Arbitration as a means of settling financial and commercial disputes has burgeoned in Africa in the 21st century – as the continent has grown economically and seen major improvements in governance. What is the current state of play?
Arbitration is essentially a procedure to resolve disagreements outside a courtroom, with disputing parties agreeing to submit their cases for judgment or mediation by an independent, impartial adjudicator. Crucially, the arbiter’s decision is usually binding in law.
For many decades, African legal systems relied mainly in court litigation to settle disputes – between officials, companies and individuals. However, the developed world practice of arbitration carries many advantages over litigation – such as faster resolution, confidentiality and the capacity for parties to agree on a “judge” – and it has caught on in Africa.
As part of its ongoing webinar series, LEX Africa, recently held a lively discussion on the topic “Developments in African Arbitration Law, moderated by Des Williams, Director of Werksmans Attorneys South Africa.
Michael Dedon, Managing Associate of Giwa-Osagie & Co, described the future of arbitration in Nigeria as “very bright” with growing interest among professionals, fuelled by congestion in the country’s courts.
“Due to overcrowding in the formal legal system, there has been a steady resort to the use of alternate dispute resolution (ADR) mechanisms,” added Dedon. The advantage of arbitration over other ADR methods is that it has the same force and effect as the judgment of a court of law.
There are two main sources of the law relating to commercial arbitration in Nigeria: firstly, common law and doctrines of equity, and secondly, statutes.
The principal statute governing commercial arbitration in Nigeria is the Arbitration and Conciliation Act (ACA) of 2004, which consists mainly of provisions of the United Nations Commission on International Trade Law (UNCITRAL) Model Law. The ACA is not a complete code as it only provides a framework for arbitration and details must be filled in by common law and in other ways.
Importantly, the New York Convention – which covers reciprocal recognition and enforcement of foreign arbitration awards – was incorporated into Nigerian legislation.
Integral to Nigeria’s embrace of arbitration has been the concept of the “multi-door courthouse”, as conceived of by Harvard University professor Frank Sander, whereby citizens with legal problems are “diagnosed” and screened before expensive lawyers enter the picture. Alternatives to litigation, such as arbitration, conciliation and mediation become institutionalised. To this end, the Lagos Multi-Door Court House was established in 2007 with three serving judges promoting ADR within the judiciary.
Mauritius is also a signatory of the New York Convention of 1958, as well as the 1965 International Convention for Settlement of Investment Disputes.
Recognition and enforcement of foreign arbitral awards must be made before the Supreme Court, explained Dev Erriah, Head of Erriah Chambers, pointing out that enforcement was the rule of thumb.
The limited grounds for setting aside a foreign arbitration award includes the award being in conflict with the public policy of Mauritius. A notable case in this regard was State Trading Company v Betamax Ltd of 2019, in which the court found that a Betamax contract breached national procurement laws and therefore annulled a foreign award.
Currently, most high-level arbitrations in Zambia involve disputes between the state and investors, a state of affairs described as “highly undesirable” by Sydney Chisenga, Managing Partner, Corpus Legal Practitioners.
He explained that an adversarial relationship with foreign investors served to discourage much-needed further investment from abroad. Many of the disputes relate to pre-investment undertakings by the Zambian state which have allegedly been abrogated with the passage of time and changes in government policies, said Chisenga.
Shareholder disputes have increased, centred on governance issues – particularly during the Covid-19 pandemic.
Nonetheless, arbitration remains the preferred method of resolution over courts, he said.
The picture is less rosy in Kenya, according to Peter Gachuhi, Partner at Kaplan & Stratton Advocates, with mixed market reactions to a number of well-publicised arbitration awards. The silence of the Kenya Arbitration Act on rights of appeal and a confusing judgment from the Supreme Court on the subject has further complicated the area of arbitration.
However, Gachuhi said Covid-19 had offered “a silver lining” in terms of setting an example of fast resolution of disputes via virtual arbitration and mediation practice.
Unlike several other African countries, Malawi has not adopted the UNCITRAL Model Law mentioned earlier, nor is it party to the New York Convention and other international pacts on recognition of foreign awards.
However, Shabir Latif, Managing Partner at Sacranie Gow & Co, revealed that Malawi is a party to the 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention on Foreign Arbitral Awards. The effect of these is that the procedure for enforcement of both foreign and domestic arbitral awards is exactly the same as enforcement of a local court judgment – showing that there are many more than a single avenue to gain legal recognition for decisions taken far from the shores of Africa.
The Southern African Development Community (SADC) is committed to “the development, strengthening and enhancement of commercial ADR practices … by way of a joint initiative between SADC-LA and the Arbitration Foundation of Southern Africa (AFSA)”, said Stanley Nyamanhindi, CEO of the SADC Lawyers Association and AFSA SADC Division Vice Chairman.
The SADC aims to set up a panel of arbitrators and mediators, adopt a standard set of rules for the region, establish a secretariat and provide requisite training, revealed Nyamanhindi.