REUTERS | Mike Hutchings

Africa risen!

Following the great recession in 2008, with competition fierce amid falling revenues in more established markets, some of the major London-based law firms turned to Africa as an untapped area of growth. Many of these firms already had long-standing relationships with firms on the continent and there was already a significant amount of international arbitrations related to African countries, usually carried out by a small number of specialist practitioners. The major change in the last few years has been the increase in the level of investment by major firms in their African operations and the significant developments related to international arbitration in major African markets.

It is significant that Pinsent Masons, Clyde & Co and DLA Piper have significantly increased their presence on the continent in the last 18 months. Pinsent Masons and Clyde & Co have opened new offices in Johannesburg, taking on experienced local lawyers, both with an eye to servicing not just the South African market but, perhaps more importantly, the major markets to the north.

The level of interest from London firms and UK firms more generally in the African market has been astonishing. Many firms are looking to buy into local firms or to set up standalone operations in the major markets of Nigeria, South Africa and Kenya. All of these firms are looking to gain a slice of what is hoped will be an increase in international arbitrations originating in Sub-Saharan Africa. This is as a result of increased growth, not only in the traditional areas of the extraction industries (those being oil and gas and mining) and major infrastructure projects funded by international institutions (such as the World Bank), but also in new growth areas reflective of the growth in sophistication of African economies. For example, growth has been seen in:

  • Telecommunications-related arbitrations.
  • Arbitrations in respect of renewable energy projects.
  • Arbitrations by African companies related to major commercially funded projects.

All of the external interest in the African market is complemented by developments on the continent itself. New arbitration bills, which apply to international arbitration, have been progressing through both Nigerian and South African legislatures. In the case of South Africa, the legislation is limited to international arbitration. In Nigeria, the legislation applies to both domestic and international arbitration, as well as to conciliation. At the recent Chartered Institute of Arbitrators (CIArb) conference in Johannesburg, the South African Deputy Minister for Justice confirmed that the South African government’s intention was to complete the public consultation process on the bill by the end of September this year. Furthermore, other legislative issues and political factors permitting, the intention is for the new law to be passed by the South African Parliament by the end of 2017 or early 2018. In Nigeria, the bill is before the Senate. Reliable sources are confident that it will be passed by both houses and signed into law by the President by the end of the year.

Both the Nigerian bill and the South African bill are based on the UN Commission on International Trade Law (UNCITRAL) Model Law. In Nigeria’s case, the existing federal statute (the Arbitration and Conciliation Act (Cap A19, Laws of the Federation of Nigeria, 2004)) is based on the Model Law, but there is a generally held view among arbitral practitioners that the present law (which is a re-enactment of a piece of legislation passed in 1988) does not meet modern best practice standards. Over the years, difficulties have arisen with a handful of decisions that have not been viewed as being “arbitration friendly”. This has necessitated updating the governing legislation.

The problem in South Africa is more acute. Both domestic and international arbitration are presently governed by the Arbitration Act 1965 (Act No. 42 of 1965). The legislation is outdated and viewed by most practitioners as a severe hindrance to the development of South Africa as a hub for international arbitration on the continent. There are political sensitivities regarding the use of arbitration domestically in South Africa; there is therefore a drive to pass standalone legislation solely applicable to international arbitration.

Another remarkable development in recent years has been the growth in the number of institutions on the continent seeking to become established as regional arbitration centres. The drive has been to seek to domesticate international arbitrations on the continent, which, for a host of reasons (some more valid than others), have been taking place outside the continent. In recent years, new arbitration centres have been set up In Lagos, Kigali, Mauritius and Nairobi, offering their services beyond the borders of their host countries. These centres have met with varying degrees of success, but these efforts confirm the realisation that African jurisdictions are losing out on substantial revenues when arbitral disputes which are closely connected to Africa are being heard in London, Paris, Geneva or Dubai.

The passage of the new legislation in South Africa will be a game changer in this respect. Johannesburg has advantages over other African seats of arbitration, given its level of infrastructural development. The uncomfortable truth is that some parties would be happier to seat their arbitrations in Johannesburg or Cape Town, rather than in any other African seat. If South Africa provides the modern legislative framework in its bill, promising support for international arbitrations, it could, as a seat, offer 30% – 40% savings to parties in respect of the cost of the hearings. This would be a powerful incentive.

The attractiveness of South Africa as a potential seat of arbitration, coupled with the increasing levels of investment into the continent from China, has resulted in the formation of the China Africa Joint Arbitration Centre (CAJAC). This is based in Johannesburg and Shanghai. It remains to be seen how other African countries will react to Johannesburg as the location. There has apparently been little consultation with other African jurisdictions. It also remains to be seen whether the centre will succeed in its stated aim of centralising all arbitral disputes between African and Chinese entities.

Despite all of the progress, one continuing area of dissatisfaction is with the lack of diversity in the appointment of arbitrators in arbitrations concerning African parties. There remains a distinct underrepresentation of African arbitrators in such disputes. This is despite, for example, the largest branch of the CIArb outside of London being in Lagos. The issue does not appear to be a lack of qualified arbitrators.

The level of interest and growth in the African arbitration market shows little sign of slowing down. The commitment demonstrated by major international firms in setting up operations on the continent signifies that these firms view this as a long term commitment. Hopefully, it will be beneficial to both those making the investment and the continent as a whole.

Keating Chambers Abdul Jinadu

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