for the sale and transfer of assets and liabilities of the defunct banks to the eventual purchasers and that BoU did not document the evaluation of alternatives and the assumptions arrived contrary to section 95 (3) (b) of the FIA, 2004.

The reliance by BOU on the due diligence undertaken by an interested party and eventual purchaser was imprudent, and an abdication of its role under section 95 (3) of the FIA, 2004. BoU in conducting this sale owed a fiduciary duty and duty of care to ensure that all its activities are conducted in the best interests of the financial institution. Interestingly, the Supreme Court of Uganda on the 25^th day of June 2022 placed a check on the supposed blanked authority of BOU as a statutory liquidator holding that liquidation of the defunct Crane Bank did not affect its corporate existence as a company. Once liquidation ended, the Shareholders were entitled to reclaim whatever assets were held by the company after the statutory liquidation. The Directors of Crane Bank successfully blocked the takeover of properties claimed by BOU as statutory liquidator as forming and parcel of the liabilities taken over by DFCU upon acquisition of the defunct bank.

Availability of credit and at competitive prices are major factors that promote the growth of businesses. Two of the main problems that face Ghana’s small and medium-scale enterprises arethe unavailability of credit and the cost of credit. A critical look at this problem reveals that it is not primarily unavailability but rather, the conditions for accessing available credit that most entities are unable to meet. In particular, the requirements for businesses to provide comfort to financial institutions on their ability to repay the loan and acceptable collateral as a fallback measure in the event that they are unable to repay.

We will take a look at the issues relating particularly to collateral arrangements from both the perspective of borrowers and lenders.

 

Funding of Businesses

Businesses require capital for their operations to generate income. Capital is provided in two main ways – through the resources of the business owner or by borrowing from relatives, friends, business associates or financial institutions. Financial institutions lend money to make money. Two factors primarily determine the ability of businesses to obtain credit from financial institutions – first, the legal capacity of the entity and second, its creditworthiness.

For a business to be credit-worthy, it must demonstrate its ability to repay the loan given. It can do this by showing that there are potential future receivables that will be available to repay the loan. A business must demonstrate that:

Lenders will look at the whole business cycle of the entity to conclude on the above factors. Assessing the operations of the business including its potential income is, therefore, key to the ability of the business to secure credit. This will also include looking at the borrower’s previous financial statements to determine the past financial performance of the business. In spite of the borrower’s ability to meet the above conditions, there are events that could happen in the future which may affect the above factors. Lenders, therefore, want a fallback measure to recover loanswhere such future events occur. This introduces the issue of collateral. Typically, if lenders are assured of the above position, the issue of collateral may not arise.

Collateral

Collateral generally covers fallback guarantees and securities available to a lender in the event the borrower defaults in repaying the loan as agreed under the loan agreement. Collateral or security interest may generally cover:

Collateral is a fallback measure. Lenders do not grant a loan primarily with a view to enforce the fallback measure (collateral). Lenders must, therefore, require and obtain any of the above collateral only after assessing that there are potential risks to the operations of the business which may affect the future receivables that will be used for the repayment of the loan.

Over-collateralization

Imagine you have a house valued at Ghc150,000. You have applied to the bank for a loan of GHc10,000 for your company and the bank has requested the house as collateral. In addition, the bank has asked that you provide a personal guarantee in the event the company is unable to pay. Then, for good measure, the bank has asked that you pledge your shares in the company as collateral. This situation is the over-collateralization situation. Another example may be where on an application for a personal car loan, the financial institution requires a guarantee from your employer, your salary to be passed through the financial institution with charge over the account, a charge over the car, assigning proceeds from comprehensive insurance over the car, and taking life insurance with proceeds assigned to the financial institution. This is after the usual requirement for the borrower to pay upfront 10 – 25% of the cost of the car. The situation can be compared to intending to kill a fly with a sledge-hammer. From the borrower’s perspective, that is problematic. The issue of over-collateralization has been one of the silent factors discouraging businesses from accessing credit.

Whilst financial institutions may see it as fully underwriting all possible risk, this adds to the cost of credit particularly since the security documents must be stamped and perfected. The cost of stamping is 0.5% of the secured amount for the principal security, and 0.25% of the secured amount for each additional security. It does not matter if all the security are included in the same document. This must be a problem for the financial institution itself as it makes the institution less competitive. Such cost, together with the interest charged, processing and other applicable fees make the cost of obtaining a loan prohibitive for businesses. This feeds into the narrative of high cost of lending. In order to be competitive, financial institutions must be mindful of the type of security and number of securities to take as a fallback position in the event of default of the borrower. A number of ways are suggested below for consideration by financial institutions.

Avoiding over-collateralization

Any of the suggestions below must be implemented within the context of assessing the potential risks that the collateral is to cover. In order to avoid over-collateralization, the following can be implemented:

The suggestions above are not exhaustive and must be implemented within the specific context of the risk exposure the financial institution intends to cover.

Conclusion

It is important for businesses, especially small and medium–scale enterprises, to always assess the cost of borrowing prior to entering into any financial transaction. A business must check its financial health and ensure that repayment of loans will not have the potential to cripple the business. Where security is required, the business must ensure that the security provided is commensurate with the loan amount plus interest. As much as possible, businesses should attempt to negotiate fair collateral packages rather than settling for over-collateralized loans out of desperation for a loan. Financial institutions should have policies on requirements for collateral and nature of security to take. This will feed into the competitiveness of financial institutions.

Many businesses require financing for growth and financial institutions also need to provide these credit facilities in order to grow. Although lending and borrowing may seem like an everyday transaction and fairly straightforward, it is particularly important for lenders to aim at reducing credit cost while providing financing to businesses. This will make loans more accessible for all types of businesses and will ultimately contribute to business and financial growth for both lenders and borrowers. A win-win for all.