The US is taking continues measures to freeze Huawei’s business on the global market but even its allies countries have refused to the US’s request to ban Huawei.
In a fresh development of this story, the US telecom regulator is planning to announce Huawei and another Chinese telecom gear provider as national security risks, proving this decision as another frustrating step by the US government.
At a meeting set for November 19, the Federal Communications Commission (FCC) said it plans to vote to ask carriers how much it would cost to remove and replace Huawei and ZTE from existing networks and to establish a reimbursement program to offset the costs of removing the equipment, reported Reuters.
“When it comes to 5G and America’s security, we can’t afford to take a risk and hope for the best,” FCC Chairman Ajit Pai said in a statement.
“As the United States upgrades its networks to the next generation of wireless technologies – 5G – we cannot ignore the risk that the Chinese government will seek to exploit network vulnerabilities in order to engage in espionage, insert malware and viruses, and otherwise compromise our critical communications networks.”
Pai first proposed in March 2018 to ban companies that posed a national security risk but did not name any specific. FCC’s top officers arguably believe that the Chinese government and military working in collaboration with such companies.
This latest decision by FCC completely reflects the US government’s will to add to ban Huawei from serving the US companies.
“In 30 years of business, Huawei has never had a major security-related incident in the 170 countries where we operate,” said a Huawei spokesman in Shenzhen, China.
“Today’s proposal, released by the FCC Chairman, only impacts the broadband providers in the most unserved or underserved rural areas of the United States,” the spokesman said. “Such action will further widen the digital divide; slowing the pace of economic development without further securing the Nation’s telecommunications networks.”
Back in May, the US Commerce Department imposed a trade ban on Huawei, alleging of being a national security threat and the company is under control of Chinese law. These allegations are repeatedly denied by the Chinese tech giant.
Under the trade blacklisting, Huawei cannot do business with US firms such as prohibiting the use of Google Mobile services for its smartphones, buying chips and more.
Besides the trade ban, the Trump government creating pressure on its allies countries to ban Huawei from participating in 5G network development, of which they’ve refused to bar Huawei.
A number of African countries are suffering the impact of insect invasions that are threatening food production and livestock production.
To the east, Ethiopia is battling locust invasion whiles further south, Malawi is dealing with tsetse fly attack on local populations after elephants were relocated from a wildlife reserve.
Ethiopia and the desert locust invasion
Ethiopia is working to contain a locust invasion that according to reports affects about four regions of the Horn of Africa nation. The affected regions are Afar, Oromia, Somalia and Amhara regions.
Authorities resorted to the use of aerial spraying of large fields to control the spread and damage caused by the insects believed to be migratory in nature.
The privately-owned Addis Standard portal wrote in a report: “Migrating from Yemen through Djibouti and Somaliland, Desert Locust swarms entered Ethiopia and settled in the breeding sites in Afar, Amhara, Oromia and Somalia regions.
“The swarms have produced hopper bands that have covered more than 174 square kilometer (in 56 Woredas and 1 085 kebeles) and are consuming approximately 8700 metric tons of green vegetation every day. It is estimated that about 30 million hoppers can land on one-kilometer square area.”
Zebdewos Salato, Director of Plant Protection in the Ministry of Agriculture is quoted to have cautioned thus: “The swarms are likely to invade wider areas and cause significant crop, pasture and forest cover losses in eastern Ethiopia.”
To date, the insects have covered 17 370 out of the 28 671 hectares surveyed between July and September 2019.
In July 2019, the UN’s Food and Agriculture Organization, FAO, warned that Desert Locust summer breeding, buoyed by heavy rains, could pose a serious threat to agricultural production in Yemen, Sudan, Eritrea, parts of Ethiopia and northern Somalia.
The Organization called on all countries to monitor the field conditions by mounting regular ground surveys and undertaking the necessary control measures whenever infestations were detected.
Malawi fights tsetse flies, disease after wildlife relocated
The relocation of hundreds of elephants to Malawi’s largest wildlife reserve was meant to be a sign of hope and renewal in this southern African nation. Then nearby residents began falling ill.
The cause of the headaches, weakness and pain were trypanosomes, tiny parasites spread by the bite of the tsetste fly — a companion of the elephants. Trypanosomiasis, or sleeping sickness, is the result.
Local families described the toll the disease can take.
“I feel too weak,” said Chiomba Njati, who was still recovering after a week in the hospital. He said he was bitten while farming near the wildlife reserve. “I cannot even carry a hoe and farm. The home is lacking food and other important things because it is my wife doing everything on her own. This is so worrying.”
Authorities said the Nkhotakota wildlife reserve has seen a surge in tsetse fly numbers since around 2015 when the elephants and other game animals were reintroduced.
The local hospital said it did not have a number of sleeping sickness cases. One community resident, Group Village Ngondo, recalled at least five deaths from the disease.
The World Health Organization says sleeping sickness is endemic in 36 countries in sub-Saharan Africa but cases have been dropping. Last year just under 1,000 cases were recorded, a new low. The majority of cases are reported in Congo.
The disease is “notoriously difficult to treat” with drugs and easier to treat when caught early, WHO says. The health agency says it is usually fatal when untreated as the parasite moves into the central nervous system and eventually can cause seizures and coma.
You want to avoid sanctions for lack of compliance with local content norms in Equatorial Guinea? Easy, start complying. We intend here to provide you the key steps to ensure your local content compliance in Equatorial Guinea. For a full diagnosis of your compliance, please make sure to contact our attorneys on the ground.
The common problems that companies have with local content in Equatorial Guinea
In 2018, the Ministry of Mines and Hydrocarbons of Equatorial Guinea informed operators Exxon Mobil, Noble Energy and Marathon Oil that they should stop doing business with several companies because they were not in compliance with local content regulations under the country’s hydrocarbons law and the clauses of their PSCs. The truth is that it was not the first time that happened. In 2015 and 2016, there were also economic sanctions for the breach of local content requirements. With the local content Ministerial order covering only 20 pages, it seems surprising that companies could be risking their operations and contracts over something very straightforward. To understand the catch, read on.
Between 2015 and 2016 in our offices in Malabo, we had the opportunity to assist the Government in a plan that was unprecedented to audit oil and gas companies and verify their compliance with their local content obligations. We were very surprised to see how the legal departments of large oil companies did not know exactly how to protect their organizations against these demands. Because the number of companies that did not comply was very high, the Ministry decided to adopt a more collaborative than penalty approach, without which all operators and contractors would have been sanctioned in some shape of form.
Reserving the confidential client information, we observed that most of the in-house local content departments of these companies have three common problems: 1. determining who is obligated to do what under local content regulation; 2. knowing what local content includes; and 3. correctly developing a local content plan that meets very specific points required by applicable laws.
To examine these common problems, it is necessary to briefly clarify what the local content is according to the legislation of Equatorial Guinea. The keyword of the local content is “privilegio.” This is a set of privileges that companies or physical entities have and whose purpose is to obtain preferential treatment with respect to other companies and people from other places when obtaining contracts in oil & gas and mining. These privileges belong to local companies, companies of the CEMAC community, or African companies.
The local content regulations in Equatorial Guinea are broader than just those set out the ministerial order. They can be found in five main legal documents: the famous decree 127/2004 (amended in April 18 of 2018 by the decree 72/2018) that ensures local participation in the oil industry, the Law No. 8/2006 of November 3rd regulating Hydrocarbons in its articles 88 to 93, the Ministerial order 4/2013 regulating petroleum operations in articles 156 and 157, the Ministerial order 1/2014 on local content. Lastly, all PSCs have very specific local content clauses. The Labor Code also contains laws such as Law No. 6/1992 on national employment policy that also affects companies in the sector, and the list goes on. The question is, how do we put together all the requirements of those laws to get a unique list that tells a company what exactly it should do to comply with local content? While complex, the exercise is feasible and quite straightforward when you know where to start and what to consider.
Because the circumstances and needs of each company are different, local content laws are also flexible. Flexibility in the terms of the law does not mean an exemption from compliance, but compliance mechanisms that can be negotiated with the authorities. For example, you can get more time to meet a specific obligation.
Now that we have outlined the basic frame of local content, we can explore the common problems that companies in the oil and gas sector have when they deal with a local content audit in Equatorial Guinea.
Operators or contractors: who is obligated under local content regulations?
The oil and gas industry is governed by agreements, and many companies have to form alliances and joint-ventures to operate together. This may create doubts about who is obliged to comply with local content laws. According to article 2 of Ministerial order 1/2014 on local content all companies that carry out activities in the petroleum and mining sectors are obliged to comply with local content requirements. This includes: operators, explorers, contractors, sub-contractors and their associates even if they are local businesses. According to this, a) you have to have a contract in the sector and b) you have to operate in Equatorial Guinea. However, despite this clarity, there are many doubts that may arise, for example: what happens to companies that have contracts in the sector but are only licensed to provide material from abroad? Equally, if two companies are linked by a joint-operation agreement, must they comply individually or jointly? Another question that may arise is on whether a local company has to comply with all obligations or if it must simply comply with some. For example, it makes no sense that a local company would be forced to transfer technology just because it is from the oil sector. For such questions that require an interpretation, companies must work with the local content authority to obtain their interpretation in writing. It should never be assumed that a certain obligation is not applicable to a company. This is part of what we consider being flexibility in the local content laws.
The main obligations that any company should pay attention to
Local content is much more than building a primary school in a village or drilling a small water well in a local community. In our experience, it is very common for companies to present small works carried out in the villages as being works of compliance with local content. While the value of such efforts should not be minimalized and corporate social responsibility should be encouraged, a company could still be sanctioned for lack of local content compliance despite having spent money and time on CSR.
Local content mainly includes five obligations that must be structured in detail in a local content plan. These obligations include:
What should be in your local content plan?
The local content regulations oblige all oil and gas companies to have a detailed, long-term local content plan and implement it. Companies must also demonstrate that they are reasonably executing the plan they themselves have prepared.
The important thing about this plan is that: a) it is flexible, b) it is a plan that can be adapted to the individual circumstances of each company and c) must be approved by the General Directorate of Local Content. The design of the local content plan, its evaluation and presentation to the authorities when undergoing an audit is the most critical part.
Almost all companies that have been sanctioned have breached some of the essential points of their own plan. We can organize these into four large groups: i) Documentation related to the incorporation of the company; ii) Documentation related to the procurement of goods and services; iii) Documentation related to technology transfer and training of personnel; and iv) Documentation related to infrastructure development. Although we do not intend to address all these aspects in details, the following according to our experience are the ones that can create the most problems for a company.
2. Documentation related to the acquisition of goods and services.
3. Documentation related to technology transfer and staff training:
4. Documentation related to infrastructure construction (with social impact)
How serious is the local content compliance issue?
The highest penalty for breaching local content standards is that the government can order operators to terminate contracts or prohibit them from renewing contracts they have with a company that does not comply; and this has already happened in the past. Other sanctions include financial sanctions that in the past have reached anywhere between $500,000 to $3 million, sometimes more if we analyze the full impact of the consequences of a sanction. Other much lighter sanctions have included a warning with the company being given a short amount of time to meet very specific requirements.
Furthermore, if a company demonstrate a track record of non-compliance, they will lose the confidence not only of the government but of the operators, because every time a company is sanctioned, all its partners are affected in some way.
Conclusion. So far, three things must now be clear: a) failure to comply with local content requirements may jeopardize not just a company's contracts, but its very existence in Equatorial Guinea and its ability to renew or obtain new contracts b) local content is a complex issue but c) managing its compliance is not a big deal providing the right steps are taken early on.
At Centurion Law Group, thanks to the experience that we have accumulated over the years and in several African jurisdictions, we are always willing to assist and advise companies to deal with these problems in the best way so that they can protect their interests and that their operations are carried out without any risk.