The future of institutional arbitration in Anglophone, Francophone and Lusophone Africa

The International Chamber of Commerce (ICC) is experiencing an increasing number of arbitrations where one of the parties, and more significantly the claimant, is from Sub-Saharan Africa. The range of disputes is broadening from resource extraction to major infrastructure projects, farming and even football. There is a strong correlation between the growth in external investment development and the growth in arbitration. However there are structural and cultural challenges. On 29 June 2016, Tunde Ogunseitan, Counsel at the ICC, Olasupo Shasore, former Attorney General and Commissioner for Justice, Lagos State, and Julius Nkafu, barrister, met to discuss the opportunities and challenges for international arbitration in Sub-Saharan Africa.

The view from Tunde at the ICC was hopeful. With increased investment into Sub-Saharan Africa, the ICC has seen an enormous increase in the numbers of references involving parties from Nigeria, South Africa, Gabon, Mauritius, Kenya, Ethiopia, Uganda and Guinea. It has seen most growth from Anglophone Africa.

However, there continues to be a disappointing number of appointments of African arbitrators. This is not for want of skilled and competent African Arbitrators, but rather because of two tendencies. The first was the parties’ tendency to decide on a foreign seat in Paris or London. The second was the inclination of the parties’ to take a conservative, risk free approach and choose a European arbitrator who was less likely to raise eyebrows. Tunde’s prescription for these problems was that parties should choose African seats, the idea being that this would result in the increased use of African arbitrators, so that the business of arbitration would start to move to and grow in Africa. He also wanted the ICC to work more closely with local arbitration institutions in order that it could better identify and appoint local arbitrators.

In Francophone and parts of Lusophone Africa the scene is dominated by OHADA, which has 17 member states. OHADA has succeeded in establishing a common commercial code across the region, which includes arbitration rules and a supranational court, the Common Court of Justice and Arbitration (CCJA). OHADA states have the option of institutional arbitration under CCJA or ad hoc arbitration under the Uniform Act of Arbitration.

Nkafu spoke from the perspective of Cameroon, which was used to OHADA. However, in his experience, the big disputes were exported. Generally there were three reasons given for exporting disputes:

The first two reasons were exaggerated. After all, the parties had already chosen to do business within the Sub-Saharan region.

However, Getma v Guinea was a more real issue, which required careful examination to demonstrate that it was not an indictment of OHADA, the CCJA, or African arbitration more generally. The result of this case was that an arbitral award for approximately EUR 40 million produced under the auspices of OHADA and the CCJA was confirmed by a US District Court to be null and unenforceable. The case was bad PR for the CCJA. At first glance it adds fuel to any perception that arbitral awards produced in Africa are not respected and enforceable in Africa, never mind in the rest of the world and further, that the CCJA does not respect party autonomy and their agreements as to how arbitrations are to be conducted.

However the case deserves closer scrutiny. As is common with other arbitral institutions, such as the London Court of International Arbitration (LCIA) and the ICC, the CCJA has rules for fixing and determining the arbitrators’ fees. The CCJA fixed the fees for the Getma arbitration. The arbitrators thought they were too low and appealed to the CCJA to increase them. The CCJA refused. The tribunal then sought and obtained the agreement of the parties to increase the fees, and, after publication of the award, obtained part payment from Getma. Throughout the arbitration, the CCJA ordered the tribunal on multiple occasions to abandon its efforts to solicit increased fees from the parties. The CCJA’s position was plain: the fees were to be fixed by the CCJA in accordance with the CCJA Rules of Arbitration. Any separate arrangement between the parties and the tribunal was null and void. The tribunal acted in defiance of these orders and it should have come as no surprise when the CCJA annulled the award as being made in breach of the Rules of Arbitration. In those circumstances, and notwithstanding the “emphatic federal policy in favour of arbitral dispute resolution… that applies with special force in the field of international commerce”, the District Court of Columbia applied Article V(1)(e) of the New York Convention to refuse recognition and enforcement.

Getma v Guinea is not a case about the CCJA as an arbitral institution, whose conduct was consistent and in accordance with the CCJA Arbitration Rules and CCJA precedent. All criticism of the CCJA was rejected by the District Court of Columbia. It is a story about an arbitral tribunal, which acted in the most unimaginable way in defiance of their duties as arbitrators and the orders of the CCJA, and whose actions were rightly deplored by both the CCJA and the US District Court.

Olasupo offered the final perspective from West Africa and particularly Lagos State. His perception was that both the ICC and LCIA were losing out to ad hoc arbitrations that dominated the market. He gave three reasons for this. First, at the point of negotiation of contracts, the negotiators were unlikely to be sufficiently sophisticated to include arbitration clauses that incorporated the ICC or the LCIA. Second, he identified a cultural issue. Only sophisticated users who would understand the ICC approach to arbitration would have known that it was very time constrained and, in that sense, very European in its approach. The LCIA was slightly more attractive because it offered greater flexibility as to procedure. However, ad hoc arbitrations (with African arbitrators) offered the most flexibility for the African user. In an ad hoc environment, the tribunals were more tolerant of the parties, who would, for example, expect to be indulged when they advised the tribunal that they could not make a hearing one week, but could do the week after. Olasupo did not seem to consider this sort of request or indulgence to be disrespectful, but merely the way business is done in Lagos.

The conclusion of the panel was that the economic growth in Sub-Saharan Africa meant that the business of international arbitration in the region could only grow. There were amply qualified arbitrators in the region to sustain this growth. However, there was more work for the LCIA and ICC to do in the region to increase awareness of their institutions, so that they could be incorporated into contracts. There was also a need for international institutions to work with local arbitrators and practitioners to appoint African members to tribunals, so that arbitration would not be seen as a procedure that was European or culturally unsuited to parties in Sub-Saharan Africa.

Keating Chambers Krista Lee

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