Rwanda Legal Framework on Insolvency: Problems and Proposals for Reform

• DOI: http://doi.org/10.1002/iir.1235
• Published date: 01 June 2015
• Author: Ngaundje Doris Leno
• Date: 01 June 2015

Rwanda Legal Framework on Insolvency:

Problems and Proposals for Reform

Ngaundje Doris Leno*

Centre for Advanced Corporate and Insolvency Law, University of Pretoria, Pretoria, South Africa

Abstract

The purpose of this article is to explore some key insolvency issues, which will be

highly selective for this article, and to identify the weaknesses and inconsistencies

in the existing framework on insolvency. Rwanda does not have an efficient and

effective framework on insolvency, and the article argues that there is a need for

an improved insolvency law regime. In view of the weaknesses and inconsistencies,

it is vital to consider international best practices such as the United Nations

Commission on International Trade Law (UNCITRAL) Legislative Guide on

Insolvency and the UNCITRAL Model Law on Cross-border Insolvency as the

basis needed to deal with different aspects or elements of the Rwanda insolvency

law. The value of this article lies in the insights it offers into the current framework

on insolvency and the opportunity given to address the inconsistencies, weaknesses

and uncertainties that invariably arise from the law. Copyright © 2015 INSOL

International and John Wiley & Sons, Ltd

I. Introduction

The Republic of Rwanda (‘country of a thousand hills’) is a small country in terms

of surface area,

1

with an expanding population of over 11.46 inhabitants.

2

It is

situated in East Africa and borders the Democratic Republic of Congo in the

West, Uganda in the North, Tanzania in the East and Burundi in the South.

Rwanda operates a mixed legal system of civil law that is heavily based on the

*E-mail: dorisleno2008@gmail.com

This article draws on work carried out at a time when the

author was the insolvency advisor at the Office of the

Registrar General (ORG), Rwanda Development Board

(RDB), Kigali, Rwanda. RDB is gratefully acknowledged.

1. The surface area (sq km) in Rwanda was last re-

ported at 26 340 in 2010, according to a World Bank

Report published in 2012, available at: <http://www.

tradingeconomics.com/rwanda/surface-area-sq-km-wb-

data.html>(last accessed 14 January 2014).

2. This is following the fourth Rwanda Populationand

Housing Census in August 2012. The census was

effected in accordan ce with the Presidential Ord er

No. 02/01 of 07/02/2011, available at: <https://www.

google.rw/#q=Rw anda+population+>(last accessed

10 January 2014). As of July 2014, the population

was estimated at 12. 34 million; see Rwanda Demo-

graphic Profile 2014 available at: http://www.

indexmundi.com/rwanda/demographic_profile.html

(last accessed 23 February 2015).

Copyright © 2015 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 24: 122–139 (2015)

Published online 26 May 2015 in Wiley Online Library

(wileyonlinelibrary.com). DOI: 10.1002/iir.1235

Belgian civil law system and the English common law. This is following the

country’s integration of the English common law system.

3

For Nick Johnson, Rec-

tor of the Rwanda Institute of Legal Practice and Development, ‘such a decision is

a pragmatic move forward.’

4

The mixed legal system is capaciously embraced by

Rwandans, and for the former High Court president, Johnston Busingye,

We [Rwanda] prefer hybrid law; we have the commercial law and other laws of

procedures (almost 400) and other amended laws that have very big convergence to

common law to answer Rwanda problems.

5

It is instructive to note that Rwanda’s move or shift from the continental civil

law to a hybrid system was not only necessitated by the country’s membership of

the East African Community (EAC) or the Commonwealth

6

but also by the

country’s desire to increase local investment and improve the standard of living

of the people.

7

For Appleton,

it is driven in part by a desire to distance the country’s legal system from the 1994

genocide that saw up to a million people murdered –but also to accelerate the integra-

tion of the country into the EAC trade bloc.

8

Rwanda is in effect a mixed legal system blending common law and civil law in the

commercial sphere.

9

The challenge faced by Rwandans is working in the different

official languages (French, English and Kinyarwanda),

10

translating words and

concepts into another language: Kinyarwanda, a language widely spoken and used

by the people and judges in the courtroom. Consequently, it will take time for all to

get acquainted with the reform process and to generate the skills needed for the ap-

plication and implementation of the applicable commercial laws.

11

As far as insolvency is concerned, it is largely regulated by the law relating to

commercial recovery and settling of issues arising from insolvency (RIL).

12

The

goal of the RIL generally is to enable a quick commercial recovery and settlement

of issues arising from insolvency.

13

In 2013, the author commenced an investiga-

tion of the RIL in its entirety, which culminated in the ‘modified insolvency

law’.

14

The modified insolvency law is designed to improve on the mechanisms

3. EKosar‘Rwanda’straditionfromCivilto

Common law’, available at: <http://www.oba.org/

getattachment/Sections/International-Law/Articles/

Articles-2013/July-2013/Rwanda%E2%80%99s-

Transition-from-Civil-to-Common-Law/

Rwanda%E2%80%99 s-Transition-from-Civil-to-

Common-Law.pdf>(last accessed 21 December

2013) (hereinafter referred to as Kosar E).

4. Cited in S Appleton ‘Africa: Rule of Law in Africa,

adaptive behaviour’available at: http:// www.ibanet.

org/Article/Detail.aspx?ArticleUid=17621b67-2482-

455c-9900-2b69ce220599 (last accessed 19 January

2014).

5. See ‘EAC wants Rwanda, Burundi to adopt com-

mon law’available at: <systemhttp://www.newtimes.

co.rw/news/views/article_print.php?i=13914&a=

16230&icon=Print>(last accessed 12 January 2014).

6. Rwanda joined the East African Community on 1

July 2007 and the Commonwealth in November 2009.

7. E Kosar, before note 3.

8. Id.

9. Id.

10. Id.

11. Id.

12. Law No. 12/2009 of 26/05/2009 relating to com-

mercial recovery and settling of issues arising from in-

solvency (RIL) as modified and complemented by

Law N° 35/2013of 29/05/2013 relating to commer-

cial recovery and settling of issues arising from insol-

vency (‘Modified insolvency law’).

13. RIL, art 3.

14. Modified insolvency law, before note 12.

Rwanda Legal Framework on Insolvency 123

Copyright © 2015 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 24: 122–139 (2015)

DOI: 10.1002/iir