20 Jun 2017

Whilst there is much focus within the UK, and Europe, on Brexit, there is also focus on the position of the UK, and London, as an international trading centre, which is less reliant on Europe and the EU. Indeed, it is perhaps London's international status which is both a reason for Brexit, and also its economic survival and prosperity following Brexit. An essential component is English (and Welsh) law and lawyers practising that law, so that London and the UK has become a magnet for international legal transactions. Within our oil and gas team, advising on international transactions is forming an increasing part of our legal work, in jurisdictions throughout the world, but particularly Africa and the Middle East. English law is viewed as rational and predictable, as (in the main) are the lawyers who make decisions on matters governed by it. This makes London and the UK an attractive choice of law and jurisdiction. We have gained a massive amount of know-how in carrying out international transactions, particularly M&A, investment and joint venture transactions, and have set out some key points below.

Common law and legislation

Britain exported much of its law to far flung parts of the world, and consequently much of the judicial process and, indeed, the legislation is based on English law. It is therefore very familiar to lawyers trained in the UK. For example, the Ghanaian Companies Act 1963 (Act 179) shares much in common with the UK Companies Act 1948 (since repealed). This enables lawyers in various jurisdictions to interact with UK qualified lawyers.

Language and practice

English (albeit perhaps American English) is acknowledged as the international language and UK/US transactional practices are considered as standard practices in relation to international transactions, including warranties, disclosure, conditions precedent and tax covenants. This enables us to graft those practices, and principles, onto transactions where elements must be governed by local law (where local company, real estate, environmental, employment, regulatory and tax law will apply).

Local content or ownership restrictions

Many jurisdictions have laws requiring a minimum level of "local content" or ownership. It is necessary to understand the current requirements in the relevant jurisdiction and also the direction of travel. Whilst it might not be possible to "future proof" the arrangements, it is sensible to analyse what developments are likely and build in some flexibility so that the structure can accommodate any changes which are anticipated or reasonably foreseeable. In Ghana, for example, a foreign entity cannot import fuel, nor set up a local entity to import fuel without a local partner holding at least 50% of the share capital of such entity. This raises issues as to control, funding, participation and other key governance considerations which would be irrelevant were a foreign entity able to incorporate a wholly owned subsidiary (as can be the case in the US). Also, in terms of default remedies, these need reflect what is possible. There is no point having put and call option arrangements if the foreign entity cannot acquire a greater shareholding.

Requirements in relation to company distributions

Local laws might have more restrictive provisions in relation to dividends and profit extraction, than is the case in the UK or elsewhere, and it is necessary to reflect these in the arrangements. For example, in Ghana there are limitations upon the level of dividend that can be paid other than from profits verified by annual audited accounts. There might also be local restrictions on dividends and share classes (such as equality of dividends in Dubai). Best to understand these first and then structure the legal agreements so as to work within them.

Tax requirements

The tax requirements should also be considered from the outset. In particular any rules in relation to withholding should be factored in (as it might not be that likely that credit can be obtained by a foreign shareholder in relation to tax withheld). These are often closely related to thin capitalisation rules, so that if the debt funding exceeds a certain debt:equity ratio, the withholding rate is increased. Accordingly, any funding and future funding should be in such proportions of equity and debt so as not to trigger punitive withholding rates.

Security requirements

Likewise, the requirements of local law (or laws with multi-jurisdictional transactions) should be understood. What is possible or practicable in the relevant jurisdictions? We have advised on international transactions where parties have relocated entire, or facets of, joint venture proposals due to the unavailability of satisfactory security coverage under local law. It may be possible to adopt hybrid structures, where different security arrangements, including collection accounts, can be adopted on a "mix and match" basis, although the arrangements must be workable from a commercial and business perspective.

Legal opinions

Legal opinions are a common feature of virtually every international legal transaction. One is placing reliance on the local law firms, where actual legal recourse is very limited. However, they are the oil that lubricates international transactions. The request for legal opinions is often misunderstood, or seen as unwarranted. However, in jurisdictions where the availability of public corporate information is limited, and governance requirements unclear, it is a valuable document to evidence that a foreign party has capacity to enter into a contract, and that the contract is valid and enforceable against such party. The status and reliability of the foreign law firm is critical though, and here one is relying upon their expertise and reliability. Accordingly, experience of the standing and reliability of law firms within the relevant jurisdictions is invaluable.


Some UK law firms make the mistake of applying the jurisdiction of the UK courts as a default setting. This is dangerous, as the judgments of the UK courts may not be directly enforceable (in which case a victory at court is very much a pyric victory. It is important to first check the rules of the local laws of the relevant parties, and the treaties which are applicable. It is very likely that arbitration is more likely to be recognised and that therefore arbitration should be the prescribed forum for dispute resolution, perhaps in London.

Other local requirements

Processes and structures which are taken for granted in the UK can raise concerns or require special treatment in other jurisdictions. The UK company law has become very deregulated, and many other jurisdictions have not developed in this way (even where the law is based on UK law, such as in Ghana). Whilst we are accustomed, in the UK, to being able to administrate most matters remotely, this is often not the case elsewhere: from shareholders needing to be physically present at incorporation of companies, to multi-party documents causing concern in local registries accustomed to seeing bi-party documents (such as leases). Further, the requirements for the constitutional documents might be inflexible so that the relevant terms should be contained in separate documents that override, as far as possible, the constitutional documents.