African countries ‘race’ to dominate continent’s growing arbitration market

It comes after a report (24 pages / 5.5MB PDF), published by the UK Ministry of Justice, found that various African governments have taken active steps to ensure that disputes between African parties are held in Africa – a phenomena it said was set to increase as the impact of the African Continental Free Trade Area agreement on promoting economic inter-African trade results in more infra-African disputes.

Mariam Hassaballah of Pinsent Masons said: “It is clear from the report that a number of African countries are racing to become the continent’s ‘arbitration hub’, with Nigeria the latest in a line of African countries, including Sierra Leone, and South Africa, to adopt new arbitration and mediation laws. On top of this, Egypt’s CRCICA recently published new draft arbitration rules which focus on expediency and flexibility.”

The report said African governments are seeking to have arbitrations that are conducted under the rules of traditional institutions, such as the International Chamber of Commerce (ICC) and London Court of International Arbitration (LCIA), held physically in Africa.

Citing concerns about costs and perceptions of unfair treatment to justify relocating proceedings, African governments are increasingly using the flexibility that arbitration provides in the distinction between the seat and the physical location of the hearing.

Hassaballah said: “Whilst great strides have been made in many African jurisdictions, perceptions can take longer to change and so many foreign investors still insist on the arbitration having its seat, or legal place, in better known jurisdictions such as London and Paris.”

African arbitration expert Rob Wilkins of Pinsent Masons said: “The push by governments to have arbitrations physically held in country is understandable, given the benefits for the economies of host countries in terms of revenue generation and attracting much-needed foreign currency. This can be done whilst the arbitration still has its 'seat’ or legal place in another jurisdiction with which the parties - in particular foreign investors - may be more comfortable.”

The report said that the push to strengthen arbitration, and broader dispute resolution methods, in Africa is being driven by the need to improve access to justice and encourage foreign direct investment, so that investors feel comfortable in the event that a dispute arises.

Wilkins said: “Foreign investors will typically want arbitration in their contracts because it is neutral, having no connection with the host government, confidential and flexible. This gives investors the confidence that any dispute that may arise will be handled efficiently and fairly.”

While litigation remains the default mechanism for handling local disputes, the report also noted that local counsel within various African jurisdictions are reporting an increase in alternative dispute resolution (ADR) work entering their doors.