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  • 13 Oct 2021 9:50 AM | Anonymous

    Zimbabwe now has three arbitral institutions:  

    1. The first one is the Commercial Arbitration Centre-Harare (CAC), founded in 1995 by Muchadeyi Ashton Masunda and Ian Donovan. 
    2. The second one is the Africa Institute of Mediation and Arbitration (AIMA) which was established by Mr Justice Moses Chinhengo (retired) in 2013.
    3. The latest one is the Alternative Dispute Solutions Centre (“The Centre”) (www.adscentre.net) which was established in 2020 by Davison Kanokanga (Zimbabwe) Aaron Peron Ogletree (USA) and Arnold Z Chikazhe (Zimbabwe). 

    Why a new institution? 

    1. Arbitration in Zimbabwe is fast gaining momentum due to its advantages over litigation, and so the Centre complements the work being done by the other arbitral institutions.
    2. No training of ADR practitioners has been taking place in Zimbabwe. Both the CAC and AIMA do not provide training, and so the Centre was established to fill in the aforesaid void. The Centre provides training for current and prospective ADR practitioners in and outside Zimbabwe.
    3. A survey recently conducted by the Law Society of Zimbabwe amongst lawyers revealed a massive need for arbitration training. The results of the aforesaid survey led to a collaborative arrangement between the Law Society of Zimbabwe and The Centre for the provision of Alternative dispute resolution (ADR) training to lawyers. The first training is scheduled for November 2021.
    4. The Centre has access to the most eminent and experienced  evaluators, arbitrators, mediators and experts from many jurisdictions who resolve business and legal disputes in an efficient, cost-effective and impartial way. For example, for one to be on The Centre’s list of arbitrators, they must have received arbitration training. Both CAC and AIMA do not have this requirement.
    5. Unlike The Centre, both CAC and AIMA are not membership-based organisations.
    6. The Centre administers international arbitration and mediation, and acts as an impartial appointment and administering body for all forms of alternative dispute resolution, under the UNCITRAL Rules.
    7. ADR mechanisms work best where a neutral, efficient, and credible organisation administers the process. Redfern and Hunter observed in 1995 that: [a]n established and well-organised arbitral institution can do much to ensure the smooth progress of an international arbitration even if the parties themselves- or their legal advisers- have little or no practical experience in the field (A. Redfern & M. Hunter, Law and Practice of International Commercial Arbitration 155 (2nd ed., London: Sweet & Maxwell, 1991). Arbitral institutions act as gatekeepers in the arbitral process. With three arbitral institutions to choose from, parties and ADR practitioners are spoilt for choice. 

    What to look for in arbitral institutions? 

    1. The institution named in the arbitration clause should be genuine, credible, and efficient;
    2. The institution should have some permanency or a reasonable guarantee of permanency.  Otherwise, the arbitration clause may prove to be inoperative or incapable of being performed;
    3. An arbitral institution should have staff that is conversant with arbitral proceedings;
    4. Regard should be had to the role the institution plays in the arbitral process. For example, does it have a hands-on approach to the conduct of arbitrations, or does it leave matters to the arbitral tribunals it appoints whilst keeping an eye on the arbitral process?
    5. The services offered by the institution; and
    6. What it charges for its services as the charges have a bearing on the total cost of the arbitration. Disputants prefer institutions whose charges are reasonable.

    The Centre’s contact details are:

    Suite 1 Mizrahi House,33 Robson Manyika Avenue,Harare,Zimbabwe

    Telephone:  +263(0)786851768

    Email: info@adscentre.net

    ______________________________________________

    * Partner, Kanokanga & Partners Law firm, Harare, Zimbabwe


  • 23 Sep 2021 6:11 PM | Anonymous

    NB: This article was first published by Thomson Reuters, trading as Sweet & Maxwell, 5 Canada Square, Canary Wharf, London, E14 SAQ, in the International Business Law Journal (IBLJ) 4/2021 and is reproduced by agreement with the publishers. 

    INTRODUCTION

    Sub-Saharan Africa, including East Africa, is experiencing a rapid growth in population. At the same time, the region suffers from an enormous infrastructure deficit when compared to other parts of the world: quality infrastructure is lacking on many levels, especially for transport, energy production, real estate and communications. This deficit has been recognised as a major obstacle to faster and more stable economic growth, productivity and job creation in Sub-Saharan African economies. For a number of years, therefore, various infrastructure projects have been undertaken throughout the Continent. In light of the existing backlog, this is only the beginning of a long-term development process to create a competitive business environment, promote trade and unleash Africa’s huge productive potential.

    Many East African countries have ambitious infrastructure agendas, reaching from the construction of new ports and airports to modern road and railway networks and hydroelectric dams. The major challenge these countries are facing is financing. Several foreign States (especially China, Russia, the US and certain European countries) have seized the investment opportunities and are competing to provide financial aid—often not entirely disinterested, but with a (geo)-political agenda to gain access to resources and influence in emerging markets.

    The growing number of complex infrastructure projects across the region, some of which are mentioned in this article, inevitably leads to a growing number of construction disputes. This article describes the landscape regarding major infrastructure projects in East Africa, including the impact of China’s Belt and Road Initiative. It examines how disputes related to such projects are being resolved today and provides a brief overview of the East African arbitration landscape. The article seeks to identify certain trends for the future, including the impact of the COVID-19 pandemic and digitalisation, and closes with an outlook into the future.

    INFRASTRUCTURE DEVELOPMENT IN EAST AFRICA

    Taking stock of the infrastructure development

    East African States have upped the ante on infrastructure development. This is evident not only from regional and national policy documents such as the East African Community Vision 2050, the Tanzania Development Vision 2025 and Kenya’s Vision 2030, all of which prioritise infrastructure development as a core pillar of economic growth, but also from the number of ongoing projects. As of June 2019, there were at least 182 infrastructure projects with a value of USD 50 million and above that had commenced in East Africa. Collectively, these projects were valued at USD 146 billion and accounted for more than a third of the Continent’s infrastructure projects.

    However, in what has been termed as “Africa’s Infrastructure Paradox”, the Continent’s track-record in moving projects to financial closure has been poor despite international investors having both the appetite and funds to spend on infrastructure projects in Africa. As of 2020, there were only 46 ongoing projects on the Continent with a value between USD 500 million and 1 billion; the vast majority of projects ranged between USD 50–100 million. This has been attributed to difficulties in structuring, financing, and delivering projects. Several projects fail at the feasibility and business plan stage owing to the insufficient technical capabilities and financial resources being dedicated to design and implement infrastructure projects with commercial potential. Other issues that may lead to failure include short political cycles, which challenge commitments to long-term infrastructure projects, delays in obtaining licences, approvals and permits as well as the inability to obtain guarantees.

    Nonetheless, East African States have succeeded in securing funding commitments and increased budgetary allocations for infrastructure projects. In 2018, East Africa reported funding commitments of USD 14.2 billion with state spending ranging between USD 5.6–8.4 billion. While most projects are funded and owned by national governments as facilitators of infrastructure development, China has emerged as the single largest financier of infrastructure projects, surpassing private domestic firms and international development finance institutions. In 2020 alone, China funded 13.6 per cent of East Africa’s infrastructure projects, not counting international consortia. China is also involved in the construction with at least 50 per cent of the projects, primarily in the transportation sector, being built by Chinese firms. This is part of China’s African policy as well as its Belt and Road Initiative (BRI), which is further discussed below.

    Despite the increase in financing from China, Africa’s infrastructure finance gap is still very significant. It is estimated that between USD 67.6 billion and USD 107.5 billion is needed annually to alleviate Africa’s current infrastructure deficit. An increasing number of EastAfricanStatesare turning to Public-Private Partnerships (PPPsin order to finance this gap.

    Notable infrastructure projects

    Several mega infrastructure projects are underway in East Africa as part of a concerted effort by States to lower the cost of business, attract foreign investment and facilitate economic growth in the region. The transport and energy sectors account for the largest number of projects in the region. 

    East African States are investing heavily in modern port, airport, rail and road infrastructure to cater for the increased number of passengers and cargo volumes, while facilitating trade and boosting regional integration. Ports have attracted the most valuable projects in this sector, led by the USD 10 billion Bagamoyo Mega Port in Tanzania, which is set to become Africa’s largest port on the East African coast upon completion, superseding the Kenyan port of Mombasa. The project, which is jointly financed by Oman and China, will include 65 kilometres of railway connecting the port with the Tanzania-Zambia railway. It has however experienced delays after Tanzania’s government demanded the renegotiation of the project contracts.

    Kenya is constructing a 32-berth port in Lamu to reduce congestion at the port of Mombasa. The port is part of the USD 25 billion Lamu Port and Lamu–South Sudan–Ethiopia Transport Corridor (LAPSSET), East Africa’s largest integrated infrastructure project that aims to connect countries in the region, including through intraregional highways, railway lines and airports. Djibouti has also built the Doraleh Multipurpose Port for USD 590 million. The port, which came into use in 2015, has been at the centre of a dispute concerning its management.

    Railway projects have also drawn a significant amount of investment across the region, the most prominent of which is the construction of the first phase of a standard gauge railway from the port of Mombasa to Nairobi at a cost of USD 3.6 billion. This railway, along with the USD 4 billion Addis Ababa–Djibouti Railway, are being financed using loans from the Exim Bank of China as part of the BRI. The second phase of the railway from Nairobi to the Kenya–Uganda border is facing some obstacles after China decided to withhold USD 4.9 billion needed to complete the project. Tanzania, on the other hand, opted not to rely on Chinese funding for its USD 7.5 billion standard gauge railway system, which will link the country to its landlocked neighbours Rwanda and Uganda; this project has been financed through budgetary allocations and a syndicated loan from a development finance institution.

    Spurred on by the discovery of oil and gas deposits in the region, the energy and power sector accounts for the second highest number of projects in East Africa. Tanzania’s USD 30 billion Likong’o–Mchinga Liquefied Natural Gas Project (LMLNGP) is the most valuable energy infrastructure project in the region. The project, which will be undertaken by a consortium of companies in conjunction with the Tanzania Petroleum Development Corporation (TPDC), a state-owned entity, is expected to commence in 2022. Similarly, Djibouti is building a USD 4 billion LNG plant to process and export natural gas from Ethiopia.

    In Uganda, the construction of a USD 4.27 billionoil refinery is set to begin following the discovery of an estimated 1.7 billion recoverable barrels of oil in its Lake Albert basin in 2006. Uganda and Tanzania have also signed agreements with France’s Total and China’s CNNOC oil firms, paving the way for the construction of the 1,445 km East African Crude Oil Pipeline (EACOP) from Uganda to the port of Tanga in Tanzania. The project, which is valued at USD 3.5 billion, is touted to be the world’s longest heated pipeline. Several infrastructure projects have also been initiated in the renewable energy sector, including the USD 4.8 billion Grand Ethiopian Renaissance Dam (GERD) project that is expected to produce at least 5,000 MW making it the largest hydro-power project on the Continent, and the construction of a 30 MW solar energy plant in the Grand Bara desert in Djibouti by the French energy group Engie.

    The array of mega infrastructure projects in East Africa, some of which are mentioned above, demonstrates a shift towards infrastructure that aims to spur intra-Africa trade. Furthermore, the alignment through regional projects allows the East African economies—particularly the smaller ones—to participate in collective bargaining, making it easier for them to secure funding for infrastructure projects.

    While the above overview is by no means intended to be exhaustive, it presents some of East Africa’s most notable infrastructure projects while at the same time demonstrating the financing challenges that are encountered and the increasing prominence of China in the region’s infrastructure development.

    China’s Belt and Road Initiative in the East African context

    China’s direct investment into African infrastructure projects is nothing new. In the last two decades, it exceeded a cumulated USD 200 billion and peaked at USD 5.5 billion in 2008 alone. That amount of investment has resulted in hundreds of African projects being funded with Chinese capital to date.

    The BRI launched by the Chinese government in 2013, originally contemplated only a few African stops. In theory, the only parts of the Continent intended to be concerned with the BRI were the Horn of Africa and the Suez Canal area in Egypt as these territories were to be included in the maritime road aspect of the BRI, and investments were to be focused mainly on port infrastructure.

    Seven years into the initiative, however, a significant number of African projects have been tagged as BRI projects, despite not being in close proximity to the original stops. Further, although officially there are only ten African countries involved in the BRI (Angola, Chad, Djibouti, Egypt, Ethiopia, Kenya, Nigeria, Sudan, Uganda and Zimbabwe), several BRI projects either are located, or connected, to countries outside of this official list—the rationale being that the BRI is an adaptable and multidimensional effort that can incorporate projects on an ad hoc basis, as long as they broadly relate to connectivity aspects, which form a key part of the BRI’s underlying motives, and are officially announced as BRI projects by the Chinese authorities.

    In 2018, loan and investment commitments of USD 60 billion were announced, with a significant portion geared towards addressing Africa’s infrastructure deficit. As is well documented, and sometimes considered as controversial, these loans are made on a State-to-State basis and/or are resource-backed.

    As one of the original stops in the African arm of the BRI, Egypt has so far been one of the biggest recipients of BRI investment. Over 100 Egyptian projects have been financed through BRI funds amounting to just under USD 100 billion. The most significant among these projects is the construction and development of the Suez Canal Economic Zone (SCZone), a free trade zone aimed at facilitating economic and trade cooperation between China and Egypt. This project covers a 461 km2 area and plans to house over 150 Chinese companies of all sectors, for a total investment of over USD 2 billion. Egypt is also home to a second pharaonic BRI project, namely the construction of the country’s new administrative capital city, Wedian, which will be located 45 km east of Cairo.

    The development of economic and trade cooperation zones such as the SCZone has in fact been chosen as a key pillar of the BRI investment strategy in Africa. Apart from Egypt, these types of infrastructure have notably been developed in Zambia (Zambia–China Economic & Trade Cooperation Zone), in Nigeria (Lagos Free Zone) and in Ethiopia (Oriental Industrial Park).

    At the Horn of Africa, one of the original stops of the BRI in Africa, Djibouti in particular has been a main target of BRI investment. The Doraleh Multipurpose Port has received significant BRI investment with the objective of enlarging its capacities. As discussed further below, these efforts have resulted in major disputes, notably in relation to the decision by the Djibouti authorities to rescind the original operation concession, held by non-Chinese operators, to then allocate it to different operators from China. Additionally, Kenya has also seen significant projects financed and constructed under the BRI label, such as the Mombasa–Nairobi Standard Gauge Railway.

    In terms of sectors targeted by African BRI efforts, in addition to the general transport infrastructure (especially maritime and rail), natural resources (with a particular emphasis on mining) and the construction sectors have been key investment recipients.

    DISPUTE RESOLUTION PRACTICE

    Insights into infrastructure-related disputes in East Africa

    Sophisticated operators involved in East African infrastructure projects are also well versed in dispute resolution. International contracts entered into in relation to such projects typically contain dispute resolution mechanisms aimed at ensuring the efficient and quick resolution of disputes to mitigate adverse consequences for the underlying projects, such as a temporary or permanent suspension of the works. In this respect, experience shows that international infrastructure contracts often include multi-tier dispute resolution clauses, blending negotiation, adjudication, expert determination, mediation and arbitration.

    A review of the most publicised disputes arising from infrastructure projects in East Africa helps shed light on the specifics of the dispute resolution mechanisms used in the relevant contracts, in particular with regard to the arbitration rules used and the different steps involved in the resolution of these disputes.

    One of the most well-known disputes in the region in recent years is the one between DP World and Djibouti in relation to the Doraleh Port. In 2006, DP World, an entity owned by the Government of Dubai, was awarded a 50-year concession to build and operate the Doraleh terminal in Djibouti. In 2014, Djibouti, having failed to persuade DP World to renegotiate the concession terms, unilaterally terminated the agreement and seized control of the terminal. In the meantime, Djibouti had signed an agreement with a subsidiary of Chinese state-owned port operator, China Merchants Group, to build the Djibouti Multipurpose Port, an extension to the site located near a new Chinese military base. 

    These circumstances gave rise to two arbitration proceedings under the auspices of the London Court of International Arbitration (LCIA). First, in 2014, Djibouti lodged an arbitration claim against DP World, arguing that the rescission of the concession contract by the Djibouti government was valid as the contract had been procured through corruption. This claim was dismissed by an LCIA tribunal in 2017. In parallel, in 2014, DP World lodged a counterclaim against Djibouti for damages resulting from the State’s breach of the exclusivity clause in the concession contract when it entered into an agreement with China Merchants Group. This damages claim was upheld by the arbitral tribunal and Djibouti was ordered to pay USD 485 million to DP World as compensation. In 2018, DP World launched a further claim against Djibouti in relation to the seizure by the government of parts of the container terminals at the Doraleh Port subsequent to the rescission of the concession. This claim was heard by an LCIA sole arbitrator who held in 2020 that the seizure was unlawful given that it was based upon the invalid rescission of the concession. The sole arbitrator ordered the State to return the seized assets, or alternatively, to pay damages that had been quantified in excess of USD 1 billion.

    Contractual disputes such as the one involving DP World are not the only type of disputes brought before arbitration tribunals in relation to East African infrastructure projects. Disputes between foreign investors and States initiated on the basis of international investment treaties (mostly bilateral investment treaties or BITs) have also emerged in the East African context, partly as a result of governmental efforts to assert greater control over natural resources located on a country’s territory, which runs counter to the interests of foreign investors (resource nationalism). For instance, in June 2018, two US companies (Bay View Group and Spalena Company) launched a claim for over USD 95 million against Rwanda over the cancellation of mining concessions. That claim is based on the 2008 US–Rwanda BIT, and is administered by the International Centre for Settlement of Investment Disputes (ICSID). As part of a privatisation program launched in 2005, the claiming investors entered into preliminary agreements (“acquisition contracts”) with the Rwandan government, which would then be turned into long-term contracts necessary for the implementation of their mining project. They invested more than USD 30 million on a new processing plant, upgrading processing and transport lines and establishing a medical clinic. When the State rejected the claimants’ application for long-term concession contracts in 2016, the State took control of the mining operations and seized the investments. As a result, the claimants argue that the State breached its obligations under the US-Rwanda BIT.

    The above brief overview shows that the dispute resolution mechanisms in relation to East African projects can be of a contractual nature and treaty based. For commercial disputes, parties have typically agreed to resort to established institutional arbitration institutions such as the ICC and the LCIA, leading to efficient enforcement of contractual rights despite tense and complex factual situations.

    A further element worth mentioning relates to potential disputes involving State lending agreements. In relation to the BRI in particular, China, through the Asian Infrastructure Investment Bank (AIIB) or the China EXIM Bank, has loaned significant amounts to African States in order to finance BRI infrastructure projects in these States. While the geopolitical interpretation of these mechanisms is not the topic of this article and the terms of these agreements have not been disclosed to the public, resolution of disputes in connection with these agreements will include specially created arbitration courts and State-to-State mechanisms, in conjunction with traditional diplomatic negotiations.

    Whether the latter mechanisms would include alternative dispute resolution tools such as mediation and arbitration remains to be seen. One such mechanism is the China–Africa Joint Arbitration Centre (CAJAC) with offices in Shanghai and Johannesburg. The CAJAC was set up to provide a platform for resolving commercial disputes between Chinese and African parties, aiming to make parties from both sides feel comfortable when selecting the arbitral institution. It is structured to make use of existing arbitral institutions and has entered into partnerships with the Nairobi International Arbitration Centre (NCIA), the Arbitration Foundation of Southern Africa (AFSA), the Shanghai International Arbitration Centre (SHIAC), the Beijing International Arbitration Centre (BIAC), the Shenzhen Court of International Arbitration (SCIA), and the Organization for the Harmonization of Business Law in Africa (OHADA).

    Applicable law in construction contracts

    Unlike OHADA, which seeks to modernize and harmonize business laws of its member States, there is no common legal framework governing contractual relationships in East Africa. Each State has its own national law that would be applicable depending on the choice of law in the contract. Accordingly, the interpretation and effect given to the terms of a contract will depend on the national law governing the construction contract. The parties’ choice of law is influenced by various factors including their nationality, familiarity with the applicable law, the certainty offered by the law with respect to key aspects of the contract, the place of performance of the project as well as the jurisdiction and forum the parties have selected for dispute resolution. Most African infrastructure projects are contracted under local laws where the employer entity is the State or a state-owned entity, which will seek to make the choice of its own law mandatory.

    The choice of law may also be affected by the decision of the project financiers. Contracts involving international finance institutions are often governed by the law of jurisdictions with an established body of law applicable to financing. Lenders often have a clear preference for English and New York Law as opposed to the local law at the location of the infrastructure project, not only because of its “neutrality” but also because it is felt that these legal systems are better equipped to deal with disputes concerning sophisticated project structures and documentation.

    Some Development Finance Institutions (DFIs), including the African Development Bank (AfDB), provide that public international law shall be applicable to project finance agreements.

    Unlike transactions financed by traditional DFIs, the terms of engagement in contracts financed by China are not clear owing to confidentiality provisions.

    The regulatory environment for infrastructure projects is becoming increasingly complex with anti-corruption and bribery legislation emerging in many jurisdictions. In addition to the various anti-corruption regulations existing in East African States, some jurisdictions such as the UK and the US have enacted anti-bribery legislations which have extra-territorial application. Through such laws, investors face scrutiny at home and in the jurisdiction of the investment. Further, where the project is financed by DFIs, there is an additional level of scrutiny.

    Overview of the East African arbitration landscape

    The growing attractiveness of arbitration as a means of settling commercial and investment disputes in Africa has triggered new developments on various levels.

    Importantly, it has led to increased legislative activity and the modernisation of arbitration laws in several countries, introducing overdue changes required by the local arbitration community by incorporating recent developments in arbitration practice. Rwanda passed its Arbitration and Conciliation Act in 2008, Kenya amended its 1995 Arbitration Act in 2009, and Mauritius updated its 2008 International Arbitration Act in 2013—in all three cases, the new acts are based on the UNCITRAL Model Law. In 2020, Tanzania enacted a new Arbitration Act, which is broadly modelled on the English Arbitration Act of 1996and provides a modern and comprehensive set of provisions enhancing clarity and efficiency in arbitration as against the earlier, antiquated act of 2002. The new law also provides for the establishment of the Tanzania Arbitration Centre to act as a regulator of arbitration in Tanzania and to keep a register of approved arbitrators in the country. Similar reforms will likely occur in other East African States whose arbitration laws have not kept pace with changing trends. Apart from responding to the needs of businesses, the legislative changes also serve to position the East African jurisdictions in the competition to emerge as the seat of choice for Africa-related international arbitrations. In early 2021, the African Arbitration Association (AfAA) helpfully introduced its “African Arbitration Atlas”, a free online resource intended to provide a comprehensive overview of the African arbitration legislation landscape.

    While several East African States including Kenya, Mauritius, Rwanda, Tanzania and Uganda have for a number of years been contracting States to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the cornerstone of the global international arbitration system, others have only joined in recent years. Those include Burundi in 2014, Angola in 2017, Sudan in 2018, the Seychelles and Ethiopia in 2020, and Malawi in 2021. Eritrea, Somalia and South Sudan have yet to adhere to the New York Convention. Overall, it has hence become easier to uphold international arbitration agreements and to enforce foreign arbitral awards in this part of the Continent—provided the local judiciary and lawyers alike are trained to adopt an arbitration-friendly approach when applying the New York Convention.

    Another change in the dispute resolution landscape in Africa is the creation of new, and the further development of existing, arbitration institutions that provide modern alternative dispute resolution case administration services both domestically and internationally and adhere to accepted international standards of governance. East Africa features the Kigali International Arbitration Centre (KIAC), the Nairobi Centre for International Arbitration (NCIA), the Mauritius International Arbitration Centre (MIAC), the newly established Tanzania International Arbitration Centre (TIAC), and the International Centre for Arbitration and Mediation in Kampala, in Uganda (ICAMEK). The growing sophistication, reputation and caseload of these institutions, which are competing with other arbitral institutions on the Continent, will be crucial in establishing East Africa as a mature and safe place to arbitrate. It will not be long until these local institutions will supersede the non-African arbitration institutions that have for many years dominated the space of international arbitration in Africa, such as the ICC and the LCIA.

    The development of a vibrant local arbitration community has yielded several arbitration associations that actively promote the nomination of arbitrators from African countries and provide training and knowledge transfer for African lawyers, in particular for the younger generation. These include the African Arbitration Association (AfAA), the Kenya Branch of the Chartered Institute of Arbitrators, and the Association of Young Arbitration Practitioners in Africa (AYA), which organises a yearly Africa Arbitration Academy for young practitioners. “The African Promise” aims to improve the profile and representation of African arbitrators, especially in arbitrations connected to Africa, a goal that is shared by AfAA’s Directory of African International Arbitrators (DAIA) and the group Racial Equality for Arbitration Lawyers (REAL). This account would be incomplete without mentioning I-Arb Africa, an Africa-focused international arbitration resource platform, and the annual East Africa International Arbitration Conference (EAIAC).

    Last but not least, the construction industry and arbitration practitioners will be able to rely on the technical expertise of a growing body of local, sometimes internationally certified experts of African descent who can be appointed in arbitration proceedings. For instance, the Association of Consulting Engineers Tanzania (ACET), a member association of the International Federation of Consulting Engineers (FIDIC), maintains a list of national adjudicators in Tanzania.

    TRENDS IN EAST AFRICAN CONSTRUCTION ARBITRATION

    There is every indication that domestic and international disputes relating to construction projects in East Africa will increasingly be resolved through arbitration. Given the enactment of modern arbitration-related legislation, the proliferation of arbitral centres across the Continent, and the growing body of skilled local arbitration practitioners, the practice of arbitration in the region will reach fruition. Moreover, Africa-related disputes will increasingly be heard in Africa, before “Africa-focused” arbitration centres, rather than before international centres in distant cities abroad. This also applies to investment arbitration cases involving African States, which have been on the rise in recent years.

    As in other regions of the world, the legal profession in Africa is adapting to new technologies entering the market. Law firms in particular are forced to change certain traditional ways of servicing their clients and to respond to their clients’ needs, making use of “legal tech” and competing with providers of new alternative legal solutions. The COVID-19 pandemic has acted as a catalyst for this transformation. Indeed, legal tech presents an opportunity for African legal markets to “leapfrog countries globally in its adoption of technology to improve legal services”. It is noteworthy, for instance, that the African Arbitration Academy was the first to develop, in April 2020, an innovative “Protocol on Virtual Hearings in Africa”, designed to take also into account the specific challenges and circumstances that may arise in relation to remote hearings in Africa. Naturally, the courts are often slower in embracing technological changes and will likely require more time to do the shift towards “remote justice”.

    The construction sector will undergo a digital transformation with the adoption of modern technologies for the construction industry such as Building Information Modeling (BIM), a software used to create digital 3D representations of buildings and infrastructure to facilitate planning, designing, and construction. The new international standard ISO 19650, launched in January 2019, will likely pave the way to a more rapid digitisation. Furthermore, resorting to blockchain technology for construction contracts can help safeguard legal certainty and reduce the risk of misuse and corruption, which in turn could significantly enhance efficiency, productiveness and thus competitiveness—and promote foreign direct investment.

    As on other continents, the construction industry in Sub-Saharan Africa has been heavily impacted by the COVID-19 pandemic, exacerbating financial difficulties, labor shortages, lack of construction material due to disruptions in the global supply chains, and project suspensions. As governments expand their spending on the health sector to combat the Coronavirus, less funding is available for infrastructure projects. The stalling of project financing in 2020 has been described to result in “an all-time low growth rate” for the construction sector inTanzania. As the pandemic endures, it remains to be seen how resilient the East African economies are. Existing financial difficulties may also result in parties to Africa-related disputes increasingly resorting to third party funding in arbitration proceedings.

    Conclusion and Outlook

    The multitude of infrastructure and construction projects and related investments throughout East Africa will inevitably lead to numerous disputes, especially where complex financial, operational and political risks materialise. In line with the “Africanisation” of dispute settlement and given the strategic importance of many of the infrastructure projects, disputes will no longer only be settled in traditional arbitral centres outside of the Continent, but increasingly in Sub-Saharan Africa itself. Many East African States are preparing the ground with domestic legislative reforms, capable arbitration institutions and a growing body of sophisticated local arbitration practitioners. The enormous potential can probably best be realised if all involved institutions and organisations take a collaborative approach to reaching this common goal.

    Dispute resolution in general, and international arbitration in particular, has an important role to play in ensuring that disputes arising from infrastructure projects can be resolved efficiently and fairly—and thus contribute to successfully closing East Africa’s infrastructure gap and fostering economic growth in a sustainable way.

    ____________________________ 

    * Partner, LALIVE, Geneva, Switzerland

    ** LL.M. International Dispute Settlement (MIDS) (Graduate Institute of International and Development Studies and the University of Geneva); Arbitration and International Disputes Lawyer; Advocate of the High Court of Kenya. The views expressed in this article are solely those of the authors.

    *** Associate, LALIVE, Geneva, Switzerland

  • 2 Sep 2021 9:56 AM | Anonymous

    The Commercial and Tax Division of the High Court of Kenya (“Court”) has recently pronounced itself in the case of Kenya Medical Women’s Association v. Registered Trustees Gertrude’s Gardens; Paul Ngotho, Arbitrator (Interested Party)[2], regarding the termination of an Arbitrator’s mandate due to lack of impartiality and independence and exceeding the scope of his jurisdiction in his mandate.

     Significantly, the law was clarified, to a certain extent, in three key areas:

    1. Whether the High Court’s appellate jurisdiction on an application challenging the mandate of an arbitrator should only be invoked after the said application, in the first instance, has been made before and determined by an arbitral tribunal pursuant to Section  13(3) and 14(2) and (3) of the Arbitration Act[3].

    2. Whether an arbitrator’s recommendation for parties to engage in mediation or other ADR processes in an arbitration reference exceeds the scope of his jurisdiction under the Kenyan law.

    3. Whether withholding of a ruling by an arbitrator at his own discretion for purposes of securing costs for arbitration is permissible under the Kenyan law.

    Facts

    On or about May 2012, the applicant, Kenya Medical Women Association (“KMWA/applicant'') and the respondent, Registered Trustees Gertrude’s Gardens (“Gertrude Gardens/respondent”), entered into a formal lease agreement.

    A dispute regarding the payment of rent arrears arose between the parties. The applicant sought to have auctioneers auction the respondent’s property. The respondent sought an injunction to stop the injunction process and further sought to have the dispute referred to arbitration pursuant to Clause 3 (F) of the lease agreement.

    The court referred the matter to arbitration and Mr. Paul Gathu Ngotho was appointed as arbitrator by the Institution of Surveyors of Kenya (ISK) in 2017 who were the designated appointing authority in the lease agreement between the parties.

    The arbitration process commenced on 22nd June 2018 and the arbitrator issued Order for Directions No. 3 following a preliminary meeting held on 23rd May 2018. The Order for Directions No. 3, and particularly paragraph E, which was in contention, ordered that:

    “The parties having attempted negotiations previously, are agreeable in principle to mediation, even though that is not a contractual requirement, in order to save time and costs. The parties may seek mediation independently or seek the Tribunal’s help in the appointment of a mediator. While mediation is voluntary, the Tribunal will consider a party’s refusal or failure to cooperative in the apportionment of costs regardless of the outcome in these proceedings

    It is  the above paragraph E in the Order for Directions No. 3 that led to the present contention as to whether: the directions for mediation were mandatory and within the jurisdiction of the arbitrator; the arbitrator’s statement of  “…party’s refusal or failure to cooperative in the apportionment of costs regardless of the outcome in these proceedings” meant that the Tribunal would make an unfavorable order for costs against any party refusing mediation, if so, whether this sanction was within his jurisdiction;  and there was justifiable doubt to the Arbitrator’s impartiality and independence, in the arbitration proceedings.

    The applicant, aggrieved by Order for Directions No.3, filed an application to the tribunal for the recusal of the arbitrator. The tribunal required a further deposit of Kshs. 840,000 from the parties and Kshs. 140,000 from the applicant, and interest respectively for his services. The applicant, in protest of the demand, requested the tribunal to deliver the ruling on its application for recusal which the tribunal declined. The applicant contended that the tribunal thereafter withheld the writing of the interlocutory ruling conditional on payment of additional costs without legal justification (i.e., statutory provision, legal precedent or rules governing arbitration). The applicant argues that the imposition of costs overrode statutory objectives requiring affordable resolution of arbitration disputes.

    The applicant then sought to invoke the principle of party autonomy to choose their preferred arbitrator, and have the court terminate Mr. Ngotho’s mandate in the arbitration.

    In opposition to the applicant’s application, the respondent sought the court’s order that the tribunal’s direction in promoting alternative forms of dispute resolution mechanism, pursuant to Order for Directions no. 3 was in line with the guiding principle set out in Article 159 (1) (c) of the Constitution of Kenya 2010. Also, that the applicants had not advanced justifiable grounds for the disqualification and recusal of the arbitrator from presiding over the arbitral proceedings.

    The Court’s Judgment

    The Court dismissed the application with costs to the respondent.

    The Court observed that, “…an application challenging the mandate of an arbitrator should, in the first instance, be made before a tribunal... before the same can be handled by the High Court in its appellate jurisdiction” pursuant to Section 13(3) and 14 (2) and (3) of the Arbitration Act[4] which reads as follows:

    Section 13(3): -

    (3) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality and independence, or if he does not possess qualifications agreed to by the parties or if he is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his capacity to do so.

    Section 14(2) and (3): -

    (2) Failing an agreement under subsection (1), a party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the composition of the arbitral tribunal or after becoming aware of any circumstances referred to in section 13(3), send a written statement of the reasons for the challenge to the arbitral tribunal, and unless the arbitrator who is being challenged withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

    (3) If a challenge under agreed procedure or under subsection (2) is unsuccessful, the challenging party may, within 30 days after being notified of the decision to reject the challenge, apply to the High Court to determine the matter.

    The Court held that by the facts presented before it that the tribunal had not made its determination as to the application for recusal, it was clear that the application was premature, and that the applicant had not followed the correct path in invoking the court’s appellate jurisdiction.

    As for the Order for Directions No. 3E, the court found that it was not made in favor of any specific party but was a mere attempt by the arbitrator to “prevail upon the parties” to consider mediation as mode of dispute resolution. This, to the court’s mind, did not mean that the arbitrator portrayed bias or that there was any illegality in referring the dispute to mediation. The court premised its thinking to Article 159 (2) of the Constitution of Kenya 2010 which stipulates as follows: -

    (2) In exercising judicial authority, the courts and tribunals shall be guided by the following principles— (a) justice shall be done to all, irrespective of status.

    (b) justice shall not be delayed.

    (c) alternative forms of dispute resolution including reconciliation, 96 Constitution of Kenya, 2010 mediation, arbitration and traditional dispute resolution mechanisms shall be promoted, subject to clause (3).

    (d) justice shall be administered without undue regard to procedural technicalities; and (e) the purpose and principles of this Constitution shall be protected and promoted.”

    The Courts found that the Constitution of Kenya encourages Courts and Tribunals (i.e., Arbitral Tribunals), in exercising their judicial authority to be guided by the principles of alternative dispute resolution. Thus, the dispute’s referral to arbitration did not preclude the arbitrator from recommending mediation if he deemed it appropriate. The court further finds that the arbitrator in his Order for Directions 3E noted that the mediation is voluntary save that refusal or failure to cooperate in the process would be factored in the apportionment of cost of the arbitration. Therefore, the court concluded that the arbitrator was not biased since he had not made any findings on the substantive disputes before him.

    The court did not delve deeply on withholding of a ruling until the arbitrator’s fees are settled, but found that, if the allegations were true, then the court’s decision should be served upon the arbitrator for his attention with the court’s position being that he should conclude the arbitral proceedings in the shortest time and proceed to pursue his fees through the proper channels that are provided for under the Kenyan law. 

    Analysis

    High Court’s jurisdiction on an application challenging the mandate of an arbitrator

    An important takeaway of this case is likely to be the court’s treatment of the question, ‘when is an application challenging the mandate of an arbitrator ripe for the court’s jurisdiction?’. The court reaffirmed the decision in Chania Gardens Limited vs Gilbi Construction Company Ltd & Another [5] that: -

    “…The first port of call to challenge the jurisdiction of an Arbitrator is the Arbitral tribunal in line with the principle that is commonly referred to in arbitration parlance in the German phrase, Kompetenz-Kompetenz. Therefore, the jurisdiction of this court on matters of challenge of an Arbitrator is not original in nature...Under Section 14 of the Arbitration Act, 1995 a challenge on an Arbitrator seeking his removal must first be heard by the Arbitrator.”

    The court was unequivocal that an application challenging the mandate of an arbitrator should be made to the arbitral tribunal in the first instance and that the court’s jurisdiction is appellate and not original in nature. Further, it is not sufficient that an application for challenge has been filed before an arbitrator, the arbitrator must also decide the application on the merits for the appellate jurisdiction to be invoked.

    This is yet another clear indication that the Kenyan courts are friendly towards arbitration and recognize the kompetenz-kompetenz doctrine where an arbitral tribunal has the power and authority to determine its own jurisdiction. By virtue of this decision, Kenyan arbitral tribunals may now be incentivized to expressly pursue their original jurisdiction in determining a challenge on its jurisdiction and acknowledge judiciary’s incontrovertible support.

    Arbitrator’s power to recommend Mediation or any other ADR processes

    In relation to the court’s observations that the mere fact that a dispute is referred to arbitration does not preclude an arbitrator from recommending mediation if he deems it appropriate, is a bold affirmation and recognition of the essence of Arbitration and all other forms of Alternative Dispute Resolution (ADR) mechanisms. In particular, the court noted that so long as an arbitrator recognizes party autonomy in making such recommendations and there is no evidence of bias, lack of independence or impartiality, then they are Constitutional.

    The court, alive to the provision of Article 159 (2) of the Constitution of Kenya, 2010, validates the need for courts and tribunals (arbitral tribunals included) to be guided by the principles of alternative dispute resolution in making their decisions.

    Certainly, the court acknowledged that the tribunal's discretion on mediation should not be found to be oppressive or favoring one party. A finding of bias and unfairness to the parties would be the only way such an Order for Direction by an arbitral tribunal may be found to be unconstitutional.

    An arbitrator’s withholding of Ruling in order to secure costs

    The third observation we make concerns the payment of arbitration costs by the parties. The court in its finding stated that, “…if the allegations are true”, then (i.e., refusal to render a ruling) the arbitrator should conclude the arbitration process within the shortest time possible and pursue his fees through “the proper channels” as provided for under the law.

    Unlike the express provision in Section 32B (3) of the Arbitration Act which permits an arbitral tribunal to withhold the delivery of award to the parties until full payment of fees and expenses, there is no similar provision for withholding of a ruling in determination of interlocutory matters. It appears that the Court may have had in mind Section 32B (3) as the only proper mechanism under the Act for exercising lien for fees.

    _____________________ 

    * Ms. Victoria Kigen is a Case Counsel at the Nairobi Centre for International Arbitration and an Advocate of the High Court of Kenya. She holds an LL.B. from the Catholic University of Eastern Africa(CUEA), (Class of 2012), and a graduate of University of Miami School of Law, White & Case International Arbitration LL.M. (Class of 2017).

    [2] Kenya Medical Women’s Association v Registered Trustees Gertrude’s Gardens; Paul Ngotho, Arbitrator(Interested Party) [2021] eKLR

    [3] Arbitration Act, No. 4 of 1995 (Revised 2012), Laws of Kenya.

    [4] Id.

    [5] Chania Gardens Limited vs Gilbi Construction Company Ltd & Another [2015] eKLR



  • 26 May 2021 9:08 AM | Anonymous

    Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021[1] 

    I. Introduction on the interlink between increased investment and dispute settlement provisions 

    A.  The importance of inter-African and foreign investment to African development

    The economies of African nations, like most countries in the world, are dependent on foreign direct investment (FDI).[2] 

    The stability and growth of African economies is intricately intertwined with the ability of African governments to attract investors from outside the continent. As well stated by the International Journal of Financial Studies, “Foreign Direct Investment can bring in much needed capital, particularly to developing countries, help improve manufacturing and trade sectors, bring in more efficient technologies, increase local production and exports, create jobs and develop local skills, and bring about improvements in infrastructure and overall be a contributor to sustainable economic growth.”[3] With this plethora of potential benefits, it is absolutely essential that African nations create favourable environments for foreign investors. At the same time, however, they must ensure that the gains derived from FDI are in fact being used to create sustainable development.

    B.  The role of dispute settlement in attracting investment to the continent

    While there is a list of other criticisms of this mechanism, both investors and states do agree on one benefit, which is what led to the almost global switch from diplomatic espousal to the Calvo Doctrine in the first place. At the renaissance of Investor-State Dispute Settlement (ISDS), States (both developing and developed) and investors viewed ISDS as stronger in promoting the rule of law than State-to-State Dispute Settlement. The idea behind this was that ISDS allows for investors to put a check on States, most specifically when they are seen as overstepping their bounds. Proponents of this argument argue that ISDS helps bring otherwise hesitant investors to markets they would otherwise avoid because of their poor legal systems. At the same time, at the advent of individual rights taking center stage in international law, ISDS was seen as even further protecting the rights of individual citizens around the globe. 

    Existing dispute settlement mechanisms under African investment agreements are, in many cases, not protecting the needs of African nations. Currently, the dispute settlement mechanisms built into investment agreements almost always allow for ISDS. Using ISDS, investors have been quick to challenge proposed local laws or policy decisions that may run contrary to their investment expectations. In most cases, little consideration is given to local needs or objectives. As a result, frustrations are boiling. 

    Several African leaders have begun to express concern over a perceived infringement of their sovereign rights and obligations being built directly into existing dispute settlement options. At the same time, African governments have historically argued that international arbitration, investors’ preferred method of dispute settlement, is extremely costly and perceived as biased towards investors, resulting in African nations having to pay large awards that further inhibit their economic growth. What has become clear is that there is diminishing confidence amongst African nations in the current dispute settlement mechanisms. 

    II. Investment protection and Africa’s Regional Economic Communities (RECs) 

    A.  Overview of existing RECs 

    Strength in numbers is considered to be one of Africa’s most direct paths towards progress. For decades now, several regional economic blocs have been making steady progress towards growth and development. Today, Africa has an array of both trade blocs and monetary blocs. These include, among others, eight economic communities recognized as the building blocks of the African Union: the Arab Maghreb Union, the Community of Sahel-Saharan States, the Common Market for Eastern and Southern Africa, the East African Community, the Economic Community of Central African States, the Economic Community of West African States, the Intergovernmental Authority on Development and the Southern African Development Community.[4] 

    These economic communities have the principal purpose of integrating economic policy and facilitating the movement of goods and people between countries. Many African nations are either too small or lack the resources (both natural and in terms of capacity) to be economically viable on their own. By combining their collective knowledge and other strengths, these communities have demonstrated success in improving economic conditions in their member countries. 

    B.  Example dispute settlement mechanisms utilized by each REC 

    Africa is home to a number of Regional Economic Communities (RECs), which hold substantial influence over investment policies on the continent. At the regional level, there are several African regional bodies that have begun putting in place protections against unlimited ISDS. The South African Development Community (SADC), through its Finance and Investment Protocol, for example, has limited the use of ISDS, requiring that disputes be resolved in local courts and tribunals. The East African Community (EAC) Model Investment Treaty specifically includes a provision stipulating no ISDS. Similarly, in the Common Market for Eastern and Southern Africa, the COMESA Common Investment Agreement provides for arbitration under ISDS to be brought to the COMESA Court of Justice. In this case, however, the law also leaves open the possibility that claims between parties not party to COMESA bring cases to African arbitration tribunals or to the international bodies (ICSID or UNCITRAL). This leaves open some doubt as to whether COMESA has in fact limited ISDS, given that countries belonging to different agreements may forum shop as needed. Finally, the ECOWAS Supplementary Investment Act does not provide for ISDS, but rather includes a provision that investors use local remedies to resolve disputes. 

    One of the issues with reform under regional bodies, however, is the lack of uniformity between policies pertaining to the same country. States that are party to several agreements are given the ability to somewhat manipulate the process by forum shopping. Larger countries with greater resources are able to select from a larger pool of possible forums and procedures, based on what will most favour them during a particular case. This disadvantages smaller countries with fewer resources and leads to overall confusion over what in fact is the governing principle and in what circumstances ISDS will actually be applied. The SADC, for example, has not made clear in which cases its dispute settlement mechanisms are to be used over the ISDS mechanism existing under overlapping agreements, making the entire system less effective and, often, leaving it ignored all together, particularly given that investors often prefer the ISDS model permitted to them under certain international agreements. As in other regions in Africa (for example, West Africa, where there exists several regional bodies) several members of SADC are also members of the COMESA. This adds to confusion and again diminishes the intention of moving away from ISDS, as investors have the option to search for more favourable forums (treaty shopping). 

    III.     The OHADA model

    One of Africa’s most successful attempts to attract additional investment and move away from the negative perspectives of the country has been the establishment of OHADA. This intergovernmental organization aims to harmonize investment and business laws in Africa with the purpose of better attracting foreign investment and increasing both intra-African and foreign trade.[5]

    To date seventeen countries are parties to the OHADA.[6]

    A.  OHADA’s unique system of dispute settlement

    i. Uniform system of laws 

    Member States developed a uniform set of laws, referred to as the Uniform Acts, which supersede all conflicting domestic provisions. There are currently nine Uniform Acts, which govern: General Commercial Law, Commercial Companies and Economic Interest Groups Law, Organizing Securities, Insolvency Law, Arbitration Law, Organizing Simplified Recovery Procedures and Measures of Execution, Contracts for the Carriage of Goods, Cooperative Companies Law, and Mediation Law.[7] As confirmed by the CCJA on April 30, 2011, and later confirmed by a Paris Court when upholding OHADA law over Cameroonian law,[8] these acts are supranational, rendering domestic laws inapplicable. The intent of each of these acts is to create modern, simple, legal rules that create a favourable economic environment within Member States. At the same time, in adopting these laws, OHADA Member States are looking to promote an independent and efficient judicial system. The acts are updated as necessary to reflect international trends on each subject matter. For example, the General Commercial Act, the Commercial Companies and Economic Interest Group Act, the Securities Act, the Bankruptcy Act and the Arbitration Act have all been updated. Additionally, OHADA most recently adopted the Meditation Act.[9]

    As will be further detailed, the CCJA is the court of last resort for judgments rendered and arbitral awards pertaining to the Uniform Acts. This means that it is the court of last resort for all matters of business law that are governed by the acts.[10] Thus, business-related disputes must first be heard in domestic courts, unless it is determined that the competent jurisdiction has not acted on a case within 30 days.[11] This includes any appeals that may be made against a domestic court judgment. The CCJA then acts in the place of domestic supreme courts, serving as the final decision maker in cases falling under the OHADA Uniform Acts.[12] This Court does not hear matters that do not come under those acts; for example, the court does not hear criminal cases.

    The Uniform Acts have helped to attract investors by creating consistency and predictability, allowing them to move from one jurisdiction to another with some confidence.[13] Since they are subject to the same set of laws in each country in which they invest within the OHADA region, investors are able to decrease the legal risks associated with investment. Moreover, the OHADA regime strengthens the rule of law by holding its Member States responsible to a supranational law. This in turn means that the protection of an investment is not tied to the stability of an individual country, but rather, to well-established laws that stand regardless of the internal conflicts or political issues that may be impacting one specific country. At the same time, investors are provided the option to have disputes arising from their investments settled by a competent body that is well-versed not only in the laws of OHADA, but also in strong international business practices. All in all, the OHADA system has had a “significant beneficial impact on access to finance, business registration and business cost savings,” according to the World Bank.[14] OHADA’s success in creating a supranational organization with harmonized laws should be applauded, particularly, as will be further explained below, in light of the number of similar attempts on the continent that have fallen short of achieving the same or similar objectives.

    ii. The OHADA Common Court for Justice and Arbitration (CCJA) 

    One of OHADA’s most attractive accomplishments is not just its uniform laws, as previously discussed, but rather the establishment of its Common Court of Justice and Arbitration (CCJA). This court of thirteen judges provides advice on proposed uniform acts and serves as a court of cassation. This court is seen as superior to national courts in matters pertaining to the Uniform Acts and allows cases to be presented by either party or a national judge. Moreover, the CCJA facilitates and oversees arbitrations on matters related to the uniform acts. This serves to add a greater scrutiny to the impartiality of arbitration tribunals, reducing the possibility of corruption and adding greater legitimacy to dispute resolution. In creating this security, CCJA is building investor confidence that their investments will be protected. This court still has a hill to climb in building its reputation and legitimacy to a point where it is trusted as much as more established centres, such as the ICC and ICSID, but it is making strides in the right direction.[15]

    In 2017, the CCJA amended its Arbitration Act, as well as the CCJA rules, making them more attractive and more efficient. These amendments were intended to put the CCJA better in line with its international counterparts, particularly the ICC, allowing it to become more globally competitive. Among other changes, the amended Act now specifically states that an arbitration may be initiated on the basis of an investment-related instrument. This means that disputes arising from the growing number of investment treaties that have been entered into by Member States may be brought to the CCJA, allowing for African settlement of the disputes, rather than international tribunals. Additionally, this new Act puts in place mechanisms for the parties to a dispute to resolve an issue amongst themselves before relying on a formal arbitration proceeding. This amendment puts the tribunal in line with international standards, creates a more effective process and gives parties an opportunity to avoid the costly and time-consuming process that is inherent to any dispute settlement.[16]

    IV. Africa and ISDS

    Africa has a great reason for being increasingly frustrated with the ISDS system. The continent has been a steady target of disputes brought under the system and States have over and over again seen their domestic policies questioned in front of international arbitrators. Approximately 11% of all arbitration disputes have involved African States.[17] These claims have often led to exorbitant judgments. Total claims against African States since 1993 have totalled $55.5 billion, with investors having claimed over $1 billion in damages on 10 separate occasions.[18] In one circumstance, Egypt was ordered to pay $2 billion to Union Fenosa as the result of what may be considered an exorbitant ruling.[19] Needless to say, these cases have largely contributed to Africa’s distrust of the ISDS system and desire to move away from this mechanism.

    The results of growing tensions between African nations and the ISDS system have been mixed. Certain countries have reviewed the BITs to which they are party, to determine whether the ISDS provisions should be modified. Other countries, including South Africa and Tanzania have amended their domestic laws to refer investment disputes to national courts, moving even further away from the traditional ISDS model. Then, at the regional level, there has been an effort to establish regional mechanisms related to investment, as will be discussed below. Moreover, there are certain indications that the continent as a whole may not be ready to fully reject ISDS. 

    V.      Proposed continental reforms 

    Taking collectively the strengths and weaknesses of each of the existing dispute settlement forums currently being used in African investment and forums that have been established in other regions, there is a strong argument that the African Union should establish a permanent tribunal for investment dispute resolution, located on the African continent. First and foremost, at this pivotal moment in the continent’s history, Africa must demonstrate that it is able to create an amicable environment for investment that will, at the same time, push the continent forward in its development objectives. To do this, when further negotiating the Dispute Resolution Protocol, the State members of AfCFTA must create a forum that will allow for equitable dispute resolution that takes into consideration the needs of States as much as private investors. 

    A.  Following the OHADA model - Creating a common system for dispute settlement 

    A forum located on the African continent, with knowledge and experience of the local context within which disputes arise will be crucial in gaining the support of African nations. Having the tribunal in Africa would also reduce costs and burden to African governments. To foster accessibility, the African Union could have various satellite courts of the continental tribunal, allowing cases to be heard in a mutually agreed upon, convenient location for the parties. At the same time, there should be one primary seat where the permanent staff and judges of the court should be located on a regular basis. On a continent as big as Africa, geography is crucial in ensuring equitable treatment of parties. Moreover, it is essential that the tribunal be located in a stable, democratically strong country where it is less likely to be impacted by conflict or country turmoil in the host country.

    In developing this continental court, the African Union should also take care to make sure the voices of all African nations are heard. Africa is a continent comprising 54 different countries, all at varying levels of economic development and each with its own needs. African Member States must consider this when drafting the rules for procedure for this court. Just as African nations do not want the desires of wealthy investors to overshadow their own needs, nor do smaller, less developed countries want their voices to be silenced by larger, stronger economies on the continent. If the continent is truly to develop collectively, then all countries must have an equal footing when it comes to dispute settlement. Equitable representation in the tribunal must be a top priority.

    Judges at the African continental court should be from different countries throughout the continent and should have the business knowledge that foreign investors would expect of a tribunal of such stature. This diversity of judges from varying countries would help reduce the bias and corruption concerns that exist with local courts. It would also better assure that smaller countries be treated equitably when in conflict against larger, wealthier countries. Moreover, foreign investors have historically expressed concern that African courts are not familiar with business transactions and this has turned them away from using local or regional courts. In developing a continental tribunal, it is important to recognize that there are plenty of African nationals with the capacity to consider complex investment disputes that could serve on a continental court, from even the smallest countries with small economies. Utilizing local human capital from across the continent would achieve one of the key purposes of the AfCFTA, namely that local human resources are better utilized to meet local needs.

    Perhaps the greatest benefit of having a continental tribunal will be the contextual awareness that is added by having local judges who are familiar with the most pressing issues on the African continent. African-bred judges will have greater concern for the impact investments in the continent are having. African judges will be more likely to consider the social, environmental and labour consequences of investments. This will give them a unique perspective on the reasoning behind why States may take certain policy decisions and allow them to weigh that reasoning with investors’ interests. This will in turn serve the purpose of balancing Africa’s sustainable development goals with investment decisions. With this in mind, judges should be carefully selected from each of the Member States to the AfCFTA. As is provided in the Articles of the current Dispute Settlement Protocol for the DSB process, judges hearing a given case should not be from either of the countries party to the dispute.

    Special staffing consideration should be given to types of disputes that may be expected to arise, given the nature of investment in Africa. For example, given the predominance of the extractive industries on the continent, the court should be well-staffed with individuals familiar with these industries, who are able to comprehend the intricacies that may be argued in the event of a dispute. Moreover, staff should be aware of the interlinking between international and domestic law and should have an acute awareness as to when and to what capacity domestic law should govern. Again, it is important to reiterate that human capital is one of Africa’s most untapped or underutilized resources. The continental court, not unlike industries that stand to benefit from the AfCTA, should recognize this and find human resources that will be able to build confidence in investors, as well as State Parties, that the court is competent to resolve even the most complicated business matters.

    As has also been suggested under the Dispute Settlement Protocol, the continental tribunal should have an appeals process, which allows parties to challenge decisions based on law or evident misinterpretation of facts. This appellate tribunal should have clearly defined procedures and directives, defined through the negotiation process of the AfCFTA.[20]

    B.  Limiting ISDS

    In moving forward, African State Parties to the AfCFTA must also decide to what extent ISDS will be utilized to resolve investment disputes. As currently written, the Dispute Settlement Protocol appears to point towards State-to-State dispute settlement, with all language used referring to State Parties, without mention of investors or non-State actors. In considering the current world landscape as it pertains to ISDS, as discussed above, rather than moving completely towards State-to-State, Africa should consider the possibility for a limited, regulated ISDS. The limited approach utilized under the new USMCA and the CPTPP (the predecessor to the TPP Agreement, which is posed to be ratified by the remaining Member States) agreements offers a strong solution to many of the expressed grievances of African States, while at the same time allowing investors to bring legitimate claims for breaches of the Agreement. One limitation that could be put in, for example, as is currently alluded to under the Dispute Settlement Protocol, is a limitation on compensation as a remedy for an aggrieved party. This would alleviate the concerns over overly burdensome judgments, which, as discussed, have been one of the major sticking points in African opposition to ISDS.

    The EU model that appears to be taking shape after the Achmea case, wherein the laws of the European Union are taking precedence over the needs of investors can be used as a guide in the African negotiation of the AfCFTA. The final terms of the AfCFTA should specify the supremacy of African continental law and should place clear limits over the cases in which private investors will be able to challenge domestic law. There should be express provisions built into the Agreement that protect individual countries’ right to regulate for the public good.

    This said, the AfCFTA dispute settlement provisions should not outwardly exclude State-to-State dispute settlement, but rather, should adapt an either-or approach to ISDS and State-to-State. When considering State-to-State Dispute Settlement in the context of the African continent, there are several key specificities that are important to pause and consider. As has been reiterated several times throughout this book, more than anywhere else in the world, the sustainable development objectives of African nations are essential in assuring a prosperous future for the continent. States are balancing an array of different needs; everything from strengthening the rule of law to food security, from providing health services to creating jobs, must be considered if countries hope to reduce the current level of poverty and, quite frankly, if they wish to better attract foreign investment. Without improved infrastructure, for example, foreign investors will be wary of entering many markets. They will also be hesitant to enter a market that cannot guarantee protection of contracts. The long-term objectives of African States, therefore, must be built into current policies and laws.

    While foreign investment will play a key role in creating strong economies that can lift countries from developing to developed, there must also be advances made in local development to assure the same trajectory. By way of example, in the extractive sectors, there is often a reliance on foreign investors to provide the technical assistance necessary to extract natural resources. At the same time, however, the country where the natural resource is located must ensure that the environment is protected, so as to not cause issues with food security or raise health concerns with local populations. There must also exist a strong system of rule of law to protect against illegal extraction and to ensure that the foreign investor is protected against third-party intervention into their projects. To improve the local economy, States must also ensure that the extraction project is involving local workers and creating better job opportunities for surrounding communities. Every project has a long list of different considerations for the State, while oftentimes the sole consideration of investors is profit.

    State-to-State Dispute Settlement, the mechanism currently built into AfCFTA under the Dispute Settlement Protocol, for claims brought to the DSB, allows States to better consider their internal needs, without a direct challenge from investors who may view legitimate development objectives as contrary to potential profit. Allowing States to have a voice in arguing their public policy reasoning for certain decisions will protect against infringement on sovereignty and will allow local governments to maintain adequate control over domestic policy. Moreover, State-to-State Dispute resolution carried out on the continent will allow holistic consideration of the needs of not only individual countries, but of those of the continent. This mechanism could contribute to Africa’s intention of becoming more self-reliant.

    At the same time, there are certain considerations that must be weighed in relation to State-to-State dispute settlement. For example, the willingness of States to bring a claim on behalf of a national may be hinged on the same problem of costliness that exists under international arbitration and not on the legitimate needs of an investor or on the black-and-white terms of a contractual agreement. Additionally, the capacity of African nations varies tremendously from one state to another. Larger countries with more resources[21] have greater capacity to bring claims and to then be successful in their pursuit than do smaller countries with fewer resources.[22] Moreover, there are varying levels of relationships between different governments on the continent and there is a risk that political interests may boil over into investment dispute settlement. For these reasons, a compromised position, where ISDS is limited, but State-to-State Dispute Settlement may also be used for cases that may have a more widespread impact, rather than a complete move to State-to-State Dispute Settlement is likely the best option for the continent. This would allow investors the opportunity to defend themselves when facing breaches of contract, but will, at the same time, allow governments to maintain their own sovereignty. Of course, the procedural rules built into the AfCFTA must demonstrate that States will maintain certain rights, even when faced with an ISDS claim.

    Taking all of this into consideration, it is also important that Africa, as previously mentioned, develop a dispute resolution mechanism that does not create the same issues that exist under the current ISDS dominated system. What that means is that the system developed under AfCFTA should not place small economy countries with fewer resources in a more vulnerable position than their more affluent counterparts. This also means that the system should focus inward, rather than outward. The new AfCFTA dispute settlement system should be focused on the needs of African countries, rather than the desires of foreign investors. The African Union must do better to protect the interests of its Member States, all of its Member States, and must do so through creating a stronger, more equitable dispute settlement mechanism.

    __________________________ 

    * Partner, GENI & KEBE Member of the ICC Court of Arbitration

    [2] FDI is defined as “an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy in an enterprise resident in an economy other than that of the foreign direct investor.” See IMF, “Foreign Direct Investment Trends and Statistics: A Summary” <https://www.imf.org/External/np/sta/fdi/eng/2003/102803s1.pdf>

    [3] Prince Jaiblai, “International Journal of Financial Studies, Determinants of FDI in Sub-Saharan Economies: A study of DATA from 1990-2017,” available at: https://ideas.repec.org/a/gam/jijfss/v7y2019i3p43-d256918.html.

    [4] These regional blocs work in parallel with the African Union in meeting its economic objectives. As stated by the African Union, “The RECs are closely integrated with the AU’s work and serve as its building blocks. The relationship between the AU and the RECs is mandated by the Abuja Treaty and the AU Constitutive Act, and guided by the: 2008 Protocol on Relations between the RECs and the AU; and the Memorandum of Understanding (MoU) on Cooperation in the Area of Peace and Security between the AU, RECs and the Coordinating Mechanisms of the Regional Standby Brigades of Eastern and Northern Africa.” See “Regional Economic Communities,” United Nations Economic Commission for Africa, available at: https://www.uneca.org/oria/pages/regional-economic-communities 

    [5] Redaud Beauchard and Mahutodji Jummy Vital Kodo, “Can OHADA Increase Legal Certainty in Africa?” The World Bank (2011), available at: http://documents.worldbank.org/curated/en/266761467990085419/pdf/659890WP00PUBL010Can0OHADA0Increase.pdf

    [6] Benin, Burkina Faso, Cameroon, Chad, Central African Republic, Côte d'Ivoire, Congo, Comoros, Gabon, Guinea, Guinea Bissau, Equatorial Guinea, Mali, Niger, the Democratic Republic of Congo (DRC), Senegal, Togo

    [7] Organization for the Harmonization of Business Law in Africa, “Organization,” available at: https://www.ohada.org/index.php/en/ohada-in-a-nutshell/history.

    [8] CA Paris 16/25484, 20 December 2018. See Thomas Kendra, Thibaud Roujou de Boubee and Ledea Sawadogo-Lewis, “The Paris Court upholds the supranational nature of OHADA law in dismissing annulment application,

    14 February 2019, available at https://www.hlarbitrationlaw.com/2019/02/the-paris-court-upholds-the-supranational-nature-of-ohada-law-in-dismissing-annulment-application-ca-paris-16-25484-20-december-2018/.

    [9] Gaston Kenfack Douajni, “Recent Developments in OHADA Arbitration,” Global Arbitration Review, 11 April 2019, available at: https://globalarbitrationreview.com/chapter/1190118/recent-developments-in-ohada-arbitration

    [10] Alhousseini Mouloul, “Understanding the Organization for the Harmonization of Business Laws in Africa (OHADA), 2nd edition, June 2009, available at: http://www.ohada.com/content/newsletters/1403/Comprendre-l-Ohada-en.pdf.

    [11] Mouhamed Kebe, “The Attractiveness of the New OHADA Arbitration Act,” Geni & Kebe SCP, 13 December 2018, available at: https://www.lexology.com/library/detail.aspx?g=680f77e3-1b8c-4327-87c1-183a7abc45f4

    [12] Alhousseini Mouloul, “Understanding the Organization for the Harmonization of Business Laws in Africa (OHADA), 2nd edition, June 2009, available at: http://www.ohada.com/content/newsletters/1403/Comprendre-l-Ohada-en.pdf.

    [13] Mouhamed Kebe, “How Can OHADA Boost Integration and Investment in Africa?” Geni & Kebe SCP, available at: https://www.hg.org/legal-articles/how-can-ohada-boost-integration-and-investment-in-africa-19603

    [14] “An Impact Assessment of OHADA Reforms,” International Finance Corporation’s OHAD Investment Climate Program, 2018, available at: http://www.ohada.com/content/newsletters/4643/rapport-ohada-ifc.pdf

    [15] Fagbayibo, Babatunde, “Towards the harmonisation of laws in Africa, is OHADA the way to Go?” The Comparative and International Law Journal of Southern Africa, November 2009, available at: https://www.jstor.org/stable/23253105?seq=1#page_scan_tab_contents

    [16] See Mouhamed Kebe, ‘’The attractiveness of the new OHADA Arbitration Act’’https://www.dlapiperafrica.com/fr/senegal/insights/2018/the-attractiveness-of-the-ohada-arbitration-system.html

    [17] “Impacts of Investment Arbitration Against African States,” Transnational Institute, October 2019, available at: https://www.tni.org/en/isdsafrica.

    [18] Ibid.

    [19] Unión Fenosa Gas, S.A. v. Arab Republic of Egypt (ICSID Case No. ARB/14/4)

    [20] On the trend and the relevance of having an appellate body in international dispute settlements, see: Noemi Gal-Or

     ‘’The Concept of Appeal in International Dispute Settlement’’ EJIL (2008), Vol. 19 No. 1, 43–65 doi: 10.1093/ejil/chm054, available at: http://ejil.org/pdfs/19/1/177.pdf 

    [21]Examples would include South Africa, Kenya, or Nigeria, among others.

    [22]Examples would include The Gambia, Gabon, Niger, among others.

  • 18 May 2021 9:51 AM | Anonymous

    Presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021. 

    Question from Moderator to Gaston: Much has been said about the Singapore Convention and its future, but a historical analysis is often most instructive in contextualising its purpose. Gaston, I believe that you were a delegate at the negotiation of the Convention. Perhaps you can share some impressions and insights from that process, particularly with regard to the motivation behind the Convention.

    Response: The negotiation of this Convention resulted in the updating of the 2002 UNCITRAL Model Law on International Commercial Mediation; therefore, the 2002 version was replaced by the 2018 version.

    During the negotiation, it was agreed that States wishing to legislate on mediation have the possibility of adopting either the Singapore Convention itself or drawing inspiration from the 2018 UNCITRAL Model Law on International Commercial Mediation.

    It is useful to underline here that Cameroon is an OHADA contracting State and that the OHADA Uniform Act on Mediation adopted in 2017 is inspired by the 2002 UNCITRAL Model Law on International Commercial Mediation.

    Even though this OHADA Uniform Act on Mediation aims is to promote mediation in the OHADA contracting parties, it contains a provision according to which amicable agreements concluded by the parties without the assistance of a third (mediator or conciliator) are included in the scope of that Uniform Act.

    As a member of the Cameroonian delegation, I must say that the Cameroonian delegation had, during the negotiation of the Singapore Convention, suggested that agreements reached by the parties in dispute without the intervention of a mediator or conciliator should be included in the scope of the Singapore Convention.

    The Cameroonian proposal was thus inspired by the aforementioned OHADA Uniform Act on Mediation.

    This proposal, supported by other delegations, even not parties to the OHADA Treaty, was not accepted, on the ground that the purpose of the Convention is to promote mediation for the settlement of trade disputes.

    However, the concern being to promote not only mediation but also, more generally, the amicable settlement of disputes, it was agreed that the possibility to recognize and grant “exequatur” to amicable agreements reached by the parties themselves without the intervention of a third could be taken into account by those of the States who wish to do so.

    For this reason, the 2018 version of the UNCITRAL Model Law on International Commercial Mediation, which amends the 2002 UNCITRAL International Trade Conciliation Model Law, includes a footnote 5 under Section 3, according to which "a State may consider enacting this section to apply to agreements settling a dispute, irrespective of whether they resulted from mediation. Adjustments would then have to be made to relevant articles."

    Question from Moderator to Gaston: Are there areas which proved particularly difficult to reach consensus, and how were those addressed?

    Response: Concerning areas which provided difficulties to reach consensus, I will focus on article 5 of the Convention that specifies the grounds for refusing exequatur.

    This article 5 is one of the longest and more detailed provisions of the Convention.

    Indeed, the grounds for refusal are so many because the Delegations of the States negotiating the Convention wanted to be sure that the said Convention is consistent with their public policy and that a Convention in harmony with the public policy of the Contracting States will really help in promoting worldwide mediation as an appropriate instrument or tool for the settlement of commercial dispute.

    So, the negotiation of this article 5 and also article 4 was, to my humble opinion, laborious not because there was any intention to block the negotiations but rather because each Delegation participating in these negotiations was keen to come out with an instrument agreeable and acceptable to all.

    In this regard, the negotiations took place in a courteous manner and in a spirit of mutual understanding.

    Question from Moderator to Panel: In view of the key provisions and purposes of the Convention, does the panel think that the legal profession and disputing parties can derive benefit from the Convention?

    Response from Gaston: In any event, mediation appears to be an advantageous means of resolving commercial and/or investment disputes, thanks to its flexibility. 

    Furthermore, while mediation or conciliation is a paid service, it still costs less than State justice or arbitration.

    Therefore, it seems to me important that lawyers are educated on mediation/conciliation and on its advantages as a method to settle commercial and investment disputes.

    This education should begin at the university level.

    In my opinion, aiming to promote mediation as an alternative means of dispute resolution, the Singapore Convention of 2019 is intended to be for mediation what the 1958 New York Convention is for arbitration.

    It appears that education is really important here; I mean education for lawyers because they have to know what mediation or conciliation is about, in order to be in a position to convince their clients on the advantages and utility of these methods of settlement of commercial and investment disputes.

    ________________________

    * Chairman, Association for thé Promotion of Arbitration in Africa-APAA

  • 18 May 2021 9:24 AM | Anonymous

    Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

    The Singapore Convention

    On 12 September 2020, the United Nations Convention on International Settlement Agreements Resulting from Mediation, the Singapore Convention, entered into force. The overarching purpose of the Convention is to create a mechanism for the enforcement of international settlement agreements resulting from mediation. The convention was described by the Prime Minister of Singapore, Mr. Lee Hsien Loong, as the “missing third piece” in the international dispute resolution enforcement framework. Currently, 53 states have signed the convention, including three states in MENA namely Jordan, Qatar and Saudi Arabia.

    Mediation in MENA

    Mediation in the Arab Middle Eastern region is rooted in the Islamic tradition of settling disputes with the help of a third party. Against this backdrop, many states in the region continue to promote commercial mediation through legislation and the creation of mediation institutions.

    For example, in 2006, Jordan enacted legislation to regulate mediation of civil disputes.  The law provides for mediation by both judges of the court of first instance and private mediators. 

    Also in 2006, Qatar established the Qatar International Center for Conciliation and Arbitration. In 2012, it promulgated the QICCA Conciliation Rules, which were largely inspired by the UNCITRAL conciliation rules. The Qatar International Court and Dispute Resolution Centre, established in 2010, also provides mediation services.

    In 2009, the Bahrain Chamber for Dispute Resolution, which provides both arbitration and mediation services, was established. In 2019, in anticipation of the Singapore Convention, it adopted mediation rules.

    In 2014, Saudi Arabia created the Saudi Centre for Commercial Arbitration. It adopted Arbitration and Mediation Rules together with a Code of Ethics for Mediators. Recently, the Centre also launched the Emergency Mediation Program to assist businesses in financial distress due to the impact of COVID-19 with the resolution of their disputes.

    Finally, in the UAE, there are several institutions that provide mediation services. The Centre for Amicable Settlement of Disputes, which was established in Dubai in 2009, is linked to the Dubai courts. Mediation services are also offered by the Dubai International Financial Centre Courts and the DIFC-LCIA Arbitration Centre, which provides mediation services under the LCIA Mediation Rules.

    Do Parties in MENA mediate?

    There is good legislative and institutional support for parties who wish to mediate in the MENA region. However, statistics from regional institutions that offer mediation and arbitration indicate that commercial mediation remains underused. The Cairo Regional Centre for International Commercial Arbitration registered 13 mediation cases since its inception compared to 1303 arbitration cases. In 2019, the DIFC-LCIA registered 13 mediation cases compared with 67 arbitration cases. Between 2018 and 2020, QICCA administered 11 mediations and 77 arbitrations.

    Justice Delayed

    There may be many reasons why institutional mediation is still relatively underused by commercial parties in the region. One underlying reason could be the ease with which defendants in certain jurisdictions can delay the resolution of meritorious claims in court through dilatory tactics. These delays are exacerbated where there is a backlog of cases. Moreover, enforcement is complex and protracted in certain jurisdictions especially if sought against, for example, real property.

    The World Bank’s Doing Business[1] contract enforcement ranking measures the time and cost for resolving a commercial dispute through a local first-instance court until payment. Egypt is ranked 166 out of 190 ranked countries with an average duration of 1010 days. Jordan is ranked 110 and with an average of 642 days. Qatar is ranked 115 with an average of 570 days. Bahrain is ranked 59 with an average of 635 days. Saudi Arabia is ranked 51st with an average of 575 days. The UAE is ranked 9with an average of 445 days.

    In jurisdictions where contract enforcement is difficult and prolonged, there is a further incentive for defendants to engage in delay tactics in the hope that the ‘nuisance value’ created will reduce or offset the value of the claim from the Claimant’s perspective. This, in turn, reduces their incentive to engage in mediation.

    Cost Sanctions

    Many of the region’s civil procedure codes do not yet provide for Courts to impose cost sanctions on parties who have failed to engage in mediation or good faith settlement discussions of obviously meritorious claims. Because the cost of litigation is relatively low, some businesses may choose to contest meritorious debt claims in court as a means of managing cashflow.  

    By contrast, under part 36 of the England and Wales Civil Procedure Rules if a party refuses to settle a meritorious claim it may be penalised in costs. Moreover, in PGF II SA v. OMFS Company the Court of Appeal held that the defendant’s refusal to respond to an invitation by the claimant to mediate was unreasonable, which also led to adverse cost consequences.

    Conclusion

    If the correct incentives to mediate are not imposed, the Singapore Convention may not have the desired impact in the MENA region, notwithstanding the undoubted benefits of ease of enforcement of mediated settlements. Even if mediation is not compulsory, reform of the civil procedure codes to include penalties for dilatory tactics and to streamline enforcement processes could incentivise mediation and improve contract enforcement.

    ________________________

    * Counsel, Freshfields Bruckhaus Deringer LLP co-authored by Leila Kazimi, DR Intern, Freshfields Bruckhaus Deringer (Dubai) 

    [1] Data collected as at May 2019.

  • 14 May 2021 1:29 PM | Anonymous

    Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021.

    [1]

    Introduction 

    Transparency and consistency are desirable qualities in any legal system. Inadequate transparency is one of the most common complaints aimed at the investor-State dispute settlement (ISDS) system. Confidentiality of proceedings has been one of the main features of investment arbitrations. Gradually, this confidential nature has become heavily criticised because investment disputes frequently concern public interest such as protection of public health or environment but at the same time offer little or no opportunities for public participation.[2] For these reasons, the general public and interest groups have pressed for access not only to the final awards, but also to proceedings. Demands for more transparent institutions and procedures have recently been raised.[3] Under such circumstances, the trend toward open and participatory investment arbitrations intensified and consensus that the public should have the right to be informed about a notification of a claim, an access to proceedings and a final award was established in the international community.[4] 

    On the other hand, consistency engenders predictability, thereby contributing to the system’s credibility and legitimacy. Conversely, a dispute system where comparable cases produce contradictory results is unpredictable, which increases disputes and their associated costs.[5] The debate over the lack of consistency in investment arbitration is not new. Several authors have extensively analysed instances of alleged inconsistency in an attempt to identify its causes and propose solutions.[6] 

    Transarency in Investment Arbitration: Manifestations and Prospects of Standardisation 

    Critics of investment arbitration have long condemned the lack of transparency at all stages of a dispute. This was because, until recently, treaties and international investment agreements (IIAs) were largely silent as to the degree of transparency which should attach to the arbitral proceedings conducted pursuant to them. Institutional rules also largely left the matter of procedural transparency to arbitral or party discretion.[7] In light of silence in treaties and institutional rules, parties to investment disputes held significant residual discretion to deal with many aspects of transparency by agreement. In the absence of agreement, tribunals were left to decide matters of transparency under the rubric of their general powers to regulate the proceedings. 

    a. International Arbitration Rules and Regulations: Causes of Dissimilarity and Prospects of Uniformity 

    Transparency in international investment arbitration refers to the extent to which the public can access arbitral proceedings and information pertaining to those proceedings. In this context, institutional arbitration rules offer different transparency frameworks. The substantive differences between these rules may be owed to the fact that there is no strict consensus as to the appropriate balance between squarely conflicting notions of confidentiality/privacy and transparency in international investment arbitration. On the one hand, compromising confidentiality peels away one main attraction of international arbitration. On the other, maintaining levels of transparency is of significant import in the context of investment arbitration because disputes often involve matters of particular public interest and consequence. In Biwater Gauff Ltd v. Tanzania, the claimant requested provisional measures on confidentiality as a result of the unilateral disclosure of the minutes of a tribunal meeting. The tribunal agreed to the requested measures, stating that the disclosure of some documents should not be allowed in principle since it would jeopardise the procedural integrity of the arbitral process.[8]

    In this regard, the standardisation of arbitration rules dealing with privacy and transparency would be a welcome development in international investment arbitration. It has the potential to achieve greater normative uniformity across institutions and boost the subjective acceptance of the regime, altogether increasing the legitimacy of investment arbitration. First, standardisation helps reduce uncertainty as to “how calls for transparency will be resolved in any particular case”.[9] This is beneficial for states and investors alike who can rely on a single body of practice. Second, implementing a more robust set of transparency rules could increase public confidence in investment arbitration by virtue of its openness. Investor-state disputes may be of significant interest to potentially affected communities, such as those involving environmental or human rights concerns, state concessions over natural resources or approvals of the privatisation of public services, and disputes resulting in a state’s liability for which payment may be absorbed by public tax money. In this context, greater demands for transparency are justified and to be expected. In addition, transparency in arbitral decisions contributes to the development and drafting of new treaties and increases the predictability of investment law, consequently leading to greater “participation and confidence in the system particularly of the less knowledgeable investors and host States”.[10] Moreover, increasing access to decisions also enhances the quality of decisions as tribunals and parties learn from the experience of their predecessors. 

    b. Amicus Curiae Submissions and Third Party Funding

    In addition to increasing the transparency of arbitrations by providing the public with information about the cases, some tribunals have also increased the openness of the proceedings by specifically allowing non-parties to act as “amici curiae” and submit information relevant to the dispute.[11] The 2006 revised ICSID Rules integrate that practice in an explicit provision allowing tribunals to accept amicus briefs. The rules require the tribunal to consult with the parties before deciding whether to allow the non-party submissions, but do not allow either or both parties together to veto the tribunal’s decision on the matter. This is consistent with the very concept of a “friend of the court” that serves to provide useful information to the tribunal, while leaving it up to the tribunal to determine how to use that information. 

    The relevant ICSID Rules (Rule 37(2) of the 2006 ICSID Arbitration Rules and Article 41(3) of the 2006 Additional Facility Rules) provide, inter alia, that “After consulting both parties, the tribunal may allow a person or entity that is not a party to the dispute… to file a written submission with the Tribunal regarding a matter within the scope of the dispute”. The 2006 ICSID Rules go on to provide that, when deciding whether to accept an amicus curiae submission, a tribunal must consider a non-exclusive list of three factors: (a) whether the submission will assist the tribunal determine a factual or legal issue by providing a perspective that differs from the parties to the dispute; (b) whether the submission is within the scope of the dispute; and (c) whether the non-party has a significant interest in the proceeding. 

    In Biwater Gauff Ltd v. United Republic of Tanzania, amici successfully invoked Amended Rule 37. The tribunal granted five non-governmental organisations the right to make written submissions. The tribunal concluded that the non-disputing parties’ written submissions had a reasonable potential to assist the arbitral tribunal by bringing a perspective, knowledge or insight that was different from that of the disputing parties.[12] 

    Similarly, the COMESA Investment Agreement states that the “arbitral tribunal shall be open to the receipt of amicus curiae submissions in accordance with” certain requirements set forth in a separate annex.[13] This annex, in turn, merely: (a) confirms the tribunal’s authority to accept and consider the submissions, (b) sets forth requirements for amicus curiae applicants to make their submissions in certain languages and disclose their identities and the identities of those who provided assistance in making the submission (financial or otherwise), and (c) adds that “submissions may relate to any matter covered by [the COMESA Investment Agreement] that is relevant to the claim before the tribunal”.[14] 

    On the other hand, third-party funding is an influential ingredient which, if not disclosed, may impede transparency in investment arbitration. Neither the ICSID nor UNCITRAL Rules provide for an express power to inquire into a third-party funder’s involvement. Although tribunals have relied on their inherent power to order disclosure in cases involving a potential conflict of interest, this is not a settled matter.

    In an ICSID decision, the tribunal ordered the claimants to disclose whether they were the recipients of third-party funding, and to divulge the names and details of the funder and some terms upon which the funding had been provided. On 12 June 2015, the ICSID tribunal in Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd Sti v. Turkmenistan ordered the claimants, two Turkish construction companies, to disclose whether their claims in the arbitration are being funded by a third party.[15] In another PCA case under the UNCITRAL Rules, South American Silver Limited v. Bolivia, the tribunal ordered the claimant to disclose the identity of the third-party funder that granted financing to the claimant in the arbitration.[16] Tribunals have also considered the presence of third-party funding in whether to grant security for costs. In RSM v. Saint Lucia, the tribunal granted RSM’s request for security stating that the presence of third-party funder “supports the Tribunal’s concern that Claimant will not comply with a costs award rendered against it”.[17] More recently, in Eskosol v. Italy, the tribunal rejected Italy’s request for security for costs on the grounds Eskosol, with the assistance of a third-party funder, obtained an insurance policy from which costs could be paid.[18] Conversely, it has been reported that in Luis García Armas v. Bolivarian Republic of Venezuela, the ICSID tribunal ordered the claimants to provide guarantee for Venezuela’s costs in defending the investment arbitration on the basis that claimants’ third-party funding agreement provides that the funder is not liable for any adverse cost orders and claimants have not established that they have the resources to pay an adverse costs order themselves.[19] 

    It should be noted here that funding agreements may affect important procedural issues such as conflict of interests and requests for security for costs. Third-party funding may give rise to conflicts of interests in several ways with respect to the arbitrator’s independence, for instance if the arbitrator has a relationship with the third-party funder. However, conflicts of interests are not necessarily limited to arbitrators. Many third-party funders are well-known and large institutions, which are inevitably involved in other claims. Accordingly, the risk of non-disclosure in the context of conflict of interests is relatively high. A refusal would increase the chances of a challenge based on the arbitrator’s lack of impartiality and independence, including at the time of the enforcement of an arbitral award before national courts.

    Consistency and Coherence of ISDS: What Is It About and What Lies Beyond? 

    A legal system is consistent when it produces coherent solutions, treats identical or similar situations in the same way, and gives equal treatment to the participants in the system. Nonetheless, many States have expressed their concerns regarding the predictability and consistency of the ISDS regime. 

    On the importance of consistency and coherence for the system’s legitimacy, Mauritius explained in the meetings of the UNCITRAL Working Groups that “this question of coherence and consistency is absolutely key. It is the major concern. There is an utter lack of predictability and therefore legitimacy in the framework as it exists today. There is no appeal; there is no harmonization system and for that reason and contrary to other views that have been expressed we say it is absolutely a problem of the system because ISDS is by its very nature fragmented and incapable of harmonization in its current form”.[20] Meanwhile, Egypt stated that “the problem of inconsistency and unpredictability will remain as long as there is this large part of overlapping treaties of international and investment treaties especially the old generations of bilateral investment treaties which involve inaccurate drafting, uncontrolled drafting and indefinite drafting of the rules of the protection of investment”.[21] 

    Certain features of investment law explain why it may be perceived as being more prone to inconsistent decisions than other areas of law. Specifically, its reliance on broad legal concepts and its decentralisation may foster inconsistent decisions, whereas other aspects, such as factual commonality and public availability of awards, may make the pre-existing inconsistencies more visible to observers. 

    a. Catalysts and Magnifiers of Inconsistency 

    The legal issues addressed in investment arbitration generally involve legal concepts that are designed to be applied to a broad range of situations, and, therefore, are open to criticism and different interpretations (e.g. fair and equitable treatment (FET), full protection and security (FPS), transparency, and arbitrary and discriminatory treatment).[22] Further, the decentralised nature of dispute resolution under investment treaties contributes to its inconsistency. Treaties provide for arbitration in the context of different arbitral institutions, each with its own set of differing rules. In addition, the mere nature of arbitration, where parties have a determining influence over the composition of the tribunal, allows for inconsistent results. Each dispute is decided by tribunals consisting of different arbitrators chosen by the parties, sometimes with opposing views on the relevant matters. Finally, international investment law only emerged in its current form in 1959, when Germany and Pakistan adopted a bilateral agreement, which entered into force in 1962.[23] The ICSID was not established until 1965, and significant case law in international investment law did not begin to take shape until the early 1990s with the end of the Cold War. While it may appear that investment law offers less certainty than many areas of domestic law, this is, in part, a product of the fact that many – if not most – areas of investment law are in the process of being formed. 

    In addition, different cases with similar factual patterns are common. In fact, it is not unusual for different cases to challenge a single state measure or group of measures affecting several investors. Occasionally, the common facts are not limited to the challenged measures, but also extend to the investment itself, which is sometimes jointly owned by different investors filing separate claims. The fact that different arbitration tribunals address similar facts contributes to the risk of inconsistent arbitral decisions. Besides, investment arbitration cases and decisions are often publicly available and regularly attract attention as they deal with state policies and matters of public interest. Although transparency may be seen generally as a factor that increases consistency – because it allows arbitral tribunals and practitioners to have access to previous decisions – it also highlights contradictions among decisions by different tribunals. Scholars and practitioners closely scrutinise decisions focusing on contradictions and thereby increase the perception of inconsistency.[24] 

    b. Tackling Parallel Proceedings: Adverse Consequences and Potential Mitigators 

    Parallel proceedings may threaten the credibility of investment arbitration as a public form of adjudication because they can run against the principle of legal certainty and undermine arbitration as a credible method of dispute settlement.[25] It is often in the context of parallel proceedings that inconsistency in investment arbitration arises. One paradigmatic example is the case of Ampal-American Israel Corporation and others v. Arab Republic of Egypt, in which Ampal-American Israel Corp and other companies brought an investment arbitration under the ICSID Convention and two BITs, as well as four other related arbitrations; three commercial and one additional investment arbitration under UNCITRAL Rules.[26] The Ampal tribunal drew the line at claims in parallel arbitrations that are “double pursuit of the same claim in respect to the same interest”, reasoning that it would be an abuse of process to pursue this kind of parallel proceeding once the jurisdiction of one of the fora is confirmed. Thus, the tribunal held that Ampal had to “cure the abuse” and submit the claim to the exclusive jurisdiction of one tribunal, relinquishing the other. 

    Hence, parallel proceedings may have negative consequences that undermine the advantages of arbitration including the risk of inconsistent awards, in particular when contradictory decisions are made, and a party tries to enforce the judgment or the award. Further, double recovery may occur where a company, shareholder or another company within the same group brings a treaty claim and a claim for breach of contract and prevail in both proceedings for the same wrong. 

    Indeed, some commentators have argued that “arbitration fulfils its function only if it finally settles the dispute underlying the claims of the parties. This means that the end of arbitration proceedings shall coincide, from a substantial point of view, with the end of the dispute between the parties. If, when a claim is judged, another substantially identical claim is pending in another arbitration (or can be started again before another tribunal), arbitration has failed in fulfilling that function”[27] by undermining the fundamental legal principles of legal certainty and procedural fairness. Parallel proceedings may also result in the increase in legal costs and in logistical issues because the parties need to present their arguments before multiple fora sometimes in different jurisdictions. 

    By and large, preventing parallel proceedings has not usually been a key concern for drafters of bilateral or multilateral investment arbitration treaties. Some treaties, however, include procedural mechanisms, which some consider may prevent parallel proceedings. For instance, fork-in-the-road clause gives parties a choice between seeking relief via either litigation in the host-state’s domestic courts, or international arbitration. Once the decision is made, the party waives its right to seek relief through the unchosen fora. While this does prevent the same entity from bringing claims in both litigation and arbitration, its effect is limited to that specific party. 

    Courts and tribunals may also resort to some doctrines in addressing parallel proceedings. Res judicata is one legal principle according to which courts and tribunals are bound by the earlier judgments or findings of another court or tribunal as to a dispute before them.[28] The principle is grounded in the desire to ensure finality in the resolution of a dispute and to eliminate the harassment of respondents. However, the effect of this principle is limited. It only comes into play after a proceeding is complete, where there is a triple identity of object, cause, and parties, and it applies only to successive, but not simultaneous, parallel proceedings. Besides, Lis pendens is used by an adjudicator to stay or suspend a proceeding until the conclusion of a parallel proceeding before another adjudicator.[29] This doctrine is applicable when parallel proceedings involve the same parties (persona), cause of action (causa petendi) and claims (petitum).[30] Some commentators have suggested that this triple identity test should be relaxed, the persona requirement – in particular – to include identical claims brought by shareholders, locally incorporated companies and companies within the same chain of ownership.[31] 

    In addition, arbitrators’ competence to rule on their own jurisdiction, the principle of competence-competence, provides tribunals with the means to stay proceedings before them for reasons that include the mitigation of adverse impacts of parallel proceedings. Although rules that govern investment arbitration are silent as to a tribunal’s power to stay proceedings, it is generally accepted that it falls within their inherent powers to conduct them in the manner they consider appropriate. Moreover, consolidation may be an option for parallel proceedings, in particular, when one or more of the arbitrators appointed in the various and related cases are identical. However, consent of all the parties involved is required, either expressly or by accepting the rules of the institution administering the arbitration or by explicit consent of the parties. Consolidation as a mechanism to increase the likelihood of consistent awards has been included on ICSID’s agenda for the amendment of its arbitration rules.[32] 

    c. Tools to Ensure Consistency in Investment Arbitration 

    Where regionalism is especially ascendant, some states have attempted to create tools to exercise control over their treaties and ensure that the obligations they have undertaken are interpreted consistently across their overlapping investment agreements. A review of some of the multilateral treaties negotiated in recent years, offer insight into how states may be responding to concerns regarding overlap and inconsistency in ISDS awards. States may use these tools to ensure that tribunals provide consistent interpretations of the obligations they have undertaken to avoid conflicts between different legal regimes and instruments. The first and most obvious tool could be drafting substantive provisions in the text that will guide interpretation. Another tool states have at their disposal in several regional IIAs is the ability to issue joint interpretations of their treaties. Nonetheless, while these provisions are becoming more commonplace, it is unclear whether they are a practical means of achieving consistency across awards, especially in large multilateral treaties. Furthermore, joint interpretations may impact consistency in instances where the statement effectively “amends” rather than “clarifies” the treaty. Moreover, it has been disputed whether joint interpretations and notes of interpretation are binding on investors.[33] 

    Perhaps the most underused tool is the non-disputing party submission procedure.[34] These submissions are non-binding persuasive pronouncements by a single state on the meaning of certain provisions. Most commentators and tribunals have recognised that State treaty-members’ “common, concordant, and consistent statements” of their intent with respect to a treaty provision provide the best evidence of its meaning.[35] Non-disputing party submissions are not as frequent as one might expect, however, especially considering that all member states, including non-parties to the dispute, have a right to submit statements on treaty interpretation, even without prior tribunal approval or party consent. 

    Conclusion

    Transparency and consistency are undeniable features of any credible method of dispute settlement. Increased transparency of arbitration proceedings benefits the goal of consistency. Significant steps have been taken in this regard, notably the 2006 ICSID rules amendments requiring publication of awards or excerpts of awards, the 2014 UNCITRAL Rules on Transparency in Investment Arbitration and the Mauritius Convention. While a number of challenges still exist within the ISDS system, increasing its transparency and consistency fosters its legitimacy. Many of the criticisms levelled at ISDS can in fact be addressed through comprehensive, disciplined and collective efforts to attain those objectives.

    _______________________ 


    * Mohamed H. Negm is State Counsel, Arbitration and International Dispute Resolution, Egyptian State Lawsuits Authority – Ministry of Justice. He represents the interests of Egypt before international courts and arbitral tribunals in international investment arbitrations. He is currently representing the State of Egypt in 9 investment arbitrations before the ICSID. He has handled many complex, high value, commercial institutional and ad hoc arbitral proceedings involving parties from the Middle East, Europe, Asia, and the United States under the rules of leading arbitral institutions such as the ICC, CRCICA, UNCITRAL, LCIA, and DIAC. Mr. Negm has been appointed by the African Union as an Expert Consultant on the Pan African Investment Code (PAIC). He was recently selected by the Association of Young Arbitrators (AYA) as one of Africa's 50 Most Promising Arbitration Practitioners in 2020. He is the Institute for Transnational Arbitration Reporter for Egypt and OHADA. Mr. Negm lectures on Arbitration Law and International Dispute Resolution in the American Bar Association Rule of Law Initiative. He was the regional representative of LCIA-YIAG for the Middle East and North Africa. Mr. Negm publishes regularly in international journals on issues of international law, international investment and commercial arbitration. 

    [2]   Gus Van Harten, Reforming the System of International Investment Dispute Settlement. In: LIM, Ching L. (ed.), Alternative Visions of the International Law on Foreign Investment. Cambridge: Cambridge University Press, 2016, p. 111.

    [3]     Anna Peters, The Transparency Turn of International Law. The Chinese Journal of Global Governance, 2015, Vol. 1, No. 1, p. 4.

    [4]    Marcos A. Orellana, The Right of Access to Information and Investment Arbitration. ICSID Review, 2011, Vol. 26, No. 2, p. 85.

    [5]     Samaa A. Haridi and Reza Mohtashami QC, Consistency, Efficiency and Transparency in Investment Treaty Arbitration, Report of the IBA Subcommittee on Investment Treaty Arbitration (2018).

    [6]  See e.g., Gabrielle Kaufmann-Kohler, Is Consistency a Myth? in Emmanuel Gaillard and Yas Banifatemi (eds), Int’l Arbitration Inst, Precedent in International Arbitration (Juris Publishing, Inc. 2008), pp. 137–148; Susan D Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions (2005) 73 Fordham L Rev 1521; Charles N Brower, Charles H Brower II and Jeremy K Sharpe, The Coming Crisis in the Global Adjudication System (2003) 19 Arb Intl 415.

    [7]  D. Euler, UNCITRAL Working Group II Standards in Treaty Based Investor-State Arbitration: How Do They Relate to Existing International Investment Treaties? 12 Asper Review of International Business and Trade Law (2012), 139, 143; J.A. Maupin, Transparency in International Investment Law: The Good, the Bad, and the Murky, Transparency in International Law (2013); C. Knahr & A. Reinisch, Transparency Versus Confidentiality in International Investment Arbitration – The Biwater Gauff Compromise, 6 The Law and Practice of International Courts and Tribunals (2007) 1, 97, 116. 

    [8]      Biwater Gauff Ltd v. United Republic of Tanzania, Procedural Order No. 5, para. 55 (ICSID Case No ARB/05/22), February 2007.

    [9]     Nathalie Bernasconi-Osterwalder and Lise Johnson, Transparency in the Dispute Settlement Process: Country best practices, Bulletin No. 2, Best Practices Series, International Institute for Sustainable Development, February 2011.

    [10]   Federico Ortino, External Transparency of Investment Awards, Society of International Economic Law Inaugural Conference, Geneva (2008).

    [11]      Nathalie Bernasconi-Osterwalder and Lise Johnson, Transparency in the Dispute Settlement Process: Country best practices, Bulletin No. 2, Best Practices Series, International Institute for Sustainable Development, February 2011.

    [12]      Biwater Gauff Ltd v. United Republic of Tanzania, Procedural Order No. 5, para. 55 (ICSID Case No. ARB/05/22), February 2007, (“The arbitral tribunal grants the Petitioners the opportunity to file a written submission in these arbitral proceedings, pursuant to Rule 37(2)”).

    [13]      Art. 28(8); See also Annex A, Art. 8.

    [14]      Annex A, Art. 8.

    [15]   See Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd Sti v. Turkmenistan, Procedural Order No. 3, ICSID Case No ARB/12/6.

    [16]   South American Silver Limited v. Bolivia, PCA Case No. 2013-15, Procedural Order No. 10 dated 11 January 2016.

    [17]      RSM Production Corporation v. Saint Lucia, Decision on Saint Lucia’s Request for Security for Costs of 13 August 2014, para. 83.

    [18]    Eskosol SpA in Liquidazione v. St Italian Republic, ICSID Case No ARB/15/50, Procedural Order No. 3 of 12 April 2017, para. 37.

    [19]       Luis García Armas v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/16/1, Procedural Order No. 8 of 20 June 2018.

    [20]        Anthea Roberts and Zeineb Bouraoui, UNCITRAL and ISDS Reforms: Concerns about Consistency, Predictability and Correctness, June 2018

    [21]        Ibid.

    [22]    Christoph Schreuer, Coherence and Consistency in International Investment Law, in Robert Echandi and Pierre Sauvé (eds), World Trade Forum: Prospects in International Investment Law and Policy (Cambridge University Press 2013).

    [23]     Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd ed., Oxford University Press 2012), p. 6.

    [24]      Samaa A. Haridi and Reza Mohtashami QC, Consistency, Efficiency and Transparency in Investment Treaty Arbitration, Report of the IBA Subcommittee on Investment Treaty Arbitration (2018), p. 7.

    [25]      See Giovanni Zarra, Parallel Proceedings in Investment Arbitration (Giappichelli Editore 2016).

    [26]    This parallel investment treaty arbitration against Egypt was initiated under the 2013 UNCITRAL Arbitration Rules (“UNCITRAL Rules”) and Egypt’s investment treaty with Poland. In that proceeding, the claimants were Polish-Israeli national Yousef Maiman and three companies of the Merhav group of companies that he allegedly controls, including Ampal’s subsidiary, Merhav Ampal Group Ltd.

    [27]  Giovanni Zarra, Parallel Proceedings in Investment Arbitration XV (2017).

    [28] See Denis Bensaude, The International Law Association’s Recommendations on Res Judicata and Lis Pendens in International Commercial Arbitration (2007) 24 JIA 415; see also Bernardo M Cremades and Ignacio I Madalena, Parallel Proceedings in International Arbitration (2008) 24 AI 507, 519.

    [29]  Gary B Born, International Commercial Arbitration, Vol III: International Arbitral Awards (Wolters Kluwer 2014) 3792.

    [30]    Denice Forstén, Parallel Proceedings and the Doctrine of Lis Pendens in International Commercial Arbitration: A Comparative Study between the Common Law and Civil Law Traditions (Uppsala University 2015). See also www.diva-portal.org/smash/get/diva2:813565/FULLTEXT01.pdf accessed 15 December 2017.

    [31]  See Christoph Schreuer, Shareholder Protection in International Investment Law (2005) 3 TDM 1, 14; Silja Schaffstein, The Doctrine of Res Judicata Before International Arbitral Tribunals (PhD Thesis, University of Geneva and University of London, 2011, paras. 713–715.

    [32]    See IAReporter, ICSID Identifies Sixteen Topics that Have Emerged from Rules Amendment Consultation, and Turns to Study and Drafting, IA Rep (Santa Monica, 8 May 2017).

    [33] David Gaukrodger, The Legal Framework Applicable to Joint Interpretive Agreements of Investment treaties, OECD Working Papers on International Investment, No. 2016/01, OECD Publishing, Paris; Eleni Methymaki and Antonios Tzanakopoulos, Masters of Puppets? Reassertion of Control Through Joint Investment Treaty Interpretation, in Andreas Kulick (ed.) Reassertion of Control Over the Investment Treaty Regime (Cambridge University Press 2017), pp. 155–181.

    [34]    United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (2015) 54 ILM 747 (the “Mauritius Convention”).

    [35]    Gerald Fitzmaurice, The Law and Procedure of the International Court of Justice 1951-4: Treaty Interpretation and Other Points (1957) 33 Brit Y B Int’l L 203, p. 223; See Anthea Roberts, Power and Persuasion in Investment Treaty Interpretation: The Dual Roles of States (2010) 104 AJIL 179, 200. 

  • 12 May 2021 1:44 PM | Anonymous

    Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

    Summary

    The  African Continental Free Trade Agreement (AfCFTA) is acknowledged as  one of the flagship projects for Africa’s developmental policies as established by the African Union.  The Agreement establishing the AfCFTA which entered into force on 30th May 2019 has six (6) protocols including the investment protocol which is the subject of this article.

    Introduction

    The  Investment Protocol presents  a unique opportunity  for African states to disentangle a complex , often- overlapping and fractured  system of African related international investment agreements (IIAs). This includes the various investment related agreements developed by regional groups such as ECOWAS, COMESA and SADC ,  intra-African Bilateral Investment Treaties (BITs) and BITs between African countries and countries outside the continent. Over the past decade there have been strong efforts at both the national and regional level towards achieving    harmonised investment regulatory framework(s) in relation to foreign direct investment.

    The most recent attempt towards the development of a harmonised model document relating to investment was the Pan African Investment Code  (PAIC) .  The object of the  PAIC as stated in the document is to ‘...promote, facilitate and protect investments that foster the sustainable development of each Member State...’[2] .  The PAIC  is  non-binding on African member states [3] however the document acknowledges under Article 3.2 that  the Code may be reviewed at a future date to  become a binding instrument.

    The opportunity to ‘escalate’ the PAIC from a non-binding document   into a consolidated investment  instrument  to be  adopted and utilised by African governments in negotiating IIAs is highly significant.  Though there has been loud criticism from many quarters on the PAIC as being overly protectionist or narrowly focused  as  a model investment treaty document, it reflects consensus from African countries that investment on the continent must be focussed on sustainable development.

    As negotiations on the Investment Protocol progress it is recommended that the following are taken into consideration by the  countries involved in the negotiations:

    There is no time like the present

    As mentioned earlier one of the key criticisms of the PAIC was that it was ‘over-protectionist’  and veered towards  promoting the rights of host states against the well established  rights of foreign investors. The global COVID-19 pandemic which started spreading worldwide in  the 1st quarter of 2020  placed into startling relief  the necessity of governments around the world to  take bold and rapid action to mitigate the adverse effects of the pandemic threatening to cripple their respective economies.  UNCTAD[4] lists some of these actions as the  tightening of foreign investment screening mechanisms,  mandatory production and export bans of health related products and services, and  the nationalisation of  certain  companies adversely affected by the pandemic. These actions which often went against the commercial interests of  international investors is slowly emerging as a possible fertile ground for investor state disputes.  The International Institute of Sustainable Development (IISD)[5]  posited  that hundreds of foreign investors could potentially bring claims to challenge the COVID 19 pandemic measures taken by host governments. These claims could conceivably be supported by third party funders looking forward to  huge payouts on  their investment arbitration portfolios. 

    The advocacy for reform of the IIA framework to ensure the rights of host states  to regulate in the public interest whilst maintaining appropriate levels of investor protections which has been promoted by institutions such as UNCTAD and IISD has received an unexpected boost due to the effects of the COVID 19 pandemic on the economies of countries . The silver lining as it were of the pandemic  is that there is arguably a greater level of acceptance  and understanding now more than ever before in Africa and around the world,  for the state’s  right to regulate in the event of a crisis to public health, public safety, environment, security, finance etc. 

    The negotiators of the AfCFTA Investment Protocol must therefore seize the opportunity presented by the increased awareness and understanding of the state’s right to regulate, to actively promote within the Protocol provisions to preserve the rights of African governments to regulate in the public interest,  the maintenance of  a reasonable balance in the respective rights of investors and host countries as well as the obligation for investment to be driven by the sustainable development goals.  Needless to say it is important that the host states' right to regulate is exercised in a transparent, non-discriminatory and good faith manner. 

    Leap-frog over the mire

    Over the past decade African countries at a national  and regional levels have taken strenuous efforts to reform the IIA framework[6].  Approaches have included  a partial or complete opt out of ISDS, termination of IIAs and the crafting of new IIA models Though well-intentioned  these efforts have often resulted in a lack of unified purposefulness in the direction of reform across the continent. The AFCFTA Investment Protocol provides an unrivalled opportunity for African states to come to a consensus (as far as practicable) on the core principles of international investment law that should be reflected in the document on matters such as most favoured nation treatment, national treatment, pre-establishment, right to regulate and dispute settlement mechanisms.  It is noted that during the negotiations of the PAIC  a lot of effort was put into defining these concepts and setting out their respective scopes of application.

    The following  are recommended for consideration:

    • Clear and as far as practicable unambiguous language  on definitions and scope of concepts utilised in the Investment Protocol. There should be carefully drafted exceptions to the applications of the Protocol to  specific policy areas and measures such as public health and safety,  and sensitive industries & economic sectors.
    • Provision of detailed guidance  on the interpretation of relevant provisions in the Protocol. This would avoid the application of wide discretion by courts, arbitral panels and other dispute resolution bodies in the interpretation and application of the Investment Protocol.
    • Innovative approaches to investor state dispute settlement including the  exhaustion of domestic remedies and resort by parties to reputable regional arbitration or mediation institutions on the continent.
    • Insertion of investor obligations particularly in relation to sustainable development.  

    The PAIC it is argued should be the base document  for the negotiators , the key reference document as it were. In an effort not to reinvent the wheel, best practice examples of similar continental investment agreements should be studied particularly those entered into by developing countries.  

    Building the blocks of consensus

    Negotiators of the AFCFTA Investment Protocol have the herculean but not unsurmountable task ahead of achieving a consensus on all the relevant provisions of the document. African countries  its humbly proposed,  should take the following into consideration:

    a.     Inbuilt flexibility

    African countries  are economically vastly different from each other, from behemoths in size, population and GDP to small island nations  and least developed countries. Obviously then agreement on  thorny issues such as definitions of key terms, pre-establishment, performance requirements, right to regulate and international arbitration would not be readily obtained.  Instead there should be some level of flexibility in limited circumstances for countries based on factors including their state of economic growth and developmental priorities to have a phased in/out approach to the provisions of the Protocol. Also to be considered would be the use of carefully crafted reservations to be utilised on  a case by case basis by a  contracting party. 

    b.     Unratified IIAs

    It is a curious fact that a significant number of African IIAs (whether with African/non-African countries) remain unratified. There are by conservative estimates almost a thousand IIAs signed by African countries of which less than two hundred are between African countries.  The Republic of Ghana for instance has executed 25 BITs and ratified 7. A likely rationale is that these African IIAs were entered into as a demonstration of strong bilateral political ties rather than as a driver for international investment.  With  the AFCFTA framework firmly settled , and negotiations for an AFCFTA Investment Protocol ongoing, there is a distinct possibility of increased  pressure on  African countries to ratify these BITs which may date back over a decade and reflect first generation style IIAs. There must be a general understanding to halt the ratification of IIAs executed by African states, particularly those which do not reflect sustainable development and have a poor balance between the rights of states and foreign investors.

    c.      Negotiation of IIAs

    Though the COVID -19 pandemic put a chill on many IIA negotiations it is a distinct possibility that some non-African countries may be desirous of ‘locking in’ African states into IIAs prior to a possibly less ‘liberal’/ pro-investor IIA document under the Investment Protocol. African countries should proceed with current or prospective IIA negotiations  with much caution. This will prevent challenges from acceding to an AFCFTA  Investment protocol which is inconsistent with recently executed or ratified IIAs. 

    d.     Manage expectations

    A lot of expectations are riding on the Protocol as the mechanism which would most likely resolve the complicated and often contrary  framework of IIAs on the continent.  This would in turn increase trade and investment. It  is  however  a trite fact that the existence of IIAs does not necessarily  translate into increased FDI. The negotiators of the  Protocol must also take note of the barriers to FDI entry in Africa such as lack of transparency, excessive bureaucracy , corruption, and lack of harmonisation of investment legislation. Investment facilitation provisions in the Protocol may be most helpful to practically guide African governments in attracting investment towards sustainable development. 

    e.     Scope of the Investment Protocol 

    It is unclear at present whether the Protocol will apply only to intra-African IIAs or also to IIAs between African and non-African states.  As majority of IIAs entered into by African states are with non-African states  as well as a majority of investment disputes arise between African states and non-African foreign investors, it would be imprudent to limit the scope of application of the Protocol to only intra-African IIAs. It would be useful for clarity on this matter to be established as early as practicable on the negotiations. 

    f.       Capacity Building 

    The over fifty countries on the African continent have very varying experiences in the promotion of foreign direct investment , investment regulation and the management of investment related disputes. Therefore there will be very experienced country negotiators who have been involved in the negotiation of IIAs and investment dispute settlement. Conversely there will be representatives of other countries who will not have the benefit of such experiences. It will therefore be helpful for the AfCFTA Secretariat to provide opportunities for  country representatives/negotiators to increase their knowledge and exposures in issues relevant to the Investment Protocol.

    Conclusion

    The first meeting of experts on the investment protocol has taken place  within the 1st half of 2021. There is a lot of enthusiasm among African countries on the possibilities that the Protocol presents in increasing investment across the continent. With commitment and good faith of all the relevant parties it is clear that the Protocol once completed and acceded to by African states will be a key instrument in enhancing the framework to increase intra-African investment and set a more uniform playing field for investment agreements  between Africa and the world. 

    ______________________

    * Head of Legal Division, Ghana Investment Promotion Centre.  The views expressed in this Article are that of the author and do not represent the position or views of any particular government or  party in the Investment Protocol negotiations

    [2] Article 1 of the Draft PAIC

    [3] Article 2.1 of the Draft PAIC

    [4] UNCTAD Investment Policy Monitor May 2020, Special Issue No. 4,  Investment Policy Responses to the COVID 19 Pandemic

    [5]  IISD -Protecting Against Investor–State Claims Amidst COVID-19: A call to action for government. April 2020

    [6] UNCTAD June 2017 Issue 2; IIA Note discusses in further detail the approaches taken by various African countries to reform the IIA network.

  • 11 May 2021 7:22 PM | Anonymous

    Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

    ABSTRACT

    In late 2017, the OHADA Council of Minister modified and revised the Uniform Act on Arbitration and CCJA Arbitration rules which are the two rules governing arbitration within the OHADA area. The substantive point of the reform was the insertion of investment arbitration provisions in these two instruments governing arbitration in the OHADA area; this insertion thus expanded the scope of OHADA. Henceforth an arbitration under an instrument regarding investment such as an investment code or a bilateral or multilateral treaty is in the most natural way possible within the OHADA area. 

    The expansion of OHADA arbitration to investment arbitration constitutes therefore an undeniable innovation. However, this paper goes further and a bit “against the flow” will discuss the new OHADA approach toward investment arbitration, more specifically the impact of the reform to date in the OHADA landscape. 

    INTRODUCTION 

    On 23 and 24 November 2017, the OHADA Council of Minister modified and revised the two laws governing arbitration in the OHADA area: The Uniform Act on Arbitration[1] (UAA), and the CCJA Arbitration Rules. The new laws came into force on 15 March 2018. One of the substantive modifications of the OHADA reform on arbitration was the insertion of investment arbitration provisions in the UAA and the CCJA Arbitration Rules. Initially, OHADA Arbitration laws turned to commercial arbitration even though it had often dealt with disputes resulting from investment arbitration.[2] Following 2017’s revised provisions, the UAA and CCJA’s arbitration rules moved from commercial arbitration to expressly include investment arbitration.[3] By introducing these new provisions on investment, arbitration broadens the scope of OHADA arbitration. 

    OHADA is a regional organization with Seventeen-member states.[4] These member states are also members of one of the two regional economic and monetary organizations: The Economic Community of Central African States (ECCAS) and the Economic Community of West African States (ECOWAS). Therefore, OHADA arbitration has a regional investment policy impact. 

    The investment arbitration provisions were necessary due to the growing demand. For instance, the CCJA Arbitration Centre heard investor-State disputes based on an arbitration agreement in several instances, despite the absence of related investment provisions.[5] 

    A lot has been said about the OHADA arbitration reform especially about the expansion of the scope of its application following the introduction of the investment arbitration provisions.[6] 

    The aim of this paper is not to remake an in-depth presentation of the aforementioned provisions.  Without compromising the positive contribution of the reform in particular as regard the introduction of provisions dealing with investment, this paper a bit “against the flow” will discuss the new OHADA approach toward investment arbitration, more specifically the impact of the reform to date. Have the new investment arbitration provisions appeared as a real innovation within the OHADA member States' investment landscape? Has OHADA investment arbitration evolved since the revised UAA and CCJA arbitration rules came into force? Can innovation be evidenced in the OHADA investment landscape? 

    This paper provides answers to the following questions.

    I.       OHADA investment arbitration provisions: a real innovation for resolving investment disputes within the OHADA Member States?  

    OHADA arbitration in itself has its roots in the OHADA Treaty. Hence, OHADA investment arbitration provisions must comply with the OHADA Treaty (A). Therefore, one can only expect the revised law to comply with the trend of investment arbitration laws (B). 

    A.    The trend of the OHADA Treaty  

    Both the UAA and the CCJA arbitration rules are based on the OHADA Treaty. As per the OHADA Treaty,[7] “Pursuant to an arbitration clause or submission agreement, any party to a contract may submit a contractual dispute to arbitration as provided for in this part, where one of the parties is domiciled or has his usual place of residence in the territory of a State Party, or where the contract is performed or will be performed wholly or partly in the territory of one or more States Parties…”

    The UAA provides that “An arbitration may be based on an arbitration agreement or on an instrument regarding an investment, in particular an investment code or a bilateral or multilateral investment treaty” and the CCJA revised Arbitration rules provide that “The mandate of the Court shall be the administration, in accordance with these Rules, of arbitral proceedings when a contractual dispute, pursuant to an arbitration agreement, is referred to it by any party to a contract, either where one of the parties is a resident or has its usual place of residence in the territory of one or more of the Member States, or where the contract is performed or to be performed, in whole or in part, in the territory of one or more Member States. The Court may also administer arbitral proceedings based on an instrument related to an investment, in particular, an investment code or a bilateral or multilateral investment treaty”.

    Article 21 of the OHADA Treaty seems to limit OHADA arbitration to disputes arising from a contract and states also that one of the parties must be domiciled or has his usual place of residence in the territory of a State or that the contract shall be performed wholly or partly in the territory of one or more State Parties. 

    Thus, two conditions form the basis of OHADA Arbitration: A dispute arising from a contract and the domiciliation or place of residence in the territory of a Member State or the performance of the contract in one or more State parties.  

    If one looks especially at article 2.1 of the CCJA Arbitration Rules[8], it is clear that the first part of article 21 of the OHADA Treaty has been maintained. However, unlike the first part of article 21, there is no indication in the second part of article 2.1 dealing with investment arbitration, particularly whether one of the parties to the investment disputes must be domiciled or has his usual place of residence in the territory of a state party, or whether the investment is to be performed wholly or partly in the territory of one or more States Parties. 

    Besides, article 21 of the OHADA Treaty remains in its current wording, limited to disputes arising from a contract while articles 3 of the UAA and 2.1 of the CCJA arbitration rules open OHADA arbitration to disputes arising from an investment based on an international investment instrument such as an investment code or a bilateral or multilateral investment treaty.[9] 

    The new provisions in the UAA and the CCJA Arbitration rules disconnect with the OHADA Treaty as it fails to consider the state or the residence of the parties or the place of performance of the investment[10]. Once the international instrument has designed CCJA as the forum where the dispute must be settled, the CCJA has jurisdiction regardless the state, place of residence of the Parties or the performance of the investment within the OHADA area. Thus, the current wording does not comply with the current requirements of OHADA arbitration and has to be clarified or completed. 

    Discussing compliance between the new OHADA provisions on investment arbitration, some authors have argued that the actual reform of OHADA arbitration will be achieved with the OHADA Treaty reform.[11]

    Even if the practitioners, especially arbitral tribunal who will be dealing with these provisions as they are written will have to interpret them broadly, in favour of disputes relating to investment arising from international investment instruments in the OHADA area, there should be a rationale to revise the OHADA Treaty to expressly include investment arbitration. There is also a rationale to review the OHADA arbitration provisions on investment that have been added so that the conditions relating to domiciliation and performance of the investment in one of the many OHADA States appear clearly. 

    In any event, some adjustments are still needed to complete the OHADA reform on arbitration. 

    The same remark applies when one looks at investment requirements that should underlie legislation dealing with investment arbitration. 

    B.    The trend of the investment arbitration requirements and its policy 

    The development noted in OHADA arbitration legislation concerning investment arbitration has been marked by an "inclusion" policy. In other words, despite the substantive changesets observed, the OHADA legislator has chosen not to disrupt the structure of the texts as they existed. This choice was justified by the desire not to disturb the practitioners who were already familiar with the existing system of the OHADA arbitration texts. 

    If this choice not to encumber the existing texts is not in itself subject to criticism, since substantive modifications can be emphasized,[12] the legislator left out some essential requirements, especially dealing with investment arbitration. In other words, they are few added considerations regarding investment arbitration in the OHADA provisions related to investment arbitrations.  

    One of the requirements of investment arbitration is Transparency. As a matter of fact, investment disputes imply States or one of its entities and therefore public interest such as protection of public health or environment is a concern. Thus, Transparency in investment arbitration implies access of the general public and interest groups such as various non-governmental organizations to the final awards and proceedings[13] and information resulting from those proceedings.

    The need for Transparency in investment arbitration mushroomed through the participation of amicus curiae in arbitral proceedings. Amicus curiae's involvement in investment arbitration responds to continuing public pressure and criticism of the ISDS system. Allowing third parties such as NGOs and civil society groups to intervene in arbitral proceedings contributes to the ISDS system.[14] 

    One of the questions raised when looking at the OHADA arbitration texts as revised is whether amicus curiae intervention can be allowed in case of investment disputes involving an OHADA State Party against an investor. Neither the UAA, nor the CCJA rules have considered that extremely topical subject. Article 8-2 of the CCJA's arbitration rules on voluntary intervention is the solution because it is written in general terms[15]and can be used to allow intervention of third parties, but this intervention is submitted to publicity of the proceedings and the consent of the parties.[16] However, it appears that the principle within OHADA arbitration is still confidentiality of the proceedings.[17] Access to information and documents related to an arbitration proceeding under the OHADA arbitration rules is subject to the consent of all the parties and to their will to publicize their dispute. [18] 

    Upstream the trend in investment arbitration, the OHADA rules have not taken directly into account the requirement of Transparency in investment while: 

    • The new OHADA legislation on arbitration has been enacted after the adoption and entry into force of the Mauritius Convention on Transparency ; [19] Some OHADA State Members have signed and ratified the Convention.[20] Thus, Article 3 of the said convention Rules of Transparency apply to their BITs; 
    • BITs signed between some OHADA member States and Canada expressly referred to the application of UNCITRAL arbitration rules.[21] Since these BITs have been concluded after 1st April 2014, UNCITRAL Rules on Transparency applied to them. OHADA member States are open to the application of UNCITRAL rules on Transparency. Therefore, with the expansion of the scope of application of OHADA arbitration rules to investment arbitration, it is necessary to align with UNCITRAL rules on Transparency to avoid any doubt in the application of provisions relating to Transparency on investment arbitration proceedings within the OHADA area;[22]
    • Many other arbitration institutions have adopted rules on Transparency. See, for example, The Investment Arbitration Rules of the Singapore International Arbitration Centre (SIAC IA),[23] the China International Economic and Trade Arbitration Commission (CIETAC) “Arbitration Rules on investment disputes” [24] or more recently in 2019, the ICC who provided new rules on Transparency foreseeing the possibility for the arbitral tribunal, after consulting of the parties, to adopt measures to allow oral or written submissions by amici curiae and non-disputing parties.[25] These ICC rules on Transparency have been confirmed in the 2021 note to parties and arbitral tribunal on the conduct of the arbitration under the ICC rules of arbitration.[26] 

    The structure of OHADA texts on arbitration is still primarily designed for commercial arbitration than investment arbitration, despite expanding the scope of application to investment arbitration. An authoritative doctrine has raised some critical issues revealing a nature inclined towards commercial arbitration.[27] However, these criticisms do not intend to undermine the significant step taken by the OHADA legislator in expanding OHADA arbitration to investment arbitration. They are seeking to improve the existing texts. 

    Since the name of the legislation has not changed and can lead to confusion, the solution could be to develop a separate corpus of rules mainly dedicated to investment arbitration within the OHADA area.[28] Such a separation will have the advantage of clarity. 

    Broadly, one might have expected the OHADA reform on investment arbitration with a firm policy towards investment in the OHADA Member States, especially because the OHADA reform on arbitration coincides with the discussion about the ISDS reform at UNCITRAL, which started in late 2017.[29]  

    There has been an increase in attendance of African states between the first session in late 2017 and the last in-person session in January 2020°. It is also true that an Africa intersession commission has been put in place to discuss the ISDS reform from an African perspective.[30] This African intersession Commission comprises some OHADA Members states, the African Legal Support Facility, Francophonie and other NGOs; nevertheless, there is no precise position arising from these meetings on the policy these countries want to implement for their investment laws and international investment instruments at a regional level, for instance.

    It is unfortunate that within the OHADA area, there are still isolated positions on such a sensitive topic. Some OHADA Member States have expressed their standpoint towards the ISDS ongoing reform at UNCITRAL, Burkina Faso in 2020[31] and Mali in 2019[32]. A single voice carried by the whole Organisation on behalf of all the Member States could have been more constructive. What is the position of OHADA Members states towards ISDS? Would the OHADA Member States want to terminate the existing BITs and renegotiate them? On what criteria? 

    The OHADA Organisation has not seized the opportunity to express its opinion on how its perceived investment policies should be. 

    II.             OHADA investment arbitration provisions: a real influence on investment policies of OHADA Member States? 

    For consistency, this section should also lead the reader to two considerations related to changesets observed in primary texts referring to investment within the OHADA area, if any (A) and in newly BITs concluded by OHADA Member States after the reform (B). 

    A.    An influence on primary texts referring to investment within the OHADA Area? 

    As stated in the introduction, OHADA Member states are also members of the Economic Community of Central African States (ECCAS) and the Economic Community of West African States (ECOWAS). Some instruments of these regional organizations are aimed at investment regulation. Albeit non-exhaustive, this includes the CEMAC Common Convention on Investments in the States of the Customs and Economic Union of Central Africa, the CEMAC charter of Investments or the Economic Community of the West African States Supplementary Act.[33] 

    Part V of the CEMAC Common Convention on investments in the States of the Customs and Economic Union of Central Africa is dedicated to the settlement of disputes with chapter III dealing with arbitration. 

    The preamble of the Charter of investment of CEMAC states that Member States adhere to international main mechanisms guaranteeing investments including those relating to international arbitral courts proceedings and to the recognition and enforcement of arbitral awards. Article 4 paragraph 2 of the said investment Charter stipulates that all Member States of CEMAC adhere to the OHADA Treaty and article 5 paragraph 2 states that CEMAC Member States encourage recourse to arbitration and ensure the enforcement of arbitral awards. 

    The ECOWAS Supplementary Act was signed in 2008 and entered into force in 2009 to harmonize national laws and create a single Community investment Code. It provides for ISDS but only through arbitration at national courts or national investment arbitration centres.[34]

    One might observe that the OHADA arbitration reform did not lead, at least for now, to modification on the primary texts referring to investments within the OHADA area, although some of them are obsolete[35].

    The Charter of investment of CEMAC already encourages arbitration; however, with the expansion of OHADA arbitration scope, an express reference can be directly made to OHADA arbitration under the UAA or CCJA arbitration rules.

    There is a need to reform or adapt these existing legislations with the investment policy the OHADA Member States would like to implement, which have been reflected in opening OHADA arbitration expressly to disputes arising from investments.

    The idea behind this is that the existing primary texts within ECCAS and ECOWAS must encourage OHADA arbitration. This remark also applies to BITs concluded by OHADA Member States. 

    B.    An influence in  newly concluded BITs by OHADA Member States after the reform?

    Most of the OHADA States, if not all, are host countries for investments. They are, therefore, signatories of many BITs aimed to protect foreign investors. To date, OHADA Member States have signed about 220 BITs with developed countries and other African countries .[36] 

    A handful of OHADA countries have signed new BITs after enacting new OHADA texts on arbitration that expand the scope of OHADA arbitration to investment disputes. These BITs include; Burkina -Faso – Turkey BIT[37], Congo- Morocco BIT 2018[38], Côte d’Ivoire-Japan BIT 2020[39], or Mali -UAE and Mali-Turkey BIT 2018.[40] 

    BITs give foreign investors the possibility of choosing from many arbitration options, the one the investor would like to sue the host state. In a large majority of BIT’s signed by OHADA member States, there is an option for international arbitration institutions such as ICSID, UNCITRAL or ICC.[41] Some references to OHADA arbitration exist but are still not systematic.[42] 

    It has been noted for example in BITs signed in 2014 by some OHADA Member States and CANADA for example, that only ICSID and UNCITRAL are mentioned as possible arbitration institutions before which an investor can sue the host state.[43] 

    The situation is not fundamentally different in the new BITs signed after the OHADA arbitration reform. Most of these BITs provide for ICSID, UNCITRAL or ICC arbitration.[44] This is the case even in BITs signed between an OHADA Member State and another African country.[45]

    One of the exciting BITs of this series is the Burkina Faso – Turkey BIT signed in 2019, which provides an option for one arbitral institution within the OHADA area, the Ouagadougou Arbitration, Mediation and Conciliation Centre (CAMCO).[46] An interesting trend observed in that BIT and some others like the Côte d'Ivoire – Japan BIT is the parties' possibility to submit their dispute to "any other arbitral institution or arbitration rule".[47] Hence, one might expect that parties agree to submit their disputes to CCJA arbitration rules or an ad hoc arbitration under the UAA. 

    OHADA governments must show interest in their arbitration system by including OHADA arbitration as a possible forum of settlement of disputes between one Contracting Party and the investors of other contracting parties in the framework of the BITs they signed. This has to be the case, mainly when investment is performed in one OHADA country. To this effect, an author stated: “The credibility of an arbitration center is measured by the confidence it inspires in those who created it, manifested by its designation in arbitration clauses, national and international provisions”.[48] 

    CONCLUSION 

    The inclusion of investment arbitration in the UAA and the CCJA Arbitration Rules is an innovation in the OHADA investment dispute resolution landscape. However this inclusion has to date a limited impact deemed unachieved. Furthermore, these investment provisions need to comply with the OHADA Treaty and include investment requirements in the law. As of now, the expansion of OHADA arbitration to investment arbitration has no real impact on the investment framework. It's relevant to note that BITs concluded after the OHADA arbitration contain few references to OHADA arbitration.

    Furthermore, the investment arbitration policy within the OHADA Member States is not consistent. Do these States intend to terminate the former BITs and negotiate new ones on a more protective basis? Or do they continue to impose the provisions of investment agreements they signed? The OHADA organization is silent on the ISDS reform initiated by UNCITRAL, reform currently at its ends. 

    The criticisms addressed above do not mean that the OHADA system of arbitration is not ready for investment arbitration. A strong foundation has been built before it, as it was possible to settle investment disputes within the OHADA arbitration framework. The current structure has to be completed, or rather, it would be better to have legislation dedicated especially to investment arbitration to avoid confusion or room for numerous interpretations. 

    Practitioners appointed or chosen as arbitrators should use the current texts and interpret them to ensure adherence to investment requirements. Parties also have a significant role to play. 

    It is also up to the Courts and CCJA to adopt an extensive favour arbitri interpretation of the current provisions when dealing with investment arbitration. Some OHADA Member States have signed the Mauritius Convention on Transparency and its application cannot be contrary to the public order in these countries if there is a need to apply provisions on transparency. 

    OHADA member states government shall continue improving their investment arbitration mechanisms and trust them.

    ____________________________

    *Research Officer APAA, Co-founder & Partner HBE AVOCATS 

    [1] The First OHADA arbitration texts were adopted in 1999.

    [2] Prior to the OHADA reform on arbitration, the CCJA was often used as an investment arbitration tribunal. Some BITs for instance have referenced the CCJA as a possible arbitration institution in case a dispute arises.

    [3] Art.3 UAA, Art 2.1 CCJA Arbitration rules.

    [4] BENIN, BURKINA FASO, CAMEROON, CENTRAL AFRICAN REPUBLIC, CHAD, COMOROS, CONGO, DEMOCRATIC REPUBLIC OF CONGO, EQUATORIAL GUINEA, GABON, GUINEA, GUINEA – BISSAU, IVORY COAST, MALI, NIGER, SENEGAL, TOGO.

    [5] M.Kebe, « The attractiveness of the new OHADA arbitration Act”, https://www.lexology.com/library/detail.aspx?g=680f77e3-1b8c-4327-87c1-183a7abc45f4

    [6] See for example, T. Kendra, OHADA Arbitration: Reforms adopted to keep the system modern, https://www.lexology.com/library/detail.aspx?g=c0f818a3-0aa7-4d0b-9a34-afea60ee8b00

    R. Ziade, C. Fouchard, 30 march 2018, New OHADA Arbitration Text Enters into Force, http://arbitrationblog.kluwerarbitration.com/2018/03/30/new-ohada-arbitration-text-enters-into-force/

    L. Franc-Menget, M.Papadhopulli , OHADA Arbitration Reform – Publication of the New Uniform Act Arbitration and the Revised CCJA Arbitration Rules, https://hsfnotes.com/arbitration/2017/12/22/ohada-arbitration-reform-publication-of-the-new-uniform-act-on-arbitration-and-the-revised-ccja-arbitration-rules/
     F. Bernauer,  V. Bénézech, G. Mezache The reform of OHADA's arbitration: a promise of greater efficiency?, https://iclg.com/alb/8370-the-reform-of-ohadas-arbitration-a-promise-of-greater-efficiency
    P. Mabiala, Reforms to OHADA Arbitration Law, 2 November 2018, https://thearbitrationbrief.com/2018/11/02/reforms-to-ohada-arbitration-law/
    G. Kenfack Douajni “Recent Developments in OHADA Arbitration, 11 April 2019 https://globalarbitrationreview.com/review/the-middle-eastern-and-african-arbitration-review/2019/article/recent-developments-in-ohada-arbitration.

    M. Kebe, Geni & Kebe SCP , The attractiveness of the new OHADA Arbitration Act, https://www.lexology.com/library/detail.aspx?g=680f77e3-1b8c-4327-87c1-183a7abc45f4

    [7] Art 21 OHADA Treaty

    [8] CCJA Arbitration is directly based on article 21 of the OHADA Treaty.

    [9] For more development on the compliance between the compliance between new OHADA arbitration provisions on investment and OHADA Treaty see for example, W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”in A. Ngwanza (ed), Vingt ans d’arbitrage OHADA: bilan et perspectives, LexisNexis, 2019, pages  285-301, sp. 292- 293.

    [10] W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”, op.cit, p. 295.

    [11] See for example, G. Kenfack Douajni, in “Le nouveau droit de l’arbitrage OHADA”, Rev. Camerounaise Arb, special volume, May 2018, p.59

    [12] OHADA arbitration reform is aimed at more efficiency and transparency of arbitral proceedings. See for e.g Parties’s duty of loyalty and efficiency, arts 14 UAA, 16 CCJA arbitration rules, duty of impartiality and independence, prompt recognition of Arbitral awards art. 31 UAA, 30 CCJA Arbitration rules. For a summary on efficiency and transparency of the OHADA reform on arbitration R. Ziade, C. Fouchard, 30 march 2018, New OHADA Arbitration Text Enters into Force, http://arbitrationblog.kluwerarbitration.com/2018/03/30/new-ohada-arbitration-text-enters-into-force/.

    [13] O. Svoboda, “Current state of Transparency in investment arbitration: progress made but not enough”, Cofola international 2017, Conference proceedings, p. 26; A. Kouyate “ La transparence dans l’arbitrage CCJA”, in A. Ngwanza (ed), Vingt ans d’arbitrage OHADA: bilan et perspectives, LexisNexis, 2019, pages  303-321, sp.314.

    [14] L.Y. Fortier  and R. Thériault “La transparence de l’arbitrage  international à l’ère des différends États-investisseurs : du mythe à la réalité”, in mélanges en l’honneur de Alain Prujiner, Ed. Yvon Blais, 2011, p.67, sp.p.98.

    [15] Art. 8-2 “No voluntary intervention shall be admissible before the constitution of the arbitral tribunal.

    After the constitution of the arbitral tribunal, any voluntary intervention to an arbitral proceedings shall be subject to approval by the parties and the arbitral tribunal”.

    [16] W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”, op.cit. p. 298-299.

    [17] Art. 14 CCJA Arbitration Rules : “Arbitral proceedings shall be confidential. The work of the Court relating to conduct of arbitral proceedings shall be subject to this rule of confidentiality, as well as any meeting of the Court held for the purpose of administering the arbitration. Confidentiality shall also apply to documents submitted to the latter or drafted by it in the course of the administered proceedings.

    Unless otherwise agreed by all parties, the latter and their counsel, the arbitrators, the experts and any person involved in arbitral proceedings shall be bound by the duty to respect the confidentiality of the information and of the documents produced during the said proceedings. Confidentiality shall extend under the same conditions to arbitral awards.

    The Secretary General may publish extracts from arbitral awards without mentioning elements which would enable the parties to be identified.

    [18] On that question see W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”, op.cit. p.299.

    [19] https://uncitral.un.org/en/texts/arbitration/conventions/transparency

    [20] https://uncitral.un.org/en/texts/arbitration/conventions/transparency/status.

    [21] Burkina Faso, Cameroon, Côte d’Ivoire, Guinea, Mali and Senegal have signed BITs with CANADA in 2014 and 2015. Most of them refer to the application of UNCITRAL Arbitration rules. All these BITs are available on https://investmentpolicy.unctad.org/international-investment-agreements.

    [22] A. Kouyate, « La transparence dans l’arbitrage CCJA », op.cit, p. 314-315.

    [23] https://www.siac.org.sg/images/stories/articles/rules/IA/SIAC%20Investment%20Rules%202017.pdf

    [24] China International Economic and Trade Arbitration Commission (CIETAC) “Arbitration Rules on investment disputes.

    [25] W. Ben Hamida « L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA », op.cit p.298/

    Also ,https://cdn.iccwbo.org/content/uploads/sites/3/2017/03/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration.pdf § 139-143.

    [26]https://iccwbo.org/content/uploads/sites/3/2020/12/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration-english-2021.pdf § 173-178

    [27] W. Ben Hamida « L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA », demonstrates that despite the expansion to investment arbitration most of the provisions, if not all refer to arbitration agreement ignoring investment arbitration see for example the following articles of CCJA Arbitration Rules : 8 on forced intervention, 9 on the control prima facie of the tribunal jurisdiction, 10 on party autonomy… the same critics are addressed to the UAA.

    [28] W. Ben Hamida « L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA », op.cit, p. 301.

    [29] The first meeting of the  UNCITRAL Working Group ISDS Reform took place from the 27 November – 1 December 2017. More details on ISDS Reform on  https://uncitral.un.org/en/working_groups/3/investor-state

    [30] http://undocs.org/en/A/CN.9/WG.III/WP.183

    [31] http://undocs.org/en/A/CN.9/WG.III/WP.199

    [32] http://undocs.org/en/A/CN.9/WG.III/WP.181

    [33] Common Convention on Investments in the States of the Customs and Economic Union of Central Africa (adopted 14 December 1965, entered into force 1 April 1966). The CEMAC Charter of investments was signed in December 1999, Economic Community of West African States Supplementary Act A/Sa.3/12/08 Adopting Community Rules on Investment and the Modalities for Their Implementation with ECOWAS (signed 19 December 2008, entered into force 19 January 2009).

    [34] M. Freedomm Qumba, “Assessing African Regional Investment Instruments and Investor- State Dispute Settlement”,  British Institute of International and Comparative Law 2020, Pages 197 - 232 , see  especially p. 201

    [35] See for example the Common Convention on Investments in the States of the Customs and Economic Union of Central Africa, adopted 14 December 1965, entered into force 1 April 1966.

    [36] https://investmentpolicy.unctad.org/international-investment-agreements/

    [37] https://investmentpolicy.unctad.org/international-investment-agreements/countries/31/burkina-faso

    [38] https://investmentpolicy.unctad.org/international-investment-agreements/countries/47/congo

    [39] https://investmentpolicy.unctad.org/international-investment-agreements/countries/50/c-te-d-ivoire

    [40] https://investmentpolicy.unctad.org/international-investment-agreements/countries/129/mali

    [41] See for example  the new generation of BIT’s signed between seven  OHADA Member States (Benin, Burkina Faso, Cameroon, Côte d’Ivoire, Guinea, Mali and Senegal) and Canada in 2014 and 2015.

    [42] See for example Benin – Burkina Faso, Benin - Chad BITs 2001, France – Senegal BIT 2007 containing references to OHADA Arbitration. The reference to OHADA arbitration can be found also in some investment law. See for example the Charter of investment of the Central African Republic (2001), Mali investment Code (2005) Congo investment Code (2003) or the Togo investment Code (2012). It’s important to note, however, that wording used in these different instruments to make reference to OHADA arbitration as an option to settle investment disputes can sometimes lead to confusion or have to be subject to interpretation.

    [43] See note 27 and 37 above.

    [44] See Art. 9 Congo-Morocco BIT 2018, Arts 10 and 11 Mali -UAE , Mali-TURKEY BITs, Art 23 Côte d’Ivoire – Japan BIT.

    [45] For example Congo- Morocco BIT 2018. One might expect to have at least a reference to an African arbitration option such as OHADA arbitration or a Morocco arbitration institution.

    [46] See Art 10 If after a period of six (6) months :from the date of the written notification referred to in paragraph 2, the consultations and negotiations have not made it possible to settle such disputes, they may be submitted, as the investor may choose, to:

    (a) to the competent court of the Contracting Party in whose territory the investment was made;

    (b) or, subject to the condition set out in paragraph 5 of this Article, to

    (i) the International Centre for the Settlement of Investment Disputes (ICSID) established by the "Convention on the Settlement of Investment Disputes between States and Nationals of Other States" in the event that both Contracting Parties are Parties to this Convention;

    (ii) an Ad Hoc Arbitral Tribunal established under the Rules of Arbitration Procedure of the United Nations Commission on International Trade Law (UNCITRAL), approved by the United Nations General Assembly on 15 December 1976, as revised in 2010;

    (iii) the Istanbul Arbitration Centre;

    (iv) the Ouagadougou Arbitration, Meditation and Conciliation Centre (CAMCO);

    (v) any other arbitral institution or arbitration rule, if the parties in the dispute agree.

    [47] Arts. 10 Burkina-Faso – Turkey BIT, 23 Côte d’Ivoire- Japan BIT

    [48] J-C Ngnintedem, « Le juge OHADA et l’investissement international », RDAI 2015-1, P.105, sp. p.106.

  • 10 May 2021 12:36 PM | Anonymous

    Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

    [1]

    Introduction

    The COVID-19 Pandemic (the “Pandemic”) accelerated the process of mainstreaming technology in arbitration and reshaping the way we perceive legal practice. With lockdowns in place, travel restrictions, and imposed social distancing measures, arbitral institutions, parties, and tribunals are required to adapt to this unprecedented situation. After all, “in times of crisis, whether actual, foreseeable or pending, time and money are of the essence, […] hence the need for innovation and tailored solutions”.[2]  Life, businesses, and disputes must go on as usual. New cost and time efficient solutions must be implemented to ensure the smooth conduct of ongoing and future arbitral proceedings, especially as one year into the Pandemic, it does not seem that life will be back to normal anytime soon. This article provides a brief outline of the risks of high-tech in international arbitration, raising issues that need to be addressed to ensure arbitrations can proceed seamlessly during the Pandemic and beyond.

    I- High-Tech in International Arbitration: The Risks

    The use of technology in international arbitration is not immune to risks or challenges some of which are technical in nature (A) whereas the others relate to procedural matters and due process concerns (B).

    A- Technical Risks

    1.     Technological illiteracy and unequal access to the internet

    Most readers would remember the lawyer shouting “I am not a cat” as he mistakenly used a filter during a court hearing on Zoom. This video[3] that went viral revealed the technological illiteracy that many arbitrators, counsels, witnesses, or experts suffer from due to their failure to catch up with technology. The Pandemic took us all by surprise, and so did our need to become tech savvy. With other professional and family obligations, one wonders when practitioners will have the time to educate themselves in the use of technology. The pressure is on as failure to do so will negatively impact their chances of being appointed as counsel and arbitrators. More importantly, however, incidents such as the cat filter are disruptive to say the least and can delay if not obstruct the resolution of multi-million-dollar disputes, thus defeating the purpose of resorting to technology in the first place.

    The use of high tech in arbitration also raises the issue of unequal access to the internet. With interruptions being common in the developing world, causing delays and disruptions to the online hearings,[4] it is unclear how international commercial or investor-State arbitrations involving counsel from areas with unreliable internet access will be managed without interruption. Unless this issue is addressed, the existing preference for hiring counsel and arbitrators from the developed world will continue, perpetuating a phenomenon that lawyers from the developing world are working hard to change.

    2.     Cyber-Security

    Confidentiality is one of the most attractive benefits of arbitration and is an issue that various arbitration institutions emphasize in their procedural rules.[5] That said, the confidentiality of the proceedings can be easily compromised in the context of virtual hearings. A survey conducted in 2018 by Bryan Cave Leighton Paisner found  that among the 105 surveyed practitioners (arbitrators, experts, counsels, etc.) from all regions of the world, 11% experienced a security breach (i.e., an unauthorized third party was able to obtain access to electronic documents or other information).[6] Moreover, in 2017, LogicForce, a cybersecurity consulting firm, surveyed 200 law firms and found that all firms were subject to hacking attempts and that 40% of these firms were unaware of such hacking until the study was conducted.[7] It is worth noting that these surveys were conducted before the Pandemic and the proliferation of virtual hearings. With the increase in virtual hearings (and the hackers’ knowledge of such increase), one expects a surge in cyber-attacks.

    Hackers may be inclined to gain unauthorized access to videoconferencing apps or online platforms in the hope of accessing any confidential information such as trade secrets (notably in intellectual property and pharma disputes, among others). This is not limited to commercial disputes as hacking can also take place in State to State or investor-State arbitration, leaving intelligence information vulnerable to unauthorized access. For example, it is reported that in 2015, hackers successfully breached the website of the Permanent Court of Arbitration in the Hague, the Philippines’ Department of Justice and the law firm representing the Philippines during the Philippines-China territorial dispute in the South China Sea;[8] and in Libananco v. Turkey (ICSID Case ARB/06/08), Turkey managed to intercept correspondence between Claimant’s counsel and third parties.[9] Now, with the Pandemic ravaging the world and many arbitrations being conducted via Zoom, it is worth mentioning that this app was under scrutiny for a flaw in the system, allowing for anyone with access to the link to view (and potentially record) the video call.[10]

    3.     Data protection

    The protection of personal information must also be guaranteed especially considering the increased promulgation of data protection laws in various jurisdictions. Personal data is broadly defined as “any information relating to an identified or identifiable natural person” (e.g., name, email, address, credit card and banking information, civil and marital status, etc.)[11] It follows that the consequences of this information being known to unauthorised persons can be devastating as it may lead to identity theft, compromising the personal security of arbitrators, witnesses, and experts, threats to family, extorsion, and other forms of abuse.

    Given the importance of protecting personal information, the ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration provides that participants in arbitration “are aware and accept that their personal data may have to be collected, transferred, published and archived for purposes of the arbitration, and (ii) that applicable data protection regulations, including the GDPR, are complied with”. [Emphasis added]

    Documents and pleadings are typically stored on a cloud platform, and while cloud service providers generally indicate in their privacy policies that they take all the necessary physical and technological measures to safeguard information they are entrusted with, such measures are not “bulletproof”, leaving personal information vulnerable to security breaches. For example, it is reported that (i) in 2012, more than 68 million Dropbox user accounts on Dropbox; (ii) in 2016, LinkedIn was hacked, and the hackers posted and sold 167 million emails and passwords online; and (iii) Yahoo was hacked in 2013, compromising more than a billion user accounts.[12]

    B- Legal Risks

    Following the Pandemic, parties and institutions were faced with the difficult decision of needing to either stay ongoing proceedings until further notice or opting for virtual hearings. While the decision is easy when the parties are aligned, since all the tribunal needs to do is comply with the Parties’ wishes, things become more complicated when either or both parties object to conducting virtual hearings. Since arbitration procedures largely depend on the lex loci arbitri, [13] should the law of the seat not be sufficiently flexible or welcoming of virtual hearings, issues of annulment will arise.

    Sadly, not all legal systems are tech-friendly; and since we are still exploring the effects of virtual hearings throughout the world, one expects courts dealing with annulment claims to possibly re-interpret applicable law. One such example is the Egyptian Court of Cassation which, in a recent judgment, acknowledged the possibility of conducting hearings outside of Egypt (or even virtually) while deeming the arbitration to be seated in in Egypt.[14] For virtual hearings to be acceptable worldwide, courts in other jurisdictions should follow suit.[15]

    II- High-Tech in International Arbitration: The Remedies

    While the use of technology in international arbitration has its challenges, it is also an efficient and convenient way to conduct proceedings during lockdowns and imposed social distancing measures. This prompted the arbitration community to come up with a list of possible technical remeidies: (A) and procedural remedies (B) that should allow tribunals to conduct arbitrations smoothly.

    A- Technical remedies

    Cybersecurity and data protection issues should be raised as early as possible, i.e., during the first case management conference.[16] Raising cybersecurity and data protection concerns at the outset of the arbitration allows the parties and the tribunal to assess all possible risks that might occur during the proceedings and to agree on solutions to prevent external disruptions of the proceedings.

    Parties and tribunals are encouraged to agree on a cyber security and privacy protocol that lays out the manner in which the virtual hearing will be conducted, thus ensuring the confidentiality of the proceedings as recommended by the Africa Arbitration Academy Protocol on Virtual Hearings in Africa (the “AAA Protocol”) and other organizations and arbitral institutions (e.g., the ICC Guidance Note  on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic and the ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration).

    To prevent security breaches, parties and institutions must use secured digital platforms and videoconferencing applications with end-to-end encryption for both data storage and virtual hearings.[17] This is highly recommended by the ICC and the Africa Arbitration Academy.[18]

    Furthermore, parties and tribunals must restrict access to the arbitration proceedings to a limited number of people authorized to participate in the proceedings (e.g., parties, counsel, tribunal members, tribunal secretary, witnesses, experts, etc.). This can be achieved with the installment of a two-factor authentication mechanism, which “provides an additional layer of security so that only authorized individuals are accessing sensitive information”.[19] The two-factor authentication mechanism will ensure that all participants feel secure about the confidentiality of the information they disclose in a virtual hearing or through a database.[20]

    The question of data protection must be considered at every phase of the arbitration proceedings, starting from the request for arbitration and ending with the issuance of the award and subsequent retention and deletion of the personal data, which must comply with applicable law.[21] Each phase must comply with the common principles of fair and lawful processing, proportionality, data minimization, purpose limitation, accuracy, data security, and transparency,[22] all while giving the data subjects the opportunity to exercise their rights under applicable law.[23]

    In order to comply with the general principles of personal data processing, data encryption must be resorted to as it is an effective way of ensuring the confidentiality of information collected. The ICC Guidance Note also requires that the parties and arbitral tribunals envisage the “minimum requirements of encryption to safeguard the integrity and security of the virtual hearing against any hacking, illicit access, etc.”[24]

    The foregoing measures aim to maximize the confidentiality and security of virtual hearings, communication between the parties and/or tribunals, as well as the security of the documents shared online.

    B- Legal remedies

    Issues of fairness and due process related to the use of technology in arbitration proceedings can be remedied by ensuring the transparency of the hearings, where each party is given the opportunity to defend its position even if not physically present at the venue of the hearing.  

    During witness or expert examination, the video conferencing system must allow maximum visibility so that witnesses or experts could be seen, and the tribunal could confirm that no unauthorized person is present with them. To this end, online proctoring software and cameras can be installed after clearing privacy risks and securing the concerned parties’ informed consent.

    Tribunals must also exercise their right to postpone a virtual hearing if it will result in unfairness to a particular party, (e.g., a party with poor internet connection) until the issue is addressed. Failure to do so can expose subsequent awards to annulment.

    Conclusion

    The use of technology in arbitration is “now progressively becoming the new normal”.[25] More so, the Pandemic has shown how flexible arbitration can be,[26] and the extent to which it can adapt to changing circumstances.

    A year into the Pandemic, the number of virtual arbitral proceedings increased tremendously (virtual hearings are reported to be eleven times more common after 15 March 2020 than before),[27] and introduced technical and legal challenges, which may be overcome with a bit of creativity and eagerness to adapt. The Pandemic has shown us that the traditional methods of conducting arbitration (e.g., submission of hard copies, in-person hearings, etc.) may need to change and that there are more cost and time-efficient ways of doing things. Unfortunate as it may be, it took a Pandemic to push us to adapt to the requirements of the twenty-first century. As some would say, better late than never!

    ____________________________

    * Partner, Shahid Law Firm, Cairo, Egypt. The author wishes to thank Shahid Law Firm Associate, Hoda El-Beheiry for her contribution to this article.

    [2] Mohamed S. Abdel Wahab, “Dispute Prevention, Management and Resolution in Times of Crisis Between Tradition and Innovation: The COVID-19 Catalytic Crisis”, in International Arbitration and the COVID-19 Revolution, edited by Maxi Scherer, Niuscha Bassiri and Mohamed S. Abdel Wahab, Wolters Kluwer, 2020.

    [3] https://www.youtube.com/watch?v=9f9eDBpnkaU.

    [4] Jiyoon Hong and Jong Ho Hwang, “Safeguarding the Future Arbitration: Seoul Protocol Tackles the Risks of Videoconferencing”, Kluwer Arbitration Blog, 6 April 2020.

    [5] Article 28 (3) of the UNCITRAL Arbitration Rules states that hearings should be conducted in private unless otherwise agreed by the parties. Article 30 (1) of the LCIA Rules provides that “The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority. The parties shall seek the same undertaking of confidentiality from all those that it involves in the arbitration, including but not limited to any authorised representative, witness of fact, expert or service provider”. Furthermore, Article 22(3) of the ICC Rules provide that “upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information”.

    [6] Bryan Cave Leighton Paisner, “International Arbitration Survey: Cybersecurity in International Arbitration”, 2018. https://www.bclplaw.com/images/content/1/6/v2/160089/Bryan-Cave-Leighton-Paisner-Arbitration-Survey-Report-2018.pdf 

    [7] Claire Morel de Westgaver, “Cybersecurity in International Arbitration – A Necessity and an Opportunity for Arbitral Institutions”, Kluwer Arbitration Blog, 6 October 2017.

    [8] David Turner and Gulshan Gill, “Addressing emerging cyber risks: reflections on the ICCA Cybersecurity Protocol for International Arbitration”, Practical Law Arbitration Blog, Thomson Reuters, 17 May 2019. http://arbitrationblog.practicallaw.com/addressing-emerging-cyber-risks-reflections-on-the-icca-cybersecurity-protocol-for-international-arbitration/

    [9] Claire Morel de Westgaver, “Cybersecurity in International Arbitration – A Necessity and an Opportunity for Arbitral Institutions”, Kluwer Arbitration Blog, 6 October 2017.

    [10] Jiyoon Hong and Jong Ho Hwang, “Safeguarding the Future Arbitration: Seoul Protocol Tackles the Risks of Videoconferencing”, Kluwer Arbitration Blog, 6 April 2020.

    [11] General Data Protection Regulation (“GDPR”), Article 4 (1).

    [12] Contel Bradford, “7 Most Infamous Cloud Security Breaches”, https://blog.storagecraft.com/7-infamous-cloud-security-breaches/.

    [13] Mohamed S. Abdel Wahab, “Dispute Prevention, Management and Resolution in Times of Crisis Between Tradition and Innovation: The COVID-19 Catalytic Crisis”, in International Arbitration and the COVID-19 Revolution, edited by Maxi Scherer, Niuscha Bassiri and Mohamed S. Abdel Wahab, Wolters Kluwer, 2020.

    [14] Court of Cassation, Case No. 18309/89JY, judgment dated 27 October 2020, “with the 1958 New York Convention, arbitration gradually moved away from the idea of localization, namely, the close association of arbitration with a particular geographical territory. In the context of the globalization of the legal profession, it has become common to rely on foreign lawyers to represent the parties in arbitration proceedings with their seat of arbitration in Egypt, without requiring any arbitration hearings to be held within the Egyptian territory, since the concept of the seat of arbitration as an abstract idea is not linked/related to the actual venue of arbitration hearings, especially with the increasing demand for arbitration hearings by virtual means of communication”.

    [15] See Landesbank Baden-Wurttemberg et. al v. Spain (ICSID Case No. ARB/15/45).

    [16] ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration, 2020. https://cdn.arbitration-icca.org/s3fs-public/document/media_document/icca-nyc_bar-cpr_cybersecurity_protocol_for_international_arbitration_-_electronic_version.pdf?mc_cid=23ce363898&mc_eid=6e9a9290a8.

    [17] Kun Fan, “The Impact of COVID-19 on the Administration of Justice”, Kluwer Arbitration Blog, 10 July 2020.

    [18] ICC Guidance Note, para 32; AAA Protocol, para 5.2.

    [19] Wendy G. Lozano and Naimeh Masumy, “Online Dispute Resolution Platforms: Cybersecurity Champions in the COVID-19 Era? Time for Arbitral Institutions to Embrace ODRs”, Kluwer Arbitration Blog, 25 September 2020.

    [20] Kun Fan, “The Impact of COVID-19 on the Administration of Justice”, Kluwer Arbitration Blog, 10 July 2020.

    [21] Wendy G. Lozano and Naimeh Masumy, “Online Dispute Resolution Platforms: Cybersecurity Champions in the COVID-19 Era? Time for Arbitral Institutions to Embrace ODRs”, Kluwer Arbitration Blog, 25 September 2020.

    [22] GDPR, Article 5; Data Protection Law, Article 3.

    [23] GDPR, Articles 12 to 22; Data Protection Law, Article 2.

    [24] ICC Guidance Note, Annex I, C (iii).

    [25] Joint Statement of 13 Arbitration Institutions relating to “Arbitration and COVID-19”, 16 April 2020. https://sccinstitute.com/media/1658123/covid-19-joint-statement.pdf.

    [26] Troutman Pepper, “Virtual International Arbitration and the COVID-19 Pandemic: One Institution's Approach”, Lexology, 15 April 2020. https://www.lexology.com/library/detail.aspx?g=759b1c2a-bbed-4527-982d-fcedc6dc3bc5.

    [27] Gary Born, “Empirical Study of Experiences with Remote Hearings: A Survey of Users’ Views” in International Arbitration and the COVID-19 Revolution, edited by Maxi Scherer, Niuscha Bassiri and Mohamed S. Abdel Wahab, Wolters Kluwer, 2020.

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