Updates to the codes regulating Djibouti's business environment

Thanks to its privileged geographical position in the Horn of Africa, Djibouti enjoys a number of significant assets and plays a major role as the eastern gateway to the African continent. Its position at the crossroads of Africa, Asia and Europe, reinforced by political stability and social peace, has enabled the country to attract both local and foreign investment. The growth rate of GDP, which averaged 3.5% for the 2000-10 period, now stands at around 7%.

The economic policies developed since the early 2000s have continued to bear fruit for the country. The Djibouti Chamber of Commerce, the Djiboutian Industrial and Commercial Property Office (Office Djiboutien de la Propriété Industrielle et Commercielle, ODPIC), and the National Investment Promotion Agency, which was described as a pioneer on the continent when it was created in 2001, all play an important role in this regard.

Attracting Investment

At the request of the government of Djibouti, the UN Conference on Trade and Development made recommendations in 2013 to improve the country’s attractiveness for foreign direct investment (FDI). The investment policy review recommended a multidimensional FDI-attraction strategy that focuses on the following five elements:

• Undertake ambitious legal and regulatory reforms to improve the business environment;

• Invest heavily in infrastructure and human capital;

• Target the attraction of FDI based on priority sectors in the economy;

• Stimulate a public-private dialogue; and

• Strengthen the institutions responsible for securing and regulating investment. Djibouti rolled up its sleeves and got to work on addressing these areas. Investment in infrastructure in Djibouti is now a top priority. Meanwhile, the Ministry of Education and Professional Training, the Ministry of Higher Education and Research, and the Ministry for the Promotion of Women, Family Welfare and Social Affairs work to develop training opportunities tailored to the needs of the local labour market, which continues to evolve, alongside, of course, private initiatives that are also being provided.

In addition, the strategic choice of appointing a minister to the presidency in charge of investments makes it possible to optimise the attraction of FDI according to priority sectors, and enables the effective coordination of the different state services and ministries working for the development of national and foreign investments.

On March 23, 2014 President Ismaïl Omar Guelleh officially launched the High Council for Public-Private Dialogue, with the objective of improving the economic environment in Djibouti. Organised by the Ministry of Economy and Finance, the launch event brought together members of the government, the Djibouti Chamber of Commerce, private sector actors and public sector decision-makers, acknowledging the importance of these stakeholders working together to effect change.

Nevertheless, all of these measures could not achieve their ultimate goal of creating an investor-friendly business environment if they were not accompanied by serious legal reforms.

Labour Law

After independence, the adoption of the Law of Renewal LR/77-009 of 1977 maintained in force Law No. 52-1322 of 1952, instituting a Code of Labour of the French Overseas Territories.

However, in the face of criticisms that the code was no longer suited to the economic reality of the country, a series of reforms were adopted in 1997 on the development of the 1952 code. Then, in 2006 a new law on the Labour Code was passed, replacing the previous one.

Most recently, on June 25, 2018 the National Assembly approved Law No. 22/AN/17/8th L, amending and supplementing the provisions of the 2006 Labour Code. Through it, a major clarification was made. According to the 2006 version of the law, the code was applicable throughout the national territory with the exception of free zones, which are covered by specific legislation. However, the Free Zones Code provides that labour relations within the areas under its jurisdiction are governed by the Labour Code of Djibouti. As a result of the 2018 amendment, the text is now clear: “this Labour Code is applicable throughout the national territory” without exception.

In addition, the 2018 law establishes a guaranteed minimum interprofessional wage below which a worker cannot be hired, fixed at DJF35,000 ($197) per month. This minimum applies retroactively to individual labour contracts as of January 1, 2018. Another change in the law is that contracts of indefinite duration can no longer be verbal and must be made in writing, marking a change from the oral and informal habits of the labour market.

Contractual Concerns

Large-scale infrastructure developments mean that Djibouti is in the middle of a multitude of construction projects. Depending on the stage of work, staffing requirements may vary. Flexibility in the duration of the specified employment contracts is therefore necessary. However, the new wording of the article dealing with the duration of fixed-term contracts might seem to go against the flexibility of work requirements.

Although its interpretation is varied because the drafting was ambiguous, the Labour Code as drafted in 2006 allowed the employer to successively offer several short-term, fixed-term contracts in the first year, as long as the short-term, fixed-term contract in the second year covered 12 months.

The article stipulates that the first contract may have a duration that must not exceed 12 months, and this contract may be renewed once for the same period, which allows us to deduce that the concept of maximum duration of a fixed-term contract (fixed at 24 months) has been removed under the new law.

However, and fortunately, this measure is offset by a positive innovation in hiring practices, offering greater flexibility in the contractual duration of the employment relationship, which should appeal to companies in construction and in other sectors with variable activity density.

In more detail, the article stipulates that the fixed-term employment contract may not include a specific term when it is concluded in the following cases:

• Workers on a seasonal or temporary basis;

• Workers engaged for a specified task whose performance does not exceed six months;

• Casual workers;

• Workers hired by the hour or by the day;

• Workers hired for the duration of a construction site or mission;

• Replacement workers of employees absent for a temporary period following illness, maternity or training; and

• Workers recruited through a temporary increase in the volume of the company’s activity. In these cases, contracts may be concluded for a minimum duration based on the end of the absence of the person being replaced or the realisation of the object for which the worker was hired.

Employee Rights & Protections

While this law instituted measures that could favour the employer, it is worth noting that:

• Staff representatives must be set up in companies employing at least 11 employees, down from 50 previously.

• The right to vacation cannot be prescribed for the worker when it is shown that the employer had deprived the employee of the opportunity to enjoy his annual leave for need of service. The employer must notify the employee of his decision in writing with an acknowledgment of receipt. Moreover, the law of June 2018 now defines situations of sexual harassment and psychological harassment in the Djiboutian Labour Code. Psychological harassment at work is manifested by repeated acts that result in a deterioration of the working conditions of an employee likely to affect the rights and dignity of the worker, to alter his physical or mental health, or to compromise his professional future. Sexual harassment at work is the act of repeatedly imposing on a person sexual comments or behaviours that are offensive to his or her dignity because of their degrading or humiliating nature, or create an intimidating situation against him or her, hostile or offensive. Sexual harassment includes any form of serious pressure, even if not repeated, exercised for the real or apparent purpose of obtaining an act of a sexual nature, whether it is sought for the benefit of the perpetrator or for the benefit of a third party. The perpetrator may be a colleague, supervisor or subordinate of the victimised employee.

The employer shall take all necessary steps to prevent the occurrence of sexual harassment. Any employee who has committed acts of sexual harassment is liable to disciplinary action. If found guilty, employers may be punishable by a fine of DJF1m-2m ($5630-11,300) and one month of imprisonment and, in case of recidivism, two months of imprisonment and a double fine, or one of these two penalties only.

Civil Law & Civil Procedure

After the independence of Djibouti in 1977, the so-called Constitutional Law No. 1 provided that “the laws and regulations applicable on the day of the promulgation of this Constitutional Law remain the same, and that they remain in force in all their provisions and not contrary to national sovereignty, until it is legally decided to repeal or amend them”. As a result, the French Civil Code from 1887 continued to have an effect in Djibouti. Since then, Djibouti has adopted, in several instances, texts on specific subjects and built codes such as the Family Code, the Land Code or the Code of Nationality.

To meet the needs of citizens and legal practitioners, as well as to improve the business and investment climate, Marie-Paule and Alain Martinet of the Djibouti Bar Association, and Yves Strickler, vice-dean of research at the Faculty of Law and Political Science of the University of Nice, were selected to first make an inventory of existing texts, and then propose a Djiboutian civil code and a code of civil procedure.

After two years of work, the Civil Code and the Code of Civil Procedure were promulgated on April 12, 2018. In a general way, these texts meet the requirements of the World Bank’s “Doing Business” project, which aims to support states in acquiring modern and effective tools to guarantee a certain juridical stability and a rapidity of justice in the resolution of conflicts to improve the investment environment.

Moreover, in the field of civil procedure, the new code has made a major overhaul of the existing jurisdictional organisation in the country, as well as the procedure itself and the enforcement procedures.

Justice is rendered in the Republic of Djibouti by a single order of jurisdictions which includes:

• The Court of First Instance;

• The Personal Status Tribunal;

• The Administrative Tribunal;

• The Court of Appeal;

• The Supreme Court; and

• The Criminal Court. These jurisdictions deal with all civil, commercial, criminal, administrative, social, personal or customary matters. Thus the customary courts, which saw non-professionals of the law sitting in parallel with the common law courts, are now abolished.

Major principles of law have been developed, such as the right to a fair trial, the right to a quality justice, the right of action and the right of execution. Progress in terms of implementation of the code to date includes the introduction of simplified procedures for the settlement of small claims.

Arbitration

The establishment of arbitration centres in Djibouti such as the COMESA International Commercial Court and the Intergovernmental Authority on Development’s Commercial Arbitration Centre has been expected for several years. However, perhaps due to a lack of a Djiboutian Code of International Arbitration, the establishment of these arbitration centres locally has been delayed. There is hope that momentum will resume now that the Code of Civil Procedure has taken over the Djibouti Code of International Arbitration instituted by Law No. 79/AN/84/1st L, largely completing it by defining all the general and technical aspects necessary for a smooth implementation of arbitration and its rulings.

Code of Commerce

To meet the needs of citizens and investors, Djibouti in 2018 undertook major reforms of the Code of Commerce dating from 2009. These reforms relate to insolvency, the protection of minority shareholders, the reliability of guarantee and personal property security registry. While this reform has made it possible to develop mechanisms that are favourable to creditors and protect minority shareholders, the measures related to the personal property security registry are subject to controversy.

Moreover, Law No. 001/AN/18/8th L of April 12, 2018, amending and supplementing the Code of Commerce, established a new General Registrar of Property Securities, known as the Registraire Général des Sûretés Mobilières. This registrar function is provided by the Central Bank of Djibouti, meaning that the register of securities must be kept in the Republic of Djibouti at the office of the Office of the Registrar General, located at the Central Bank of Djibouti. Any provision to the contrary is repealed, thus ending the ability to place such a register with the registry of the Court of First Instance or, as was the case from 2009, with the ODPIC.

To implement this measure, an instruction from the Central Bank of Djibouti determines the procedures for the registration of the moveable security rights in the Office of the Registrar General at the Central Bank of Djibouti and the management procedures of the Personal Property Security Registry. However, Djibouti’s central bank statutes do not provide the possibility for it to manage such a registry.

The national bank, which by virtue of its statutes bears the status of merchant, has the general mission of ensuring the stability of the national currency, and the proper functioning of the banking and financial system. As a result, the Central Bank of Djibouti also supports the implementation of the state’s economic policy. It can therefore propose measures to the government to promote economic stability. It also produces balance of payment statistics for the country. But under no circumstances can the statutes of the Central Bank of Djibouti allow it to assume the role of Registrar General for Personal Property Security and keep the registry of securities.

Whereas the entire life of a company is recorded in the register of commerce held by the ODPIC, an institution that is generally regarded as being efficient because it satisfies its users, the idea of entrusting the register of securities to the central bank has been contested on numerous occasions by notaries, lawyers and magistrates during exchanges prior to the bill. This is likely to remain an area of concern until an effective resolution can be found.