Category: Law Firms

Cryptocurrencies: regulatory mapping in the Europe, America and DR Congo

Gaby KABUE 
Managing Partner

Abstract

The appearance of cryptocurrencies is the subject of several issues for many years. The most often issues raised by these instruments including technological, political, economic, monetary, financial and legal. Less than 10 years after their emergence, they have emerged from the shadows, sparking great interest from companies and individuals, as well as Central banks and other authorities.1 In June 2018, more than 1.600 cryptocurrencies 2 have been inventoried  for estimated market capitalization of $ 270 billion.3 Across the world, new initiatives are developing to invest in the cryptocurrencies market.4 In addition, the exponential development of cryptocurrencies impacts the real economy. Indeed, the are attracting  the investors as well as entrepreneurs who follow up the trend of market price. However, the cryptocurrencies sector is surrounded by criminal activities such as money laundering and terrorist financing. Moreover, they are characterized by volatility, lack of consumer protection, etc. In fact, the cryptocurrencies are seen as constraint, opportunity and risk.5 Therefore, the regulation of cryptocurrencies is one of the concerns of the States. Obviously the regulatory approaches vary from country to country, some welcoming, others cautious and others absolutely hostile. It is in this optic that we are carrying out the regulatory mapping in the Europe, America and DR Congo.

Keywords: cryptocurrencies, Blockchain, regulation, Central Bank of Congo, money laundering, tokens, Bitcoin, ICO.

 

 

 

 

1- Cryptocurrency: what does it mean?

Cryptocurrencies are digital currencies that have developed outside of any State control and that operate in decentralized manner.They exist only on peer-to-peer computer network, it means on  decentralized and distributed Blockchain system. They are the expression of social movement and libertarian inspiration which reject centralized systems. Cryptocurrencies aim the elimination of banknotes  and coins. Moreover, they are not issued by the Central banks and their value does not depend on the States, governments or general bank policies. They are purely private currencies, without legal tender, without any physical or financial backing. But it does not mean that they are not regulated; they are regulate as long as  part of Blockchain in which everyone can participate schematically.

2- Bitcoin: popular cryptocurrency

Currently, there is several cryptocurrencies in the financial market including: Nano (XRB), Ethereum (ETH), Stellar Lumens (XLM), Bitcoin (BTC), Request Network (REQ), Neo (NEO), Ripple (XRP), Icon (ICX), Enigma (ENG), Dogecoin (DOGE).

Indeed, Bitcoin is the most traded cryptocurrency in the world and represents a significant share of the cryptocurrency market. He is considered a pioneer in the world of cryptocurrencies.

It was created in 2009 by Satoshi Nakamoto. During its creation, definition, operation and code, Bitcoin was chosen, that at the end, it should reach  just 21 million Bitcoin, no more. In the first quarter of 2019, around 17.62 million Bitcoins have been inventoried in the global market. So we still have to create as many and it will certainly require decades.

Logically, once the number of 21 million Bitcoins reached (a limit which could be reached around 2140s), the financial market will automatically exchange them in the classic way, but except that there will not be more than this « scarcity » which makes the value of Bitcoin. It’s like gold or any other precious metal. Bitcoin obeys the law of supply and demand; and that’s what makes it unique.

3- Are cryptocurrency investments dangerous?

Indeed, the cryptocurrency investments are truly dangerous. These are the kind of investments that everyone can not afford. It is possible to lose your money invested, but it can be possible to earn money very quickly.

It should be noted that cryptocurrency investments relay on volatile supports. According to policies related to cryptocurrencies investment, the principle is: « invest only when you are ready to lose ». Because, the future of cryptocurrency market is a mystery and its market is imprescriptible.

In the investment framework, it is relevant to take into account the shadows and lights of cryptocurrencies.   Among the lights we mention the anonymous,  transparency  and  decentralization characters  allow almost instantaneous transfers (less than ten minutes), zero fees (lower than those of bank cards or PayPal, global exchanges, absence limit in the amounts transferred, absence of intermediary to store or transfer cryptocurrencies (the possibility for anyone to exchange them).

As the shadows, we note that cryptocurrencies are limitless. They present the potential risks of money laundering and terrorist financing, criminal or illegal activities at global scale; the lack of consumer protection in the event of risks or scams.

4- New questions of cryptocurrency law

The rise of cryptocurrencies, especially Bitcoin, is not without posing the legal issues. Thus, it exists the list of legal issues related to Blockchain technology, in particular the legal qualification and classic adaptation notions of applicable law, competent jurisdiction, liability, mode of proof, anti-competitive agreements, property, guarantees, confidentiality, third-party trust, the legal status of « smart contracts », the personal data processing (the right application to rectification, deletion and forgetting of data), the problem of internationalization operations of the public Blockchain, in other words the stakeholders of Blockchain operating under pseudonyms and without limitation of national borders, which is absolutely difficult to establish responsibilities in the event of fraud or illegal activity, without forgetting the issue of the supervision of ICO (Initial Coin Offering) which is the procedure for raising funds via issuance of digital assets exchangeable for cryptocurrencies.

It should be noted that lawyers are wondering about the ownership and transfer of cryptocurrency. The cryptocurrency, such as Bitcoin, is it « erga omnes right »? Does Bitcoin a debt right? Other questions deserve to be asked in the event of disputes about Bitcoin exchanges: what are the possible remedies and against whom? Which are the competent courts? And what is the applicable law? Bitcoin, can be assimilated to common currency?

These legal issues are seen as major challenges for some countries that have allowed the use of cryptocurrencies for financial transaction purposes.

5- The regulatory approaches of cryptocurrencies in Europe and in America

Although the cryptocurrencies present significant economic and financial opportunities; some countries have taken different regulatory approaches  on cryptocurrencies in order to ensure legal security for the investors.

Before addressing this subject, it is important to note that despite the regulatory initiatives adopted in these continents, it is difficult to achieve an extensive regulation because the cryptocurrency is an asset that is not regulated by itself (because it is not a currency), however rather it is the uses of cryptocurrency that are increasingly regulated. It should also be mentioned that what is more regulated is money laundering and terrorism financing.

In the United States, cryptocurrency is not legal tender. Exchange of currencies for cryptocurrency depend from State to State. Laws governing exchange also depend from State to State, and federal authorities differ in their definition of « cryptocurrency » concept.

In Latin America, on the other hand, cryptocurrency laws vary from country to country. The regulation of cyber-crime covers the entire legislative spectrum. Mexico, Argentina, Brazil, Venezuela, and Chile have regulated cryptocurrencies. They are commonly accepted as a form of payment by retailers and merchants.

In Canada, the cryptocurrencies are not legal tender. However, since 2013, the Canada Revenue Agency has imposed taxes on cryptocurrency transactions. But, it should be noted that Canada is  truly proactive by  dealing with cryptocurrencies. In 2014, he enacted the Money Laundering and Terrorist Financing Act. This Act is subject to entities that carry out cryptocurrency transactions. As for exchanges, cryptocurrency exchange regulations are not uniform at provincial level, but at federal level, the authorities consider cryptocurrencies as securities.

In the  European Union level, so far the European Parliament has not adopted a specific directive on cryptocurrencies. However, cryptocurrencies are generally considered legal across all the bloc, the regulation of cryptocurrency exchange depends on each member State.

In addition, the European Union law provides for the European anti-money laundering and counter terrorism financing directive7, which defines « a crypto-asset as digital representation of value that is not issued or guaranteed by the Central bank, which does not necessarily attached to currency which is legal tender and does not have the legal status of currency, but accepted by companies and individuals as medium of exchange and can be transferred, stored or exchanged electronically ».8

In addition, it exists the European directives that provide obligations for cryptocurrency platforms to put in place rules requesting the origin of funds9.

France has adopted an original approach regulating the issuance and circulation of tokens. Two Orders (from 2016 and 2017) came to regulate financial innovations linked to Blockchain. It has also adopted the PACTE law.10 This law establishes a new regulatory regime relating to fundraising by issuing tokens (ICO).11

6-What about the regulation of cryptocurrencies in DR Congo?

Like the monetary and financial regulatory authorities in the Europe, America and Africa, the Central Bank of Congo(CBC) has taken a position on the issue of cryptocurrencies or virtual currencies.
The CBC has several times published « Public notices » and « press releases » 12 warning the public against illegal collection operations by the public through various denominations: “Cryptocurrency”; “Bitcoins”; “Virtual Currency”, etc.

However, the regulatory and supervisory authority prohibits the population from approaching these malicious structures.

From legal point of view, the cryptocurrencies are not legal tender in DR Congo. In addition, the Government has not yet expressed the intention to adopt specific regulation on cryptocurrencies. He considers that cryptocurrencies contribute to criminal activities, including money laundering and terrorist financing, they do not protect consumers from legal risks.

However, the cryptocurrency sector continues to  interest investors and start-ups in DR Congo. Some people think that the cryptocurrency sector deserves a regulation to ensure the legal security for investments in order to contribute to economic, financial and social development in DR Congo. Some qualify cryptocurrencies as « open source » currency, because at this time any start-up can easily create cryptocurrency and his Blockchain outside of banking system(like local currencies).

References

  1. https://www.bis.org/publ/arpdf/ar2018_5_fr.pdf (consulted on 01 August 2020).
  2. Parliamentary choice report for the evaluation of scientific and technological choices on the technological challenges of blockchains, National Assembly, June 20, 2018, p.50.
  3. G. KABUE KAYOMBO, Comparative law of electronic money; mobile banking and financial services in the digital transformation, United States, Europe, Africa, DR Congo, unpublished.
  4. https://www.cafedelabourse.com/archive/article/bitcoins-monnaie-virtuelle-investir-crypto-monnaie(consulted on 01 August 2020).
  5. P. MARINI and F. MARC, Information report made on behalf of the finance committee on issues related to the development of Bitcoin and other virtual currencies, Paris, Senate, July 2014.
  6. E. JONCHERES, Legal framework of digital currencies: Bitcoin and other crypto-currencies; Thesis presented to the Faculty of Law of the University of Montreal, with a view to obtaining the LL.M. degree in information technology law. University of Montreal, 2015.
  7. Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention related to financial system in the purpose of money laundering or terrorist financing as well as directives 2009/138/EC and 2013/36 / EU, OJEU, June 19, 2018.
  8. V. LAUNAY, Questions around the legal nature of crypto-assets, Central Charts [online] available : https://www.centralcharts.com/fr/gm/1-apprendre/1-cryptomonnaie/42-trading/1020-questions-nature-juridique-crypto-actifs (consulted on 01 August 2020).
  9. https://www.youtube.com/watch?v=ZMWZegOEHHQ (consulted on 01 August 2020).
  10. Law No 2019-486 of May 22, 2019 relating to the growth and transformation of companies, JORF., No 0119, May 23, 2019.
  11. A. BAYLE, A. VAN DER AA, P. BANZET, B-M. ALICE, H-M. BISSERIER, C. LEVENEUR, T. LABBE, F.LAFFY, X.LAVAYSSIERE, J. LE GUEN et L. MAFFEI, Smart Contracts : study case et legal opinions,  [online] available : https://ecan.fr/Smart-Contracts-Etudes.pdf (consulted on 31 July 2020).
  12. These are the public notices and press releases of the Central Bank of Congo published in 2018, 2019 and 2020.

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COVID-19: popular use of electronic and scriptural money in the global health crisis

Gaby KABUE 
Managing Partner

Abstract

Practically all countries in the world are struck by the unprecedented global health crisis: COVID-19. The virus has a fatality rate estimated between 2% and 3%.1 It originated in China, precisely in Wuhan City, considered as birthplace of the pandemic. In the DRC, according to the latest INRB statistics published on 22 June 2020, COVID-19 has already contaminated 6027 people and caused 135 deaths across the country.2 Since the beginning of the pandemic, several States in the world have enacted drastic health measures to minimize the risk of contamination. Among these measures, we mention confinement, social distancing, quarantine, closing of borders and public places, wearing of masks and/or gloves, compulsory hand washing, movement restrictions, etc. However, despite these measures, certain commercial activities remain open, in particular pharmacies, petrol stations, supermarkets, etc. However, it should be noted that people are engaged in the handling of banknotes and coins during this COVID-19 period, which may constitute a potential risk of contamination with coronavirus. According to the study published on 6 February 2020 by the University of Ruhr, coronavirus cells could persist from an average of 4 to 5 days on certain surfaces such as paper or glass. Faced with this risk of spread linked to the manipulation of banknotes and coins, the Central Banks of the States recommend the popular use of electronic and cashless money instead of banknotes and coins during this pandemic.

Keywords: electronic money, scriptural money , covid-19, risk, banknotes, electronic payment.

 

 

 

1. Issues and spread risks of coronavirus through banknotes

Facing the exponential propagation of the coronavirus pandemic which affects the globe, another issue deserves to be considered seriously: Does the use of banknotes and coins constitute a danger likely to exacerbate the spread of COVID-19 ? Should cash payments be banned or reduced? The answers to these questions diverge.

Indeed, some countries in the world such as China, have resolved to disinfect their currencies with ultra-violet and very high temperatures3 before placing it under seal and isolating for 7 or 14 days.Beijing decided to destroy even those who come from over-contaminated areas. South Korea has also removed all banknotes from circulation for two weeks, enough to thoroughly clean it. And in the United States, dollars coming back from Asia are now quarantined. The Federal Reserve stores it for 7 to 10 days before putting them back into circulation.

However, other countries do not consider the risk of spreading coronavirus through banknotes. This is the case of France through the Banque of France which maintains that there is no sign that banknotes are particularly carriers of the virus. It insists only on the consideration of barrier gestures.5
 

2. Actions of the Central Banks in the fight against the risk of  COVID-19 spread

In front of the crisis linked to this pandemic, the Central Banks around the world have not stood aside to take actions to promote electronic payments;  a way for them to fight the coronavirus spread.

Following the example of the Central Bank of West African States (BCEAO) which published on 21 March 2020, the press release relating to measures to promote electronic payments in the context of the fight against coronavirus spread.6 In addition, it invited the entire banking community and the BCEAO electronic money establishments to encourage people to limit physical contact through the popular use of digital payments. Among these measures, mention is made on relaxation conditions related to opening electronic money accounts.

In the same perspective, the Central Bank of Congo (BCC) has published on 24 March 2020 a press release on measures aiming to mitigate the negative impact of COVID-19 on the Congolese economy. In this press release, the BCC invited the Congolese population, electronic money institutions (EMI) and credit institutions to strongly use electronic payment means in particular M-Pesa, Airtel-Money, Orange-Money as well as the use of Automated Teller Machines (ATMs) to reduce the risk of COVID-19 contamination from handling cash.

For this purpose, the issuing institute has taken the following measures: 1) supplying banks with good quality and sufficient quantity of banknotes, in order to allow their ATMs to work out properly and respond permanently to needs (2) instruction to banks to disinfect banknotes before launching  into circulation;(3) cancellation of fees on electronic money transactions and variable fees on transactions lower to CDF 2,500,000 in the RTGS and ACH system, until the end of 2020; (4) raising the limit of daily electronic money transaction amounts to USD 2,500, or its equivalent in CDF, and removing the ceiling on the monthly electronic transaction limit;(5) promotion of bilateral interoperability, on the one hand, between electronic money institutions and, on the other hand, with other financial institutions, to facilitate transfers and payments in small businesses.

In addition, the Central Bank of Congo has highlighted the use of electronic and scriptural money through businesses and public services for the settlement of invoices and the payment of taxes and duties.7

The Central Bank of Congo measures relating to the use of electronic payment means, in particular mobile money and bank cards, have the main objective of limiting physical contact during transactions in order to reduce the risk of spreading the coronavirus.

As a reminder, electronic money is a form of money that contains specific characteristics, in particular “dematerialization”. The dematerialization means strict minimum reduction on the use of material elements.Ultimately, electronic and scriptural money remain ideally recommended means of payment during this period of global health crisis, in order to avoid the risk of spreading COVID-19.

References

1 https://www.ouest-france.fr/sante/virus/connait-vraiment-le-taux-de-mortalite-du-coronavirus-6717061( consulted on 23 June 2020)

2 https://twitter.com/OMSRDCONGO/status/1275394059218100225

3 https://www.20minutes.fr/societe/2741411-20200316-coronavirus-peut-etre-contamine-billets-banque-pieces-monnaie (consulted on 23 June 2020)

4 https://www.bfmtv.com/economie/coronavirus-faut-il-desinfecter-les-billetsde-banque-1872061.html(consulted on 23 June 2020)

5 http://www.leparisien.fr/societe/coronavirus-la-chine-met-ses-billets-debanque-en-quarantaine-15-02-2020-8260275.php (consulted le 23 June 2020)

6 https://www.bceao.int/fr/communique-presse/communique-relatifaux-mesures-de-promotion-des-paiements-electroniques-dans-le(consulted on 23 June 2020)

7 BCC, Presse release ” Measures taken by the CBC to mitigate the negative impact of the COVID-19 pandemic on the economy”, 24 Mars 2020

8A. CHRISTIAN IVINZA LEPAPA, Electronic payment and electronic transaction: basic concepts and principles . [pdf], Bruxelles, Bookelis, April 2018, p.22, (consulted on 23 June 2020)

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Personal data protection: legal framework review of the United Nations, European Union and DR Congo

Gaby KABUE 
Managing Partner

 

Abstract

Personal data protection is at the heart of contemporary, economic, political and legal issues and debates. It is the subject of numerous discussions which mobilize a great diversity of institutional and private actors, as well as civil society.1 Indeed, thanks to the exponential development of the Internet and new technologies, every minute data floats in cyberspace, from the sanctuary of mankind, where more than 5 billion smartphones 2 in circulation today, and several items connected. Every single day, Google processes more than 24 petabytes of data, or 24 million billion bytes.3 The collection and processing of personal data is now part of daily life for consumers, as it has become a major commercial and economic issue for professionals. However there are several abuses and  failures.Various cyber attacks endanger the data of millions of users and undoubtedly tarnish the reputation of companies.5 Faced with this issue, all countries around the world are adapting to the challenge of data protection6 through the adoption of specific legislation.  At European level, the General Data Protection Regulation (GDPR) represents the most advanced legal data protection system in the world.7 The United States has federal legislation aiming the  personal data protection on certain areas.8    In addition, California voted in June 2018 its own law called “Consumer Privacy Act”.9   At the African level, only 25 out of 54 countries on the continent have personal data protection laws, and only 9 of them have data protection authorities.10   In the Democratic Republic of Congo, the review of the existing legal texts reveals the lack of a specific legislation on personal data protection. Watching the legislative progress recorded in this field by other countries around the world, it is important to draw up a legal framework  review of the United Nations, European Union and DR Congo on the personal data protection.

Keywords: Internet, personal data, privacy,  draft law, GDPR, telecommunications.

 

 

 

I. Legal regime for personal data protection

The right to the personal data protection is closely linked to the right to respect for private life. Both aim to protect similar values, namely the autonomy and human dignity of individuals, by granting them a private life sphere in which they can freely develop their personality, think and form opinions.11     In addition, information likely to be considered as invading « private life » may also fall under the status of « personal data. »12      Both constitute a fundamental human right. Indeed, the protection of personal data and the private life of individuals must be protected against all attacks that may affect them, in particular those relating to personal information.13 

II. International legal framework of the United Nations

It should be noted that the United Nations framework does not recognize the personal data protection as a fundamental right, although the right to privacy is a fundamental right which has long been consecrated in the international legal order.      Among the United Nations legal instruments which consecrates the right to private life are the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, Resolution 68/167 on the right to privacy in the digital age, etc.

a) Universal Declaration of Human Rights

On 10 December 1948, the 58 member states constituting the General Assembly of the United Nations adopted the Universal Declaration of Human Rights (UDHR).14 It is a major global instrument15 which consecrates the fundamental human rights, their respect and their recognition by law.

It focuses on the inalienable respect for these fundamental rights in all nations. Although this is not legally binding declaration, the UDHR occupies a special place as a founder Act of international human rights law and has influenced the development of other human rights instruments in Europe.16

The right to the protection of the private life of individual against the interference of third parties, in particular of the State, was introduced for the first time into article 12 of the UDHR which stipulates: « No one shall be the object arbitrary interference with his private life, family, home or correspondence, or attacks on his honor and reputation. Everyone has the right to the protection of the law against such interference or attacks. »

 b) International Covenant on Civil and Political Rights

On 16 December 1966, the United Nations General Assembly adopted the Resolution 2200 A (XXI) called the International Covenant on Civil and Political Rights (ICCPR). This text entered into force on 23 March 1976.17

It constitutes a relevant commitment of States to promote human rights. Furthermore, article 6 of this Covenant stipulates: « The right to life is inherent in the human person. This right must be protected by law. No one can be arbitrarily deprived of life ». In addition, article 17 states: « No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honor and reputation. Everyone has the right to the protection of the law against such interference or attacks. »

The ICCPR is international treaty by which its 169 Contracting Parties are committed to respect and guarantee the exercise of civil human rights, including respect for private life.

c) Resolution 68/167 on the right to privacy in the digital age

On 18 December 2013, the General Assembly adopted Resolution 68/167 on the right to private life in the digital age, in which it expressed its deep concern about the negative impact that surveillance and interception of communications on human rights.18

It reaffirms the right to private life, according to which no one shall be subjected to arbitrary or unlawful interference with his private life, family, home or correspondence and the right to the protection of the law against such interference, defined by article 12 of the Universal Declaration of Human Rights and article 17 of the International Covenant on Civil and Political Rights.19

It invites the States to respect and protect the right to privacy, particularly in the context of digital communication.

III. The legal framework of the European Union

The current European legislation has laid down fundamental milestones for the personal data protection of Union citizens.20 Indeed, the General Data Protection Regulations (GDPR) is a new legal framework for the personal data protection.

Before addressing the essential provisions of the GDPR, it is important to review the legal instruments relating to the protection of personal data which preceded the GDPR.

a) European Convention on Human Rights

The European Council has adopted the European Convention on Human Rights (ECHR) on November 4, 1950 in Rome, a year after it was founded.

The ECHR entered into force on September 3, 1953, after 10 states had ratified it.21 However, the right to personal data protection is one of the rights protected by Article 8 of the ECHR, which guarantees the right to respect for privacy and family life, the home and correspondence, and sets out the conditions in which restrictions on this right are permitted.22

There can be no interference by a public authority in the exercise of this right unless it is prescribed by law and constitutes a measure which, in a democratic society, is necessary for national security, public safety, the economic well-being of the country, the defense of order and the prevention of criminal offenses, the protection of health or morals, or the protection of the rights and freedoms of others.23

b) Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (CETS No. 108)

Convention No. 108 was opened for signature on 28 January 1981 in Strasbourg, on the occasion of the third part of the 32nd session of the Consultative Assembly.24 On the date of the recommendation adoption , 44 European Council member States have ratified it, others have signed it and prepared its ratification.25

Convention No. 108 was, and remains today, the only legally binding international instrument in the field of data protection, with a universal vocation because the Committee of Ministers has affirmed its willingness to examine applications for membership from States which are not members of the European Council.26

It defines « personal data » as: any information concerning an identified or identifiable natural person (data subject). The preamble to Convention No. 108 sets out the need to promote the fundamental values ​​on privacy and personal data protection worldwide, thereby promoting the free flow of information between peoples.27

It recalls that the right to the personal data protection must be considered with regard to its role in society and that it must be reconciled with other human rights and fundamental freedoms, including freedom of expression .

The Convention is currently being updated. The works officially started during the celebrations of the 30th anniversary of the opening for signature of Convention 108, celebrations which took place within the framework of the 6th data protection day, on January 28, 2011 in Brussels.

The main lines of the Convention modernization focused in particular: « the guarantee to all individuals, whatever their nationality or residence, of the right to the personal data protection in order to ensure respect for their other rights and fundamental freedoms, including his right to privacy with regard to the processing of his data.28

c) Charter of Fundamental Rights of the European Union

The Charter of Fundamental Rights of the European Union (EU) has been proclaimed in Nice European Council on7 December 2000. 29

The Lisbon Treaty gives it binding legal force for the Member States,30 and any citizen can rely on it. in the event of non respect of these rights by European law. It integrates a range of civil, political, economic and social rights of European citizens of the member states.

However, the Charter provides: « Everyone has the right to respect for his private and family life, his home and his communications. »31 ; it also consecrated the right to the personal data protection.32 Article 8, paragraph 2, of the Charter states that: « this data must be processed fairly, for specified purposes and on the basis consent of subject  concerned or under other legitimate reasons provided  y law. Everyone has the right to access and obtain rectification of the data collected concerning them. »

d) Treaty on the Functioning of the European Union

The Treaty on the Functioning of the European Union (TFEU) is one of the two fundamental treaties of the political institutions in the European Union. It guarantees the right to protect personal data. 33

Indeed, the article 16 of TFEU also consecrated this right, and provides that it is the responsibility  of the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, to adopt the rules relating to the protection of persons with regard to the processing of their personal data and the free movement of their data.34

This Treaty provision also creates a legal basis, making the EU competent to legislate on data protection matters. This is an important development as the EU rules on data protection.

e) General Data Protection Regulation (GDPR)

The General Data Protection Regulation, known as GDPR, of April 27, 2016, applicable since May 25, 2018 by all member countries of the European Union (EU) sets out a new principle of data protection. 35

e) General Data Protection Regulation (GDPR)

 The General Data Protection Regulation, known as GDPR, of April 27, 2016, applicable since May 25, 2018 by all member countries of the European Union (EU) sets out a new principle of data protection. 35

It should be noted that the GDPR came to repeal36 Directive 95/46 /EC37 which was the main EU legal instrument in the field of data protection in the period from 1995 to May 2018.

The GDPR is an ambitious reform of law on the personal data protection, taking into account the various issues that underlie the processing of such data.38

It applies to the processing of personal data (personal information) that the Regulation defines as « any information relating to identified or identifiable natural person » who is called the data subject. It establishes a range of rules for whole the EU. It also creates a coherent framework of rules applicable to data protection across the EU as well as legal security environment.

IV. The Congolese legal framework

 In the DRC the specific law on the personal data protection remains a challenge.

Indeed, the country is characterized by the lack of a specific law on the protection of personal data.39 Unlike other African countries40, there are no standards on the law of personal databases comparable to European standards including an “IT authority and freedoms”, nor of essential principles: databases data specialty , legality of stored information, right to oblivion, right to access and rectification, etc.41

However, there are sectoral legal texts which address the legal aspects on personal data protection. As long as  personal data protection right is closely linked to the respect for private life right, there are also legal texts which establish the right to respect for private life.

a) Constitution

 The Constitution of the Democratic Republic of the Congo, modified by law No. 11/002 of January 20, 2011 revising certain articles of the Constitution of the Democratic Republic of the Congo of February 18,2006, establishes the State of law, democracy and reaffirms the attachment to human rights and fundamental freedoms as proclaimed by international legal instruments.42 Among the fundamental rights is the right to respect for the private life of citizens.

Article 34 of the Constitution provides: « Everyone has the right to respect for his private life and the secrecy of correspondence, telecommunications or any other form of communication. This right may be infringed only in the cases provided by law ». In addition, article 29 stipulates that: « The home can not be violated, no visit or search may be carried out there except in the forms and under the conditions provided by law. »

It should be noted that when the Congolese lawmaker consecrates the fundamental principle of the right to respect for private life, he aims to protect the rights of citizens with regard to data or information which is personal to them.

Moreover, the DRC constitution protects this right to life by making use of ratified international texts, which have primacy over national law (art. 215 constitution). The DRC is a signatory to the International Covenant on Civil and Political Rights, Article 17 of which reiterates the provisions of the Universal Declaration of Human Rights relating to the protection that the law must provide against arbitrary interference. in private life, family, home or correspondence, attacks on the honor and reputation of individuals.

b) The framework law on Telecom

The 2002 framework law on telecom contains some provisions on the personal data protection which apply in the telecom sector.

According to this law, data protection is one of the reasons for imposing conditions relating to the establishment and/or operation of telecommunications networks or the provision of telecommunications services. It provides that data protection may include « the personal data protection, the confidentiality of information transmitted or stored and the protection of private life ».43

The secrecy of communication is guaranteed by article 52 of the 2002 framework law. Under this provision, the secrecy of correspondence transmitted by telecommunications is guaranteed by law. This secrecy may be breached only by the public authority, only in cases of necessity of public interest provided  by law and within the limits fixed by it. Despite what precedes, the frame law of 2002 suffers from the insufficiencies of the provisions which can ensure the protection of the private life of the human person and his personal data in the face of several dangers resulting from the exponential explosion, information and communication technologies.

c) The draft law on telecom and ICT

The draft on telecom  and ICT which is elaborated to stand in 2002 framework law, adopted by parliament in its September 2018 session, but returned by the President of the Republic for the second revision in 2019 44 consecrates the personal data protection.

This draft law consecrates the legal definition of « personal data » into the congolese legal arsenal. According to definition provided, personal data « is any information relating to natural person identified or identifiable directly or indirectly, by reference to identification number or to one or more elements, specific to his physical, physiological, genetic identity, psychic, cultural, social or economic » 45

It guarantees the consumer right of electronic communications services. From this legal point of view, all consumers of electronic communications services have the right to the protection of personal data (art. 97). It protects the confidentiality of personal data of electronic communications services consumers. It provides that any processing of data of nature is only carried out with the consent of the data subject or on request from the officer of the public prosecutor (art. 131).

The collection, recording, processing, storage and transmission of personal data is carried out with the authorization of the user concerned or of the competent public authority (art. 132 paragraph 1).

It prohibits the collection and processing of personal data relating to racial, ethnic or regional origin, parentage, political opinions, religious or philosophical beliefs, union membership, sex life, genetic data or more generally those relating to the health of the person concerned (art.132 paragraph 2).

Without offense to the payment of damages to the victim, any violation of the secrecy of correspondence or any manipulation without prior authorization, personal data is punished by the law in matters on violation of correspondence.

d) The law on the exercise of press freedom

The law on freedom of press promulgated in 1966 which applies to the professional of the press, to the press companies and to all other natural or legal persons concerned, in one or other way, by written or audiovisual messages46 protects private life.

It guarantees everyone the right to freedom and expression without any obstacle, whatever the material used but in compliance with the respect of the law, public order, the rights of others and morality.47

 Any writing or message is likely to be used by the press on condition that it does not undermine public order, and moral, or the honor and dignity of individuals.48

 It establishes the right of reply in all cases where charges are liable to damage the honor or reputation of person, disseminated in the context of an audiovisual communication activity.49

Needless to say that the law on freedom of press establishes press offenses, that is to say any offense committed by the written and audiovisual press.50 Therefore, the violation of private life through press crimes is punished by the sanctions provided for by law.

e) The Criminal Code

The decree of June 30, 1940 on the Criminal Code punishes offenses against private life. These are attacks on individual liberty and the inviolability of the home (section 5 of Criminal Code); attacks on the inviolability of the secrecy of letters (section 6 of Criminal Code); disclosure of professional secrecy (section 7 of  Criminal Code).

In the Democratic Republic of Congo, the victim private life offense including personal data may, depending on the case, have recourse either to civil procedure51, to criminal procedure52 or even to administrative procedure.53

Ultimately, the Congolese legal framework suffers from the lack of specific law on personal data protection. It is imperative to provide the country with a specific law like other African and European countries in order to protect the rights of individuals with regard to the processing of personal data.   Such a law should clearly define the key principles of loyalty, lawfulnessof the collection, the relevance and accuracy of data, the proportionality, the storage duration of personal data and ultimately the purpose of data collected (a purpose must be determined, legitimate and explicit). In addition, determine the processing of data that can only relate to personal data that meet the predetermined conditions.

References

1 B. JUANALS, Personal data protection and ICT at the hart of globalization and society issues: distributed control mechanisms, ICT & society, [online] available on :   http://journals.openedition.org/ticetsociete/1475 ; DOI : 10.4000/ticetsociete.1475 (consulted on May 9, 2020).

2 https://www.clubic.com/pro/actualite-850479-smartphones-monde-repartition-inegale.html (consulted on May 9, 2020).

3 GIGREF, Economy of personal data; : the challenges of ethical business, Paris, October 2015, p.1.

4 https://www.quechoisir.org/nos-combats-donnees-personnelles-nos-combats-et-conseils-pour-les-proteger-n63115/(consulted on May 9, 2020).

5 B. JANVIER, « Personal data protection: review of the past year and outlook for 2019  » [online] available on: https://www.lepetitjuriste.fr/protection-de-donnees-personnelles-bilan-de-lannee-ecoulee-et-perspective-pour-lannee-2019/(consulted on May 9, 2020).

6 PARLIAMENTARY ASSEMBLY OF FRANCOPHONIE, Report on Personal data protection legislation French countries in the world, Abidjan, July, 2019.

7 https://alphalyr.fr/blog/le-rgdp-comment-bien-vous-preparer/(consulted on May 9, 2020).

8 W-J. MAXWELL, Personal data protection in the United States: 130 convergences and divergences with the European approach, Cloud computing, Society for Comparative Legislation, 2013, p.72.

9 L. MEDIAVILLA, Law on personal data protection: la Californie open the doors in the USA, [online] available: https://www.lesechos.fr/tech-medias/hightech/loi-sur-les-donnees-personnelles-la-californie-ouvre-le-bal-aux-etats-unis-1160009 (consulted on May 9, 2020).

10 G. KABUE KAYOMBO, Comparative electronic money law: mobile banking and financial services in digital transformation, Europe, USA, Africa, DR Congo, Kinshasa, 2020, p.191, publication in progress.

11 European Union Agency for Fundamental Rights and Council of Europe, Handbook of European data protection law, Luxembourg, 2019, p.21.

12 E. DESIREUX, Privacy and data protection – Protection law and « right to oblivion » face to freedom of expression [online] available on : https://www.cairn.info/revue-les-nouveaux-cahiers-du-conseil-constitutionnel-2015-3-page-21.htm (consulted in May 9, 2020).

13 M. KETTANI, Legal regime for personal data protection, DLA PIPER, 2017, p.1.

14  European Union Agency for Fundamental Rights and Council of Europe, Luxembourg, 2019, p.24.

15 https://www.coe.int/fr/web/compass/legal-protection-of-human-rights (consulté le 22 mai 2020).

16 European Union Agency for Fundamental Rights and Council of Europe, Ibidem, p.24

17 https://www.coe.int/fr/web/compass/the-international-covenant-on-civil-and-political-rights (consulted on May 23, 2020).

18 https://www.ohchr.org/FR/Issues/DigitalAge/Pages/DigitalAgeIndex.aspx (consulted on May 23, 2020).

19 UN, General Assembly, Resolution on the Right to Privacy in the Digital Age, A/RES/68/167, New York, December 18, 2013, p.2/3.
20 L. FANY, Personal data protection and privacy on social media in the European Union, Dissertation presented as part of Master 1, University of Paris 3 Sorbonne Nouvelle, Paris, 2012

21 https://www.humanrights.ch/fr/droits-humains-internationaux/conseil-europe/cedh/ (consulté le 23 mai 2020)

22 European Council, European Convention on Human Rights, STCE No.005, 1950, p.4.

23  European Council, Op.cit., p.4.

24 European Council, Explanatory report to the Convention for the protection of individuals with regard to automatic processing of personal data, Strasbourg, 28 January 1981, p.1.
25European Council, Recommendation CM / REC (2010) 13 and explanatory memorandum: protection of individuals with regard to automatic processing of personal data in the context of profiling, Council of Europe editions, November 2011 , p.21.

26 See, Explanatory Report to Convention No. 108, paragraph 15 (ISBN 978-92-871-0442-7.

27 Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (CETS No. 108), Strasbourg, p.7.

28 European Council , Modernization of the European Council for Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data

29 https://www.vie-publique.fr/fiches/20322-pourquoi-une-charte-des-droits-fondamentaux (consulted on May 23, 2020)

30 https://europaforum.public.lu/fr/comprendre-europe/dossier-lisbonne/019-droits/index.html (consulted on May 23, 2020)

31 Article 7, Charter of Fundamental Rights of the European Union (2016/C 202/02), OJEU, C 202/395, June 7, 2016.

32 Article 8, Charter of Fundamental Rights of the European Union.

33 Article 16, Treaty on the functioning of the European union, OJEU, C 115/47, May 9, 2008.

34 M. KARAMANLI, Communication on the legislative package relating to the protection of individuals with regard to the processing of personal data (COM (2012) 11 final – E 7055 and COM (2012) 10 – E 7054)

35 Livre Blanc, General Data Protection Regulation, 25 October 2017, p.2

36 Article 94, Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, and repealing the directive 95/46 /CE (general data protection regulation), OJEU, n ° L 119/1, May 4, 2016.

37 Directive 95/46/ EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, OJEU, n ° L 281, May 23, 1995.

38 E. CRUYSMANS, European directive 95/46 / ce n’est plus, vive RGDP, «News», p.108.

39 See, “Overview of the current legal frameworks for the personal data protection in Africa”, ITU Regional Workshop on Human Capacity Building, Abuja, 2018

40 It should be noted that increasingly African countries are adopting legislation with “European compatible” standards: Tunisia, Morocco, Senegal, Burkina Faso, Gabon…

41 D. BROUWERS, L. LHERIAU, F. KALALA, B. MOPONGO, J. NDAMBU, W. LIBOIS, Final report on the protection of consumers of financial services in the Democratic Republic of Congo: diagnostic study, Central Bank of Congo, Kinshasa, 2013, p.57.

42 See, Constitution of the DRC, modified by law No. 11/002 of January 20, 2011 revising certain articles of the constitution of the Democratic Republic of Congo of February 18, 2006, OJ, special No., February 2011.

43  Article 4, point 13, framework law No.013/2002 of October 16, 2002 on telecommunications in the Democratic Republic of Congo, OJ, special No., January 2003, p.30.

44 National Digital Plan-Horizon of 2025, Kinshasa, September 2019, p.39.

45 Draft law on Telecom and ICT

46 E. LAMBERT ODINGA ODINGA, “Respect for privacy and the information highway in the Democratic Republic of Congo“, Lex Electronica, Vol.6, n ° 2, Hiver / Winter, 2001. 

47 Article 8, Law No. 96-002 of June 22, 1966 laying down the procedures for the exercise of the press, OJ, special No., August 2001, p. 11.

48 Article 10, Law No. 96-002.
49 Article 67, law No. 96-002.
50Article 74, law No. 96-002.
51 Decree of 3/30/1960 on the Code of Civil Procedure
52 Decree of 6/8/1959 on the Code of Criminal Procedure
53 Civil procedure is mainly applied before the administrative section of the Courts of Appeal
54 T. DEVERGRANNE, The principle of loyalty and lawfulness of data collection [online], available: https://www.donneespersonnelles.fr/le-principe-de-loyaute-et-de-liceite-de-la -collecte-des-dates (Consulted on August 15, 2019).

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Administrative and jurisdictional remedies in industrial property field: comparative study between Congolese system and Bangui Agreement

NZAYADIAMBU Papy
IP Attorney

Abstract

It’s said: “A right has no value that only in case there exist remedy to exercise it”. “Ubi jus ibi remedium” is a latin maxim which means “where there is a right there is a remedy”. (Civil remedies for copyright infringement, Laurent Carrière, Lawyer for Robic Law firm)

Most countries organize remedies, both administrative and jurisdictional, in their legal arsenal relating to industrial property.

In African Intellectual Property Organization (OAPI) area which is a sub-regional institution including 17 member countries and signatories to the Bangui Agreement. The article 19 of the Bangui Agreement provides: “the decisions on rejection or opposition cases provided by article 33 paragraph 2 below taken by the Organization are subject to remedy in front of High Commission of Appeal sitting with the said Organization.”

As a reminder, under the terms of this article 33 paragraph 2, the High Commission of Appeal is responsible for ruling on consecutive remedies:

a) the rejection of applications for a title of protection concerning industrial property;

b) the rejection of applications to maintain or extend the term of protection;

c) the rejection of restoration applications;

d) the decisions concerning oppositions.

 

 

In the Democratic Republic of the Congo, the framework Law No. 82-001 of January 07, 1982 governing industrial property, does not clearly organize the remedy procedure against the decisions of the Minister having industrial property in his attributions.

However, in France, the first paragraph of article L. 615-17 of the Intellectual Property Code provides: “All litigation arising from this title is assigned to the Courts of First Instance and the Courts of Appeal to which they are attached, exception of remedies formulate against decrees, orders and other administrative decisions of the Minister responsible for industrial property, which fall under administrative jurisdiction”. (Article written by Michel Vivant, “Arbitration and Intellectual Property”, 2004)

Thus, it is relevant for the interest of our study to carry on a first exam on administrative remedy (I) and secondly to finalize with the jurisdictional remedy (II).

1. Administrative remedy

In industrial property law field, when a justiciable considers himself offended by a decision of the competent administrative authority, for instance, in refusal case related to application registration of the patent for invention, brand certificate, model or industrial design, this justiciable has the possibility to introduce his remedy to the same authority that made the decision: this is graceful administrative remedy, because the applicant will request to the authority to report or modify his act or decision which goes against the law.

The administrative authority might or not revert to his decision.

In the assumption that he does not revert to his decision, the remedy will then be introduced to the authority immediately superior to that which made the act; this is the hierarchical remedy. Here, the hierarchical authority can, on the remedy of applicant, ascertain the illegality of the act of his subordinate and cancel it, if necessary.

In all cases, any remedy introduced out of the legal deadline incurs foreclosure.

It should be noted, moreover, that the silence of the administration to respond for a period of time may conduct to implicit rejection of the request, (Administrative Law, Volume I, Clément KABANGE NTABALA, University of Kinshasa, 1997).

Furthermore, it should be noted that administrative disputes in the field of industrial property law are different according to the legislation from one State to another.

I.I. The position of the States signatory to the Bangui Agreement

In the OAPI area, as we had previously indicated, it exists an appeal body sui generis (Latin maxim, meaning literally, “of its own kind”) called the “High Commission of Appeal”, which draws it basis from both, the Bangui Agreement (Art.19) and the regulations relating to the organization and functioning of the High Commission of Appeal.

It is composed of three members chosen by random draw from on representatives list designated by the member States, on the basis of one representative per State.

Indeed, it is the OAPI Board of Directors, which chooses three holder magistrates and three substitutes having at least ten years of experience and possessing a good knowledge in industrial property matters. They have a mandate of two years’ renewable only once. (Litigation course in the OAPI area given by Mr Maurice BATANGA)

The Commission is competent to know about:

  • Remedy brought against decisions rejecting industrial property title applications: patents, utility models, brand (article 15 of Annex III relating to the brand), model and industrial design, trade names (article 8 of Annex V relating to the trade names), geographical indications, plant varieties (Article 21 of Annex X relating to the plant variety);

The question that can be asked is why Annexes I, II, IV, VI have remained mute with regard to remedies against decisions rejecting patent applications respectively, utility models, industrial designs, geographical indications, while the other Annexes are more explicit? Is this not a legislative gap? Indeed, this is a legislative gap, because in practice the remedies are exercised for all these titles.

  • Remedy against decisions on oppositions (Article 18 paragraph 4 of Annex III, Article 9 paragraph 4 of Annex V, Article 12 paragraph 4 of Annex VI, Article 17 paragraph 5 of Annex X, Article 26 of Annex X);
  • Decisions to reject restoration requests (article 41 paragraph 8 of Annex I, article 36 paragraph 6 of Annex II, article 25 paragraph 6 of Annex III, article 13 of Annex IV, article 12 of Annex V, article 35 of Annex X;
  • Decisions rejecting requests for inclusion in special registers (the Bangui Agreement is not explicit on this subject);
  • Decision brought against decisions to strike out agents (Unless we are mistaken, we had not found in the Bangui Agreement, a single article which expressly mentions the industrial property agent.

It should be point out that, under penalty of foreclosure, the remedy must be brought following this deadline:

– 60 days in case of rejection of application for patent title, utility models, brand (Article 15 of Annex III), model and industrial design, trade names (Article 8 paragraph 7 point 2 of Annex V), geographical indication, plant variety (article 21 of Appendix X; in this matter, the legislator omitted to mention the deadline for introducing an appeal to the Commission.);

– 30 days for rejection of restoration application (article 41 paragraph 8 of Annex I, article 36 paragraph 6 of Annex II, article 25 paragraph 6 of Annex III, article 13 of Annex IV, article 12 of Annex V, article 35 of Annex X;

– 90 days in case of decision on opposition (Article 18 paragraph 4 of Annex III, Article 9 paragraph 4 of Annex V, Article 12 paragraph 4 of Annex VI, Article 17 paragraph 5 of Annex X, Article 26 of Annex X), and this on the date on which the applicant became aware of the act or decision he is contesting. After this deadline, any administrative appeal becomes inadmissible.

It is important, to define the criteria enabling to make the difference between the action in opposition and the claim of property.

If a brand is fraudulently deposited for the rights of a third party having priority in the use of this brand, this third party can claim ownership of it from OAPI. Provided that the user makes a deposit of the application registration within six months of the publication of registration related to first deposit. (Article 5 paragraph 3 of Annex III).

On the other hand, any interested party may oppose the registration of a brand, a design, a trade name or even a plant variety which does not comply with the substantive conditions of title validity. If the opposition is based on violation of anterior registered right, alone the holder of this right can trigger the opposition procedure. The opposition deadline is form six months from the publication of registration. (Article 18 point 4 of Annex III, Article 9 paragraph 4 of Annex V, Article 12 paragraph 4 of Annex VI, Article 17 paragraph 5 of Annex X, Article 26 of Annex X).

CASUS :

Mr. LOBO, is a professional Cameroonian trader, produces and markets drinking water under the brand “Ô “with circumflex accent” in all countries of the OAPI area.

What will he do to protect his brand?

Basically, he must apply for his brand registration application directly to the OAPI. If the Director General of OAPI rejects it, Mr. Lobo will introduce his remedy to the High Appeal of Commission. In this case, the secretariat of the Commission will communicate the remedy to the Director General to give him the opportunity to revert to his decision, and this within one month (graceful administrative remedy). However, if the Director does not revert to his decision, the remedy will be communicated to the President of the Commission and other members of the Commission (hierarchical Remedy).

The Commission seized by the request of Mr. LOBO may confirm the decision of the Organization or cancel it. In case of cancellation of the Organization’s rejection decision, the brand will be registered.

Once he has the title of ownership of brand and his products to be marketed, Mr. LOBO will have to ensure the payment of renewal tax related to his brand, and this, every ten years from the deposit of the request.

In the event that Mr. LOBO does not pay his renewal tax, his brand will be lost. He must draft a restoration request to the Organization. This Organization can, through its Director, restore the brand or reject the restoration request. In case of rejection, Mr. LOBO must therefore seize the High Appeal of Commission to request the cancellation of decision of the Organization and see his brand restored.

The Commission may make Mr. LOBO win the case or confirm the decision of the Organization.

What will happen if another physical person or company take the right to register the same trademark to the OAPI?

In this case, Mr. LOBO must introduce an opposition remedy to the Organization, in accordance with article 18 of the above-mentioned annex. OAPI will send a copy of notice on opposition to the other party or their attorney, who may respond to the notice motivating its response, within three months, renewable once. This response will be communicated immediately to the opponent or his attorney. If his reply does not reach the Organization within the above-mentioned period, the depositor will be deemed to have withdrawn his request for registration and it will be canceled.

Note that before taking the decision on the opposition, the Organization will hear all parties or one of them, or their agent, if requested.

Thus, the party who will feel offended by the decision of the Organization, will remedy to the High Appeal of Commission, and this within three months from the notification of the decision of the Organization.

How to do: if a partner company, aware that Mr LOBO makes use of the “Ô ‘severe” mark, having omitted to register it to the OAPI, rushes to deposit it with the OAPI in order to prevail the anteriority of this deposit?

In this case, Mr. LOBO will take action to claim from the OAPI, in accordance with article 5 paragraph 3 Annex III already mentioned.

I.2. The position of Congolese legislation

In the Democratic Republic of the Congo, the law governing industrial property is not clear enough regarding administrative disputes related to industrial property. This is what therefore puts justiciable in front of several unknown equations.

And yet, certain sources claim that our legislation is diversified: it touches practically all aspects and considering that everything has been established. (Lukieni lu Nyimi, “the protection of industrial property in the DRC”, 2004, p 24)

Only article 15 of the Ordinance No. 89-173 of August 7, 1989 relating to measures of execution of the law No. 82-001 of January 7, 1982 governing industrial property gives expressly the possibility to the applicant to use of his remedy right in front of the Ministry having industrial property in his attributions.

Under paragraphs 1, 2 and 3 of the article mentioned provides: “The Department of National Economy and Industry examines whether the invention which is the subject of the request is not patentable regarding the article 12 of the law, in which case he rejects the request and notifies the applicant the reasons of rejection.

The applicant has the right to object to the decision of the Department of National Economy and Industry, within the period provided for in article 11, paragraph 3, of this Ordinance.

After having heard the objections, the Department of Economy and Industry takes the final decision (…) “.

As formulated, the last paragraph of the aforementioned article suggests that the decision of the Minister of Industry is not subject to remedy.

The processing of remedy by the administration is subject to the payment of tax established by inter-ministerial Order No. 016/CAB/MIN/IND/2017 & No. CAB/MIN/FINANCES/2017¬ / 036 of 11 August 2017 fixing the rates of duties, taxes and royalties to be collected on the initiative of the Ministry of Industry.

However, it should be noted this interministerial Order mentioned presents the gaps at several level, because it mentions a remedy tax without even specifying the type or nature of this remedy, while the administration is examining several forms of remedy. Namely: the remedy in case of rejection of request for the registration of industrial property title, the remedy against the rejection of request for the restoration of title, or the remedy against decisions to reject application for entry in the registers.

Some people have tried to affirm and justify the payment of these various taxes by the fact that, if certain administrative remedies in industrial property field are not expressly determined by legal and regulatory texts applicable, nothing does not prohibit the applicant from bringing his remedy in accordance with the common law.

In fact, one does not need to be a specialist in administrative law to know that, on the one hand, the remedy (graceful or hierarchical) in Congolese administrative law is free, and, on the other hand, any tax that does not have a legal basis can be considered as illegal, and therefore its perception is questionable.

After the exhaustion of administrative remedy, the applicant, who has not obtained satisfaction as result of his action, may lodge a jurisdictional remedy.

II. Jurisdictional remedy

A. Viewpoint of the Bangui Agreement

In the OAPI area, the decisions of the High Appeal of Commission are not subject to remedy, because they are taken at first and last instance, and this in accordance with article 8 of Annex V related to Bangui Agreement, which expressly provides that: “Within 30 days, from notification date of rejection, the applicant can lodge appeal to High Appeal Commission; so this Commission judges the request at first and last resort.”

We think that as the system consecrated by the Bangui Agreement is imperfect, since it does not establish a supranational jurisdiction of intellectual property, which it should be possible to challenge the decisions of the Higher Appeal Commission.

It should also be noted, however, that there is nothing prohibit the complainant to take simultaneously action in front of the Courts and Tribunals of the member states and the Organization, for instance, seeking to wipe out the effect of industrial property title.

The Bangui agreement, although more advanced than Congolese law, nevertheless presents some imperfections. The informed observer will note that, unlike other industrial property titles such as patents, utility models, brands, etc., the Bangui legislator failed to provide into Annex IV relating to industrial designs and provisions on the exercise of action for nullity.

Mr. Stéphanie Ngo Mbem, lawyer considers in this regard that: “this legal vacuum was appropriately filled in France by the Ordinance of July 25, 2011 on designs and models. This text institutes an action for nullity and empowers anyone interested in practice it when it comes to contest the novelty of the design and models. The Bangui legislator could take inspiration from this France Ordinance to include it into Annex IV, as it has already done for patents, utility models and brands. » (The challenges of protecting industrial designs and models in the development of Africa, his thesis, p260).

The author’s wish has been taken into account by the Bamako Agreement, which revised the Bangui Agreement, but unfortunately its entry into force continues to delay, due to the fact that it has not received the signatures of all member States.

B.Viewpoint of Congolese legislation

In the Democratic Republic of the Congo, the jurisdictional remedy is exercised, in accordance with the Organic Law of October 15, 2016 relating to the organization, competence and functioning of administrative jurisdictions order.

Article 85 of the aforementioned Organic Law enumerates the competences of the Council of State as follows:

  • The litigation section of the Council of State is the judge of all cases which fall within the contentious jurisdiction of the Council of State.
  • The litigation section of the Council of State is competent, at first and last instance for cancellation actions related to violation of the law, edict or regulation, brought against acts, regulations or decisions of the central administrative authorities or of public bodies placed under their supervision as well as those of national bodies of professional orders.
  • The violation of the law, edict, regulation, custom and the general principles of law includes in particular: incompetence; excess power; false application or misinterpretation of the law, edict or regulation; non-compliance with the law, edict or regulation of the act, regulation or decision from which it was applied; violation of the substantive forms or the prescribed forms on nullity penalty of the acts; change nature of facts and acts; negation of faith due to acts.
  • The litigation section rules sovereignly, taking into account the facts and legal circumstances relating to actions for suspension brought against these acts.

The Minister of Industry being an authority of the central power, if he takes an illegitimate decision in industrial property field, accordingly it is right to exercise a cancellation remedy for the violation of the law at the courts.

In view of above, if it is true, on the one hand, that cancellation actions to the decisions of the Minister of Industry are within the competence of the Council of State, it is also true, on the other hand, that nullity actions related to claims and counterfeit fall within the competence of the Courts of First Instance or the Courts of Commerce (for traders).

Comparatively to the Bangui Agreement, the claim can be brought in front of High Appeal of Commission, while according to the Congolese law the competence of such action falls into the competence of the Courts and Tribunals.

  • Concerning the patent: Article 53 of the aforementioned Law

Paragraph 1 of the indicated article provides that if a patent or certificate of encouragement has been requested, either for an invention or a discovery withdrawn from the holder or his beneficiaries, or in violation of legal or conventional obligation, the offended person can claim paternity of request or ownership of the title issued.

Paragraph 2 prescribes that it succeeds, the action for claim operates the subrogation in favor of its author.

Paragraph 3 specifies that in this case, the Tribunal will order:

– either that the depositor transfers his rights and obligations to the beneficiary within a specified period; in which case, the transfer will only have effects for the future;

– either that the person entitled is subrogated in all the rights and obligations of the depositor, patented or certified; in this case, the subrogation is retroactive.

  • Regarding the model or industrial design: Article 121 of the same law

“The owner of model or industrial design has, in defense of his rights of nullity action, in claim and counterfeit as regulated by title I above”

  • Concerning the right of brand: combination of articles 138 and 121 of the aforementioned law

Under the terms of this article 138, “the rights and obligations of the owner of brand are, by analogy, the same as those provided (…) for model or industrial design.”

Emile Lambert OWENGA a lawyer writes on this subject that the action of claim tends to ensure the protection of the rights which are generally and often not yet protected legally. This is the case of action initiated by the owner of invention whose patent has not yet been applied for to defeat the patent application filed for the same invention by someone who surreptitiously withdraws the invention. The purpose of this action is to claim paternity of the application applied by the defendant or ownership of the patent eventually issued for the benefit of defendant. When it is successful, the claim action operates subrogation in favor of its author. (Juricongo-No. 5 January-February 2000, p16)

According to him, such action can also be initiated by someone who deposited his brand into ad hoc service of the provincial administration against the author of posterior deposit of the same brand, carry on directly to the Ministry having industrial property in its attributions.

In addition, concerning the nullity of remedy, Congolese legislator provided for it in the field of patent in articles 96, 97,98, 99 and 100 of the Congolese Law mentioned above, while in model and industrial design field, is based on the aforementioned article 121, and finally in brand law, it is article 149 of the same law.

In conclusion, the Congolese legislator as well as Bangui, it exists several things to do in order to improve the procedures rules applicable to the various litigations relating to industrial property law.

However, it should be appreciated the efforts of the OAPI member states by carefully reviewing the Bangui Agreement through Bamako Act which resolved the legal voids described above, despite the fact that it has not yet entered into force.

Rights of holders must always be alert to push away in front of the administration or the Courts and Tribunals any kind of violation or threat against their rights.

Download the pdf of the article here Intellectual Property Article, English version
NZAYADIAMBU-KESA Papy Ephraïm

Attorney on Intellectual Property for MBM-CONSEIL.
Tel : +243 998378810
Email : nzaya@mbm-avocats.com; kesa20022001@yahoo.fr

General economy of the Law on Payment and securities-settlement system

Gaby KABUE
Managing Partner

Abstract

In the second semester of 2018 the financial sector of the Democratic Republic of Congo experiments the new Law No 18/019 of July 09, 2018 relating to payment and securities-settlement systems. The law contains 139 articles grouped into 8 titles. It intervenes in market characterized by the deployment of new payment infrastructures (Automated Teller Machines) as well as explosion of new payment instruments including the payment cards, e-wallet, etc. Beyond the bank institutions, the Telecom operators have increasingly revolutioned financial services based on the utilization of mobile phone across the country. However, the financial services carry out through the new technologies are relatively enameled by several risks which cause prejudice to users and other stakeholders in the sector. Additionally, the transactions carry out through the new payment instruments have experienced the absence of legal protection regulations which reflects obviously the insecurity for the users of the payment instruments. It’s in this context the Law No 18/019 has been adopted and promulgated in order of establishing legal and institutional framework capable to sort out the various issues related to payment systems in DRC. It should be noted that the law has introduced major innovations concerning the legal rules applicable to electronic payment system and other payment instruments. It also determines the mechanisms for preventing and centralizing payment incidents.

By Gaby Kabue Kayombo

What is the role of payment systems in financial sector?

According to the second paragraph of preamble, the payment systems plays the role of facilitating the circulation of currency especially in form of scriptural, protecting the payments of different transactions between individuals and suppliers of goods and services, payments between financial institutions as well as fund transfer between financial institutions in order to ensure the low cost of transaction.

Who are the stakeholders involved in payment systems?

Under article 4 of the law, the participants of the payment systems are composed of the Central bank, treasure, financial institutions, centrals counterparties, system settlement agent, system operators, postal financial services and other issuers of payment instrument. However, the Central bank is required to ensure the promotion, security, efficiency and solidity of the payment systems.

What rules applied to payment instruments?

Law No 18/019 provides the legal rules applicable to the use of different payment instruments. The payment instruments are defined as any means, whatever, the device used to allow any person to transfer funds, this include check, bill of exchange, payment card, etc­. In fact, the financial institutions and other issuers of payment instruments must prior to deliver any payment instrument, ensure that the applicant is not subject to any decision forbidding the use of payment instruments (Art 37). They may, in the limit, by motivated decision reject to deliver the payment instrument. In case the payment instrument has been delivered, they also have the mandatory to request the payment instrument return that they have already delivered. The financial institutions and other payment instrument issuers have the mandatory to declare in deadline of 6 days the restitution of payments instrument to the Central of payment incidents (Art 37).

They are required to sign a contract with the beneficiary to whom they deliver the payment instrument in which the rights, obligations and responsibilities of the issuer and user are set out in accordance with the type-contract of payment instrument issue approved by the Central bank (Art 38).

The setting up, operation and issue of payment instruments requires the obtaining of license delivered by the Central bank (art 108). The applicant of license is required to provide information to the Central bank such as business plan, program of activities, proof of capital, description of measures taken to protect the funds of users of payment instruments, etc. (Art110).

What institution is competent to receive claims relating to payment instruments?

The Financial Services Observatory is consecrated by the Law No 18/019 as institution authorized to receive claims related to the using of payment instruments. In case the conditions are gathered, it can suggest pacific resolution of litigation or disputes submitted to its attention, through the conciliation or mediation way (Art 39).

By what means is given payment order?

The payment order is given through instrument means set on paper form or by any unhand written method (Art 40). The signature of decision-maker set on payment instrument or given by any unhand written method.

What type of payment the consent could be required?

The payer’s consent is required for any types of payment transaction. It may be required for one or multiple operations accordingly to the form agreed between the issuer and user. In fact, the operation of payment authorized must be executed unless if there is withdrawal of consent or revocation of payment in accordance with the law (Art 42).

Under which conditions to oppose the payment made by an account holder?

The Law No 18/019 grants the right of any user of payment instrument or interested third party to do any payment opposition to the payment account holder subject to the following cases: [a] the loss of payment instrument; [b] the theft of payment instrument; [c] removal of a case from the holder of account administration; [d] incapacity to receive the holder. The law requires that the opposition must be motivated. In fact, the law provides the legal solutions in case the payment instrument is lost or stolen. However, the holder of the lost or stolen payment instrument confirms his opposition in writing within 3 working days. When a such payment opposition is done, automatically the financial institutions could not proceed any payment (Art 44).

When does an account holder reimburse unauthorized or poorly executed payments?

Unauthorized or poorly executed payments are inherent to financial services, and in this context the law determines the circumstances in which reimbursement may be possible.

Article 45 of the Law No 18/19 stipulates that in event of unauthorized or improperly executed payment operation, the payer must submit claim to the account holder within 60 days counted the date where the payment account has been debited. Once the claim is proven, the law recommends to the payer’s payment account to re-establish within 30 calendar days from the receipt of the claim, the payment account debited. In other words, the financial institution must re-establish the payment account in the same state, as it would have been if unauthorized or wrong executed payment operation had never been occurred.

Needless to say, the Law recognizes the right for the financial institutions to deny the reimbursement if non-execution emerges from either an error or omission of the decision-maker about his instructions given, either it due to intermediate financial institution chosen by the decision-maker (Art 47).

Who have the right to open account and access to financial services?

The Law No 18/019 acknowledges to the company and individual the right to open account within the financial institutions (banks) entitled by the Central bank, to receive and to collect the public fund (Art 49). In spite of the right to open account bank, sometimes the banks can refuse to open account bank to the benefit of applicant, moreover refusing to motivate its refusal decision. In this hypothesis the law says in case of refusal to open account bank and absence of motivated decision succinctly presented by 3 banks, automatically the Central bank takes the decision to appoint a bank which has the mandatory to open a deposit account, giving the right to minimum financial service (account management, disposal of payment instrument surrounded by necessary security, possibility to carry out the transfer ( domiciliation, encasing and payment) from this account, the reception and discount related to compassion of payment operation for the count of customer (Art 50).

What are the obligations of issuer, supplier and holder related to payment card and other payment instruments as well as electronic transfer fund?

With regard to payment card issues and other payment instruments, the law determines the obligations of the issuer, including ensuring the identity of the holder and verifying the payment instrument and the electronic funds transfer process. He will be responsible in case of: (a) execution of a transaction without the authorization of the holder; (b) incorrect execution of transactions using an electronic funds transfer instrument; (c) execution of transaction after the owner’s opposition; (d) failure of the technical equipment, error in its use or defect of electronic funds transfer instrument (Art 63).

In the event of misuse, fraudulent or unauthorized use of electronic payment instrument, credit institutions and other issuers of payment instruments have from the date of the discovering; block the payment instrument and then declare, without deadline, this decision to the Central of payment incidents. The blocking also occurs in case of presumption of misuse, fraudulent or unauthorized use (Art 64).

In the case of proven unauthorized transaction or the fraudulent use of payment card or any other electronic payment instrument previously opposed, the issuer shall reimburse the holder the full amount of the payment, transaction and its bank charges (Art 65).

The supplier of goods and services has the obligation to inform his customer that he accepts the payment through card or all electronic payment instrument by posting the logo or denomination of accepted payment instrument (Art 66).

The holder of payment instrument is also obliged to use the payment card or the electronic transfer instrument in accordance with the legal and contractual conditions governing its issue and use. Take the necessary precautions to ensure the preservation of the payment card or electronic funds transfer instrument and data related to its use (Art 67).

The law provides for two situations where the holder of electronic payment instrument is not liable if the disputed payment has been carried out: (1) without physical use or electronic identification of his electronic payment instrument; (2) for the counterfeiting of his electronic payment instrument and, at the time of the disputed transaction, he was in physical possession of his card (Art 69).

How long the electronic data could be conserved?

The operators of systems, participants, payment instrument issuers, suppliers of services and goods and acceptors of payment instrument are collectively required to conserve electronic data for a period of 10 years. The electronic data must be conserved in this period mentioned in order to consult and access to messages (art 107).

Is the law punishing payment card offenses and other instruments?

Law No. 18/019 provides for offenses and penalties for breaches of payment systems, payment cards, other instruments and electronic payment methods, checks and other items drawn without right to participants in the payment system. For example, is punished from 5 to 10 year-term of imprisonment and from 10.000.000 to 30.000.000 Congolese francs or one of those penalties only, anyone who has counterfeited or falsified a payment card or any other electronic payment instrument (Art 124 point 2).

Regulation of free banking services: enabler for financial inclusion in the DR Congo

Gaby KABUE
Managing Partner

Abstract

The congolese financial and banking landscape is characterized by banks, microfinance institutions, electronic money institutions that are committed to providing several financial and banking services to its customers. However, it should be noted that the country experiences a low rate of access to banking and financial inclusion compared to other countries in the region[1]. Nowadays the banking rate in the DRC is estimated at 6% and 13 % penetration of mobile financial services(statistic of 2019)[2]. Among the factors that contribute to the low rate of financial inclusion and banking services in the country are:  the billing of basic banking services by commercial banks, electronic money institutions and microfinance institutions. This fact deserves to take legal actions aiming to reinforce the financial inclusion of the populations as well as to accelerate the banking. Reason why the Central Bank of Congo, has set up the regulation to credit and microfinance institutions No. 37 of January 03, 2019 relating to banking services offered free of charge.

By Gaby Kabue Kayombo

I. Subject of the regulation

The regulation to credit and microfinance institutions No. 37 of January 3, 2019 relating to free banking services, essentially aims the promoting of banking services offered by credit institutions and microfinance institutions to their customers. In addition, it contributes to improving the financial inclusion rate that the country is facing.

This regulation is subject to credit institutions, which are made up by banks; savings and credit cooperatives; savings banks; specialized financial institutions as well as financial companies[3]. It also applies to microfinance institutions established in the DR Congo.

II. Entry into force of regulation

Published on January 03, 2019, the regulation came into force on June 03, 2019, either six months after its publication. This text first draws its legal basis from Act No. 18/027 on the organization and functioning of the Central Bank of Congo;[4] Act No. 003/2002 relating to the activity and control of credit institutions and Act No. 002/2002 on provisions applicable to savings and credit cooperatives[5].

Under the terms of Article 4 of the regulation under review stipulates: “Anyone who contravenes the provisions of this regulation is liable to the sanctions provided by the legal and regulatory texts”.

III. Categories of free banking services

The regulation provides 15 banking services offered free of charge by all credit institutions and microfinance institutions operating within the national territory. These free banking services are divided into 3 categories.

   1° Opening, operation and monitoring of account

This category relating to the opening, functioning and monitoring of accounts contains 8 banking services to be offered by credit and microfinance institutions: it is the services related to account opening; depositing cash in the customer’s bank regardless of counter; withdrawing cash from the customer’s bank regardless of counter and currency; salary domiciliation; the change of components of the client’s file; the establishment of direct debit or permanent transfer authorization; the establishment and dispatch of the first two monthly and printed statements of the client’s account and the closing account.

   2° Payment methods and operations

This group has 4 banking services which are offered free of charge by subject institutions. It is the services related to the withdrawal from an Automatic Teller Machine (ATM) of the customer or from a Point of Service (banking agent); the balance consulting and editing the first two monthly balance statements at the customer’s ATM; transfer from account to account in the same bank; payment by bank card in national currency.

  3° E-Banking

E-banking is an outcome of the digital transformation of banks which has changed the paradigm of banking services. In fact, the E-Banking category contains 2 banking services to be offered free of charge by all credit institutions and microfinance institutions: the services related to debit and credit notice through electronic means; consultation and editing of account balance and history through an ATM from the customer’s bank.

IV. Observations and recommendations

Indeed, the regulation to credit and microfinance institutions No. 37 of January 3, 2019 relating to free banking services, is an incentive and legal action which contributes to the improvement of the rate of financial inclusion and banking in the country. However, it should be noted that the instruction on free banking services offered by credit and microfinance institutions did not take into account the payment services through bank card, collection of national transfers, regional and international.

From this point of view, it is relevant to recommend to the Central Bank of Congo, to take the regulation which includes the payment services by bank card, collection of national, regional and international transfers, as the banking services offered free of charge by the credit institutions and microfinance institutions.

As long as the regulation No. 37 aims in particular the promoting banking services, it is recommended that the Central Bank of Congo take an additional instruction from credit and microfinance institutions relating to moderately billed banking services.

References

[1] In 2018 the congolese financial and banking landscape counted 16 commercial banks; 20 microfinance institutions; 81 savings cooperatives; 7 specialized financial institutions, 3 professional electronic money institutions

[2]   www.https://arca.cd/la-rdc/ (consulted on May 2020).

[3]Article 2 paragraph 2, Act No. 003/2002 of February 2, 2002 relating to the activity and control of credit institutions, OJ, Special No, May 2002.

[4] Article 10, Act No. 18/027 of December 13, 2018 on the organization and functioning of the Central Bank of Congo, OJ, Special No. December 2018, p.8

[5] Act No. 002/2002 of February 02, 2002 on provisions applicable to Savings and Credit Cooperatives, in collection of legislative and regulatory texts in matters of currency, exchange, credit, supervision of financial intermediaries, fight against money laundering capital and terrorist financing. OJ., Special No. 20 January 2013, p.43.

Legal framework on the issuing of public securities through the State in the DRC

Gaby KABUE
Managing Partner

Abstract

More than half century, the Democratic Republic of the Congo (DRC), didn’t have appropriate legal framework relating to public securities issue (Treasury Bills and Bonds) susceptible to assume the supervision of domestic public debt market. Yet in all countries, the short-term public debt securities are relevant monetary market instrument[1].They are considered to be a  risk-free because the governments cannot default as they might always increase taxes to pay their debts (or even issue money)[2]. The implementation of Treasury Bills and Bonds requires  an appropriate regulation which defines in particular the terms of issue of public securities by the State, the maturity of reimbursement and payment of interest, the auction procedures, etc. It’s in this context that the Congolese authorities, through the Ministry of Finance has put in place the regulation on issuing and reimbursement of Treasury Bills and Bonds.  The regulation establishes the conditions of formation related to the loan contract to the State[3]. In addition, the Central Bank of Congo has the mission to regulate the monetary markets and promote the capital markets,). According to this mission the Central Bank put in place several instructions in order to execute the decree and decisions of the Minister of finance, related to the market activity of Treasury values in the DR Congo. It should also be noted that Treasury Bills and Bonds are enshrined in the specific agreement signed between the Ministry of Finance and the BCC.

 By Gaby Kabue Kayombo

Keywords: bonds, treasury, stocks, bills, term, reimbursement, negotiation.

1. Legal basis on Treasury Bills and Bonds

In the DRC, the Treasury Bills and Bonds rely on the Decree No 18/025 of June 11, 2018 setting the terms and conditions for issuing and reimbursing Treasury bills and bonds. Ministerial Order No. 030/CAB/MIN. FINANCES/2018 of August 30, 2018 relating to the implementing measures of Decree No. 18/025 of June 11, 2018 setting the terms for issuance and reimbursement of Treasury bills and bonds; Instruction No. 38 bis of August 09, 2019 regulating the Treasury securities market and the Agreement of November 07, 2018 on the terms and conditions for issuing and reimbursing Treasury bills and bonds between the central government and the Congo Central Bank.

2. Issuing and supervision

The issuing authority for Treasury Bills and Treasury Bonds is assumed by the Ministry of Finance. He is the authority empowered to issue Treasury Bills and Bonds [4] hereafter called the Securities, through auction procedure[5]In this position he determines and specifies the methods of calculation of the amounts to be paid by the subscribers, the interest and amounts to be reimbursed by Treasury[6]. He is also empowered to issue other instruments[7].

The BCC is responsible for the material organization of Treasury Bill and Bond auctions[8].  In addition, he  is responsible for overseeing the Treasury securities market, with a view, on the one hand, to guarantee its integrity, efficiency and transparency and, on the other hand, to protect investors.

The BCC is required to set up control mechanisms to which participants and subject professionals are required to submit[9].  In addition,  he is called upon to ensure the operations management linked to the securities issued, in particular the codification of the securities, the settlement -delivery of the securities, the conservation of the securities, the payment of accrued interest, the reimbursement of the securities that have reached term[10].

3. Characteristics of Treasury Bills and Bonds

Financial securities issued by the State have common and specific characteristics which enable them to be correctly distinguished within the Treasury value market.

3.1 Common characteristics

Under the terms of Article 4 paragraph 3 of Decree No. 18/025 of June 11, 2018 provides: “Treasury Bills and Bonds are reimbursed in one time at maturity, their terms and conditions for reimbursement are fixed at issue by the Minister of Finance.

They are dematerialized securities exclusively registered in a security account [11]. Furthermore, the OHADA Treaty indicates: “The securities, whatever its form, must be registered on behalf of their owner. They are transmitted by account to account transfer” [12].

Indeed, the legislator has expressly consecrated the dematerialization of securities as principle, but without determining the terms relating thereto. So in order to comply with the provisions of the AUSCGIE, the DRC has promulgated the Act on payment and securities settlement systems, which determines the principle of the dematerialization of financial securities. The explanatory memorandum to the Act stipulates “dematerialization establishes the existence of financial securities only in the form of accounting entries in the register of financial institution[13].

Basically, the Treasury Bill and Bonds are also negotiable securities,[14] which mean that the securities can be yield [15] and assimilated. The assimilation consists in attaching to new issue to an issue of Bills or Bonds of the same category previously issued [16].

Treasury Bills and Bonds are issued through auction, it means procedure[17] for issuing Treasury securities in the form of multiple price auction open to all banks, including economic agents who have made a request their participation to the Ministry[18]. Moreover the Treasury Bills and Bonds may also be submitted to the term of non-competitive offers[19]. The non-competitive is a purchase  offer for a given quantity of Treasury value presented by a participant without specifying the rate and price.

Transactions on the primary and secondary markets of Treasury Bills and Bonds are liquidated through the settlement system, liquidation and conservation of securities for the Central Bank of Congo (SRLCT/ BCC).

3.2 Particular characteristics

These are the characteristics that apply distinctly to Treasury Bills and Bonds into the Treasury market.

3.2.1 Particular characteristics of Treasury Bills

Treasury Bills are short-term securities with terms of 3, 6 and 12 months. However, this term may be extended in purpose that the deadline falls on working day (day of operation of the settlement system, liquidation and conservation of BCC securities, in initials, SRLCT / BCC) [20].

They can be issued in different installments with the same characteristics, namely the unique code (ISIN, international security identification number) and deadline. In this case they are assimilable and form the same line[21]. They are issued through auctions at multiple rate basis of the rates offered by bidders. The interest rate suggested by bidders must be expressed in unit in unit with two decimals, who’s the last must be 0 or 5 [22].

All offers introduced at interest rates lower than the highest rate used by the Ministry of Finance are awarded for the total amount. Offers at the minimum rate may be awarded for proportional reduced amount. In this case, the amounts thus reduced are rounded up at slice of 1 million Congolese francs or 100 dollars immediately higher[23].

Treasury Bills are negotiable, worded in Congolese francs or, if applicable, in the US dollars and with a nominal value of 100,000 Congolese francs or 10 dollars.

They are exclusively dematerialized and registered into securities accounts kept at SRLCT/BCC, accessible, if necessary, to international clearing systems (Euroclear and Clearstream). The amount to be entered in the securities account is the amount (capital and interest included) due by the State on the final deadline before any deduction of tax levies.

3.2.2 Particular characteristics of Treasury Bonds

Treasury Bonds are issued for the terms higher to one year, at fixed or variable rates, representative of government loan issued in successive installments, the interests of which are payable annually [24].

They are issued in different installments with the characteristics of ISIN Code, nominal interest rate and installments. They are also issued by multiple price auctions based on the prices offered by bidders. The amount of the bid is the amount due by the Treasury on the final deadline.

They are also negotiable, that is to say the Treasury Bonds can be yielded, worded in Congolese francs if applicable, in dollars, with a nominal value of 100,000 Congolese francs or 10 dollars and refundable at the end of the term.

Treasury Bonds are dematerialized securities exclusively registered in a securities account hold through the SRLCT /BCC, accessible if necessary, to international clearing systems (Euroclear and Clearstream). The amount to be registered to securities account is the nominal capital to be paid by the State at the final deadline. The price is expressed in percentage of nominal value of Bonds with two decimals, which the first must be 0 or 5.

The bidders may submit several offers with different rates for the Treasury Bills as well as different prices for Treasury Bonds. The offers are awarded at the proposed price.

All offers introduced at higher price than the minimum taken into account by the Ministry of Finance are awarded for their full amount.  Offers introduced at the limit price may be awarded for proportional reduced amount[25]. Offers which do not meet these requirements are rejected [26].

4. Settlement and delivery of Treasury Bills and Bonds

Treasury Bills issued through auction or non-competitive subscription are delivered on their settlement date against payment of the amount due to via SRLCT/BCC.

The amount to be paid by the subscriber on the issue settlement date which corresponds to the amount borrowed by the Treasury for each offer selected or subscribed.  Interests are restrained and deducted from the price to be paid by subscribers at settlement moment of their subscriptions[27].

Concerning the Bonds issued through auction or by non-competitive subscription are delivered on their settlement date against payment of the amount due to via SRLCT / BCC.

The amount that the subscriber pays on the issue settlement date corresponds to the price offered or the subscription price, increased and calculated interest [28]. Interest on Treasury Bonds is paid annually

5. Reimbursement mechanisms on Treasury Bills and Bonds

Under the terms of article 19 of ministerial Order No. 030, the maturity day of the Treasury Bills and at the maturity date of the capital and interests of the Treasury Bonds, the SRLCT/BCC automatically debits the General Treasury Account of the total amount due and automatically credits the current accounts of the participants who hold the security concerned. This transfer is release for the Treasure.

Participants are required to credit at maturity and at the same value date the cash account of their customers with the nominal value of Treasury Bills and maturity Bonds. No cause of delay can be raised. If the maturity date is a non-working day, the interest and/or capital paid on the first working day that follows, without attribution of interest on late payments.

6. Sanctions

The regulation on Treasury Bills and Bonds provide for penalties. However, the Minister of Finance has the right to cancel Treasury Bills and Bonds for which no payment has been received on the date of settlement. In this context, the defaulting subscriber is fully liable to the Treasury and without any prior formality being required and 7 days’ interest allowance for the Treasury Bills and 14 days’ interest on Treasury Bonds, calculated at the policy rates of the BCC increased to 1.5 percent. This penalty is calculated on the amount that had to be paid.

References

[1] J. PAUL NYEMBO TAMPAKANYA, The organization of financial markets in the Democratic Republic of Congo: for establishment of stock exchange, Paris, L’Harmattan edition, 2017, p.33.

[2] F. MISHIKIN, C. BORDES, D. LACOUE-LABARTHE and X.  RAGOT Money, banking and financial markets, 9th editions, Paris, Pearson edition, 2010, p.37.

[3] G. MBULA ea LOONDO and W. PAMBU PAMBU, Development of private securities market in the DRC: operational diagram, BCC, January 2020, p.3.

[4] Article 2, decree No 18/025

[5] Article 2 point 1, Agreement of November 07, 2018 on the terms and conditions for issuing and reimbursing Treasury bills and bonds between the central government and the Congo Central Bank.

[6] Article 4 paragraph 4, decree No 18/025

[7] Article 4 paragraph 5, decree No 18/025

[8] Article 11, ministerial decree No 030

[9] Article 3, instruction No 38 bis of August 09, 2019, p.3.

[10] Article 2, Agreement of November 07, 2018 on the terms and conditions for issuing and reimbursing Treasury bills and bonds

[11] Article 5 paragraph 1, decree No 18/025

[12] Article 744-1, paragraph 1, AUSCGIE

[13] Law No 18/019 of July 09, 2018 relating to payment and securities-settlement systems, Official Journal, Special number, 23 July 2018, p. 55

[14] Article 2 point 2, instruction n°38 portant règlement général de marché de valeur du Trésor, p.2.

[15] Article 5 paragraph 2, decree No 18/025

[16] Article 5 paragraph 3, decree No 18/025

[17] Article 2 point 1, instruction n°38

[18] Article 7, decree No 18/025

[19] Article 5 paragraph 3, decree No 18/025

[20] Article 3, Ministerial Order No. 030/CAB/MIN. FINANCES/2018 of August 30, 2018 setting the measures for the implementation of the decree No. 18/025 of June 11, 2018, p.2.

[21] Article 3, Ministerial Order No. 030

[22] Article 10, Ministerial Order No. 030

[23] Article 12, Ministerial Order No. 030

[24] Article 4, Ministerial Order No. 030

[25] Article 13, Ministerial Order No. 030

[26] Article 10 paragraphs 6 and 7, Ministerial Order No. 030

[27] Article 16, Ministerial Order No. 030

[28] Article 17, Ministerial Order No. 030

Legal impact of the new manual exchange regulation in the DRC

Gaby KABUE
Managing Partner

Abstract

In the Democratic Republic of Congo, the manual exchange sector is an old activity most used by individuals, who are engaged in the transactions of buying and selling foreign currencies against the national currency and vice versa. Currency trading is a widespread phenomenon that comes from the monetary instability experienced by the country in 1993. It should be noted that this situation was accentuated by the political upheavals in 1990 which led to the tremendous consequences on the economies and more particularly on banking systems. In other words called “Changers”, these individuals’ purchases and sales foreign currencies against the national currency and buy and sell in cash foreign currencies against other national currencies other share. For several decades, this growing activity has been carried out in the absence of any specific applicable regulation likely to eradicate the legal and operational risks denounced several times by the banking institutions, the consumers, the public authorities and other actors evolved in this market. The Central Bank of Congo, according to its missions especially to elaborate the regulations concerning operations on foreign currencies; has established a specific regulation that governs all manual exchange activities in the relationship between manual money changers, consumers and the control authority.

In the Democratic Republic of Congo, the manual exchange sector is an old activity most used by individuals, who are engaged in the transactions of buying and selling foreign currencies against the national currency and vice versa. Currency trading is a widespread phenomenon that comes from the monetary instability experienced by the country in 1993. It should be noted that this situation was accentuated by the political upheavals in 1990 which led to the tremendous consequences on the economies and more particularly on banking systems. In other words called “Changers”, these individuals’ purchases and sales foreign currencies against the national currency and buy and sell in cash foreign currencies against other national currencies other share. For several decades, this growing activity has been carried out in the absence of any specific applicable regulation likely to eradicate the legal and operational risks denounced several times by the banking institutions, the consumers, the public authorities and other actors evolved in this market. The Central Bank of Congo, according to its missions especially to elaborate the regulations concerning operations on foreign currencies; has established a specific regulation that governs all manual exchange activities in the relationship between manual money changers, consumers and the control authority.

By Gaby Kabue Kayombo

Key words: manual exchange, regulation, prudential rules, operational risks, changers.

Introduction

The manual foreign exchange market is a very popular activity that has evolved several decades without regulations in order to determine the obligations and relationship between operators, consumers and the control authority involved in this business. It is so quiet to mention that the lack of prudential rules applicable to the manual exchange, has made operators, commonly called “Changers” to operate the activity according to their subjective rules which led most of them to act malicious, for instance, grant of loans to individuals with high interest rate, organize the fund deposits on behalf of their customers, carry out transfer fund abroad, importing and exporting bank notes, making large-scale currency exchange transactions per day, etc. It should be noted that the manual money changer’s behavior are considered as an encroaching on the activities of the commercial banks, and in other hand, the wrongdoing cause economic and financial difficulties to the financial institutions.

Effectively, sort out the multiple legal and operational issues caused in the manual exchange sector, as well as ensured the good functioning of manual exchange operations between the stakeholders involved in matter, the Central Bank of Congo, established the administrative instruction n ° 007 for regulating the manual exchange activity.

The purpose of this article consists to identify the key general and specific provisions that organize operating of manual foreign exchange activities on the national territory.

In this approach it will be a question of examining the relevant points addressed by the new regulation, in particular: (1) the legal status of manual money changers; (2) the scope of the foreign exchange activity; (3) the classification of manual money changers; (4) the rules for creating Bureau de Change or manual changer; (5) restrictive activities; (6) the obligations of  Bureau de Change and manual changers; etc.

Activities scope of the manual money changers

The manual money changers are authorized to buy and sell foreign currency in cash against the national currency (Congolese francs) and to buy and sell foreign currency in cash against other foreign currencies (art 3).

Legal status of manual money changers

The manual money changers are individuals or corporates congolese, other than credit institutions that carry out, as their usual profession, manual exchange transactions. With regard to this administrative provision, we can bring out three legal attributes, cumulative recognized to manual money changers:

■ be an individual or corporate under congolese law

■ practice the profession in usual way

■ do a manual exchange transaction

The new regulations related to manual foreign exchange activities set up the requirements before operating an exchange activity. Firstly, manual money changers must be the individuals or commercial enterprises legally registered under OHADA law. Secondly, individuals or companies must operate the business without interruption. Thistly the operation must be a manual exchange transaction, in other words they must make manual exchange a unique activity.

Categorization of manual changers

Administration instruction No. 007 subdivides three types of manual changers. They can subscribe to practice their profession as:

  • Bureau de Change of the first category or national level which enable to operate the profession of manual exchange throughout the national territory.
  • Bureau de Change of the second type or provincial level which enable to operate the profession of manual exchange within the limits of province.
  • Manual changers carry out their activities within the limits of their province of domiciliation regardless of the category of Exchange Offices to which they are affiliated.

Constitution of the bureau de change or manual changer

The regulation of Central Bank of Congo imposes the requirement for manual money changers, to be constituted in Bureau de Change or manual changer, and these must be affiliated to the Bureau de Change.

Bureau de change

In this option the Bureau de Change operates as:

Corporate

As a corporate, the Bureau de Change must fulfill the following conditions:

1.Register as a limited liability company

Manual Changers which would like to open the Bureau de Change must constitute under the form of a Limited Liability Company (LLC), in accordance with the OHADA law related to commercial companies. This is to comply with the conditions of substance and form.

Bureau de Change must obtain an operating license (RCCM), the National Identification Number, the Tax Number, the INPP, the INSS, show notarial statutes, demonstrate the proof of the existence account in national currency and / or in foreign currencies opened with the financial institutions approved in the name of the applicant; etc.

2. Approval obtaining

Regulation specifies that the first and second type of the Bureau de Change must address the letter of application for approval of the central bank of Congo.

This letter will be accompanied by the following evidence:

  • copy of original of notarial statutes;
  • proof of deposit statutes at the clerk’s office of the Commercial Court
  • certified copy of license
  • certified copy of the National Identification Certificate;
  • proof of accounts in national currency and / or in foreign currencies open with financial institutions;
  • CVs and criminal records at least three months old from the promoters and persons in charge of the administration and management of the Bureau de Change.

Applicant for obtaining approval is required to pay 3% of the deposit for file review.

Once application for approval received, the Authority has 90 days to examine. Whether the deadline expired, it supposed that the authority has approved the application. (art 11).

3. Payment of the deposit

In case the Central Bank of Congo gives a favorable opinion on the application for approval, the applicant is required to pay the deposit and approval fees as follows:

For the deposit:

  • 2500 USD for first type or national level of Bureau de Change.
  • 1500 USD for second type or provincial level of Bureau de Change.
  • 150 USD for Manual changers

For the manual fees:

  • 20% of the deposit of each type.

However, the deposit paid to the Central Bank of Congo is not remunerated. The Central Bank of Congo might reimburse the deposit in currency in case of ceasing of activities. In addition the supervisory body will deduct any sums due to Treasury. But, the regulation does not demonstrate the elements that will be taken into account to make this deduction.

It should be noted that the opening of branches allows to the payment of deposit fees (3%).

Manuel changer

In this category the manual changer carries out the activity as:

Individual

As an individual, the Manual changer is required to fulfill the following conditions:

1. Approval obtaining

In this type, the applicant must send the letter of application for approval to the Governor of the Central Bank of Congo.

The letter must be accompanied by the following elements:

  • proof of the authorizations of the competent authorities for the operating of commercial activity (declaration of activity at the Registry of the Commercial Court, subject to the license);
  • proof of accounts in national currency and / or in foreign currencies opens with financial institutions;
  • CV and criminal records less than three months old from the applicants.
  • proof of affiliation to the Bureau de Change by the transmission of the affiliation agreement.

Bureau de Change and Manual changer are not allowed:

  1. carry out the operations of buying and selling in cash the foreign currencies against the national currency, either buying and selling in cash the foreign currencies against other foreign currencies for an amount exceeding 10.000 USD or the equivalent in another foreign currency by person per day;
  2. make deposits for the accounts of their customers;
  3. make transfers abroad;
  4. import or export banknotes;
  5. grant loans to their customers;
  6. manual currency traders individuals are not allowed to affiliate to more than one Bureau de change.

Obligations of bureau de change and manual changer

The Bureau de Change, as a corporate are bound by certain obligations in foreign exchange transactions, such as:

  1. immediately seize the National Financial Intelligence Unit and the Central Bank of Congo through its Financial Intermediaries Department for any transaction deemed suspicious;
  2. collecting and photocopy the identities (address, photo) of the customers carrying out the exchange operations;
  3. keeping proper accounts that can present the summary statements in accordance with the Congolese General Chart of Accounts;
  4. prepare daily statements of exchange transactions according to the predefined models;
  5. transmit to the Central Bank of Congo, not later than the 7th day of the following month, a consolidated monthly statement by currency of the sales and purchases of the currencies made;
  6. reporting to the Central Bank of the Congo the cases of non-transmission of the unconsolidated monthly statements by currency of sales and purchases of currencies made by their affiliates;
  7. seizing against discharge and transmit to the Central Bank of Congo by a circumstantial note any false currency presented;
  8. displaying the legalized copies of the deed of approval and opening authorization of the Bureau de Change and its branches in the premises where the exchange activities take place;
  9. reproducing on each document or correspondence of the Bureau de Change the approval and authorization numbers for opening the branches our teller;
  10. organizing as a professional corporation;
  11. submitting the statutes of the corporation for the approval of the Central Bank of Congo.

Manual changers are bound to the following obligations:

  1. sending to their respective Affiliation Exchange Offices, not later than the 2nd day of the following month, the consolidated monthly statements by currency of the sales and purchases of currencies made;
  2. affiliating with Bureau de Change;
  3. organizing as a professional corporation;
  4. submitting the statutes of the corporation to the approval of the Central Bank of Congo.

Conclusion

Manual change regulation is cornerstone legal tool that governs manual change trading activities between changers and consumers involved in the manual exchange market across the country. Prudential regulatory measures help to fight against money laundering and the financing of terrorism. This regulation defines the obligations of manual money changers vis-a-vis the supervisory authority and gives a large clarification related to the restrictive activities which they can’t afford in operating of their manual exchange activities.

Legal analysis of the promulgation modifying the mining code in the DRC

Gaby KABUE
Managing Partner

Abstract

The Democratic Republic of Congo is full of mining potential, which responsible exploitation brings economic development and reduction of poverty across the country. In spite of tremendous matters experienced by mining sector, the sector remains a cornerstone of development with more than 11000 spectrum mineral substances worth estimated at 3700 billion dollars. The mining sector accounts for 95 percent of export earnings for a contribution of 10 percent to the gross domestic product (GDP), which makes it a pivotal of national economy. DRC’s mineral wealth is widespread in all provinces including copper, coltan, cobalt, diamond, cassiterite, zinc, wolframite, gold, manganese, gas, etc. The statistics reveals that the country is the largest cobalt producer with about 48 percent of the world’s reserves, and 73.940 tons were produced in 2017. The existence of mineral wealth continues to attract countless mining companies operating in the sector. According to the indicators it turns out that the DRC will record an average growth rate of 17 percent during the year 2018, overlooking other mining markets. It is very relevant to mention that the mining sector is peppered with several economic, environmental and social issues, which led the lawmakers to elaborate the mining code of 2002, in order to regulating mining extractive operations and especially to foot an incitative mining law with procedures for granting objective, fast and transparent quarries rights in which tax, customs and exchange. However, stability clauses recommend that mining code of 2002 must be revised after ten years of its application. It is in this purpose that two chambers of parliament revised the mining code as well as adopted a new mining code. In constitutional deadline the bill has been transmitted to the President of the Republic for promulgation. However, the new mining code is not promulgated.

By Gaby Kabue Kayombo

Key words: fiscal system, royalty rate, legal basis, constitutional deadlines, promulgation effect.

 Introduction

 The promulgation of the new law revising the Mining Code of 2002 is a topical issue on which all gazes are focused with backdrop. The mining sector is governed by Law No. 007/2002 of 11 July 2002 and Decree No. 038/2003 of 26 March 2003. Moreover, it exists several regulations established on mining sector. In particular, the mining code includes 344 articles divided into 17 titles. The mining code of 2002 is an incentive mining legislation with procedures of granting the objective mineral rights, fast and transparent in which are structured the tax, customs and foreign exchange.

In fact, after a decade of its application the mining code was obligated to be revised in order to identify its strengths and weaknesses and ultimately bring improvement.

Established in 2002, the mining code has realized ten years of applicability in 2012. During this year all stakeholders including the government, civil society and private sector were intensively involved in the revision work, which allowed them to make proposals for amendments to the topics such as the persistent legal dualism; social responsibilities of mining companies; deterioration and degradation of the environment; claims of local communities regarding access to mineral ownership; expropriation, compensation, relocation and implementation of sustainable development plans aimed improving the economic and social well-being of the communities affected by mining projects during and after exploiting, compensation for communities in case of relocation; public consultation during the preparation of the environmental and social impact assessment to enable the active participation of local communities affected by mining or quarry projects; implementation of the mitigation and rehabilitation plans provided for the current environmental plan or the cessation of mining research or mining activities; the presence of children in artisanal mines;  insufficiency of geological data; non-existence of the investment promotion policy; the lack of objective conditions for the execution and monitoring of exploration and exploitation projects; the inadequacy of tax collection systems; the lack of transparency and the involvement of politico-military authorities in the exploitation and trade of minerals; the question of stability of the provisions relating to tax and customs systems, etc.

Ultimately, the most stakeholders’ opinion converges and arguing that the mining legislation of 2002 did not contribute to the socio-economic development of the country. The favorable tax system has only attracted mining investors; however this did not maximize the State’s coffer in order to eradicate poverty and fight against the economic crisis that the country faces every single day. The Congolese authorities believe that the mining reform initiated will contribute to improving the lives of Congolese. However, mining operators argue that the new mining code does not target corruption, a cancer that is plaguing the mining sector.

Reform of tax system as priority of the new mining code

The meticulous reading of the new mining code shows that the tax system is a priority axis of mining reform.

Indeed, mining investments generally expose mining companies to huge tax burdens. However, in most cases the mining investors require the host countries, flexible tax regimes that allow a good return on their investments. In order to attract investment in the mining sector, the States are obligated to establish tax standards applicable to mining investments and which are generally incentives and derogate from ordinary tax system. It is in this approach that the mining code of 2002 established the tax system that is more profitable to mining investors.

As long as there is strong presence of mining investors and especially the high prices of minerals extracted in the DRC, the Congolese government ultimately would like to seize the opportunity of the mining reform to review up its tax system.

Increasing of mining royalty rate

Currently, the mining royalty rate as fixed in new code devised the congolese government and the mining operators. Before analyzing the provisions related to mining royalty rate it is essential to comprehend the background of mining royalty according to the mining code of 2002.

  • Legal approach related to Mining code of 2002

According to article 220 of the Mining Code, “the holder of the mining exploitation title is liable to mining royalty which base is calculated on the basis of the value of the realized sales, diminished to the transport fees, to the fees of analysis relating to the quality control of the product for sale, insurance fees and commercialization fees“.

Establishing of the mining royalty is an effort undertaken by the Congolese State to allow the holder of mining title to enjoy a tax regime that can contribute to the profitability of investments in the mining sector.

The mining code of 2002 sets the rate of the mining royalty according to the following products:

  • Iron or ferrous metals 0.5%
  • Non-ferrous metals 2%
  • Precious metals 2.5%
  • Precious stones 4%
  • Industrial minerals, solid hydrocarbons and other substances not mentioned 1%
  • Building materials of common uses 0%

The rate of royalty changes according to the nature of the mineral substances. The mining royalty is paid by the holder of the mining title of exploitation to the Public Treasury. The Public Treasury is responsible for distributing revenue from the mining royalty according to the following distribution key: 60 percent will remain acquired by the Central Government; 25 percent is paid into an account designated by the Administration of the Province where the project is located and 15 percent into an account designated by the City or Territory in whose jurisdiction the operation is being carried out.

  • Approach of the new mining code to promulgate

The new mining law submitted to promulgation sets royalty on “strategic metals” at the rate of 10 percent. A measure totally found unacceptable by the majority of mining investors. They believe that such a measure ruins the country’s reputation and leads the country to freeze investment in the sector.

The reasons of the review of the mining tax system are justified by rise of prices on the minerals extracted in the Democratic Republic of Congo. The statistics displays that the price of copper whose Katanga subsoil abounds, reached 14.5 percent in 2016, then its production in 2017 is 1.092 million tons (+ 6.9 percent). Diamonds potentially found in Kasai, rose by 9 percent between 2013 and 2016, its production in 2017 reached 18.9 million carats (+28.1 percent). Zinc, the production of 2017 is 7833 tons (-32.8 percent). Gold, very present in South Kivu, gained 13% in 2017 after a good of 8.6% in 2016, its production in 2017 is 23.3 tons (+2.7). Zinc, the production of 2017 is 7833 tons (-32.8%). Coltan used for the manufacture of smartphones, particularly concentrated in Kivu, its course breaks the ceiling of + 59 percent in 2017. However, the Cobalt, currently aimed for manufacture of batteries of electric vehicles to replace gasoline and diesel, this mineral potentially concentrated in Katanga with about half of the world market is 66000 tons out of 123000 tons comes from the DRC. The country holds 2/3 of known world reserves, the production of Cobalt in 2017 reached 73940 tons (+ 15.5%).

In fact, Cobalt’s strong demand for economic needs in the international market is revolting the State to classify Cobalt as “strategic metals“, whose royalty rate is set at 10%. Compared to the 2002 Mining Code approach, the royalty rate for Cobalt goes from 2 percent to 10 percent. A measure fiercely fought by the mining investors who threaten to go to international arbitration if the Congolese State can not reduce this rate. However, the decision to invest in a country depends in particular on the tax system.

Constitutional provisions relating to the promulgation of the new mining code

The mining code is the domain of the law. It is therefore subject to the rules established by the constitution.

  • Principle

Without prejudice to the other provisions of the constitution, the law determines the fundamental principles concerning the mining regime (article 123 paragraph 3 Constitution of 18 February 2006).

Article 9 of the aforementioned Constitution says: “The State exercises permanent sovereignty over the soil, subsoil, water and forests, over the airspace, fluvial, lacustrine and Congolese maritime as well as on the Congolese territorial sea and on the continental shelf “.

According to this constitutional provision it can deduce the enumeration of the terms “subsoil” which have a direct link with the concept of mines because generally the mineral substances are in the subsoil. The Constitution makes the mining domain a part of the Congolese State. And it’s in this perspective that the lawmakers elaborating the laws in the field of mines in the DRC.

Background of promulgation of the new mining code

 As in all democratic States, the final adoption of law or legislative proposal closes, in principle, the parliamentary phase of the legislative procedure, which normally conducts to the promulgation of the law. The promulgation is the legal act by which the President of the Republic authenticates the existence and the regularity of the law and gives the order to conform to the prescriptions of this law. It is logical that the law revising the mining code was passed in parliament and then transmitted to the President of the Republic.

 Legal basis

 The promulgation of laws is found in the constitution of the State

  • Promulgation effects

The effects of promulgation of laws consist, firstly attesting the existence of the law, giving the regularity of the legislative procedure. Secondly, confiding the text voted the authentic character; authenticates the law. Thirdly ordering public authorities to observe the law and to enforce it; the text is made enforceable.

  • Competency

The power to promulgate laws is the responsibility of the President of the Republic. The President of the Republic is the guarantor of the nation.

  • Extent of the power

The President of the Republic has a wide power in matters of promulgation namely:

Power of Promulgation: The President of the Republic has the power to promulgate the law within fifteen days of its transmission. The constitution does not provide delegation of power in this area (Article 140 of the Constitution of 18 February 2006).

Power to request a new deliberation: Article 137 of the Constitution says, “Within fifteen days of the transmission, the President of the Republic may request the National Assembly or the Senate a new deliberation of the law or some of its articles. This new deliberation can not be refused”.

  • Constitutional deadlines

The prerogative of promulgation laws acknowledged to the President of the Republic required the respect to the constitutional deadlines. According to article 140 “the President of the Republic promulgates the law within fifteen days of its transmission after the expiry of the time …”. The constitutional deadline of 15 days can not be derogated.

  • Failure to promulgate within the deadline

The prerogative of the President of the Republic to promulgate the law is bound to the respect of constitutional deadline. In case of absence of the promulgation law by the President of the Republic within the constitutional deadline, the promulgation is supposed done (article 140 paragraph 2 of the Constitution). In other words, whether the President should not promulgated as required according to the constitutional deadline, the law is supposed promulgated and the text is definitively enforceable.

In the context of the law revising the mining code of 2002, needless to say that the acts of two chambers of the Parliament would have been completed on February 27th 2018. From this adoption date, the objective presumption enables to say that the adopted law was transmitted to the President of the Republic within the constitutional deadline, either 6th  of February mathematically the deadline ran 06th of February 2018. And the President had 15 days to promulgate, mathematically the promulgation should occur on February of 20th, 2017. However, the silence of the promulgation still persists.

 Suspensive effects of promulgation

The Constitutional Court control the compliance of laws of assembly’ acts according to the Constitution which says: “The Constitutional Court is in charge of the control of the constitutionality of laws and acts with the force of law“.

Where a law to be promulgated is found to be unconstitutional, the Constitutional Court may be referral on appeal (Article 139 of the Constitution).

In case the law to be promulgated is found unconstitutional, the Constitutional Court might be referral on appeal (Article 139 of the Constitution).

In such assumption, four scenarios emerge:

1) The President of the Republic within fifteen days following the transmission to him of the law finally adopted;

2) The Prime Minister within fifteen days after the transmission to him of the law finally adopted;

3)  The President of the National Assembly or the President of the Senate within fifteen days of its final adoption;

4) A number of deputies or senators at least equal to one-tenth of the members of each House, within fifteen days of its final adoption.

It so relevant to mention that the referral of  the Constitutional Court for unconstitutionality of law constitute a suspensive effect on the promulgation law.

While this article is writing, the Constitutional Court does not referral an appeal of unconstitutionality of the law revising the mining code submitted to the President of the Republic for promulgation. The referral to the constitutional court for the unconstitutionality of the law could have a suspensive effect on the promulgation of the law revising the mining code.

 Conclusion

 Since 2012, the Mining Code of 2002 has realized ten years of its implementation. At the end of this period, this one is revised to assess the strength and weakness points. It is in this logic that the DRC government has initiated the mining reform, which has made other stakeholders including the private sector, civil society involved in the work of the proposals amendments on the revision of the Code Mining. Remaining in practice, the government through the Ministry of Mines has written the bill on the Revision of the Mining code revising which have been submitted to the parliament institution with a particular focus on the reform of tax system. The tax reform is justified by the rise of mineral prices extracted in the DRC, and the Congolese State has seized the opportunity to revise upwards its tax system, and particularly classify some ores as “strategic metals” with a royalty rate set at 10% contrary to the rate 2 % under the Mining Code of 2002. This rate is fiercely controversial by economic operators operating in the sector. At the end of the acts of the Parliament in margin of the revision of the mining code of 2002, the new mining was transmitted (in constitutional deadline) to the President of the Republic with a view to be promulgated within fifteen days. However, the new mining code is beneficiate signature (promulgtation); the constitution says black on white that the failure to promulgate the law within constitutional deadline, the promulgation is supposed done (Article 140 of the constitution). The most objective legal analysis of the constitutional provisions on the promulgation of laws as the prerogative of the President of the Republic, enable to confirm that the new mining code was transmitted within the constitutional deadlines, and it not exist any constitutional suspensive effect, in this case the new mining code is supposed promulgated under article 140 of the Constitution.

Bibliography

 Legal texts

  • Constitution of February 18th , 2006
  • Act No. 007/2002 of July 11th , 2002 on the Mining Code
  • Organic Law No. 13/026 of 15th October 2013 on the organization and functioning of the Constitutional Court
  • Decree No. 038/2003 of 26 March 2003 on mining regulations
  • Bill to revise the mining code

 Books

  • Muhigirwa Rusembuka Ferdinand: “Towards Good Governance in the Mining Sector of the Democratic Republic of Congo”
  • World Bank Report on “Good Governance in the Mining Sector as a Growth Factor”, May 2008
  • Commodity TopNews, the cobalt of the rdc: “potentialities, risks and importance in the global cobalt market”, 2017
  • Annual Report of the Central Bank of Congo, 2016
  • Bmi research In 2018: “the DRC will be the fastest growing mining market in the world”
  • Proposals amendments on the Review of the Mining Code: Report of Civil Society Involved in Natural Resources Issues, 2012
  • Bertrand Laporte, Céline De Quatrebarbes and Yannick Bouterige “Mining Taxation in Africa”: a review of the gold sector in 14 countries »from 1980 to 2015
  • Horizon Mines Magazine, “Professor Dona Kampata justifies the revision of the Mining Code” 2018
  • Jeune Afrique, Mines: “The new mining code worries the congolese industry”, March 02, 2018
  • Jeune Afrique: Mines: “The storm on the Congolese sector”, February n ° 2981 of February 25, March 03, 2018
  • Analysis of the Congolese Mining Tax System and Proposal reform “, Southern Africa Resource Watch, Media Edition Paul, Kinshasa, 2015
  • Emile Lambert Mende OWENGA ODINGA, Mining Law Volume I “General Mining Regime for Mines and Quarries”, July 2014
  • Georges Bokundu and Claude Kapemba, Southern Africa Resource Watch “Crossing Borders: Natural Resources Conflicts in the Democratic Republic of Congo and its Neighbors: Angola and Uganda”, 2015
  • Law-Net Course: Promulgation and Publication: Conditions of Law Enforcement
  • Dieudonné KALUBA DIBWA, “Constitutional Justice in the Democratic Republic of Congo”, Editions Academia-Harmattan s.a
  • Law-Net Course: Promulgation and Publication: Conditions of Law Enforcement

Telecom operators facing Technology evolution: Challenge of new regulatory requirements in DRC

Gaby KABUE
Managing Partner

Abstract

The telecommunication industry is moving with a breakneck speed and unparalleled in its history across the planet. It continually touches all aspects of social, economic and financial life. Many households in developing countries have a mobile phone, though without access to electricity or water, and nearly 70% of the population in developing countries has a cell phone. In the DRC, nearly 49% of population have a telephone. Certainly, telecommunication has affected the way of doing business, and has imposed a new ecosystem of building the experience of humanity. Prestigious innovations exacerbate the needs of consumers, which strongly encourages mobile and Internet operators to invest in a competitive path and play their pivotal role in the development of new digital markets. The rapid technological progress in the telecommunication sector in DRC is a real challenge for the public power, which is being asked to adopt a new regulation adapted to the unlimited innovations of the digital era in the DRC.

 By Gaby Kabue Kayombo

Introduction

The progress of digitization has completely transformed the telecommunication sector, whereby we can notice that the relationship between different technologies is becoming closer and closer. The digital economy is expanding in the Democratic Republic of Congo. With nearly 30 million mobile subscribers, there are many business opportunities. New Information and Communication Technologies (NICTs) have thus become an engine of economic growth and jobs, a key element in the evolution towards emerging market status of the DRC. Beyond the mineral resources traditionally recognized as a powerful vector of the country’s economy, there is no doubt about the shadow and several statistics show that the telecommunication and ICT sector has also become one of the most profitable and a lever for economic growth whose contribution to GDP amounted to 15% in 2016.

In the DRC, we count four mobile operators: Vodacom Congo, a subsidiary of Vodacom South Africa and a subsidiary of Vodafone with 33% market share. Then Orange DRC, second operator in the market with 30% of share; Airtel DRC represents 23% of the market share and Africell DRC, a subsidiary of the Lebanese group Lintel Holding, with 13% of the market share. In addition to mobile operators, there is also an increased number of Internet service providers such as Iburst, Comax, Afrinet, Global Broadband Solutions, Microcom, Inet, Africanus SPRL, etc. These also experience technological, organizational and commercial innovations of services and business models.

For most of these telecom operators, innovations also bring significant operational and organizational disruption but above all, those innovations encourage “competition” they are now engaged in for the unique purpose of maintaining and increasing the base of their customers by offering rate discounts for Internet or national and international calls, interconnection costs or rather offering several other offers (per-second rate, introduction of instant messengers, etc.). Telecom companies have leveraged their strong customer portfolio to position themselves at the heart of new digital services, such as homeland security, transportation, entertainment and financial services.

What are the innovations of the telecom sector?

Before addressing the legal issues raised by the innovations that operators are experiencing, we start by identifying the key innovations that have revolutionized telecom services in the DRC.

a) Mobile money service

The mobile money service is a lightning innovation that has inevitably marked the experience of telecom operators. A concept (innovation) well designed and adapted to the needs of consumers to offer concrete solutions to the daily problems of consumers. It is an innovation that has grown rapidly in financial transactions and offers enormous potential for economic growth in developing countries. The e-money service continues to gain ground not only in DRC but also in most of Central and Eastern African countries. The benefits of this innovation are demonstrated even in other parts of the world as it allows the use of mobile phones in commercial transactions for wider access to financial services for instance electronic money transfer, and even to a fringe of unbanked populations living in the most remote areas of regions.

In Africa, the concept was tested for the first time in Kenya through the mobile operator Safaricom, under the M-Pesa label. Launched in 2007, the service only provided money transfer; and in 2009 the service already offered the payment of certain domestic services (“kenya power” electricity). In 2011, there was progress with international money transfer operations. Then in 2012, investment and lending services were introduced (M-Shwari). In 2013, M-Pesa innovates with the merchandise payment service (Lipa M-Pesa). Later in 2017, a digital application was launched.

In the DRC, M-Pesa was launched in 2012 by the mobile operator Vodacom Congo. In 2016, M-Pesa has more than 2 million subscribers across the country. Very well received by the Congolese, this concept knows an expansion for financial transactions through the mobile phone to the unbanked people residing in the remote regions of the country where the financial institutions are almost non-existent due to the problems of basic infrastructures. Innovation has not only been about solving the financial transaction challenge, but it has also led to other economic markets such as the creation of small and medium-sized enterprises (SMEs), the solutions offered by the mobile phone facilitating the payment of bills from domestic service providers including electricity, prepaid cards, salary, gratuities, television subscription cards (Canal +), and even the possibility of paying for products in some supermarkets.

The mobile money service has spread to other telecoms companies operating in the DRC, such as Airtel, which offers this service under the Airtel Money label and Orange under Orange Money.

However, financial transactions for bill payments and product purchases in supermarkets are still very limited. It would be beneficial for this mechanism to extend it to other companies such as Régideso, Sonas, etc. And this would avoid consumers going to the traditional ticket offices to pay their bills.

Despite the innumerable benefits of innovation, the mobile money service presents operational risks that will be demonstrated in following points.

b) Cloud computing service

Cloud computing is a sophisticated innovation in the 21st century digital age. In simpler terms, cloud computing is the access via a telecommunication network, on demand and self-service, to configurable shared computing resources. This is a relocation of the IT infrastructure. It provides services that individuals and communities can exploit at will from anywhere in the world.

The Cloud Computing Service offers a simplified IT model that enables governments, international organizations, private institutions and businesses around the world to no longer need to invest heavily in computing resources and infrastructure that are necessarily limited and require internal heavy and expensive management. Today they have the choice to migrate to a Cloud Computing model where they can buy or rent online resources. This model saves them the costs of internal management, since IT resources are managed at the level of the cloud provider.

The cloud computing service has characteristics that offer it a different scope to other technologies namely: first, cloud users do not own the computer resources they use. The servers they use are hosted in external data centers. Secondly, services are provided according to the pay-per-use or subscription model. Tertio, the services that are provided to the customers are virtual and shared by several users and finally, the services are provided via internet.

However, the cloud computing service presents innumerable legal risks that will be pinned in this study.

c) Big data

Big data or mega data (massive data), is a very favorable technological innovation for telecom operators. It refers to a very large set of data that no conventional database management or information management tool can really contain.

Indeed, every day the world generates about 2.5 trillion bytes of data. This could be information from everywhere: messages that we send, videos we publish, weather information, GPS signals from mobile phones, messages on social media sites, digital images and videos posted online, transactional records online and many more. The giants of the Web, first and foremost Yahoo, but also Facebook and Google were the first to deploy this type of technology.

Big data has emerged as one of the important issues related to the development of new technologies within companies. It is considered as the engine of innovation, customer satisfaction and achieving greater profit margins.

Big data is based on four pillars of solution: mass storage, information exploitation, research and visualization, and the exploitation of information on the fly. Big data technology enables telco operators to process, use and exploit a real-time data flow that flows through their networks, with the aim of gaining a better understanding of the consumption patterns of their customers, allowing them to offer more personalized packages and offers. In addition, they value their data by selling to third parties on datamarkets.

Telco operators are among companies that store and deliver very large volumes of data. So big data is a technology that allows them to improve the efficiency and performance of their activities.

d) Mobile applications

By Mobile applications (Apps), we mean downloadable and executable programs from an operating system of a mobile phone or tablet. A mobile application can have a marketing (service / advertising) or commercial (e-commerce) vocation.

The exponential outbreak of mobile applications has not only created considerable opportunities in the mobile network operators’ economic market but also disruptions.

The development of applications on smartphones (Android, Apple or Windows) is now essential for telecommunication companies to conquer new markets and maintain their visibility. These operators do realize smartphone and iPhone / iPad applications to present their company, their products and services by offering to their subscribers tailor-made offers such as: streaming (music and videos), video calls, photo sharing, online shopping, online banking, etc.

Google, Amazon, Uber, Airbnb, Facebook and Whatsapp are currently world-famous mobile apps that have revolutionized the business market.

Mobile applications give autonomy to their users, they are currently making mobile phones real gates to access the online world. A new wave of Smartphone applications stimulated by broadband networks is bringing social networks into action. And innovation allows mobile phones to transform people’s living ecosystems in both developed and developing countries. Apps did not only empower individuals, but also spurred growth, entrepreneurship (start-up), and productivity across the entire economy. Mobile apps have become a digital indicator of business performance and competitiveness. Apps enable accessibility and SEO of a company.

We should note that mobile applications have created problems that still fall outside the existing telecommunication legislation, especially in DRC.

e) Digital marketing

Digital marketing is an irrefutable step forward in the current digital age that mobile network operators and consumers are experimenting to the limit. It aims to use all interactive digital tools to promote products and services in the context of personalized and direct relationships with consumers. It concerns all points of digital contact: Internet, smartphones, tablet. It is a technological process that has changed the deal on how to advertise products and services. It is no longer a question of necessarily relying on traditional media such as radio, television, billboards, leaflets… But thanks to mobile telephony, thousands of advertisements are broadcast digitally. Digital marketing is faster, cheaper, participatory, engaging and interactive with consumers through the use of the Internet.

Operational risks and legal issues of technological innovations in DRC

1. Electronic theft of funds.

The mobile money service has generated a wide range of operational risks for consumers. The typical case is that of M-Pesa, Airtel money or Orange money service with a number of subscribers currently estimated at nearly 5 million across the country. There is a systematic electronic theft of funds that is done through these electronic money services in the DRC. We met some victims who revealed to us that there are indeed networks of electronic thieves operating on behalf of mobile operators. How do they carry out these thieves? They start by giving a call to the subscriber, to inform him that he has won a bonus. In this scheme, they then ask the consumer (uninformed) to provide the digital data of his M-Pesa, Orange or Airtel money and once these codes are delivered, the electronic funds theft is operated.

The legal questions that can be asked are: How can the existing legal framework on telecommunications solve the case of digital theft of funds? How to establish criminal responsibilities? Admittedly, the existing laws applicable to the telecommunications sector are almost out of date and obsolete to respond to such risks as a result of technological evolution.

2. Insecurity, fraud, loss and theft of personal data

While Cloud Computing and Big Data have advantages as demonstrated above, however, these two innovative technologies that have revolutionized the IT ecosystem of companies also present legal risks, including insecurity, fraud, loss and theft of personal data. These two processes present risks that are increasing in the pooling of servers and the relocation of these. And access to the service requires a secure connection and user authentication; there may be a management problem of identifiers and that of responsibilities (unauthorized access, loss or theft of identifiers). The risks highlighted can not necessarily find the legal answer in the existing telecommunication laws. The loss of control by the customer over the data they have given to a third party in a cloud computing environment may give rise to specific problems because of the geographic dispersion of data across multiple processing centers. This new context requires Congolese lawyers to make provisions to best protect the interests of one another.

3. Violation of intellectual property rights

The rise of new technologies, and in particular mobile applications, has inflamed the problems of legal uncertainty generally experienced in the intellectual property law. This is the tangible case of mobile applications where consumers engage in the use of personal data for various purposes that violate copyright. However, the use of a mobile application and the processing of personal data of the users possibly collected by the download is not to be taken lightly. Many times users of mobile applications, seizing not only confidential information or business secrets, but also personal data of the author. The financial loss caused by these violations, in terms of loss of income and compensation to the wronged perpetrator, is often considerable, amounting to tens of millions or even billions. Paradoxically, the existing Congolese law on intellectual property is not adapted to answer digital legal questions including the publication of an idea (mobile application) on an online store and for example the transfer of copyright on the code of this application.

4. Fraud, incompatibility and disloyalty of digital advertising

Nowadays, most online advertisements are fraudulent, incompatible and unfair. In a Google study, in partnership with Facebook and other players in the web and online advertising, new policies are announced to fight against the click fraud, these advertising impressions artificially generated by robots that distort the traffic estimations. Especially in e-commerce, the majority of merchandise advertised online does not reflect the goods as presented. It goes without saying that incompatibilities of online advertising are much reported regarding good lives and morals. These online advertisements escape the norms of conformity even national and international.

Today in DRC, the Ordinance-Law No. 41-63 of February 24, 1950 on Competition and Ordinance No. 97-327 of October 15, 1955 on Advertising are over and obsolete to regulate the legal issues of digital advertising as well as the competition that reigns there.

Conclusion

Like other African countries, in the DRC, the telecommunications and ICT sector is booming, so that mobile operators are experimenting unprecedented technological developments in the market. The impressive growth of the mobile phone network has led to rapid technological progress, which challenges the decision-makers and regulatory authorities to endow the country with new regulations in the telecommunications and ICT field. Technological constraints recommend that they adopt as soon as possible a new regulatory approach that takes into account the new context of digital technology in order to protect consumers against operational risks such as electronic theft, loss, theft and fraud on confidential data generated by new technologies. Existing telecommunications laws are inadequate and outdated to ensure security, confidentiality of data and protection of personal data. The new law adapted to the challenges of the digital age could contribute to and anticipate the new governance requirements of new services such as Cloud computing and Big data, provided that they are already regulated and operational in most markets in African countries. In the same perspective, the new regulation will have to be attractive and incentive for the foreign and national investments to the contribution of the economic growth.

References

  1. Framework Law No. 013-2002 of 16 October 2002 on Telecommunications in the DRC.

Law No. 82-001 of 7 January 1982 on Intellectual Property3.

Legislative Decree 97-327 of October 15, 1955 on outdoor advertising.

Legislative Decree 41-63 of February 24, 1950_Competition.

5 Legislative Decree No. 86-033 of 5 April 1986 on the Protection of Copyright and Neighboring Rights.

Peng Zhao  « Impact Economique du Mobile en RDC et Catalyseurs de la Connectivité Kinshasa », 21 Septembre, 2017.

7 Rapport national de Mise en œuvre du Programme d’Action en faveur des Pays les Moins Avancés (PMA) pour la décennie  2011-2020.

8 Deloitte “Digital inclusion and mobile sector taxation in the Democratic Republic of the Congo”, November 2011.

9 CNUCD « Les services monétaires par téléphonie mobile ».  A l’appui du développement de l’activité économique dans la communauté d’Afrique de l’est », Etude comparative des plates-formes et actuelles réglementations, 2013.

10  Cloud computing en Afrique Situation et  Perspectives. Environnement réglementaire et commercial, Avril 2012 Imprimé en Suisse Secteur du développement des télécommunications.

11 Mariam Abdullahi, « Télécoms « les opérateurs à l’épreuve de l’innovation »,  2017.

12 Myriam Karoui, Grégoire Davauchelle et Aurélie Dudezert, « Big Data : Mise en perspective et enjeux pour les entreprises ».

13  Hervé Reynaud : « Le Big data : Quels enjeux pour les opérateurs ? ».

14 Banque Mondiale, « Exploiter au maximum la téléphonie mobile Abrégé « Information et communications au service du développement », 2012.

15 Murielle-Isabelle CAHEN « Cloud computing et risques juridiques ».

16  Murielle-Isabelle CAHEN « règles juridiques pour les applications mobiles ».

17  Enerst & Young « La propriété intellectuelle à l’ère du numérique » : Défis et opportunités pour le secteur Médias et Divertissement, 2011.

18 Louis Adam, « Pub en ligne : Google s’élève contre la fraude au clic », 2015.

19  Banque mondiale « Dividende numérique abrégé »,2016.

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