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. 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.

Posted by Thalia Gerzso and Stéphane de Navacelle in Arbitration