Demand for African arbitration centres on the rise – Report
Increasing disputes between African parties are being resolved ‘onshore’, through African arbitral institutions and local courts, as opposed to the former practice of ‘offshore’ resolution of disputes.
A new report has indicated there is positive outlook for arbitration in Africa, as demand for arbitration centers on the continent begins to increase.
The report, known as the Herbert Smith Freehills (HSF) Guide to Dispute Resolution in Africa, in its 3rd edition published on March 22, 2022, noted that increasing disputes between African parties are being resolved ‘onshore’, through African arbitral institutions and local courts, as opposed to the former practice of ‘offshore’ resolution of disputes.
“Over the past decades, the bargaining power of international companies has led to many disputes involving investment in Africa being resolved “offshore” through foreign litigation or through arbitration under a set of international arbitral rules (for example of the ICC or LCIA) with an “offshore” seat (such as London or Paris). However, this is starting to change. Increasingly, African counterparties and contracting African State entities are starting to require that any disputes be resolved through their local courts applying local law, or via arbitration seated “onshore” or through a regional African arbitral institution.
With the sharp increase in foreign investment across an array of sectors and across the continent, the scope for formal dispute resolution in Africa has significantly increased and will likely continue to do so," it explained.
It however observed that even while litigation or arbitration takes place outside Africa, “onshore litigation may still be required when seeking to enforce an international judgment or arbitral award against assets held in an African jurisdiction, or when dealing with local regulators.”
Also, in order to establish themselves as safe arbitral jurisdictions, many African countries have accordingly enacted new arbitration laws, the report found. Chief among them are Ghana, South Africa, Ethiopia, and Tanzania.
Arbitration centres on the continent have also been noted to have grown in reputation or sought to internationalise their rules to attract a wider international market.
These include the Cairo Regional Centre for International Commercial Arbitration (CRCICA), the Kigali International Arbitration Centre, and the West and Central African Organisation pour l'harmonisation en Afrique du droit des affaires (OHADA).
The New York Convention, the most commonly used regime for the enforcement and recognition of foreign arbitral awards, has now been ratified by 42 out of Africa’s 54 countries.
According to the report, this means enforcement of arbitral awards in those countries should be more straightforward.
While the African Continental Free Trade Agreement (AfCFTA) has come into force, there are projections about the potential need for dispute resolution on the continent.
Even though the report recognized that the dispute resolution mechanism under AfCFTA applies only to disputes arising between State Parties, it noted that the Member States will be able to opt-in or opt-out of any investor-state dispute resolution mechanism as negotiation of the Investment Protocol is still ongoing.
