Historically, most commercial arbitrations involving African parties have been resolved by non-African tribunals in places far from the African continent. As commercial disputes involving African parties have become more frequent, a new generation of arbitration institutes may result in an increase of arbitrations in Africa.
Over the last few decades, the African continent has experienced rapid economic growth. Despite a slowdown due to the recent fall in commodity prices, the substantial increase in foreign investment in the recent years has resulted in an increase in commercial disputes, which are generally resolved through arbitration, which involve at least one African party.
To date, most disputes involving African and non-African parties, and disputes of a certain magnitude involving two African parties, are resolved by arbitral tribunals without any African members, seated in Europe, North America, and more recently in Asia. As a response to this trend, African governments, legal scholars and professionals, together with the international commercial arbitration community, have embarked on a programme to promote the increased use of African arbitrators and African arbitral institutions in commercial disputes related to Africa.
Why choose arbitration in Africa-related disputes
The usual advantages of international commercial arbitration, as opposed to litigating before national courts, apply equally to disputes relating to Africa. These advantages include party autonomy of the arbitration process and composition of the tribunal, finality of awards, confidentiality and ease of enforcement.
There are certain benefits of international commercial arbitration that are particularly relevant to disputes related to Africa. In some African countries, a simple commercial dispute can take many years to resolve due to a backlog in the courts. Resolving the dispute in arbitration is quicker and ultimately more cost effective for commercial parties.
A lack of trust in the independence and impartiality of national courts is another reason why arbitration is preferred to litigation by many international parties doing business in African countries. Arbitration gives the parties the ability to ensure that the tribunal consists of members with the appropriate legal and technical skills to manage the proceedings and deliver an award of the standard expected by the parties which properly addresses and resolves all aspects of a dispute.
Main challenges to arbitrating in Africa
One reason that parties do not generally choose African countries as the seat of arbitration is that they commonly suffer from the fact that the arbitration legislation is out of date. While 35 out of 56 African states have adopted the New York Convention on Recognition and Enforcement, only 10 African states have adopted the UNCITRAL Model Law on International Commercial Arbitration. However more countries, including South Africa, are expected to adopt the Model Law in the near future. In addition, the 17 OHADA member states in Central and Western Africa have adopted the Uniform Arbitration Act, which is loosely based on the UNCITRAL Model Law.
Another reason why parties are often sceptical about selecting African states as the seat of arbitration is because there is some uncertainty as to the reliability of the national courts when it comes to striking the right balance between assisting and progressing an arbitration, without interfering with the arbitrators’ decisions. This is linked to the fact that there exists a perception among commercial stakeholders that there are few strong and well-run arbitration institutions on the African continent. This perception is not necessarily borne out by reality and in any event changes are being made to substantially improve the situation.
African arbitration institutes
There are several thriving regional arbitration institutes present on the African continent. One of the oldest is the AALCO initiated CRCICA in Cairo, Egypt, which is well run and has had a large number of cases, focusing mostly on northern Africa and the Middle East. Other active local institutes include the CCJA in Abidjan, Ivory Coast, established pursuant to the OHADA treaty, and the PCA local office in Mauritius. The locations of these institutes mean that they are well equipped to handle maritime, shipping and offshore disputes.
In addition, there are several new institutes, including the KIAC in Rwanda, the LCA in Nigeria, the NCIA in Kenya, the LCIA-MIAC in Mauritius, and the CAJAC, which will operate from both South Africa and China. These new institutes are becoming increasingly active. They commonly seek to take on as many small cases as possible, in order to position themselves to be able to administer larger arbitrations and to establish a good reputation within the international commercial arbitration professional community.
The Mauritian international arbitration project
A particularly interesting project has recently been started in Mauritius. The country is strategically placed between Africa and Asia, with a hybrid legal system, political and social stability, and well-functioning infrastructure. The Mauritian government has a stated policy aim of attracting foreign investment by becoming an African hub for international commercial arbitration.
As part of this strategy, Mauritius has adopted the 2006 UNCITRAL Model Law. Being party to the New York Convention on Recognition and Enforcement, the country has a robust and modern legal framework for international commercial arbitration.
The Mauritian International Arbitration Act 2008 features several innovations. The Act grants certain powers to the PCA that would normally be assigned to local courts, including appeals on issues relating to challenges to an arbitrator. In addition, the Mauritian Supreme Court is organised so that designated judges handle all cases related to international arbitration, and there is a right of appeal to the Judicial Committee of the Privy Council in England against any final decision of the Supreme Court. These provisions are aimed at countering any concerns there might be about the impartiality of the Mauritian legal institutions.
Another Mauritian innovation has been the creation of the LCIA-MIAC, which is a joint venture between the Mauritian government and the LCIA in London. Benefitting from the experiences and organisation of the LCIA, the hope is that LCIA-MIAC will contribute to making Mauritius the preferred seat of arbitration for many Africa-related commercial disputes.
The development of international commercial arbitration on the African continent is a positive change. Arbitration is essentially a consensual process where the parties wish to have the dispute resolved by a tribunal who not only have the requisite legal skills but who also possess a commercial understanding of the dispute. Such objectives are generally best achieved by having thriving and robust local arbitration institutes that are experienced at dealing effectively with a wide variety of commercial disputes.
OHADA - Organisation for the Harmonisation of Business Law in Africa
AALCO - Asian-African Legal Consultative Organization
CRCICA - The Cairo Regional Centre For International Commercial Arbitration
CCJA - Common Court of Justice and Arbitration of OHADA
PCA - Permanent Court of Arbitration
KIAC - Kigali International Arbitration Centre
LCA - Lagos Court of Arbitration
NCIA - Nairobi Centre for International Arbitration
LCIA-MIAC - London Court of International Arbitration – Mauritius
International Arbitration Centre
CAJAC - China-Africa Joint Arbitration Centre Johannesburg