HomeBusinessHow to make Africa more arbitration friendly

How to make Africa more arbitration friendly

Almost all the high value international commercial arbitration cases that I know of or have personally been involved in have been conducted under the auspices of foreign arbitral institutions like the International Chamber of Commerce’s International Court of Arbitration (ICA), the London Court of International Arbitration (LCIA) and the International Centre for Settlement of Investment Disputes (ICSID). It is common practice for African commercial lawyers to advise their clients to settle for a dispute resolution clause which stipulates that disputes will be resolved by a foreign arbitration institution, usu ally a European one. Invariably, African lawyers advise their high value clients to choose a non-African country as the venue and seat of arbitration. In most of these matters, African parties always appoint international law firms based in Europe and the United States of America to represent them.

By Jacob Mutevedzi

There is a general perception that Africa is not ready to handle high value international commercial arbitration matters. African countries are not trusted as suitable seats or venues of international commercial arbitration. Similarly, African arbitrators and counsel are infrequently appointed to act in international commercial arbitration hearings. Ironically, this is happening at a time when Africa is enjoying exponential economic growth. Africa’s growing economy and the corresponding massive scale of investment has pushed international arbitration to the foreground of dispute resolution in the region. This acute upsurge in arbitration involving African parties has neither translated into an increase in the appointment of African arbitrators and African law firms nor spurred the popularity of African countries as venues and seats of arbitration.

There is a prevalent belief that the practice of arbitration in Africa is not sufficiently developed to settle international commercial disputes. The belief that African arbitration practice is stunted is accompanied by a perception that there is a dearth of expertise in the region. Another popular view is that African governments are not supportive of arbitration and, consequently, it is difficult to enforce arbitral awards in African jurisdictions. Parties do not trust African courts to render adequate supervision over arbitrations seated within their jurisdictions.

These negative perceptions notwithstanding, it appears that the reality on the ground tells a totally different story. In recent times, we have witnessed an exponential increase in the number of African international arbitration centres. These arbitral centres in Africa include, among others, the Arbitration Foundation of Southern Africa (AFSA), the Cairo Regional Centre for International Commercial Arbitration (CRCICA), the Kigali International Arbitration Centre (KIAC), the Lagos Court of Arbitration (LCA), and the Nairobi Centre for International Arbitration (NCIA). As recently as the 11th December 2020, the AFSA Sadc Division launched the inaugural Sadc Panel of International Commercial Arbitrators. The panel is constituted by experienced arbitrators nominated by the 15 Sadc Bar Associations based on a globally competitive criterion.

There is clear evidence, therefore, that African governments are acutely aware not only of the global preference for arbitration as a means for resolving disputes, but also of the huge economic potential of arbitration emanating from legal fees, the hospitality sector and conference facilities. Various African countries have realized the economic potential of international commercial arbitration as an industry and are taking noticeable efforts to facilitate and nurture that growth.

While all these efforts are commendable, a lot still needs to be done to enhance the attractiveness of Africa as a global arbitration hub. Investors are drawn to countries with comprehensible and predictable laws that regulate a chosen sector of investment. A predictable regulatory environment in which rule of law prevails coupled with an efficient, impartial and independent judicial system are elements usually indicative of a suitable environment in which to resolve high value disputes.   African states may also benefit from embracing and facilitating parties’ preferred international practice regarding settlement of disputes. Municipal courts may not always be the preferred or appropriate method of dispute resolution for international or domestic investors. Once it is accepted that commercial disputes can be resolved outside the sphere of domestic courts and a government takes positive steps to facilitate that alternative dispute resolution, a country will almost always be classified as both arbitration and investor friendly. A reputation of being an “arbitration-friendly” jurisdiction attracts international disputes from across Africa and the globe.

There is an assortment of hallmarks that point to arbitration-friendliness. For instance some resource rich states have the propensity to disallow arbitration in disputes involving international companies and the state and prescribe municipal litigation. Permitting domestic or international arbitration between international investors and the state is always a positive sign. Secondly, signing and ratifying the New York Convention thus facilitating the enforcement of arbitral awards is a clear indication that a state is arbitration friendly.

Governmental initiatives meant to promote and encourage arbitration as the preferred dispute resolution method are another favourable indication. Government support can also take the form of training judicial officers to support and facilitate arbitration. Additionally, state support can also be indicated by the promulgation of modern domestic and international arbitration statutes. For example in 2017 South Africa passed the International Arbitration Act 15 of 2017 which incorporates the UNICITRAL Model Law. The International Arbitration Act of 2017 replaced the old Act 42 of 1965.

Further, nothing is more suggestive of a positive environment than striving to be both a safe seat and venue of arbitration. Investors will derive great comfort from knowing that travelling in and out of the country which is the venue of arbitration is uncomplicated and hassle-free. The need for quality hospitality infrastructure and other supportive facilities such as conference centres and transcription services cannot be overemphasized. Above all, the unwavering support of the local courts and a reputation of judicial non-interference in arbitral proceedings are invaluable. Few things boost the attractiveness of a country as both a venue and seat of arbitration than a judiciary which is pro-arbitration. Such a solid reputation is built on a foundation of independent and impartial decisions on challenges to arbitral awards and requests for court intervention in support of arbitral proceedings.

Recent Posts

Stories you will enjoy

Recommended reading