Legal Reform in Tunisia

In 2012 the EBRD conducted an assessment of Tunisia’s commercial laws, with a focus on key areas relevant to “Infrastructure and energy” (concessions/PPPs, energy regulation, telecommunications and public procurement) and to “Private sector development” (corporate governance, insolvency, judicial capacity and secured transactions). In a number of these areas, the EBRD’s assessment combines two approaches in order to evaluate the state of legal reform in the provided key sectors.

The tools assess both the quality of the laws formally adopted (extensiveness) and the actual level of implementation of these laws as well as the framework they underpin (effectiveness). Combining the results of these analytical tools shows not only how advanced the system is compared with international benchmarks, but it also shows how effective the legal system is in a given field in practice, and points to the areas where further reform may be required. The EBRD’s assessment of Tunisian commercial laws shows that in a number of sectors relevant to investments, the legal framework has seen some amendments, but there remain important challenges and there is room for reform in a number of areas. For instance, Tunisia has a history of concession projects and a potentially attractive environment for public-private partnerships. However, the country does not have a single comprehensive act unifying all concession and PPP related provisions.
 
 

Access to Finance

Under Tunisian law a non-possessory security interest can be established over a wide range of movable assets such as entire business (Fond de Commerce), tools, machinery and professional equipment, bank accounts and shares. However, a uniform modern legal system of taking non-possessory security over any type of movable property and efficient registration of such rights does not exist. Instead, taking non-possessory security is regulated by different specialised laws which usually provide a rather obsolete and limiting framework for secured credit.

In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for Tunisia.
 

 

 

Contract Enforcement and Judicial Capacity

Courts in Tunisia suffer from a severe deficit in material and human resources. Many judges lack sufficient judicial training and opportunities to specialise. The process of allocating cases to judges is not sufficiently transparent nor is it efficient, and court decisions lack predictability. Recent reforms have led to the creation of commercial court departments that specialise in commercial dispute resolution, and there is a trend towards an increased use of alternative dispute resolution, including mediation. However, both litigation and enforcement procedures remain lengthy and uncertain.

 

Corporate Governance

The results of EBRD’s 2011 assessment of the corporate governance framework in Tunisia showed that national legislation “on the books” is in ‘high compliance’ with relevant international standards. However, in practice several areas relating to corporate governance, including the institutional framework, are in need for reform. Those areas pertain to transparency and disclosure, the rights of minority shareholders and the possibility of parties to seek and obtain quick and efficient redress.

 

Debt Restructuring and Bankruptcy

There are a number of legal and institutional impediments to successful reorganisations. All insolvent businesses are required to go through judicial settlement, a procedure aimed at the reorganisation, sale or leasing of the debtor’s business. Amicable settlement, a voluntary pre-insolvency procedure, is rarely used. Reorganisation is generally limited to a rescheduling of debt, since the consent of each individual creditor is required for a reduction in principal. As a result, debts are typically rescheduled over a very long period of 15 to 20 years. Liquidation procedures are contained in the Commercial Code, which has yet to be modernised and harmonised with the Reorganisation Law. We understand that reform efforts are underway to combine all bankruptcy provisions into one single chapter of the Commercial Code. Nevertheless, it remains to be seen whether such reform will result in more effective insolvency procedures and will resolve all outstanding issues.

 

Electronic Communications

The EBRD’s assessment of the overall legal and regulatory risks in association with the country’s communications sector shows that Tunisia is in the “medium risk category” from the standpoint of investors. The country’s legal framework for the sector has provided the formal basis for a competitive market for mobile communications since 2002 and for fixed electronic communications since 2009. Whilst there is competition in the mobile sector, the fixed market remains dominated by the incumbent operator. In practice, the regulator remains under the authority of the ministry and has poor enforcement powers. The state-dominated telecoms company operates all access lines, and does not offer the sharing of its infrastructure. Furthermore, special permissions are required to operate an internet service provider (ISP) business and all ISPs are obliged to use the fixed lines of the state-dominated telecoms company. While the procedures for obtaining rights of way on public and private property are set out in legislation, they do not seem to have been applied in practice

 

 

Energy Regulation

Despite the fact that Tunisia has been attempting to modernise its sector, especially with respect to allowing participation of renewable-based independent power producers, there are, however, a number of major gaps in its compliance with international best practices, with respect to the structure and organisation of the electricity market. The state-owned electricity company is still the largest player in the power market, with a market share of 88%. However, the new Tunisian government appears to be willing to try some new approaches to gradually increase the place of the private sector in its electricity market.

 

PPPs/Concessions

Results revealed that the law on the books in Tunisia are in “high compliance” with internationally recognised standards (UNCITRAL Principles), mainly because of modern legislation, which was adopted in 2008 and supplemented in 2010 to govern PPP projects building on successful PPP experience. Nevertheless, in measuring the effectiveness of the law in practice, Tunisia was found to be in “low compliance” with international best practices. This is mainly attributable to a lack of a clear PPP policy, lack of coordination among public sector participants and no real enforcement experience as no projects have been implemented under the new laws yet.

 

 

Public Procurement

The Tunisian public procurement framework was found to be in “high compliance” with internationally recognised standards, with practice even surpassing legislation in some areas. A positive feature in the public procurement regulation in practice is that contracting entities are allowed to complement the rules of the public procurement law. The entities also play an important role in providing training to public procurement officers regarding their roles, rights, and obligations in the public procurement process. A general drawback however is that the framework does not prescribe specific deadlines for the completion of the procurement process, which results in significant delays in practice.