Arbitration: the rise of Africa

With globalization, an increasing number of companies have engaged in cross-border transactions. To resolve disputes arising out of these international transactions, arbitration has become the most effective dispute resolution method.

With globalization, an increasing number of companies have engaged in cross-border transactions. To resolve disputes arising out of these international transactions, arbitration has become the most effective dispute resolution method. As it is up to the parties to choose the seat of the arbitration proceedings, “arbitration-friendly” jurisdictions compete in seeking to host arbitral disputes. London, Paris, New York and even Hong Kong have become hotspots for international arbitration. Other places are now emerging on the arbitration market. On account of significant economic openings, African countries are currently developing legislation that aims to attract international commercial and investment disputes.

(i) Africa: an appealing arbitration market

Over the past years, some African countries have witnessed a considerable increase in foreign investments. According to a study of the Financial Times, capital investments increased by 65% in 2014 and foreign direct investments (FDIs) rose by 6% on the continent.1 Despite a small decrease of FDIs flows to Africa in 2016, UNCTAD projects that inward FDI will increase by about 10% in 2017.2 Whereas FDIs to Southern Africa and Central Africa respectively fell by 18% and 15%, flows to East Africa, West Africa and North Africa continued to grow on account of important FDIs projects in Uganda and Nigera.7. 153 parties from Sub-Saharan Africa were involved in international commercial arbitration12.

Another factor explaining the development of arbitration in Africa is the pro-arbitration legislation of many African countries. Evidence has shown that despite the perception that arbitration is not well-developed in Africa, it is in fact a prominent dispute resolution method.

Firstly, the majority of African countries are members of the two major arbitration conventions. 36 of the 54 African countries are signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 47 are party to the ICSID Convention13.

Furthermore, African courts are generally encouraging of arbitration proceedings, having enforced awards convicting state-owned companies24. The new OHADA instruments are also tailored for complex arbitration, Articles 8.1 and 8.2 of the Arbitration Rules allowing for the joinder of additional parties49. As China becomes the main economic partner of Africa50, AFSA and the Shanghai International Arbitration Centre (SHIAC) have created the China Africa Joint Arbitration Centre (CAJAC) to provide a neutral and cost-effective arbitral institution51. Originally located in Johannesburg and China, the CAJAC representatives inaugurated a new CAJAC center on June 5, 2018, which hosted the first Nairobi dispute resolution conference52.

Over the past years, African countries have rebutted the presumption that arbitration was an under-developed practice in on the continent. In this respect, many countries have enacted arbitration-friendly legislation which facilitates the recognition and the enforcement of arbitral awards. African countries have gone so far as to join forces and develop competitive arbitration institutions with advanced practices, in the hope of becoming the new hotspot in international arbitration.

Thalia Gerzso
Thalia Gerzso
Phd Studient - Cornell University

Thalia Gerzso is a PhD student in the government department at Cornell University. Her research interests include democratic backsliding and constitutionalism in Sub-Saharan Africa,but also state-building and civil conflicts in Central Africa. [...]

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Stéphane de Navacelle
Stéphane de Navacelle
Lawyer - | Page

Stéphane de Navacelle has worked in the field of white collar crime/corporate crime in New York, London and Paris (at Engel & McCarney and Debevoise & Plimpton LLP). With over ten years’ experience in French and US white collar crime [...]

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  1. Sadaff Habib, Impact of Foreign Direct Investment on Arbitration in Africa, Kluwer Arbitration Blog, March 27, 2018.
  2. Talkmore Chidede, Recent FDI trends in Africa: Summary analysis of the UNCTAD World Investment Report 2017, Tralac Blog, June 21, 2017.
  7. Ibid.3 This trend is likely to continue as African countries are currently negotiating economic partnership agreements with the European Union. 4Ibid.5

    Owing to this increase in FDIs, the number of disputes has correlatively reached a record high. In 2017, 87 cases from Sub-Saharan Africa were brought before the International Chamber of Commerce (ICC)6 ICC, ICC announces 2017 figures confirming global reach and leading position for complex, high-value disputes, News, March 03, 2018.

  12. Ibid.8. These figures represent a growth rate of 35.9% for cases and 40.4% for parties9Ibid.10. In 2018, 15% of the cases brought before the International Centre for Settlement of Investment Disputes (ICSID) involved a State Party from Sub-Saharan Africa11 ICSID, The ICSID Caseload-Statistics, p.11, Issue 2018-1.
  13. Rubin Mukkam-Owuor, Africa, Stand Up for Africa, Kluwer Arbitration Blog, March 10, 2018.
  24. Ibid.14. A Tanzanian court, for instance, enforced a $65 million award against the Tanzania Electric Supply Company in the Dowans case15Ibid.16. The Kigali International Arbitration Centre (KIAC) issued three arbitral awards against government parties, all enforced by the Rwandan courts. Nigerian and Tanzanian judges are prevented from setting aside an arbitral award on public policy grounds, demonstrating the strong commitment to upholding international arbitral award17Ibid.18. Because developing international arbitration is key to attract more foreign investments and develop an open economy, African countries have joined forces in developing a tailored legal framework and regional arbitral institutions.

    (ii) Attracting arbitration disputes through regional institutions

    To promote investments and ensure legal certainty, 17 African countries established the Organization for the Harmonization of Business Law in Africa (OHADA) in 1993. Acknowledging the importance of international arbitration as a dispute resolution mechanism, the OHADA enacted a Uniform Arbitration Act in 1999 and a Common Court of Justice and Arbitration (CCJA)19Ibid.20. To adapt to new practices and encourage parties to choose OHADA seated arbitration, the OHADA Council of Ministers adopted a new Uniform Arbitration Act along with Arbitration Rules for the CCJA on December 15, 201721Ibid.22.

    These new instruments aim at reflecting current trends in international arbitration. To implement a dialogue between parties, the arbitral tribunal may coerce parties to fulfill any preliminary steps (such as conciliation, mediation or negotiation)23 R. Ziadé & C. Fouchard, New OHADA Arbitration Text Enters into Force, Kluwer Arbitration Blog, March 30, 2018.

  49. Ibid.25 and the arbitrators being given the ability to consolidate several related proceedings initiated under separate arbitration clauses26Ibid.27.

    Because delays in arbitration proceedings may discourage parties to opt for this alternative dispute resolution mechanism, the updated Arbitration Act provides for a 30-day-time limit for challenges that have the effect of jeopardizing the smooth running of the arbitration proceedings28Ibid.29. Even if the arbitrator fails to issue a decision within 30 days, the CCJA may take the lead and render a decision in a reasonable period of time30Ibid.31. Furthermore, Article 14 of the Arbitration Act forbids parties from using dilatory tactics32Ibid.33. Article 16 of the rules precludes parties that have failed to raise an irregularity from raising it at a later stage of the arbitration proceedings. Such provisions aim at guaranteeing efficient and smooth proceedings, and thus promoting OHADA arbitration34Ibid.35.

    The rules also amend the procedures for establishing the arbitral tribunal, regulating its appointment, in light of the fact that the appointment of an arbitrator is often fertile ground for conflict. Pursuant to Article 5 of the Arbitration Act, in the absence of party agreements, the CCJA will send the parties a list of three potential arbitrators36Ibid.37. Following order of preference expressed by the parties, the CCJA will appoint the tribunal based on the final list38Ibid.39. Once again, the primary purpose of this new mechanism is to guarantee the smooth and efficient running of the proceedings and attract potential parties to a dispute.

    Finally, the OHADA intends to facilitate the recognition and the enforcement of arbitral awards, in that it is crucial for the parties submitting themselves to an arbitration. Article 31 of the revised Arbitration Act imposes a 15 day-time limit on national courts to decide on the recognition and enforcement of an arbitral award40Ibid.41. In addition to providing a shorter time period, the Arbitration Act specifies that the award will be recognized by the state court, if the latter does not rule on time42Ibid.43. Even more ambitious, the revised Arbitration Act provides that states courts must rule on annulment requests within three months of the receipt of the application. If the court does not comply with this requirement, the CCJA will have jurisdiction to render a decision within 6 months44Ibid.45. Scholars and attorneys are dubious nevertheless as to whether such deadlines will be met as the setting aside proceedings before the Paris Court of Appeal take between 12-18 months on average46Ibid.47.

    Others arbitral institutions have emerged over the past few years. Scholars have described the Arbitration Foundation of South Africa (AFSA) as a potential powerhouse in international arbitration in southern Africa48Rubin Mukkam-Owuor, Africa, Stand Up for Africa, Kluwer Arbitration Blog, March 10, 2018.

  50. Mariama Sow, Figures of the Week: Trends in Chinese investments in Africa, Brookings, July 12, 2017.
  51. Hogan Lovells, Update on CAJAC, Lexology, March 22, 2017.
  52. CAJAC, News, 2018.