INTERNATIONAL ARBITRATION
AFRICA’S NEW MARKET IN DISPUTE RESOLUTION IS INVENTING ITSELF FROM SCRATCH AS PEOPLE RECOGNISE THAT DISPUTE RESOLUTION SERVICES ARE SET TO PLAY AN INCREASINGLY IMPORTANT ECONOMIC ROLE ACROSS THE CONTINENT.
THIS ISSUE
MESSAGE FROM THE EDITOR
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SPECIAL REPORT ARBITRATION IN AFRICA – COMPARING REGIONAL APPROACHES IN CONVERSATION WITH MICHAEL KUPER SC Chairman of The Arbitration Foundation of Southern Africa (AFSA) LOUISE BARRINGTON International Arbitrator, Mediator and Consultant
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MARKET COMMENTARY CONSTRUCTION DISPUTE RESOLUTION ACROSS AFRICA
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SOUTH AFRICA – AN ATTRACTIVE VENUE FOR INTERNATIONAL ARBITRATION? INVESTOR-TO-STATE DISPUTE SETTLEMENT IN AFRICA – A MIXED PICTURE Q&A: PATRICK ZHENG, PARTNER INTERVIEWS MR JUN CUI, FORMER VP OF CHINA OVERSEAS CONSTRUCTION CORPORATION
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NEWS IN BRIEF PEOPLE MOVES MARKET ACTIVITY
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NOTABLE CASES
FORTHCOMING EVENTS
INTERNATIONAL ARBITRATION 1/3LY
MESSAGE FROM THE EDITOR 01
MESSAGE FROM THE EDITOR I am delighted to present the fourth issue of Clyde & Co’s International Arbitration 1/3LY. This issue focusses on arbitration and dispute resolution across Africa and marks the first time that we have included an in-depth special report, exploring the growth of arbitration as a discipline and an industry in its own right in African jurisdictions.
Elsewhere, we feature an in depth conversation between Alec Emmerson and Louise Barrington, Independent Arbitrator, Director of Vis East International Commercial Arbitration Moot and Founding President of ArbitralWomen. Louise tells us about the birth and development of the Vis East Moot and the founding of ArbitralWomen.
As foreign direct investment to Africa continues to grow, the continent is experiencing an upswing in the volume of disputes involving African parties. In the extended report, I investigate African responses to this trend and compare and contrast different regional and jurisdictional approaches to disputes resolution through interviews with key stakeholders from Rwanda, Mauritius, Kenya and Nigeria. Michael Kuper SC provides the South African perspective in a conversation with Clyde & Co’s Daniel Le Roux and Nicola Vinovrški. In a separate article we assess the viability of South Africa as a seat for arbitration, focussing on its arbitration laws and judicial attitudes. Other contributions to this issue cover dispute resolution trends in African construction disputes and an overview of the role of Investor-to-State Dispute Settlement provisions in Africa. Patrick Zheng covers the rise of Chinese investment, particularly in African infrastructure projects in a Q&A with Jun Cui, Former VP Of China Overseas Construction Corporation.
On behalf of Clyde & Co, I would like to thank Louise Barrington, Michael Kuper SC, Jun Cui,
Bernadette Uwicyeza, Duncan Bagshaw, Lawrence Ngugi, and Funke Adekoya for contributing their expert opinions and fascinating insights. I also wish to thank my colleagues from the firm’s global arbitration group for their interviews and articles. MAURICE KENTON, PARTNER, CLYDE & CO
DANIEL LE ROUX, NICOLA VINOVRŠKI, AND MICHAEL KUPER SC DISCUSS THE GROWTH OF INTERNATIONAL ARBITRATION IN SOUTH AFRICA AND THE PROJECT OF THE ARBITRATION FOUNDATION OF SOUTHERN AFRICA.
DANIEL LE ROUX
MICHAEL KUPER SC
NICOLA VINOVRŠKI
INTERNATIONAL ARBITRATION 1/3LY
IN CONVERSATION WITH MICHAEL KUPER SC 03
IN CONVERSATION WITH MICHAEL KUPER SC THE ARBITRATION FOUNDATION OF SOUTHERN AFRICA Daniel Le Roux and Nicola Vinovrški , Partner and Legal Director at Clyde & Co, in conversation with Michael Kuper SC, The Arbitration Foundation of Southern Africa.
business community, the attorneys’ profession, the accounting profession and the Bars to collaborate in the establishment of the Arbitration Foundation, which would offer a fully administered local arbitral system. So we started from scratch. We had to learn our own way and as you know these things take time. AFSA is now the leading commercial arbitration body in the country and it has a stable and large stream of commercial and mercantile disputes. We administer fully, providing rules and facilities and overseeing panels. At any one time there are about 300 disputes under administration by the Foundation. The Centre in Johannesburg is by far the biggest venue for arbitral disputes, compared to Pretoria, Durban and Cape Town. NICOLA In terms of the types of disputes that are managed by AFSA, could you tell us a bit about that and whether you have noticed any recent trends? MICHAEL The Centre has a stable and large stream of commercial and mercantile disputes often involving mining ventures or banking relationships, among other things. The disputes cover every aspect of commercial life including various large construction disputes. For example, we have seen a run of well publicised disputes involving Government and foreign contractors relating to a speed train that has been designed and built here linking Pretoria, Johannesburg and the airport, a project which has given rise to a range of construction disputes. I don’t think we’ve seen any particular trends in recent years except that the amounts in dispute have probably increased. Is that a sign of changed economic circumstances or does it indicate that all levels of large disputes are going to arbitration? I’m not entirely sure.
THE DEVELOPMENT OF ARBITRATION IN SOUTH AFRICA
NICOLA You have had a long and eventful career stretching back to the 1970s. Can I kick off by asking you how and where your journey in arbitration began? MICHAEL I had a commercial practice as an advocate of the Johannesburg Bar and I was introduced to arbitration during the 1970s and the 1980s. Back then, arbitrations were all ad hoc and closely resembled the courts but without robes. These proceedings were an effective introduction to the arbitration process but the need for administered arbitration soon became apparent and that gave rise ultimately to the initiative which created the Arbitration Foundation of Southern Africa (AFSA). NICOLA Okay, so can you tell us a bit about how you came to establish the AFSA? MICHAEL I was the Chairman of the Johannesburg Bar, when during the mid-90s I was approached by the President of the South African Chamber of Business, Mervyn King (now the doyen of corporate governance internationally). The chamber was worried about the delays and the technicalities in civil litigation. Mervyn’s view was that South Africa and its business community were lacking an administered arbitration system and he was pointing a finger at the Bar and asking why it wasn’t actively leading the creation of a good arbitration system. In response to that invitation or challenge we set about creating a corporate partnership, bringing together the
INTERNATIONAL ARBITRATION 1/3LY
decades which we’re now trying to bridge. In a sense though, it both invites and challenges us to look at the situation in 2015 and to plan anew with the benefit of all of the experience of international arbitration developments throughout the rest of the world. We must also take regional developments into account, such as the recent incursion of China into Africa and the establishment of the BRICS, all of which have added new dimensions and opportunities. So if we’re a bit of a blank page, it’s quite exciting to write a new adventure in international arbitration. NICOLA Daniel, as a practitioner in the region is this consistent with your experience? DANIEL Yes certainly. I think that there is varying demand for matters to be referred to arbitration. The benefits of doing so are not limited to the short timeframe within which the process can be completed but extend to confidentiality. This makes it a very attractive proposition for our clients. NICOLA Michael, you’ve mentioned contact between Africa and China. MICHAEL Well it’s a very important development. China is by far the most active and supportive of the international investors and its influence has grown dramatically in the course of the last five years. It would make a lot of sense for China and Africa to join together in sharing an arbitral institution and AFSA has recently entered into a partnership arrangement with the Shanghai International Arbitration Centre to establish a joint administering authority for China-Africa disputes. This initiative, under the aegis of the China Law Society, is a significant further development in South Africa’s involvement in international arbitration. NICOLA That’s very interesting and I think that ties into a concern that some people in the UK and Europe are alive to, which is that the UK and Europe can’t rest upon their laurels, so to speak, as venues for international arbitration. Institutions in Singapore, Hong Kong and the Middle East are creating stiff competition for the so-called old guard of international arbitration, London and Paris. I think issues such as cost, geographical proximity, and even technology in these new arbitrations centres must be making commercial parties think twice about where to arbitrate their disputes, rather than simply defaulting to London or Paris.
However, there’s certainly been an expansion in the range of attorneys who recommend and participate in the process. It includes all sorts of firms, large and small, whether with white membership or black membership. It seems to be all inclusive and that is an encouraging trend. DANIEL Michael may I come in here and just say that our firm has as one of its goals to increase its footprint into Africa. We have an office now in Dar Es Salaam, an office in Cape Town and one in Johannesburg. We find that our international client base of insurers, mining companies and the like are increasingly looking to us to find solutions which enable them to resolve commercial disputes not only in South Africa but in countries outside of South Africa. MICHAEL The Centre has always held itself available to administer cross-border arbitrations. One of the first objectives it had was to spread throughout the region because whilst there were some arbitral institutions in North African countries, there was very little south of the Sahara. The AFSA has administered matters with some success in Namibia, Zambia and in various other African countries to the north of South Africa; and is trying to expand its footprint. Many of the disputes are very large – sometimes very complicated, sometimes routine – and we have a panel which is largely made up of retired judges and advocates. Additionally, we have a small but useful component of foreign arbitrators, including two Australian retired appeal judges, English practitioners and European practitioners, whom we use as needed because at the present time the number of international arbitrations compared to domestic cases is small. Perhaps 5% of our cases are cross- border. When such cases arise, they are dealt with as efficiently as possible in a country which has a poor international arbitral legislative infrastructure. This problem has dogged us for a long time when it comes to the international arbitration world but there are good initiatives underway. Owing to its chequered history, prior to transformation in 1994, South Africa was completely isolated and therefore had no international arbitration of any consequence, nor was it likely to be an international arbitration venue. Since that time, South Africa has developed a business community which dominates investment into Africa and one would have expected South Africa to become the engine room of international arbitration in the region.
We recognised this opportunity and entered into a partnership with another arbitral body in South Africa, the Association of Arbitrators, which has a very prominent construction arbitration mandate. Together we have established Africa ADR which specialises in cross-border arbitration. A PRACTITIONER’S PERSPECTIVE ON ARBITRATION IN SOUTH AFRICA: A NEW ADVENTURE NICOLA I want to ask you a little bit about the practice of arbitration in South Africa. My practice is commercial litigation and international arbitration. I am London based but get instructed by clients from all over the world because London arbitration is a very popular dispute resolution clause, particularly institutional arbitration, administrated by the LCIA or the ICC. We see that quite a lot in agreements between parties based all over the place. Now the practice of international arbitration in the UK and Europe is very elitist. It is a big money industry and I think it’s right to call it an industry: most law firms have specialist international arbitration teams; there are, particularly in Europe, boutique arbitration practices; and there are lots of institutions. There are also lots of articles being published and lots of conferences about arbitration. We’re witnessing ever more technical and academic consideration of arbitration as a transnational legal system. Can I ask you what the position is in South Africa by contrast? MICHAEL By contrast, in South Africa we’ve not had any well-established involvement in international arbitration, either in the attorneys’ profession or amongst Counsel. Naturally, we have various attorneys and members of the Bar who participate in arbitrations, but there is no stable established platform or industry, as you describe. To be exposed to international arbitration in South Africa in the present situation one would have to wait to be nominated by a South African party in an international arbitration, and such opportunities arise infrequently at best. So whether you’re talking about the attorneys’ profession or the advocates’ profession you’ve got to understand that there is a very sharp gap between what you call the vibrant international circuit of Europe and the situation in Africa. That’s been one of the prices of isolation paid over the
IN CONVERSATION WITH MICHAEL KUPER SC 05
THE DISTINCTIONS WITH LITIGATION AND THE RELATIVE ADVANTAGES OF ARBITRATION NICOLA What is the preferred method for resolving disputes in South Africa? Can you talk a bit about the split between arbitration and litigation? MICHAEL Yes. For many years arbitration was very much the little brother and it was used rarely in comparison to litigation. The growth in arbitration throughout the world had a knock-on effect and the launch of AFSA in 1995 reflected a feeling that there was a real need and that something was missing from South African legal infrastructure. Now, the majority of large commercial disputes are referred to arbitration and it has become the mainstay of dispute resolution settlement. It takes two forms. One form is the administered arbitration system which is dominated by AFSA; and the other form is ad hoc arbitration. In both instances, we have always had to deal with the reluctance of lawyers to readapt their techniques and to fight the automatic assumption that a good arbitration is really a good piece of litigation conducted informally. Over the years we’ve managed, I think, to make real advances in arbitration technique and you will now find arbitration here is indistinguishable from arbitration anywhere else in the world. Oddly though, in South Africa there is a tendency for lawyers to schedule their preparation much closer to trial and the result is a spate of settlements at the ‘doors of the arbitration’. By contrast, in Europe much of the preparation tends to be done at an earlier stage and as a result you get earlier settlements, often saving parties a great deal in legal fees and other costs. NICOLA Daniel, how does the divide between litigation and arbitration play out in your practice? DANIEL I would agree that the vast majority of complex commercial disputes are now referred to arbitration. That is certainly the case in my own practice and also the experience of other practitioners in our offices in Johannesburg and in Cape Town, I believe. The downside, which Michael may wish to comment on, is that we have lost a lot of jurisprudence in South Africa because the awards are of course kept confidential.
SOUTH AFRICA AS A FORUM FOR INTERNATIONAL ARBITRATION: THE CURRENT LANDSCAPE NICOLA Picking up on some of the comments that you’ve made already, would you say that South Africa is an attractive forum for international arbitration? MICHAEL I think the answer to that up to the present moment has been negative but that is changing. First, let me deal with the legislative structure, which is essential as no one would voluntarily choose a venue in which that structure is questionable. In South Africa we still have one Arbitration Act which dates back to 1965. It makes no distinction between domestic and international arbitration and the reason it doesn’t is that it was completely unnecessary, as far as a draftsman was concerned, to deal with the international elements at that time. That leaves us with a rudimentary international arbitral structure from the legislative point of view. Then there was a long and unfortunate history in which the courts were intrusive in dealing with awards and did not display the caution and the reserve that one would expect of courts operating in an efficient arbitration environment. In addition, some judgments were particularly offensive to the arbitration world, so for a long time South Africa stagnated with a poor legislative structure and with a questionable judicial approach to arbitration. That has altered in two fundamental respects recently: First, the Constitutional Court and the Supreme Court of Appeal have come out in a number of judgments making it absolutely clear that the courts in this country are to acknowledge, respect and support the arbitral process in all the ways that international arbitration practitioners have come to expect. The latest Supreme Court of Appeal judgments are instructive in that regard and I think one can say that without any doubt the attitude of the Courts is now positive and supportive. Second, so far as the legislation is concerned, in 1998 a South African Law Commission report on international commercial arbitration suggested reforms including a draft arbitration bill based on the UNCITRAL model law. Unfortunately, it just sat in a drawer somewhere in the Department of Justice offices and nothing came of it.
MICHAEL Yes I think it’s absolutely true. A great wealth of legal learning is contained in the awards and it’s a great pity that they remain confidential. Remember, there is no connection between arbitration in this country and the courts, other than in the very limited case of review. So there’s not much opportunity for awards to be published in the course of reporting on appeal cases and the like. Hence most of the time parties are able to achieve total confidentiality, making arbitration very attractive to corporates in South Africa. I think it’s desirable that AFSA should look at including a formula in its rules which would allow at least an abbreviated award to be published but at the moment there is resistance from the participants pretty much across the board. We’ve never had a case where both parties have been willing and eager to allow publication on any basis. NICOLA It’s a great loss that awards of such high quality are not published. It sounds quite different from international arbitrations where one hears anecdotally that awards can be a bit more of a mixed bag. For example, I know from speaking to past and present Counsel for the ICC that the institution is very keen to defend its scrutiny of awards process on the basis that they see such varying quality of awards in the first draft. It seems to me that varying quality of awards could be a function of the less homogenous nature of three arbitrator panels which are common in international arbitrations. Often panels are made up of arbitrators for the parties from two different jurisdictions and then a chairman from a third jurisdiction. Necessarily the arbitrators come from a large and diverse pool. It may be that that this is reflected in a myriad of approaches at the award drafting stage. Could it be that the more homogenous nature of the panels in South African arbitration explains why the awards are such high quality? MICHAEL Yes, I’m sure that is an important difference. We don’t have to worry about coordinating different legal backgrounds or establishing an average acceptable quality of award as our arbitrators here are invariably retired Judges and senior silks. The general quality of the award is therefore good and it is of course coming from a homogenous and limited pool.
INTERNATIONAL ARBITRATION 1/3LY
I would also hope that in five years’ time Africa will be beginning to come together; its legal communities will be beginning to share a heritage which allows them the scope to interact in a way which gives them the strength and unity that they have lacked in the past. DANIEL I think that there is a clear trend to refer commercial disputes to arbitration and based upon our practice there is no reason to think it will change in future. On the contrary, I think the referrals to arbitration will expand and grow rapidly, as I see our client base expanding into Africa and investing in various countries throughout the continent. South Africa is now well placed to develop an arbitral institution for dispute resolution across Africa. I agree with Michael’s view that hopefully in the next five years that will come about and we will see a growth also in the international arbitrations being hosted by the likes of AFSA.
On one level we need it because of the costs involved in going elsewhere. On another more philosophical level, it will help to reduce the number of African disputes being resolved outside of Africa by persons who are not necessarily African arbitrators. It makes sense for the legal communities of Africa to have a shared community of interest and shared arbitral institutions and systems. In saying that, I’m not for a moment suggesting an arbitral institution which would not welcome onto its panels international practitioners from around the world – of course it would – but it would be a secretariat and a centre of knowledge and institutional experience which would be nurtured in Africa. That has been a blank page up to now and I believe we should start writing on that blank page on the basis of Africa sharing a combined initiative, rather than merely opening the continent to the European or American arbitral institutions. NICOLA Very interesting indeed. I wish you every success on your journey. I would like to conclude by asking you both how you would like to see arbitration in South Africa moving forward in say the next five years? MICHAEL I think the domestic picture of arbitration at the moment is a good and healthy one. There’s plenty of room for improvement and expansion but I think it’s going to evolve without difficulty and improve considerably. There’s everything to play for where international or regional continental arbitration is concerned. We are starting from a very low base with a combination of exciting prospects and serious challenges. In five years’ time I would hope to be able to say that there is a vibrant, regional arbitral institution operating in Africa and that Johannesburg or Cape Town has the same arbitral initiatives as Singapore or Kuala Lumpur or Brazil.
However, recently it’s been raised again at a high level and in the last month I’ve received a note saying that the Ministry of Justice has already notified the Parliamentary Secretary that it intends to submit the International Arbitration Bill to Parliament towards the end of this year. We know the content of the Bill because AFSA and other bodies were consulted and it is a good piece of work. It’s been largely researched and led by Professor Butler from Stellenbosch University who has a long track record in international arbitration. So at some point during 2016 the legislative infrastructure should be in place and there will be plenty of happy announcements from South Africa about international arbitration conferences and other international arbitration initiatives.
LOOKING AHEAD: WHAT DOES THE FUTURE HOLD?
NICOLA That’s excellent news. You mentioned before Africa ADR. Can you tell us a bit about that and your involvement in it? MICHAEL Yes. We have a strong belief that Africa must develop its own arbitral institutions with their own secretariats and panels of arbitrators. The idea of Africa ADR was to establish a secretariat which could administer matters primarily in Africa but with an international dimension. This could give to Africa a kind of shared arbitral system that we desperately need to facilitate the continents’ markets, trade and shared economic initiatives.
IN FIVE YEARS’ TIME I WOULD HOPE TO BE ABLE TO SAY THAT THERE IS A VIBRANT, REGIONAL ARBITRAL INSTITUTION OPERATING IN AFRICA AND THAT JOHANNESBURG OR CAPE TOWN HAS THE SAME ARBITRAL INITIATIVES AS SINGAPORE OR KUALA LUMPUR OR BRAZIL.
IN CONVERSATION WITH MICHAEL KUPER SC 07
WITH THANKS TO THE CONTRIBUTORS OF THIS EXCHANGE...
DANIEL LE ROUX, CLYDE & CO Daniel is a Partner based in Clyde & Co’s Johannesburg office. He specialises in all aspects of insurance law with particular emphasis on aviation, product liability, professional indemnity, financial lines, D&O and construction and engineering claims. Daniel attended the University of Pretoria where he obtained his B Proc and was admitted as an attorney in 1983. He advises on liability and coverage disputes and is recognised as a leading expert in Dispute Resolution and Insurance. Chambers Global 2015 notes that Daniel is “one of the best insurance litigators in town”, and clients appreciate that he is “always available and willing to assist.” Daniel has also recently been included in The Best Lawyers in South Africa 2015. NICOLA VINOVRŠKI, CLYDE & CO Nicola is a Legal Director based in Clyde & Co’s London office. She represents diverse clients on a wide range of complex, multi-jurisdictional litigation and arbitration. Nicola works on commercial disputes with a particular focus on financial services litigation and international arbitration. She advises on a wide range of complex, multi-jurisdictional litigation and arbitration. Her practice covers contentious matters for financial institutions, investment managers, private equity houses, high net worth individuals and corporate clients based in the UK, Europe, India, the US and elsewhere. Nicola commenced work at Clyde & Co in 2007, after having practised in Australia.
MICHAEL DAVID KUPER SC BA (HONS.) LL.B (RAND)
Michael is a senior South African commercial advocate (barrister) and arbitrator in practice at the Johannesburg Bar (Society of Advocates Witwatersrand). He has served as chairman of the Johannesburg Bar; Vice-Chairman of the General Council of the Bar, and as an acting judge of the High Court of South Africa on various occasions. His work covers mercantile, corporate, banking, mining and construction disputes and he maintains an active arbitration practice. Michael served as convenor of the joint venture between the legal and accounting professions and the South African Chamber of Business to establish the Arbitration Foundation of Southern Africa (AFSA), for the purpose of providing administered arbitration and mediation in the southern African region and for the establishment of an arbitral regime consistent with the UNCITRAL model law (1996). He is the chairman of AFSA and executive member of Africa ADR, a newly established African regional arbitration administering authority. He is a member of the AFSA Panel of Arbitrators for commercial, construction, mining and banking matters and of the Hainan Arbitration Commission. Michael has acted as counsel or as sole arbitrator, tribunal member or tribunal chairman in South African arbitrations; in various cross-border arbitrations in the southern African region and in London, Mauritius, Nigeria, Paris and the USA. He served as country rapporteur for the ICC Commission on Arbitration in 2008. He was formerly Hon. Professor in the Department of Procedural Law, Faculty of Law University of Pretoria, and Disciplinary Commissioner for Cricket South Africa.
INTERNATIONAL ARBITRATION 1/3LY
MARKET COMMENTARY 09
CONSTRUCTION DISPUTE RESOLUTION ACROSS AFRICA
THE STATE OF PLAY Inbound foreign direct investment (FDI) into Africa has increased significantly over the past few years, giving rise to a surge in commercial activity including numerous infrastructure and other construction projects across the continent. The surge has brought with it an increase in international disputes in Africa, with companies looking towards arbitration as the main method of resolving disputes involving international parties. However, the market is also witnessing an increasing level of pre-arbitration mechanisms (such as the appointment of designated persons or bodies) in contracts to prevent the escalation of disputes and to aid early settlement. Despite arbitration being the dominant method for the settlement of international disputes, regional preferences are beginning to emerge for construction disputes: • Anglophone Africa: dispute boards also tend to be used (or at least considered) • South Africa: the trend is for adjudication or a combination of adjudication and arbitration • East Africa: the primary method of funding for construction projects is by FDI and as a consequence, companies generally seek to use established arbitral centres/rules to resolve disputes, such as LCIA or ICSID • Maghreb and other parts of Francophone Africa: ICC arbitration continues to be a very popular choice Regional centres are also beginning to emerge across Africa in places such as Egypt, Mauritius, Morocco and South Africa. However, due to the lack of developed arbitral systems, international jurisdictions (mainly across Europe or the Middle East) remain popular, particularly on international projects.
BY ELSA JORDAAN AND WARREN HIEPNER, PARTNER AND CONSULTANT AT CLYDE & CO
INTERNATIONAL ARBITRATION 1/3LY
MARKET COMMENTARY 11
Across Africa, stakeholders find the court system challenging, as in most cases it is a long, expensive and arduous process. Local dispute resolution is also affected by a skill shortage at the administrative level and difficulties in securing appropriate experts, as well as allegations of corruption. As a result of these issues, international contractors are generally keen to negotiate international arbitration clauses and not to rely on the local courts. On large scale projects, most parties prefer to agree that any arbitration will take place in arbitral centres with longstanding experience and expertise. For this reason, arbitrations are still generally taking place in Europe, the Middle East or the United States. MITIGATING RISK AND THE FUTURE What does the future of construction dispute resolution in Africa look like? Across Africa, particularly South and East Africa, there has been increased activity in the construction industry insofar as infrastructure and resources are concerned. This is likely to translate into an increase in construction disputes and alternative ways in which to resolve them. At present, arbitration remains the most widely accepted form of dispute resolution, though we expect to see an increase in other forms of dispute resolution, such as disputes boards, in the future. It is also hoped that this increased activity will lead to a transfer of know-how and skills, resulting in both more expeditious local methods for resolving disputes and more efficient projects. Those looking to undertake a project in Africa should be aware of the range of legal issues that they may encounter, fully understand the implications of any contractual clauses relating to dispute resolution and ensure clear communication between parties at all times.
WHAT IS CAUSING DISPUTES IN CONSTRUCTION ACROSS AFRICA? Disputes across Africa tend to be generated by issues such as: • Poor design documents and drafting, as well as poorly adapted versions and non-standardised contracts • Delayed access to the site • Delayed progress with the works • Failure to comply with contractual obligations (at all or in a timely manner) • Lack of understanding of project requirements and professional negligence • The difference in construction contract negotiations and in contract management between public parties and private parties Construction projects in Africa are also prone to difficulties caused by the challenging environments in which they are negotiated and the asymmetrical knowledge and experience of the various parties to the contract. CHOOSING THE RELEVANT SEAT OF ARBITRATION Selecting the appropriate arbitral seat always requires careful consideration. In most cases, the competent court of the jurisdiction where the arbitral tribunal has its seat will be competent for any annulment procedure. South Africa is often chosen because its developed system of precedent provides parties with legal certainty. It is also a signatory to the New York Convention (which many African countries are not) and is more cost effective than many other African jurisdictions. Owing to marked differences between African jurisdictions, in contractual discussions it remains important that stakeholders carefully consider the consequences before agreeing to amendments to any dispute resolution clauses.
WE HAVE LAUNCHED A GLOBAL GUIDE TO DISPUTES IN THE CONSTRUCTION INDUSTRY. PLEASE EMAIL INFRASTRUCTURE@CLYDECO.COM TO RECEIVE A COPY.
OWING TO MARKED DIFFERENCES BETWEEN AFRICAN JURISDICTIONS, IN CONTRACTUAL DISCUSSIONS IT REMAINS IMPORTANT THAT STAKEHOLDERS CAREFULLY CONSIDER THE CONSEQUENCES BEFORE AGREEING TO AMENDMENTS TO ANY DISPUTE RESOLUTION CLAUSES.
INTERNATIONAL ARBITRATION 1/3LY
ARBITRATION IN AFRICA – COMPARING REGIONAL APPROACHES
Africa is witnessing unprecedented levels of investment and growth. Its construction, mobile technology, energy and natural resources industries (among others) are booming and investors from diverse locations, both inside and outside the continent, are competing for a stake in its burgeoning enterprises. Higher incidence of commercial (and investor-state) disputes is an inevitable corollary of this increased economic activity, particularly in circumstances where the local court systems have not yet enjoyed the confidence of foreign users. In response, and facilitated by the growth of inter-regional economic communities, trade bodies and governments are developing mechanisms to enable the resolution of business disputes without recourse to local courts or to slower and more expensive international forums. This new market in dispute resolution is inventing itself from scratch as people recognise that dispute resolution services are set to play an increasingly important economic role across the continent. In this article Maurice Kenton, partner at Clyde & Co, surveys the African dispute resolution scene and takes a more in-depth look at developments in Rwanda, Mauritius, Kenya and Nigeria. In the course of his investigations Maurice spoke to Bernadette Uwicyeza, Secretary General of the Kigali International Arbitration Centre (KIAC), Rwanda; Duncan Bagshaw, Registrar of the Mauritius International Arbitration Centre (LCIA-MIAC); Lawrence Ngugi, Acting Registrar of the Nairobi Centre for International Arbitration, Kenya (NCIA); and Funke Adekoya of ÆLEX, a commercial and litigation law firm in Nigeria.
BY MAURICE KENTON, PARTNER AT CLYDE & CO
SPECIAL REPORT 13
In North Africa, all countries, with the exception of Libya, have ratified the New York Convention. In Morocco, political stability combined with a buoyant economy is making the country an attractive base for foreign investors. The opening of the Casablanca International Mediation and Arbitration Centre (CIMAC) in late 2014 highlights Morocco’s intention to promote arbitration for resolving disputes. Progress is also discernible in Egypt: following a period of political stability, FDI has resumed and in 2014 the Arbitration Act, based on the UNCITRAL Model Law, was passed. In West Africa, the Lagos State government in Nigeria recently established the Lagos Court of Arbitration (LCA) under the Lagos Court of Arbitration Act (2009). The ICC has also announced its intention to set up an arbitral centre in Ghana. The trend continues across Eastern and Central Africa, where new regional centres have been created. In the past three years, the Kigali International Arbitration Centre (KIAC) has opened in Rwanda whilst the Nairobi Centre for International Arbitration (NCIA) has been established in Kenya. A Tanzanian International Arbitration Centre is expected to be launched later this year. In Southern Africa, only four countries base their arbitration laws on the UNCITRAL Model Law and all of the six common law countries have arbitration legislation based primarily on the 1950 English Arbitration Act. However, Africa ADR was recently established by arbitral institutions from across Southern Africa, along with the Institute of Directors of Southern Africa, aiming to become an arbitral authority in the region and beyond. Additional progress is being made in South Africa, where at the end of this year, the Cape Chamber of Commerce and Industry will launch the Cape Town International Arbitration Institute.
AFRICA’S INVESTMENT CLIMATE Foreign direct investment (FDI) in Africa is driving growth and increased commercial activity. In 2014, Africa was the second most attractive investment destination 1 and the world’s fastest- growing region for FDI 2 , reaching its highest level for over a decade (5.7%) resulting in job creation figures reaching an all-time high. Concurrently, the growth of inter-regional investment and the continued development of supporting infrastructures are funding the growth of existing regional economic communities and fuelling new hotspots of interest and activity. African investors accounted for 23% of FDI in 2013, while China, the UK, Japan, UAE and India continue to be major investors in the continent. According to China’s Ministry of Commerce (MOFCOM) statistics, direct investments from China to Africa increased by 33.9% in 2013 3 . This investment has fuelled a transportation, power and communication infrastructure boom that, combined with associated financial services, has had a profound impact on the aspirations of middle class Africans, producing significant growth in the consumer economy. Improved infrastructure has facilitated access to goods and resulted in the growth of both large and small manufacturers. ARBITRAL FORA ACROSS THE CONTINENT Arbitration is growing in popularity across Africa and most arbitral centres around the globe are reporting an increase in the number of cases with African claimants 4 . However, countries across Africa are at very different stages of development in relation to arbitration and other methods of alternative dispute resolution (ADR). For example, only ten out of 54 African countries (Uganda, Tunisia, Rwanda, Zambia, Zimbabwe, Nigeria, Mauritius, Kenya, Egypt and Madagascar) have chosen to base their arbitration laws on the UNCITRAL Model Law and just under half of all African countries have signed and ratified the New York Convention, prompting concerns about the enforceability of arbitral awards in African jurisdictions. Albeit in relation to investment disputes, the majority are party to the ICSID Convention. Seventeen African countries are members of the Organisation pour l’Harmonisation en Afrique du Droit des Affaires (OHADA), a system of business laws and implementing institutions, and the majority of OHADA members are French-speaking civil law jurisdictions. In 1999, the OHADA states adopted the Uniform Act, which, based on the UNCITRAL Model Law, sets out the basic principles for any arbitration seated in an OHADA member state. Owing to concerns regarding the reliability of local courts, foreign parties tend to opt for arbitration under the auspices of one of the established institutions or sets of rules in a seat outside the continent. However, a number of African jurisdictions appear to perceive the commercial opportunity represented by arbitration in its own right, in addition to the knock-on benefits in terms of attracting foreign investment. As a result, new arbitral centres are springing up across Africa, providing foreign and domestic parties with home-grown fora for settling disputes.
1 J. Nibbe and A. Sita (2014), “EY’s attractiveness survey Africa 2014: Executing growth”, EYGM Limited [Electronic] 2 C. Fingar (2015), “The fDi Report 2015”, The Financial Times Ltd [Electronic] 3 See http://english.mofcom.gov.cn/article/newsrelease/significantnews/201409/20140900727958.shtml. Ministry Of Commerce People’s Republic Of China Website 4 M. Bezant, J. Nicholson and H. Rosen (2015), “Trends in International Arbitration: A New World Order”, FTI Journal [Electronic]
INTERNATIONAL ARBITRATION 1/3LY
RWANDA
And in Rwanda, we have already noticed changes in the attitudes of users as we are receiving requests for advice on dispute resolution clauses before contracts are signed and from the last survey made, users are more aware about arbitration and its advantages over litigation.” Bernadette has been involved in the KIAC since its conception: “KIAC was established by an Act Parliament in 2011 and in January 2012, the first team comprising of myself as the Secretary General, the Registrar in charge of Case management and two support staff was put in place. The centre was formed to provide an appropriate forum for economic operators in the region to resolve their disputes in a friendly, confidential and efficient manner without the need to go to courts. We are committed to promoting global standards in international arbitration and building local capacity in the region. 300 professionals from various disciplines (lawyers, engineers, architects, accountants, judges) enrolled in KIAC’s capacity building program in arbitration, mediation and adjudication in association with the Chartered Institute of Arbitrators (CIArb), the Centre for E ffective Dispute Resolution (C E DR) and the Kuala Lumpur Regional Centre for Arbitration, which was open to participants from the region. KIAC has recently acquired new state-of-the-art facilities. It has administered 28 cases since 2013, including four international cases and one emergency arbitrator procedure. Just under half of these cases have related to the construction and infrastructure sector. Case values range between USD 20,000 to USD 5.8 million. Looking ahead, Bernadette sees the importance of promoting the benefits of arbitration in cross-border transactions. She added: “In the Context of E AC Integration, ADR should be promoted and strengthened in each E AC country to secure cross border trade.”
LOCATED IN EASTERN AND CENTRAL AFRICA, RWANDA SHARES BORDERS WITH UGANDA, TANZANIA, BURUNDI AND THE DEMOCRATIC REPUBLIC OF THE CONGO. WITH A POPULATION OF APPROXIMATELY 11 MILLION PEOPLE, IT IS AMONG THE TOP THREE AFRICAN COUNTRIES FOR INTERNET CONNECTIVITY. According to the World Investment Report 2014 5 , Rwanda received USD 111 million through FDI during 2013, with the financial services, mining and telecom sectors attracting the highest number of FDIs. Since 2008, Rwanda has made a push to establish itself as a regional hub for arbitration by passing a new law governing arbitration in commercial matters and signing the New York Convention. The new law is an adaptation of the UNCITRAL Model Law and aims to improve arbitration in commercial matters. The enactment of the new law was immediately followed by the project of Kigali International Arbitration Centre (KIAC) to provide the much needed supportive institution for effective use of arbitration and ADR in general. Many of the conditions necessary for arbitration to flourish appear to be in place but asked about the preferred method and/or forum for resolving disputes in Rwanda and East Africa, Bernadette Uwicyeza, Secretary General of KIAC, had a different response: “I am not sure we can say there is a preferred method. Litigation is commonly used as it is familiar to every lawyer. Arbitration as a concept and practice is not well known to many users.” While there is still some distance to travel, Bernadette believes that the new centres in the region are having an impact: “Things are changing since E AC countries started to promote arbitration. The KIAC launched in 2012, the Nairobi Centre opened two years later and Tanzania Private Sector Organization is looking to start an arbitration centre. All those arbitral bodies in the region will play an important role in creating a culture of ADR in their respective countries.
5 J .X. Zhan (2014), “World Investment Report 2014 Investing in the SDGs: An Action Plan”, United Nations: Conference on Trade and Development [Electronic]
SPECIAL REPORT 15
BERNADETTE UWICYEZA
SECRETARY GENERAL, KIGALI INTERNATIONAL ARBITRATION CENTRE
Bernadette is the Secretary General of Kigali International Arbitration Centre (KIAC). She has held this role since the starting of the Centre in 2012. She holds a French Law degree and a Postgraduate Diploma in European Union Law (with Honors) from the University of Rennes I in France. The special field for Bernadette is business law, regional integration, management and policy formulation. She is also an Accredited Mediator CEDR. Prior to joining KIAC, Mrs. Uwicyeza was a Legal Advisor to the Ministry of East African Affairs under Trade Mark East Africa Project (2011) assisting the Ministry in legal and judicial matters of the EAC integration. She serves also as Legal consultant to the Ministry of Justice under the Competitiveness and Enterprise Development Project/ World Bank (2006- 2011), coordinating the business law reform program engaged by the government for easy doing business in Rwanda. She worked earlier to that as Managing Director in different companies in Rwanda and served as lecturer in different schools of law in Rwanda. She speaks English, French and Kinyarwanda.
INTERNATIONAL ARBITRATION 1/3LY
DUNCAN BAGSHAW
REGISTRAR, LCIA-MIAC ARBITRATION CENTRE
Duncan practised in the fields of commercial and property litigation and arbitration for eight years until 2012 when he was appointed as the first Registrar of the LCIA-MIAC Arbitration Centre. LCIA-MIAC is an independent arbitral institution based in Mauritius. It receives support from the London Court of International Arbitration (LCIA), including administrative support and knowledge of arbitrators. LCIA-MIAC offers all the same services as the LCIA, with the same commitment to efficiency and quality of service, at competitive rates of administrative fees. The LCIA Court, which is the supervisory body for arbitrations under the LCIA Rules, performs the same functions for LCIA-MIAC under its own rules. In his role as Registrar of LCIA-MIAC, Duncan is responsible for the administration of cases and for developing and promoting LCIA-MIAC. As an arbitral institution based in Africa (Mauritius is a member of the AU and of the Common Market of Eastern and Southern Africa) LCIA-MIAC is particularly suitable for disputes involving African parties and projects. Duncan has travelled extensively in Africa to meet governments, lawyers and companies, and has spoken and written extensively on arbitration in Mauritius, Africa, Europe and Asia. He has also assisted with the continued development of arbitration law in Mauritius, including work on the drafting of amendments to the International Arbitration Act 2008 and Court Rules for international arbitration-related proceedings.
SPECIAL REPORT 17
MAURITIUS
at least regarded as an upcoming centre. Hopefully sooner or later we will be regarded as fully established. We are taking steps towards this goal all the time, such as our new hearing centre, to be built before the end of 2015, based on the standard of the Hong Kong hearing centre or the Singapore hearing centre”. How does the LCIA-MIAC stand up against more traditional seats? “The combined effect of the legislative framework and the MIAC system (based on the LCIA) is probably a more robust system than a lot of other potential venues. The whole system is designed to minimise court intervention and so to drastically reduce potential delays. You can often avoid going to court in Mauritius, where you wouldn’t be able to in other jurisdictions.” A recent snapshot of cases where the parties have agreed to refer disputes to the Centre suggests that the majority of cases tend to arise out of the main areas of activity in Africa: “Contracts relating to infrastructure development; power generation and supply; and oil and gas at both ends of the process – so exploration and extraction, and supply and purchasing.” Trends are also emerging in relation to clauses in contracts: “African parties, especially governments and state owned corporations, seem to be trying to Africanise, as far as possible, the dispute resolution process. So they are more likely to insist on domestic law as the substantive governing law of the contract. They are also more likely to try to insist on arbitrations or other dispute resolution processes taking place in the jurisdiction that the project relates to.” Looking towards the future, Duncan can still see challenges ahead for the continent as a whole: “Although we are catching up with the rest of the world, there is still a massive need for development and investment. My worry is that continued fear of disputes and fear of things not being sorted out efficiently and fairly is preventing foreign parties from investing. Dispute resolution has got to keep up so that people are not put off.”
STRATEGICALLY POSITIONED IN THE INDIAN OCEAN BETWEEN AFRICA AND INDIA, MAURITIUS IS RAPIDLY DEVELOPING INTO A NEW FINANCIAL HUB. IT HAS A MIXED LEGAL SYSTEM, WITH INFLUENCE FROM ENGLISH AND FRENCH LAW, MAKING IT FAMILIAR TO PARTIES FROM BOTH COMMON LAW AND CIVIL LAW JURISDICTIONS. OVER THE PAST 15 YEARS, MAURITIUS HAS ADOPTED A RANGE OF MEASURES TO POSITION ITSELF AS AN ATTRACTIVE VENUE FOR RESOLVING INTERNATIONAL DISPUTES, ESPECIALLY THOSE EMANATING FROM THE AFRICAN MAINLAND. This began with the adoption of the New York Convention in 2001, followed by ratification of the International Arbitration Act (the IAA 2008) in 2008. The Act is based on the UNCITRAL Model Law, with refinements to support the arbitration process, including court proceedings heard by the Mauritius Supreme Court. Duncan Bagshaw, Registrar of the London Centre of International Arbitration – Mauritius International Arbitration Centre (LCIA-MIAC) explained the thinking behind the state of the art Act: “The decision to make a real push to make Mauritius an attractive venue was taken in around 2006. Mauritius already had an arbitration law which followed the old French law on arbitration but without any of the recent modifications. A complete legislative overhaul was required. To make the new Act as attractive as possible, they made some key decisions including applying the law to international matters only and limiting court involvement in arbitrations by giving powers in relation to certain matters to the Secretary General of the Permanent Court of Arbitration (PCA) in the Hague.” Earlier this year, the LCIA-MIAC won the Global Arbitration Review 2015 award for up-and-coming regional arbitral institution. Duncan viewed the award as well-deserved recognition for hard work: “The Centre is breaking down negative perceptions overseas by building capacity and expertise in the region. I am really pleased that this work has been recognised because it shows that an African country can be
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