Africa: A bright future for dispute resolution As foreign investment in Africa increases, so does the need for international arbitration – but how can the continent grow this practice? We ask our panel of experts about the challenges

By Gabriella Kane 23 May 2019

Arbitration is the most commonly used method of dispute resolution in Africa. Do you see this trend continuing for the foreseeable future and, if so, why?

Aisha Abdallah, head of litigation, Anjarwalla & Khanna, : Yes. Firstly, foreign direct investment is increasing and, with it, the demand for international arbitration.

Secondly, the proliferation of arbitration centres across the continent is evidence of its growing importance as a means of alternative dispute resolution in Africa. This has the support of the judiciary, because it can help in easing the backlog in the court system.

Thirdly, African governments are recognising the importance of arbitration in supporting economic development. For example, the Kenyan government has established the Nairobi Centre for International Arbitration (NCIA), as part of its plans to promote the capital city as a financial hub in the region.

Adriaan Hoeben, dispute resolution executive, ENSafrica, : There is no doubt that this trend will continue. The race for Africa is on, bringing with it ever- increasing projects in sectors including technology, media, telecommunications (TMT), infrastructure development and energy projects. These invariably involve parties from different jurisdictions who do not wish to entrust the resolution of their disputes to domestic courts.

Furthermore, in some jurisdictions, corruption is rife and parties want the comfort of knowing that their disputes will be resolved by a tribunal that will not be affected by corruption. Chris Todd, head of dispute resolution, Bowmans, Cape Town: I think the trend is likely to increase. There are two main reasons for this: the first is global, the second is local. Globally, disputes across borders are not considered suitable for resolution in domestic courts and parties routinely – and for good business reasons – prefer the flexibility, adaptability and predictability of recognised international centres for dispute resolution.

More specifically relating to the African continent, local courts in most jurisdictions face significant challenges with delay, consistency and, in some cases, with a lack of confidence (both locally in that jurisdiction and from global investors) in court outcomes.

Sarah McKenzie, dispute resolution partner, , : We expect this trend to continue. The growing economies and emerging middle-class of African countries, together with the continued interest in the exploitation of their natural resources, is likely to inspire further investment and encourage confidence from lending and financial institutions.

Although arbitration is a commonly used method of dispute resolution for African parties, in the past a majority of international arbitrations were resolved offshore. Africa is a developing continent and countries such as , Rwanda and Mauritius are taking steps to position themselves as strategically pivotal players in the arbitration field. South Africa, for example, has recently introduced the International Arbitration Act, which has resulted in increased confidence in the arbitral process.

On the back of this, South African-based international arbitration institutions have sought to revise their rules and position themselves to take advantage of the attention attracted as a result of the new legislation.

In our view, positive action taken by African countries, such as updating legislation and the creation and strengthening of international arbitration institutions, will, in turn, secure the upward trend in popularity of international arbitrations seated in Africa. , Rwanda

Key international arbitration institutions, such as the International Chamber of Commerce, have also recognised the increased regionalism of arbitral disputes and are seeking to increase their reach and the diversity of the arbitrators they appoint. Their increased attention towards African jurisdictions will similarly enhance the popularity of international arbitration in Africa.

Des Williams, head of disputes, , Johannesburg: Yes, we do see this trend continuing for several reasons.

First, the modernisation of African arbitration legislation in recent years has stimulated its growth and development. In South Africa, the enactment of the International Arbitration Act 2017 is seen to be a very positive development which will promote the growth of South Africa as the leading Southern African regional arbitration centre.

Second, the International Arbitration Act adopts the Uncitral Model Law. The adoption of internationally accepted norms and standards in arbitration practice is encouraging parties from outside South Africa (particularly in the Southern African region), to seat arbitrations in South Africa.

Third, the enactment of the International Arbitration Act is an indication of political support for the development of arbitration in South Africa.

Finally, arbitration enjoys strong court support at the highest level, in both the Supreme Court of Appeal and the Constitutional Court, and it is likely to continue.

What are the main factors contributing to the continuing attractiveness of arbitration as a method of resolving disputes?

Abdallah: First, domestic legal reforms in most African countries. A number are modernising their statutes to promote arbitration. Second, judicial support of the arbitration practice in key jurisdictions in Africa – the Kenyan Constitution of 2010 – requires the courts to actively promote the practice.

Third, challenges facing the court system leading to delays, uncertainty and increased legal costs. Finally, foreign lenders and investors preferring arbitration rather than litigation to resolve commercial disputes for a number of reasons, including neutrality. Kirsty Simpson, dispute resolution executive, ENSafrica, Cape Town: International arbitration enables parties from different jurisdictions to minimise reliance on domestic courts and entrust the resolution of disputes to independent tribunals (generally and, at least, in part) of their own choosing. As such, international arbitration provides a neutral, confidential forum of experts to decide cross- border disputes in the context of doing business on a continent that is, in many jurisdictions, plagued by political instability and judicial uncertainty, but with major commercial opportunity.

Todd: I would perhaps emphasise flexibility, choice of arbitrators and law, modern rules of arbitration, flexible use of electronic and ‘paperless’ resources, plus a common standard of procedure and decision- making. All of these ultimately lead to more effective and credible outcomes.

The increasing cost of arbitration is a potential concern, but many dispute settlement centres are working on managing this through more streamlined processes. The potential for settlement, whether through mediation, negotiation or other forms of alternative dispute resolution, may also be enhanced by the use of regional or international dispute settlement centres.

Erin Warmington, dispute resolution partner, Webber Wentzel, Johannesburg: As is the case globally, there is often a reservation about resolving prospective disputes in foreign courts. The popularity of arbitration on the continent of Africa has largely been driven by a desire to ensure that disputes are efficiently and effectively resolved in a fair and unpartisan arena and with a measure of confidentiality.

Arbitration provides advantages. Party convenience and ability to control selection of the adjudicator are major factors that make it attractive to commercial parties. In the cross-border context, moreover, arbitration can provide a measure of certainty as to applicable laws and the manner in which disputes are resolved. For instance, there is an ability to nominate a seat of the arbitration and thus select the procedural law which will govern the dispute.

Because enforcement is often a concern in disputes, the fact that the New York Arbitration Convention has been so widely acceded to and it is often easier to enforce a foreign arbitral award than a foreign judgment (which is heavily dependent on local law), arbitration is an extremely attractive option. Johannesburg, South Africa

Williams: The first factor is international acceptance of arbitration as an alternative and appropriate mechanism for the resolution of disputes involving parties from different jurisdictions.

Second, there is the fact that a suitable arbitrator can be appointed by agreement, or in accordance with the rules of recognised institutions such as the Arbitration Foundation of Southern Africa (AFSA) or the International Chamber of Commerce Court of Arbitration.

Third, the perception that arbitration is more cost-effective than litigation and, fourthly, the perception that it is a faster dispute resolution process than litigation. Finally, the flexibility and relative informality of arbitration.

What impact is the International Centre for Settlement of Investment Disputes (ICSID) rules amendment project likely to have?

Abdallah: It will improve time and reduce costs, which are key considerations when drafting dispute resolution clauses. For example, it requires the tribunal to meet deadlines and, when it does not do so, to inform parties of the reason and anticipated length of delay. Parties will be better able to allocate the required resources effectively. The rules will also encourage parties to consolidate multiple related cases that may lead to saving time and money.

Second, it will avoid conflicts of interest in cases where there is a third-party funder, by requiring parties to disclose details of this as early as possible after registration. Third, the proposal of allowing open hearings unless either party objects may promote transparency. However, it may also undermine a key advantage of arbitration proceedings, in that they are confidential.

Finally, the expedited hearing will be much welcome by investors and practitioners generally. Hoeben: ICSID was established to provide a forum through which investor-state disputes could be confidently resolved, free from political interference. While approximately 20 per cent of its 2018 caseload pertained to African jurisdictions, African states have seemingly been concerned about transparency in and outcomes of ICSID arbitrations favouring investors. This view is curious, given that most investor-state disputes determined through ICSID have been resolved in favour of the state.

Of relevance to the African market, the amendments to the ICSID rules are intended to make the procedures more time- and cost-effective. They are also intended to create greater respect for state sovereignty and public access to the dispute resolution procedure.

For example, one proposed amendment to the ICSID convention will change the long-established principle that no award may be published without the consent of both parties. The proposed amendment creates a deemed consent to publication, where a party fails to object to publication of the award within 60 days.

Where a party does object, the proposed rule amendments will nonetheless permit ICSID to publish components of the award in terms of a prescribed procedure and timeline. This is intended to create enhanced transparency, which will hopefully appease the concerns held by certain African states.

It is, therefore, hoped that the proposed amendments to the arbitration rules, regulations and convention will engender the confidence of the African states, encouraging them to participate in investor-state arbitrations through ICSID.

Todd: I think that this is likely to have a positive impact on the resolution of investment disputes. Rules of practice should be modernised and updated regularly to keep pace with changes in the international business environment and rapidly evolving technology. The real challenge across Africa is the recent trend against the conclusion of bilateral investment treaties in many jurisdictions and challenges in enforcement (in local jurisdictions) of arbitral outcomes in disputes.

McKenzie: African states have been key participants in the ICSID dispute resolution system and Africa has undoubtedly become one of the most attractive investment destinations in the world. Investor-state arbitration and, specifically, ICSID arbitration, is particularly important to the continent. Some of the factors driving the level of importance include the escalation of foreign direct investment (FDI) flows, the increase in the number of investment treaties in force and the choice offered in those treaties to consent to arbitration as a means to resolve any disputes.

The overarching goal of the amendments to the ICSID rules is to modernise, simplify and streamline the rules. The amendments also aim to increase transparency and third-party involvement.

In our view, these amendments would be positive. The changes highlight ICSID’s availability to investors and states to help promote international investment by instilling confidence in the expedience of the dispute resolution process and its legitimacy.

Williams: This amendment project is unlikely to have much impact in South Africa, as it has not signed and ratified the Washington Convention on the Settlement of Investment Disputes. South Africa is not renewing its existing bilateral investment treaties and is not entering into any new ones. The ICSID rules are, therefore, becoming increasingly irrelevant in relation to South African investment disputes.

How do you see the future of arbitration in Africa?

Abdallah: Arbitration will continue to grow for the reasons already mentioned and as African arbitration centres in key jurisdictions such as Kenya, Rwanda and Nigeria develop in sophistication and experience.

Because of the well-established link to economic development, there is an increasing push for commercial disputes to be resolved on the continent and by using African professionals, rather than for them to be ‘exported’ to international centres such as London and Paris.

Todd: International arbitration centres outside Africa have historically dominated international arbitration of disputes involving African parties. The reasons for this are complex, but are certainly related to the fact that many of these involve international parties who have perceived arbitral centres outside Africa as being ‘safer’ and as being more strongly supported by local courts. They are better known and understood and, therefore, strongly preferred.

However, arbitration between African parties is growing and a number of jurisdictions have established high-quality dispute settlement centres and have focused attention on changes to local laws to support the practice. Warmington: As investment activity on the continent continues to grow, the future of arbitration in Africa looks promising. This is particularly so against the backdrop of the high cost of arbitration in other regions, particularly for African parties. This means that those involved in Africa-related commercial disputes may look to arbitrate in Africa in the future, as opposed to those areas.

What do you think now needs to be done to influence the emergence of local, safe arbitral seats and stronger, more capable institutions?

Abdallah: First, arbitration institutions in Africa – especially newly established ones such as the Nairobi Centre for International Arbitration (NCIA) – should publish statistics of cases administered by the institutions and update their arbitration rules in line with international best practice. They should also encourage a wide range of arbitration practitioners to apply for accreditation, to give parties a lot of choice in appointments.

Second, arbitration institutions should publicise key decisions by the local courts on arbitration practice, particularly on recognition and enforcement proceedings, to counter concerns by foreign parties and wrong perceptions.

Third, there should be further modernisation of domestic arbitration laws and continued training for the local judiciary and lawyers alike. Fourthly, efforts should be made to encourage the appointment of more arbitrators from African countries on international arbitration tribunals.

Finally, efforts should be made to enhance the capacity of arbitration institutions in Africa in terms of number and quality of available arbitrators, adequate administrative staff and financial support to ensure they are well-equipped to administer international arbitrations.

Simpson: Most modernised African jurisdictions have adopted, at least, the New York Arbitration Convention.

Some jurisdictions (such as South Africa) have also adopted the Uncitral Model Law by incorporating it into national statute and directing that all international commercial disputes be resolved in international arbitration proceedings in terms of Uncitral.

These African jurisdictions are consequently well-placed to be nominated as arbitral seats. This is, in any event, beneficial as arbitral awards often need to be enforced in African domestic courts.

The adoption of modern arbitral practices and enforcement conventions, as well as the policy decision taken by the courts in some African countries to be ‘pro- arbitration’, has led to a strengthening of existing arbitral institutions and the growth of new arbitral institutions on the African continent (for example, Arbitration Foundation of Southern Africa (AFSA) International; the China Africa Joint Arbitration Centre (CAJAC); the Mauritius International Arbitration Centre (MIAC) and the MCCI (Mauritius Chamber of Commerce and Industry) Arbitration & Mediation Centre (MARC); and the Kigali International Arbitration Centre (KIAC).

In order to promote arbitration in Africa, awareness of the existence and capabilities of the African arbitral institutions will need to grow, so that their caseloads, in turn, increase. They will need to demonstrate a track record of efficient, expeditious and cost-effective dispute resolution. Domestic courts will need to defer to arbitrators as the rule rather than the exception.

Politicians will need to create stability and follow international best practice in policy- making.

From a practical perspective, favoured African jurisdictions will also have minimal visa requirements and easy visa application processes; established legal fraternities with good infrastructure for the conduct of international arbitrations (such as hearing venues and stenographers); good transport and accommodation facilities and the like.

Todd: The recently established African Arbitration Association should assist in coordinating and supporting a limited number of strong arbitration jurisdictions across the continent. I think that this is preferable to attempting to grow international arbitration simultaneously in multiple seats or jurisdictions.

There are a number of African jurisdictions that should now be recognised as safe seats for international arbitration and their credibility is likely to grow incrementally. But this is likely to take time to influence the choice of seat where ‘non-African’ parties are involved.

A key factor in growing confidence in African arbitral seats is communication, some examples of successfully executed arbitrations and, critically in my view, good examples of effective enforcement of awards across African jurisdictions. These factors should build confidence in the use of African arbitration seats.

McKenzie: The growth of Africa as an arbitration destination is dependent on the ongoing building of trust and certainty. Therefore, continued legal reform and modernisation of arbitration laws in African countries (such as the commitment by African countries to the New York Arbitration Convention and the adoption of the Uncitral Model Law) will, we believe, contribute to the emergence of local safe arbitral seats and stronger and more capable institutions.

There are a number of African jurisdictions that can boast extremely sophisticated legal systems and fraternities. However, a focus on diversity within international arbitral panels and the inclusion of more African arbitrators on such panels will afford greater visibility to African arbitration practitioners – in order to continue to build trust, strengthen existing African arbitral institutions and encourage the emergence or strengthening of new, reliable institutions.

Williams: Local institutions, including particularly AFSA, are taking steps to ensure that arbitration practice and procedure in South Africa is in line with international norms and standards. AFSA, for example, has recently established AFSA International as a new division, with rules that reflect international best practice.

AFSA is also engaging with other African arbitration institutions in order to encourage regional cooperation in the development of arbitration. International institutions, including the International Criminal Court (ICC), are promoting the development of arbitration, in accordance with internationally accepted norms and standards, throughout Africa.

How are local firms in Sub-Saharan Africa responding to the continuing demand for arbitral expertise?

Abdallah: There is more focus on resourcing and training. There are a number of training and education programmes for African lawyers and the judiciary in arbitration, in which law firms and arbitral institutions are playing an active part. For example, the ALN (African Legal Network) Academy provides high-quality training in arbitration to practitioners.Efforts are being made to collectively market African expertise. For example, the establishment of the African Arbitration Association, based in Kigali, is a welcome step in this direction. Last, there is increased lobbying of African governments to use local law firms alongside international law firms in international arbitrations, to increase experience on the continent.

Todd: Different firms are, of course, responding differently. Many simply lack the depth of experience to take the lead in international arbitration and are more likely to play a support role and, perhaps, a role in enforcement. Other, usually larger, firms have provided expertise in the drafting of revised laws to support arbitration in their jurisdictions.

African firms operating in multiple jurisdictions, which consequently have a strong focus on cross-border dispute resolution and who are engaged in multiple jurisdictions, are providing support to local dispute settlement centres, to the African Arbitration Association and, also, to traditional international dispute settlement centres. This will improve access to arbitration, its conduct and enforcement proceedings where needed in local jurisdictions.

Warmington: There are many sophisticated lawyers who specialise in local and international arbitration on the continent. In addition, a number of local firms are responding to the growing demand for arbitral expertise on the continent by employing legal practitioners who already possess arbitral expertise, or by investing in the development of lawyers who are looking to specialise in or further their arbitration expertise.

Research conducted by SOAS University of London shows a significant majority of African arbitration practitioners are formally trained in arbitration.

Local firms are also maintaining or creating dedicated dispute resolution practices, which specifically target work in alternative dispute resolution, including local and international arbitration. The increasing number of arbitration conferences hosted in Africa illustrates the significant appetite amongst practitioners to develop skills and harness the growth potential of the African market.

Furthermore, the topics discussed at these conferences evidences that there is an increased awareness of the interest and use of international arbitration and a resolve to build a solid arbitration practice throughout Sub-Saharan Africa and the rest of the continent.

Williams: The major South Africa firms have all recognised the importance of arbitration as a specialised practice area. They have done so in various ways, including the establishment of specialised arbitration practice groups and the introduction of training programmes and courses designed to stimulate the interest of younger lawyers in arbitration practice.

The major firms also continue to develop their arbitration practices through ongoing contact with international law firms and involvement in international institutions, including the ICC and the London Court of International Arbitration.