Practice improvements and rise in ‘resource nationalism’ driving up Africa arbitration

Adoption of modern arbitration laws

The past year has seen a number of positive developments in international arbitration practice across Africa, including the adoption of international trends and standards by African countries and arbitration institutions; a shift to more virtual and hybrid arbitrations; and the increasing acknowledgement of the value of third party funding for arbitration.

The past few years have seen a number of African countries adopting modern arbitration laws based on the UNCITRAL Model Law 2006. The most high-profile example is perhaps Nigeria, which enacted the Arbitration and Mediation Act 2023 on 26 May 2023 in an attempt to bring it in line with the global best practices in arbitration and mediation. The adoption of the Act is set to strengthen Nigeria's position as a leading arbitration destination in Africa and establish itself as an arbitration-friendly jurisdiction.

Development of arbitral institutions

There has also been a drive towards developing international arbitration centres in Africa, most notably those in Johannesburg, Nairobi and Lagos. This push has resulted in increased focus by these institutions on aligning their administered arbitration rules with international trends and standards and upskilling of panel arbitrators.

Among those trends, African arbitration institutions have embraced virtual and hybrid arbitrations, giving access to experts, factual witness and arbitrators via digital communication platforms that were never thought of as being helpful before the Covid-19 pandemic.

Another example is the ongoing attempt by the Arbitration Foundation of Southern Africa (AFSA) to create a South African development community (SADC) arbitration community, following on from the development and promulgation of AFSA’s international arbitration rules. AFSA’s international arbitration rules are distinct from its domestic arbitration rules, which are still used extensively in the South Africa market.

Third party funding becoming more prevalent

Whilst most African countries do not have express legislation or regulations dealing with third party funding in arbitration – and, indeed, a number prohibit it – several arbitration institutions in African countries have adjusted their rules to allow for and encourage third party funding. The Cairo Regional Centre for International Commercial Arbitration’s (CRCICA) new arbitration rules are a case in point. The new rules require the reference to any funding agreement and the identity of any third party funder in the notice of arbitration and in the response to the notice of arbitration.

More notably, Nigeria has become one of a few countries to directly adopt express legislation in relation to third party funding. The new Nigerian Arbitration and Mediation Act 2023 permits third party funding in Nigeria-seated arbitrations and arbitration-related proceedings in any Nigerian court.

AFSA’s international rules also make express reference to third party funding and how this impacts on an arbitration administered under those rules.

Steady improvements are also being made to the enforcement of arbitral awards on the continent. Courts are becoming more comfortable with what it means for their jurisdictions to be signatories to the New York Convention and are moving away from refusing enforcement via the public policy escape clause in the Convention, albeit with exceptions. However, enforcement remains problematic in some jurisdictions, which is an acknowledgement that signing the Convention is the start of a process rather than an end in itself.

Challenges still exist

These positive developments need to be seen against the background of the ongoing – and passionate – debate about ensuring that “African disputes” are dealt with on the continent and by lawyers connected to Africa.

Despite the structural improvements, African arbitration centres still lag behind the established giants in London, Singapore, Paris and Hong Kong. To challenge these arbitration centres will require a shift in the mindset of parties in dispute, and those advising them. In that context, funders and those drafting the contracts containing arbitration agreements need to be aware of the improvements that have been made and of the benefits of having African disputes resolved in African centres. This will be influenced by external confidence in and understanding, amongst other things, of the arbitrators who have signed up to the panels administered by centres on the continent.

Ensuring that potential litigating parties know that these arbitrators have the experience and skills to efficiently administer and decide complex domestic and international arbitrations will no doubt remain a key priority for African arbitration centres.

Investor-state disputes driven by ‘resource nationalism’

Looking forward, the continued move towards ‘resource nationalism’ and the promotion of local processing is likely to remain a feature across a number of African countries, including the Democratic Republic of the Congo (DRC), Côte d'Ivoire, Guinea and Senegal, driven by political instability and increased global demand for natural resources such as bauxite and gold. This may give rise to further arbitrations by investors against host states who may have breached their international treaty obligations by taking such action. In the DRC, for instance, the recent cancellation of a number of mining licences by the government could lead to affected companies invoking investment treaty rights.

There are already a number of major arbitrations arising out of the move towards resource nationalism. In a long-running case against Ghana, Australia-listed mining company Cassius is seeking $300 million compensation for alleged unfair treatment and breaches of mining laws by Ghana’s failure to extend the term of the company’s licence. However, the Accra High Court recently placed an injunction on Cassius preventing it from going for international arbitration.

Two other high-profile investment dispute cases are against the state of Tanzania. In the first case, filed by UK investor Nachingwea, Tanzania has been ordered to pay $109m by the ICSID tribunal for cancelling the claimant’s licences for the Ntake Hill Nickel Project. In the second case, Canadian gold mining company Winshear has successfully recovered $96m from the Tanzania government through settlement for cancelling its licence in a gold project.

A number of recent UK court rulings are also noteworthy for Africa related international arbitrations. In a judgment rendered by the High Court in London on 23 October 2023, Nigeria successfully challenged an $11bn arbitral award in favour of British Virgin Islands company Process & Industrial Developments (P&ID) on grounds of fraud. The UK court sided with the Nigerian government, which accused the gas company of obtaining the arbitral award fraudulently and continuously bribing some Nigerian officials.

A UK Supreme Court decision handed down on 20 September 2023, meanwhile, provided important guidance on when a stay of court proceedings can be brought in respect of a “matter” covered by an arbitration agreement. In the so-called “Tuna Bond” case, the UK court refused to stay legal proceedings commenced by Mozambique against shipbuilder Privinest in the context of an ongoing international arbitration. The court found that the claims of bribery, conspiracy and dishonest assistance did not fall within the scope of the arbitration agreements, allowing the suit to proceed. 

In light of the implementation of the African Continental Free Trade Agreement, more cross-border trade and investments can be expected in Africa, which will lead to an increase in commercial disputes and international arbitration. This is one of the key findings of the latest SOAS Arbitration in Africa Survey. There has been a renewed focus on the importance of, ideally, a unified set of rules applying to investor-state disputes. However, this is something which the agreement itself is silent on.