Africa: a Bright Future for Dispute Resolution
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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, Nairobi: 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, Cape Town: 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, Webber Wentzel, Johannesburg: 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 South Africa, 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. Kigali, 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, Werksmans, 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