Adjudication, arbitration, conciliation and mediation are some of the alternative dispute resolution mechanisms in use in Zimbabwe. Of these, arbitration is the most prominent one. On the 13th of September 1996, Zimbabwe repealed its outdated Arbitration Act (Chapter 7:02) and replaced it with the Arbitration Act (Chapter 7:15). Through section 2 of the said Act, the country adopted with minor modifications, the United Nations Commission on International Trade Law (UNCITRAL) Model Law. The said Act applies to every arbitration agreement, whether made before, on or after the 13th of September 1996. It covers both domestic and international arbitration.

Matters that are not capable of determination by arbitration in Zimbabwe

In Zimbabwe, the following matters are not capable of determination by arbitration:

(a)   An agreement that is contrary to the public policy.

(b)  A dispute which in terms of any law, may not be determined by arbitration.

(c)   A criminal case.

(d)  A matrimonial cause or a matter relating to status, unless the High Court gives leave for it to be determined by arbitration.

(e)   A matter affecting the interests of a minor or an individual under a legal disability, unless the High Court gives leave for it to be determined by arbitration.

(f)   A matter concerning a consumer contract as defined in the Consumer Contracts Act (Chapter 8:03), unless the consumer has by separate agreement agreed thereto.

Arbitration in Zimbabwe

Since the introduction of the Arbitration Act (Chapter 7:15) the use of arbitration as an alternative dispute resolution mechanism has gained momentum. Most commercial contracts contain an arbitration clause that enables the parties to choose arbitration as their preferred method of resolving any existing or future dispute between them arising out of or in connection with the contract, including any question regarding its existence, validity or termination. 

Most contracts nominate the Commercial Arbitration Centre (CAC) in Harare as the appointing authority in the event that the parties are unable to agree on an arbitrator. The CAC was founded in 1995 by Muchadeyi Masunda and Ian Donovan, the godfathers of arbitration in Zimbabwe. It was the first arbitration centre to be established in Zimbabwe. The second centre, Africa Institute of Mediation and Arbitration (AIMA) is relatively new. It was established by Justice Moses Chinhengo (retired) in 2013. Most of AIMA’s panellists are retired judges. The CAC’s panellists are mostly senior lawyers, retired judges and professionals within fields such as Construction, Engineering, Accounting and Banking.

Advantages of Arbitration

More and more businesses are resorting to arbitration as a dispute resolution mechanism. This is because arbitration offers them the following advantages:

(a)   It helps them resolve their disputes in a less antagonistic manner, thereby enabling them to preserve their business relationships.

(b)  They are able to keep the dispute and its resolution away from the public, and are thus able to protect their secrets.

(c)   They are able to appoint or contribute towards the appointment of the arbitrator.

(d)  The flexible nature of the arbitral process makes it possible for them to structure the arbitral process the way they want.

(e)   It tends to be quicker and more cost effective than litigation.

(f)   The arbitral award is final.

Challenges of arbitration in Zimbabwe

Whilst the use of arbitration as a dispute resolution mechanism in Zimbabwe continues to grow, the field faces various challenges. For example, there are hardly any resources on commercial arbitration in Zimbabwe. Moreover, there is virtually no training for arbitrators taking place in Zimbabwe. Although there are several Fellows or Members of the Chartered Institute of Arbitrators in Zimbabwe, most of these received their training outside the country or by correspondence. 

Finally, apart from a few articles, there are no publications on commercial arbitration in Zimbabwe. The one book written many years ago by Muchadeyi Masunda and Ian Donovan has been out of print for over a decade.

The Book Commercial Arbitration in Zimbabwe 

In my forthcoming book entitled Commercial Arbitration in Zimbabwe, I highlight the undesirability of the state of affairs described above, underscore the importance of having trained arbitrators, and call for the training of arbitrators. 

The book will be of interest and benefit to arbitrators, lawyers, students of arbitration, judges, and those who deal with local and international contracts which include arbitration clauses. 

Anyone wanting to know about commercial arbitration in Zimbabwe, the relationship between the Zimbabwean judiciary and the arbitral process, the attitude of the Zimbabwean Courts towards arbitration agreements, how arbitral awards are enforced in Zimbabwe and the circumstances under which arbitral awards might be set aside by the Courts should struggle no more as through the book they will have easy access to that information. 

The formation of the African Arbitration Association in 2018 should encourage each African country to have readily available resources on the conduct of arbitration in their jurisdiction. This way, arbitration practitioners from different jurisdictions can share information and draw from each other’s experience with arbitration. The book Commercial Arbitration in Zimbabwe is aimed at doing exactly that for Zimbabwe.

Topics Covered by the book Commercial Arbitration in Zimbabwe

The book covers a wide range of topics, including:

·       The historical background of commercial arbitration in Zimbabwe

·       Characteristics of arbitration

·       A comparison of arbitration with litigation

·       The advantages of arbitration

·       The appointment of arbitrators

·       The qualities and qualifications of arbitrators

·       Types of arbitrators

·       The difference between the seat of arbitration and the venue

·       Principles of natural justice

·       The arbitrator’s powers

·       Interim measures

·       Security for costs

·       Termination of an arbitrator's mandate

·       Liability of arbitrators

·       Preliminary meeting

·       The hearing 

·       How to deal with a dilatory disputant

·       The Zimbabwean judicial system

·       The courts and arbitration

·       The structure and types of arbitral awards

·       The registration of awards

·       The functus officio doctrine

·       When an arbitral award may be set aside and the effect of setting aside an award

It is hoped that this book will promote the use of arbitration as a dispute resolution mechanism and shine a spotlight on commercial arbitration in Zimbabwe.

_____________________

*www.kanokangalawfirm.net

Support for Arbitral Institutions

As at May 2016, there were at least 72 Arbitration institutions in Africa.[1] Most of these institutions are privately run. By implication, arbitration is driven more by the efforts of private persons than by the efforts of government. While that is not in itself wrong, there are success stories in government-supported arbitral institutions. For instance, the Cairo Regional Centre for International Commercial Arbitration (CRCICA) is a respected arbitral institution in Africa. It started as the product of an agreement between the Asian-African Legal Consultative Organization (AALCO) and the Egyptian government. The government, therefore, played a major role in setting this organisation on its feet. Even better, the Egyptian Government endowed the CRCICA with all the privileges and immunities that will permit it to run as a truly independent body. To that end, CRCICA is accepted for its independence and the Centre is not known to have been unduly influenced by the Egyptian state, which has itself received heavy fines by CRCICA panels. For instance, on 31 January 2018, a CRCICA panel awarded damages over $1 billion against the Egyptian government.[2] Lastly, the Global Arbitration Review reports[3] that the Egyptian government has provided caseload opportunities for CRCICA by selecting CRCICA as the institution of choice in bilateral and multilateral agreements.

In Mauritius, the LCIA ran an institution known as the LCIA-MIAC which was the product of a 2011 joint agreement between the Mauritian government and the LCIA. That agreement ended in 2018 with LCIA terminating its role and leaving the Mauritius International Arbitration Centre (MIAC) to operate independently. The government’s role was crucial to negotiating the joint-venture which exposed MIAC to the top-tier arbitration access that LCIA provides. The Mauritian government has also not hidden its intentions to make Mauritius a state-of-the-art hub for arbitration in Africa. Till date, MIAC prides itself in the full support that it gets from the government of Mauritius. However, MIAC is independent of the government, and strict provisions for independence are in the MIAC constitution.

Another good example is the Kigali International Arbitration Centre (KIAC). KIAC is a generally a private-sector idea. However, it received the strong support of the Rwandan government to take off and operate. The Rwandan government promulgated LAW N°51/2010 which established the KIAC and its organs. That Act confers KIAC legal personality as well as financial and administrative autonomy. The Rules of the Centre were created by ministerial order in an official gazette. In essence, the government threw its weight behind the KIAC to facilitate the Centre’s swift development.

In Nigeria, the Lagos Court of Arbitration (LCA) completely revolutionised arbitration in Nigeria, particularly in Lagos State. In a state where arbitration was rapidly growing, the establishment of the LCA caused arbitration practice to explode. The centre is home to at least three different arbitration bodies; the hearing rooms are purpose-built for arbitral proceeding and thus more convenient than hotel rooms and meeting rooms which used to be the norm. The hearing rooms are just floors above the administrative offices of several arbitration institutions which means that the facilities and staff of those institutions are only an elevator-ride away from hearing venues, thereby significantly reducing secretarial costs. The Court has different auditoriums which imply that the centres can now host symposiums, workshops and pieces of training in a venue exclusively for arbitration and where they get scheduling preferences, as opposed to hotels and eventual public halls. Also, a sprawling building dedicated solely to arbitration has significantly reduced the risks of non-parties chancing upon parties, witnesses, arbitrators and hearings. All these have been made possible by the building of the LCA by the Lagos State Government and the enactment of the Lagos Court of Arbitration Law (Law No. 8 of 2009.

These examples all show that governments can play a strong role in assisting arbitration. The greatest fear that arises from government assistance in arbitration is the threat of interference. The models above may present a guide of just how a government can ensure and demonstrate the independence of arbitral practice within its shores.

Creation of a multilateral framework

Governments are in a position to create a multilateral framework for arbitration. Governments have the manpower to negotiate at that level and governments have the financial capacity to fund such arrangements. Three examples are relevant here.

The first is OHADA (Organisation pour l'harmonisation en Afrique du Droit des affaires or Organisation for the Harmonization of Corporate Law in Africa). OHADA is the creation of 17 West and Central African civil law states. The OHADA framework includes the Common Court of Justice and Arbitration (CCJA) which supervises the OHADA Arbitration Centre. The Arbitration Centre, headed by the Secretary-General, administers arbitrations under the supervision of the President of the CCJA. The CCJA ultimately entertains appeals/challenges from arbitral proceedings as well as enforcement and award-validity proceedings. The CCJA also performs appointment roles – the CCJA is responsible for creating and updating a list of arbitrators. Every year, the CCJA meets to consider the list and update same based on nominations received year-round. Members of the court are themselves excluded from the list. The court appoints arbitrators taking into account their nationality, domicile and qualifications.

The second is the Africa Continental Free Trade Agreement. This is a trade agreement to which about fifty-two (52) African countries have signified interest, in one form or the other. Arbitration features prominently in this agreement. A reference may be instituted upon referral by a Dispute Settlement Board (DSB) set up pursuant to the Agreement. On the other hand, it may be set up directly by the parties, pursuant to Article 27 of the Agreement. The Secretariat is required to provide support to tribunals including assisting in the composition of tribunals. The Secretariat is also authorised to avail tribunals with experts that may be relevant to references.

The third is the China-Africa Joint Arbitration Centre. Realising that about $60 billion of Chinese investment was flowing to Africa, China took steps to protect those investments by negotiating the creation of the Centre. Crucially, CAJAC is not regarded as a standalone institution but a part of the Forum on China-Africa Cooperation (FOCAC), the official forum between the governments of all African states, except Swaziland and China. CAJAC utilises existing arbitral institutions in Africa, designated as CAJAC Centres – like the Nairobi Court of International Arbitration, the Arbitration Foundation of Southern Africa for Eastern and Southern African disputes respectively. The Chinese Centres are the Shanghai International Arbitration Centre (SHIAC), Beijing International Arbitration Centre (BIAC) and the Shenzhen International Court of Arbitration. This arrangement is expected to increase the frequency and quality of references that the arbitration centres will entertain.

Infrastructure and superstructure

When parties debate arbitration venues, they consider a lot of factors. In debating the seat of arbitration, parties consider the state of the law, the attitude of the judiciary, the ease of recognition and enforcement, the legal view on finality, etc. However, the considerations for the venue are completely different. Parties already have an idea of the lawyers they are likely to brief and the arbitrators they are likely to appoint. They want a venue that is easy to access, that is comfortable, and that is security for their representatives and arbitrators. They also do not want to inflate arbitration costs by having to fly in the support staff integral to arbitration. Thus, the more developed a country, the likelier it is to be chosen as a seat.

While discussing the rise of arbitration in Mauritius, Keating Chambers explains that Mauritius has certain practical advantages as a choice venue for arbitration. These advantages were identified as excellent hotels and conference centres which serve as excellent venues for arbitrations, available good secretarial support and good security. They also note that “Mauritius has good transport links with Dubai, Nairobi and Johannesburg and multiple flights a day to all of the major hubs”.[4]

The 2010 Queen Mary Arbitration Survey found that of the top six reasons for selecting arbitration venues, convenience ranked third, and general infrastructure ranked fifth. Both ranked higher than the “location of people, including legal advisors”. In effect, responders to that survey were willing to bear the cost of flying their people and legal advisors in, if it was convenient and the infrastructure was right. With particular regard to infrastructure, the (26% of responders identified good transport connections while 21% were concerned about hearing facilities (including translators, interpreters and court reporters). Safety and the absence of bribery also featured as important factors.

Experience tells us that infrastructure cannot grow without government support. The private sector cannot just decide to build connecting bridges between cities without the permission of municipal authorities. Permission alone is not all the private sector will need – active funding, legal backing and allied development are all essential. Nigeria has an oceanfront development, the Eko Atlantic City which was conceived to be a major upscale building development. However, property interests are reported to be low because the road network leading to the development is notoriously narrow for the traffic it caters to and heavily prone to flooding.

If the arbitration user is concerned about bribery, there is nothing he can privately do to prevent bribes from scuttling his arbitration, if the government does not pursue an aggressive campaign against bribery. If the country has a poor transport system that discourages arbitrators and foreign counsel from flying in, arbitral institutions might find themselves running small domestic claims only. Governments must provide infrastructural backing.

Treaties and contracts negotiation

As explained earlier, CRCICA is the arbitral institution of choice in most agreements to which Egypt is a party. Experience tells that agreements signed by the Nigerian government regularly select the Regional Centre for International Commercial Arbitration, Lagos as the arbitral institution of choice in its agreements. Per capita, no entity executes more contracts than governments. The government is therefore in the best position to popularise arbitration law by executing arbitration clauses and by choosing institutional references above ad hoc references to boost the reputation and caseload of verified arbitral institutions.

Presently, African governments have exported scores of arbitrations by choosing non-African arbitration centres, accepting foreign law jurisdiction clauses and agreeing to foreign venue arbitration provisions. When the disputes arise, it may just make economic and practical sense to choose a foreign arbitrator who lives a train-ride away from the venue and to instruct counsel who are just a few blocks away from the arbitration centre, to the detriment of local arbitrators and counsel. Thus, there is a need for a rethink.

Law Enactment

The example of the LCA Act and the Rwandan instruments in support of the KIAC show us that the government’s law-making powers are a compliment to arbitration. African Governments can support arbitration by deliberately pursuing the enactments of laws that support arbitration, standardise arbitration and make its arbitration practice less tedious for parties. Many African countries are already doing this.

Counsel instruction

As governments are parties to so many arbitration clauses, they are the single most frequent appointer of arbitrators as well as the single most frequent instructor of counsel. It was recently reported that an analysis of ICSID cases involving East African state parties revealed that “all of them, save for one involving Burundi, involved the state being represented by an international law firm (ILF)”.[5]

If African state parties in arbitrable disputes continue to ship out references, homegrown arbitration competence will suffer. The report that all cases involved representation by an ILF does not paint the full picture – the truth is that in most of these cases, the ILFs partner with local counsel. Nevertheless, the point that is made by such analysis is valid – African practitioners do not often get a healthy bite of arbitration pie. The imbalance is also more vivid when it is noted that European state parties do not instruct African counsel, and the European counsel they instruct never see the need to partner with African counsel in defending such European states. The effect is that out of at least four separate counsel opportunities (as lead and supporting counsel in African/foreign references), the African counsel has just one, while his European counterpart has at least three.

African governments in supporting arbitration must deliberately pursue the education of domestic practitioners. This can be achieved by insisting that only local counsel are instructed (with liberty to partner with colleagues from anywhere else in the world). That way, the local counsel are not just spectators – they dictate the strategy of the reference, they conduct oral hearings (except when they cede/share responsibilities), and they sign the core arbitration documents. Scholastically, the globalisation of learning has placed African arbitrators practically at par with their Euro-American colleagues. Experientially, however, the gulf is wide; and African governments have to play a role in this regard.

A part of African governments playing a role is in African governments recognising their place as contractual parties and not just sovereign entities. African governments very rarely refer otherwise arbitrable disputes to arbitration – they choose rather to pressure their contractual parties using their sovereign apparatuses such as law enforcement and regulators. The result is that African states are now perpetually respondents in arbitration, and the lawyers that represent them have to wait for investors and contractual partners to take the initiative before they can experience arbitration.

While that is happening, developments in arbitration in other continents now see states going on the offensive. In Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Bizkaia Ur Partzuergoa v Argentina[6], Argentina was the respondent, but it pursued and won a counterclaim. That decision has now sparked the contemplation that states can begin to institute human rights claims against investors before ICSID. Commendably, Nigeria too has taken steps to reverse the perpetual-defensive stance in arbitration as it just obtained a $2.6 billion judgement against an oil firm.[7]

Appointing Arbitrators

There have been instances where an African state party submitted to a reference before a panel on which none of its nationals was present. In some instances, institutional rules prevent the appointment of nationals of disputing parties as arbitrators. However, such prohibitions do not explain the failure to appoint other Africans. Certainly, if the rules of an institution prohibit Nigeria from appointing a Nigerian to a tribunal, those rules do not prohibit the appointment of a Ghanaian. In any event, this unfortunate appointment imbalance had existed even when there were no institutional prohibitions, the presence of. In the past, African states have completely overlooked arbitrators from fellow African countries and appointed from other continents, blinded by the myth of superior arbitration knowledge.

Experience has shown that on some points in an international trade dispute, arbitration knowledge alone is not enough. Arbitrators have to have a working knowledge of the region and allied issues surrounding the dispute. Without a doubt, a non-African may have this knowledge, but it is likelier to be found in an African. For these reasons, as contractual parties, African states must now realise that the appointment of an arbitrator is not merely formal – it marks the first sword-stroke in the dispute resolution process. African disputes should be resolved by Africans.

Again, state parties thinking of themselves as contractual parties is crucial here. A private investor gives a lot of thought and strategy to appoint its arbitrator. Why then should a state appoint its arbitrator merely that an official may inflate official costs? Governments will have to pursue a policy of Afro-centric tribunals. Of course, this does not mean that African states will always prevail before such tribunals; however, such references will be shorn of the biases and disconnects that prevent a fair adjudication of disputes to which African states are a party.

Boosting Trade  

Arbitration follows trade. If trade increases in volume, disputes will also increase in frequency and value, as will the imperative to quickly resolve them. This will also spike the usefulness and appeal of arbitration. In the light of fears of African re-colonisation, a centre like CAJAC will never have received the broad African support it has received today, without the promise (partly fulfilled) of over $60 billion trade investment from China. China has demonstrated to African countries how African countries too can protect their citizens. So many African countries are exporting goods and services, and naturally, arbitration will grow from this economic activity. Indeed, the arbitration framework of the AfCTA is an acknowledgement of the fact that if goods are to move freely between 54 countries, a robust arbitration network must exist. Thus, if African governments boost trade, they will boost arbitration.

_____________________________

* Adebayo Adenipekun, SAN, FCIArb, Afe Babalola & Co.

[1] Dr Emilia Onyema, List of Arbitration Institutions in Africa

[2]http://shahidlaw.com/2018/02/22/shahid-law-firm-acting-as-co-counsel-secures-the-highest-damages-ever-awarded-by-a-crcica-%E2%80%8Etribunal/

[3]https://globalarbitrationreview.com/chapter/1169230/crcica-overview

[4]http://www.keatingchambers.com/wp-content/uploads/2017/12/AJ-Arbitrating-in-Mauritius.pdf

[5]http://arbitrationblog.kluwerarbitration.com/2018/03/10/africa-stand-africa/

[6]https://www.italaw.com/sites/default/files/case-documents/italaw8136_1.pdf

[7]https://www.iarbafrica.com/en/news-list/17-news/907-nigeria-arbitration-tribunal-awards-govt-$1-69bn-over-dispute-on-brass,-forcados-assets

On November 11, 2015, the Republic of The Gambia (“The Gambia”) filed an application for annulment of an Award rendered on July 14, 2015, (the “Award”) in the case of Carnegie Minerals (Gambia) Limited v. Republic of The Gambia, ICSID Case No. ARB/09/19. As part of its application for annulment, The Gambia requested a stay of enforcement of the Award. Pursuant to Section 52(5) of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the “ICSID Convention”) and Rule 54(1) of the ICSID Rules of Arbitration Proceedings (the “Arbitration Rules”), the enforcement of the said Award was provisionally stayed on November 19, 2015. On February 1, 2016, an ad hoc Committee (“Committee”) of the International Center for the Settlement of Investment Disputes (“Center”), acting pursuant to Arbitration Rule 54(2), extended the stay of the enforcement of the Award. On September 4, 2018, The Gambia filed application for a continued stay of enforcement (“Application”) of the said Award. On October 18, 2018, the Committee granted The Gambia’s request. While celebrating The Gambia’s recent victory, it is important to remember that a stay of an ICSID award is a temporary and an extraordinary remedy and that it is not granted automatically. What lessons then can a prospective applicant for a stay learn from this case? What are the potential obstacles and challenges to an application for a stay?

Carnegie Minerals (Gambia) Limited v. Republic of The Gambia: Position of the Parties

The Gambia based her request for a stay on economic hardship and the prejudice that would result to it from lifting the stay. The economic hardship argument was based on the impact that payment of the Award would have on the economy of The Gambia.  The Gambia argued that lifting the stay would cause it economic hardship as “the enforcement of the Award sum would amount to at least 2% of The Gambia’s entire GDP,” and “[p]aying the Award while the possibility of annulment exists—along with the risk of non-recoupment—would put a significant, unnecessary, and unavoidable impediment upon those development efforts.”

As summed up by the Committee, The Gambia’s prejudice argument was based on the claim that, “if it were to pay the award The Gambia would run the risk of having difficulty recovering any amounts paid if the Award were to be annulled, particularly in light of the fact that the benefit of the Award is being held on trust and the Claimant has not disclosed information about that trust that The Gambia has requested.”

Carnegie Minerals (Gambia) Limited (“Carnegie”) argued, unsuccessfully, that two and a half years had already passed since the registration of the application for annulment, and that maintaining the stay would cause prejudice as the Award does not include post-Award interest and the beneficiary of the Award suffers the devaluation of the Award with the passage of time. Carnegie also argued, again unsuccessfully, that there was a risk that The Gambia will not comply or enforce the Award if it is upheld. 

Potential Obstacles and Challenges to a Request for a Stay of Execution of Award

One of the biggest considerations for a prospective applicant is purely financial.  An application for a stay of enforcement of arbitral award necessarily involves considerable expenses in the form of legal fees, cost of the proceedings, and other related expenses. In Carnegie Minerals (Gambia) Limited v. Republic of The Gambia, The Gambia had problems paying the necessary fees and this prompted the Center to suspend proceedings or threaten to suspend proceedings. On March 28, 2016, the Center notified The Gambia’s default to pay the required advances. On April 12, 2016, the Committee authorized The Gambia to pay the required advances in installments. Not until June 2016, upon receipt of a partial payment of the required advances, were the parties invited to confirm their availability for a first session. On March 7, 2017, proceedings were suspended for non-payment of the required advances. Proceedings resumed on April 17, 2018, following the payment of the required advances.

A second consideration for a prospective applicant is the ability to advance cogent grounds (supported as necessary by evidence) for a stay.  Rule 54(4) of the Arbitration Rules require the applicant to specify the circumstances requiring a stay, but is silent about burden of proof and what it takes to discharge this burden. In Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited (“SCB HK v. TANESCO”), the ad hoc Committee observed that Article 52(5) of the ICSID Convention, “does not indicate that one particular party bears the burden of establishing circumstances requiring a stay” and that establishing the existence of such circumstances is part of the Committee´s discretionary power. 

Stay of Awards: Legal Strategies and Arguments

An award creditor can always oppose a request for a stay of enforcement. As the Committee noted in SCB HK v. TANESCO, “it is for the award debtor to advance grounds (supported as necessary by evidence) for the stay. If the award creditor disputes these grounds, it must also advance evidence in support of any ‘positive allegations’ that it makes.” In addition to or in the alternative, an award creditor can request that the annulment Committee order an applicant to provide security in the form of an unconditional and irrevocable bank guarantee for the whole amount of the Award. In Carnegie Minerals (Gambia) Limited v. Republic of The Gambia, Carnegie requested, unsuccessfully, that The Gambia provide security in the form of an unconditional and irrevocable bank guarantee for the whole amount of the Award issued by a first-tier reputable international credit institution (outside of The Gambia and with no principal establishment branch in The Gambia) immediately payable upon the issuance of a final decision of the Committee rejecting the Application for annulment, or if the Annulment Proceedings are withdrawn or discontinued.

Conclusions

Carnegie Minerals (Gambia) Limited v. Republic of The Gambia teaches a number of very useful lessons:

6. While The Gambia was lucky to obtain an unconditional stay of enforcement, some applicants are not so lucky. In SCB HK v. TANESCO, the Committee granted TANESCO’s request for the continuation of the stay of enforcement of the award but on the condition that, “TANESCO provide an unconditional and irrevocable bank guarantee or security bond issued by a first-tier reputable international credit institution … for the full amount of the Award rendered against TANESCO, inclusive of all interest accrued to the date of issuance of said irrevocable bank guarantee or security bond, and immediately payable to or cashable by SCB HK upon the issuance of a final decision of the Committee rejecting the annulment, or if the annulment proceedings were withdrawn or discontinued.” The Committee also ruled that in the event that TANESCO declined to issue such guarantee, the termination of the stay on enforcement would be automatic.

_________________________________________________

* E.J. Ball Professor of Law, University of Arkansas School of Law; Arkansas Bar Foundation Professor (2014 – 2016).

Introduction

On October 18, 2018, an ad hoc Committee (“Committee”) of the International Center for the Settlement of Investment Disputes (“Center” or “ICSID”) allowed an application by the Republic of Gambia (“The Gambia”) requesting the continued stay of the enforcement of a nearly $23 million arbitral award granted in the case of Carnegie Minerals (Gambia) Limited v. Republic of The Gambia: Decision on the Gambia’s Request for a Continued Stay of Enforcement of the Award (ICSID Case No. ARB/09/19). Unless modified or terminated, the decision will remain in place until the Committee rules on The Gambia’s application for the annulment of the Award. Despite The Gambia’s apparent victory, celebrations are not exactly in order for at least two reasons. First, a stay of enforcement of an ICSID arbitral award can be modified or terminated at the request of either party to a dispute; a common reason for modifying or terminating an award is if an award debtor fails to fulfill a condition (e.g. the provision of adequate financial security) for the stay. Second, as the Tanzania Electricity Supply Company (“TANESCO”) discovered recently in the case of Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited (“SCB HK v. TANESCO”), a stay of enforcement of an arbitral award does not necessarily mean that the underlying application for annulment will be ultimately successful. On April 17, 2017, a Committee granted TANESCO’s request for a stay of a $148.4 million award in favor of Standard Chartered Bank Hong Kong (“SCB HK”). However, on August 2, 2018, the same Committee upheld the initial award and rejected TANESCO’s annulment application in its entirety.

Stay of Award: What is It? What is the Legal Basis? What is the appropriate Legal Standard?

Article 52(5) of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the “ICSID Convention”) and Rule 54(1) of the ICSID Rules of Arbitration Proceedings (the “Arbitration Rules”), provide the legal basis for a stay of enforcement of arbitral awards. A request for a stay of enforcement of an award can be included in the initial application for annulment of an award or can be made subsequently. Article 52(5) of the ICSID Convention, first sentence, provides that a Committee constituted to hear a party’s application for annulment “may, if it considers that the circumstances so require, stay enforcement of the award pending its decision.” Article 52(5) of the ICSID Convention, second sentence, provides: “If the applicant requests a stay of enforcement of the award in his application, enforcement shall be stayed provisionally until the Committee rules on such request.”

A stay of an award is an exceptional recourse mechanism designed to safeguard against the violation of fundamental legal principles relating to the arbitral process. Ordinarily, ICSID awards are final and binding. Article 53(a) of the ICSID Convention clearly states: “The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.”

Who has Standing to Request a Stay of Enforcement of an Arbitral Award?

Only a party to a dispute before the ICSID can apply for a stay of enforcement of an award rendered in connection to that dispute. Essentially, under the ICSID Convention, the right to request a stay of enforcement is triggered by an application for the annulment of an award. As previously noted, an application for a stay may be made as part of the initial application for annulment or at any time during an annulment proceeding. Rule 54(5) of the Arbitral Rules specifically mandates the Secretary-General of the ICSID to promptly notify both parties of the stay of enforcement of any award and of the modification or termination of such a stay. A stay of enforcement becomes effective on the date on which the Secretary General dispatches such notification.

A Stay of an Award: How Often Are Requests Made? What is the Record of African States?

According to the ICSID, as of April 15, 2016, a total of 43 requests for the stay of enforcement had been made in connection with some 90 registered annulments. African countries have been involved in at least 10 requests for a stay of enforcement of an award.  African States that have in the past requested a stay of enforcement of an arbitral award include:

·   The Republic of Guinea: MINE v. Guinea ARB/84/4;

·   The Arab Republic of Egypt: SPP v. Egypt ARB/84/3;

·   Wena Hotels v. Egypt ARB/98/4;

·   The Republic of Seychelles: CDC Group plc v. Seychelles ARB/02/14;

·   The United Republic of Tanzania: Standard Chartered Bank (Hong Kong)         Limited v. Tanzania Electric Supply Company Limited ARB/10/20; and

·   The Democratic Republic of Congo – Mitchell v. DRC ARB/99/7;

Is there a Presumption in Favor of a Stay of Enforcement?

The legal texts provide no basis for a presumption in favor of granting a stay or continuing a provisional stay of enforcement. On the contrary, the language of Article 53 of the ICISD Convention and Rule 54(2) of the Arbitral Rules suggest that the decision whether or not to grant a stay is at the discretion of the ad hoc committees. A sizeable group of committees have confirmed that that there is no presumption in favor of a stay of enforcement. In Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador: Decision on the Stay of Enforcement of the Award, 30 September 2013 (ICSID Case No. ARB/06/11) the Committee stated that “an award debtor is not entitled to a continued stay of enforcement,” and that “there is no basis for a presumption in favor of continuation of the stay.” Although there is no presumption in favor of a stay of execution, more often than not requests for stays are granted.

What Factors Support a Stay of Execution of an Award?

The ICSID Convention does not offer any guidance as to the factors that an ad hoc committee must take into account when considering whether or not to grant a stay.  Article 52(5) of the ICSID Convention simply states that “the Committee may, if it considers that the circumstances so require, stay enforcement of the Award pending its decision.”  Although a discretionary decision, annulment committees take into account a variety of factors in considering whether to grant a stay on enforcement. In SCB HK v. TANESCO, the Committee reiterated the non-exhaustive list of all the circumstances that may be a committee may deem relevant in determining how to rule upon a request for a stay on enforcement. These include:

·   prospects for compliance with the award if the award is not annulled

·   absence of dilatory tactics;

·  the risk of non-recovery of sums due under the award if the award is                annulled;

·  absence or minimal prejudice to the opposing party by delaying the                 payment adverse economic consequences on either party; and

·   a balance of both parties’ interest.

Conclusion

The stay of enforcement of an ICSID award is an important, extraordinary and temporary remedy. A review of prior cases indicates that African countries are not strangers to applications for stay of enforcement of arbitral awards. A prospective applicant for a stay should bear several things in mind. First, although a stay of enforcement has been granted in many cases, there is no presumption in favor of granting a stay of execution. Second, as a sizeable group of committees have concluded, the prima facie grounds for annulment are not relevant to the determination of whether an applicant on annulment is entitled to a stay. Third, while a stay can come as a welcomed relief for an applicant, it can come with stiff conditions attached and always has financial implications for the applicant in the form of significant legal fees and costs. Finally, a grant of a stay of enforcement of an award does not affect an underlying application for annulment one way or another and does not mean that the award debtor will ultimately prevail in the effort to get an award annulled. Bolivia should know.  Bolivia granted mining concessions to a Chilean company Quiborax SA and its Bolivian investment entity, Non Metallic Minerals SA. When Bolivia revoked the mining concessions, Quiborax SA initiated a claim with the ICSID. In 2015, in the case of Quiborax SA and Non Metallic Minerals SA v. Plurinational State of Bolivia, a Tribunal determined that Bolivia had violated the rights of the Claimants and awarded the latter nearly $50 million in compensation. In December 2015, Bolivia applied to have the arbitral award annulled and successfully moved to stay the enforcement of the award. In February 2017, an ad hoc Committee denied the Claimant’s request to lift the stay on the award. However, in May 2018, the Committee ultimately rejected Bolivia's application for annulment.

___________________________________

*E.J. Ball Professor of Law, University of Arkansas School of Law; Arkansas Bar Foundation Professor (2014 – 2016).

A year ago, OHADA[1]adopted a new Uniform Arbitration Act, repealing the previous Uniform Act dated 11 March 1997. This reform is part of an effort to promote and consolidate, further illustrated by a new Uniform Act on Mediation being adopted and the Common Court of Justice and Arbitration's (CCJA’s) Rules of Arbitration being revised.

The reform aims to make the OHADA space more attractive for dispute resolution.

This paper addresses the main features of the reform, complemented where necessary by the new CCJA arbitration rules and the Uniform Act on Mediation.  It is followed by a table showing the main developments of the common legislation on arbitration.

Security, flexibility and efficiency seem to be the motto of this new Act. This motto applies to the various phases of the process of accessing arbitration at the start of a trial and throughout the arbitration.

Access to OHADA Arbitration: Openness and Security

Expanding OHADA arbitration to investment arbitration

In addition to the traditional openness of OHADA law to any arbitration having its seat in one of the OHADA States and to legal persons under public law, the reforms extend the scope of the OHADA arbitration law to include investment arbitration. Investment arbitration is usually defined as an arbitration forum that hosts disputes between a State or one of its entities, and a foreign private entity carrying out an investment transaction in that State.

Although the creation of the International Investment Dispute Settlement Center (ICSID) is part of this approach, other forums have gradually opened up to this issue too. It is in this light that the new Act includes bilateral investment treaties (BITs) and investment codes as new bases for arbitration. This step, provided for in the new Act is reiterated by the new CCJA Arbitration Rules, which expressly authorise the Court to administer arbitration proceedings based on BITs or national investment laws.

It should be noted that, in practice, the Court of Arbitration of the CCJA has accepted several investor-state disputes on the basis of an arbitration agreement, particularly in the absence of specific, relevant common provisions. Therefore, the new Act only crystallises and completes the evolution of the Court's internal practices and that of other forums such as ICSID, which have now freed arbitration agreements from being the sole pathway to arbitration. Arbitration under the new Act and the CCJA forum offers a big comparative advantage in that it is close to the host countries geographically and from the point of view of the OHADA legal system with which they are familiar.

Therefore, the OHADA law of arbitration (through both its normative part, the Uniform Arbitration Act, and its institutional arm (CCJA) is well positioned in the field of investment arbitration. If accepting legal instruments relating to investments and establishing certain correlative, institutional guarantees by the CCJA characterise a certain opening up of OHADA arbitration, it is important to consolidate this tendency as much with substantial arguments (definition of the notions of investment, investor, etc.) as with procedure (transparency of procedure, admission of amicus curiae, etc.).

The opening up of arbitration to other modes of dispute resolution: the case of expanded OHADA mediation

The tempting offer of OHADA arbitration does not stand in the way of other alternative dispute resolution methods. It does not prevent a stage of prior dispute resolution. In this case, the Court will suspend proceedings pending the completion of the dispute resolution step (or finds failure to do so, if necessary.)

The example of mediation is a good one, especially as mediation is now the subject of uniform legislation in the OHADA space. At first glance, it should be noted that this does not apply to mediation undertaken voluntarily by an arbitral tribunal for the purpose of providing an amicable settlement of a dispute. Indeed, the Uniform Act on Mediation (UAM) governs institutional or ad hoc mediation, which is conventional, or which involves the intervention of a third party, an independent dispute settlement procedure, or a prior method of arbitration. In the latter case, supplementing the UAM, the Arbitration Uniformed Act unequivocally states that ''no arbitral or judicial proceedings relating to a dispute already arising, or which may arise later, is given effect by the arbitral tribunal or the state court until the conditions that go with it have been met.”

This procedure does not preclude, according to the text, initiating parallel proceedings for provisional purposes, or purposes that cannot be considered as a waiver or termination of the mediation. It is compulsory to execute the agreement resulting from the mediation and it may be exequaturated or endorsed by the competent court and taken back in the form of an award of agreement by the arbitral tribunal. This provision, which demonstrates the effectiveness of OHADA mediation and the institutional dialogue between methods of dispute resolution, also applies to mediation proceedings initiated without arbitration being in progress.

The arbitration proceedings: reliability, flexibility and speed

The new Uniform Arbitration Act proposes a reliable, flexible and timely arbitration procedure.

It offers arbitration with institutional support from CCJA. Without the parties having to opt for the CCJA arbitration rules, they have the opportunity to benefit from the support of this institution. This is the case where an arbitrator’s challenge process is not provided for by the parties or carried out by the competent jurisdiction within 30 days; the competent jurisdiction is removed and the challenge may be brought before the CCJA. The competent court remains exclusively competent in the event of an appeal against a decision dismissing the challenge.

It is also worth mentioning that in the event of a judicial decision that has become possible as a result of an arbitration agreement that is manifestly void or inapplicable, the CCJA remains the sole body competent to receive a recourse against that decision.

The arbitral procedure’s reliability is assured by the obligation of independence and legal dedication of arbitrators. In particular, these requirements make it possible to avoid conflicts of interest and leads to arbitrators recusing themselves if necessary. The parties also enjoy equal treatment during the proceedings, allowing them to assert their respective rights. The litigant parties are received regardless of their quality or status. The reliability and flexibility of the procedure are also measured by the openness in applying international law standards in case where the parties are silent on the choice of law. From the point of view of procedural rules, the parties may refer to the rules of an arbitration centre of their choice or determine a procedural law that suits them. These provisions show the opening of the "OHADA space" to "non-OHADA rules" and international best practices in arbitration.

The celerity of the arbitration procedure is demonstrated through the competitive deadlines proposed at all stages of the procedure. If the parties disagree, or if there are insufficient contractual terms on the appointment of the arbitrators, the parties have between 30-75 days to do so with the intervention if necessary of the competent court. Likewise, the arbitration tribunal must be constituted within 6 months, unless otherwise agreed. The parties nevertheless have the option to extend the legal or contractual period. More generally, the parties are encouraged to act with speed and loyalty in conducting proceedings. They must refrain from using delay tactics. Otherwise, they risk sanction and closure of the proceedings, if necessary.

The outcome of the procedure: safety and efficiency

The new Act guarantees security and efficiency in the arbitration process.

Whether it is the result of an agreement between the parties during the proceedings or a decision arising from the court hearing, the arbitral award has the authority of res judicata as soon as it is given. This award may provide a provisional enforcement to allow the parties to benefit quickly from its findings, without affecting the full judgement, including various remedies. This provisional enforcement remains valid even when an action for annulment is brought against the sentence in question.

As a general rule, the arbitration award must be exequaturated. The decision on the application for exequatur is obtained before the competent court of the relevant jurisdiction within 15 days. It is deemed acquired in the case of silence of the court. It is likely to provide cessation only before the CCJA when it is only negative.

The sentence thus rendered is not subject to opposition, appeal or judicial review. It may, however, be the subject of a review or an action for annulment before the competent court in the relevant jurisdiction whose decision is subject to review proceedings only before the CCJA. The flexibility of the OHADA arbitration procedure results from the fact that waiver clauses to the action for annulment may be provided by the parties, provided that they are not in conflict with international public policy.

The new common law of arbitration therefore establishes the OHADA space as a new place of international arbitration that is very attractive, especially for foreign investors in Africa.

[1] OHADA is: ‘Organisation pour l’Harmonisation en Afrique du Droit des Affaires,’ (Organisation for the Harmonisation in Africa of Business Laws), which is a uniform set of business laws and implementing institutions adopted by 17 states in West and Central Africa.

Statistics showing participation by region in ICSID arbitration, as of 31 May 2017. Africa is one of three major regions participating in ICSID arbitration. Source: ICSID

Statistics showing the participation of African entities by region (including public entities) in ICC arbitration. Source: ICC

Litigation is the commonest legal practice area in Africa. In Nigeria, for example, people here associate lawyers solely with litigation and disputes. As a result, litigation has come to be viewed as a rough venture, a contact sport. The tactics employed by lawyers in litigating disputes – the evisceration of witnesses under cross-examination without care for boundaries, the willingness to foray into shameful and scandalous questions and the use of a whole range of guerrilla tactics – further serve to smear the image of the process to the potential litigant. There are also personal religious and cultural beliefs that precipitate either total reluctance to initiate a court process or real unwillingness to invoke the court against a class of persons. Add to that the fact that much like a war, the only thing that is certain of the timing of a court action is the date of commencement. It is anybody’s guess how long hostilities will last. In sum, parties are loathe to litigate against persons with whom they would desire future timely relations.

On this score arbitration has strong appeal. Arbitral users can rest assured comforted by the confidentiality of arbitration. A witness may do badly in a reference and not have to worry about the public impact his testimony will have on the share price of his company. Scandalous personal details elicited under cross-examination stay within the knowledge of the participants at the reference and do not constitute indelible public record. This has led to the view that arbitration, as opposed to litigation is likelier to elicit frank and honest testimony. On a commercial plane, the parties can sort out their differences quickly and return to their supply arrangement, joint venture or concession.

Enter the lawyer. Some have bemoaned the influx of legal practitioners into arbitration with others expressly accusing lawyers of ruining arbitration. One author takes the view that the lawyer’s assumption that qualification to practice law is an automatic qualification to practice arbitration is responsible for indiscriminate set-aside applications that trail awards and legalese creeping into arbitration practice. Confidentiality in arbitration is both an advantage to the process and in the hand of the determined assailant, a bane of the process. Lawyers and party representatives have taken the status of arbitrators as non-judicial officers as a license to be offish, confrontational, condescending and downright impolite to arbitrators. With the absence of timeline default penalties in arbitration, lawyers have bogged down arbitrations with lethargic representation and compelled arbitrators to decide the reference according to their own timetables. As there are often no financial or professional punishments for late filings and deadline indiscipline, it has been easy for lawyers to casually seek timeline extensions anchored in the nebulous “interest of justice”.

A lawyer with his training and orientation is definitely a hard disciple to proselyte in arbitration. He will scrutinise every procedural order, query every direction and doubt every award that is unfavourable. If he does so privately, the reference may be safe. But when he, wearing his litigator’s hat, assumes that the unlimited jurisdiction of the High Court extends to making that court an appellate tribunal to arbitral tribunals, the reference is in jeopardy. Nigeria recently made the news in arbitral circles when the Court of Appeal upheld the power of a High Court to stay proceedings of international arbitration. Without prejudice to that decision’s validity, with that decision in the hand of the litigious Nigerian lawyer, international references are now fair game and in the crosshairs. Already, lawyers have “appealed” procedural directions deferring objections, apportioning costs for unforeseen procedural deviations and refusing unwarranted procedural extensions. The lawyer’s inability to drop the litigator’s hat in arbitration can undermine the user’s legitimate expectations of award finality.

Nigerian litigious practice has received its share of criticisms relating to the taking of evidence. On the one hand, there is the complaint that the rules of evidence are not robust enough to capture all the forms of evidence that can be produced today, that the courts are not equipped to perceive, deal with, archive and handle evidence and that the arbiters are themselves not equipped to interact with modern day evidence. And there is another criticism of the process – that the codified rules of evidence perpetuate technical justice and that litigants are at the mercy of a legal system that exists mainly to exclude evidence, than to take evidence. While the Nigerian Evidence Act does not apply to arbitral references and states so clearly in Section 256(1), this has not closed the door to all sorts of evidentiary objections in references. In references, lawyers have invoked the litigious principle of demonstration of documents that stipulates that all documents must be read out to the extent of their utility at hearing and argued that an arbitrator must not study exchanged documents in private. Lawyers have argued that certain documents must be certified by public authority or that as registrable instruments, they must proceed from a certain source and have certain endorsements. These submissions, which have no place in arbitration, have delayed hearings and scuttled references. Worse, when convinced that these rules should have applied to awards, submissions like these have frustrated awards and prevented their enforcement within the limitation period.

Imagine that a reference that was supposed to be confidential so as to protect the facts and evidence in it is submitted to the public-record Court (with copious reproductions of its proceedings and a robust narration of the same confidential facts) in a bid to set an order or award aside. Imagine that a reference that parties opted for to ease the taking of evidence is scuttled by evidentiary objections. Imagine that a reference that parties agreed to for its speedier course is delayed by numerous guerrilla tactics and converted to litigation only to later (post-award) be subjected to the same multi-tier litigation that parties opted out of to start with. Interestingly, the courts, borrowing a leaf from arbitration, are devising means to attend to cases with despatch and interpret codified evidentiary rules more liberally with encouraging results. The ironic result is, suits imitate arbitration while arbitration, by the conduct of litigious counsel, becomes litigious.

Arbitrators have to take a firmer stance with lawyers and should be more disposed to referring flagrant, deliberate disciplinary breaches to the relevant regulator. It is also important to modernise the laws. The question of what the evidentiary/procedural rules applicable to a reference would be is easily resolved by a modernised body of arbitration rules under the Arbitration and Conciliation Act. Solicitors and lawyers who are in the position to draft arbitration clauses can envisage some of these challenges and stipulate the application of certain accepted and functional rules. Most of all, the automatic arbitration competence of lawyers is already a proven fallacy to arbitrators although it remains unknown to the users who repeatedly brief these lawyers. The arbitration education of lawyers is thus mandatory for the survival of the practice in Africa. Efforts, intended and otherwise, to popularise and standardise the practice of arbitration in Africa such as the establishment of the Association of African Arbitrators and the publication of this newsletter are a welcome development. These publications will expose the Nigerian lawyer to international best practices in arbitration and finally impress on him the difference between the practice and litigation and the commercial and jurisprudential justifications for that difference. The Nigerian lawyer must learn – or else be compelled to know – that arbitration is not an extension of his litigious practice. He should know when to barge, heel and attack. And he should know that his litigious hat does not suit his arbitral robes.

_______________________

*Partner, Afebabalola & Co.

On the 10^th day of January, 2017, the High Court of the Federal Capital Territory, Abuja, Nigeria in Suit No: FCT/HC/CV/610/14 before His Lordship, Hon. Justice A.B. Mohammed delivered a judgment in the case involving ABANG ODOK V. ATTORNEY GENERAL OF BAYELSA STATE (available at here), on a matter for the enforcement/setting aside of the Final Award of Professor Paul Obo Idornigie, SAN, PhD, C.Arb, Sole Arbitrator. The Final Award was rendered on 17 January, 2014.   

Abang Odok was the Claimant in the arbitral proceedings while Attorney General of Bayelsa State was the Respondent.  The Claimant was also the Applicant (Award Creditor) at the High Court while the Respondent was still the Respondent (Award Debtor).  The Award Debtor filed a Notice of Preliminary Objection challenging the jurisdiction of the court to entertain the application to recognize and enforce the award.    The main ground for challenging the award was that the suit before the High Court did not disclose any reasonable cause of action and therefore the court lacked jurisdiction to entertain the matter.  

The court dismissed the preliminary objection on the ground that it lacked merit.  The Respondent then applied to set aside the award on the sole ground that the Sole Arbitrator who claimed to have been appointed by the court was not so appointed.  This was premised on the fact that the court order showed that Professor Paul Idonije was appointed by the court while Professor Paul Obo Idornigie rendered the award and argued that Professor Idonije and Professor Idornigie were not the same person.  The Respondent/Award Debtor submitted that Professor Idornigie had no jurisdiction to render the award and that the arbitral proceedings were a nullity.  It is noteworthy that at the Preliminary Meeting, the Sole Arbitrator presented himself as the court-appointed Arbitrator and both parties confirmed his appointment.  It was contended on behalf of the Applicant that even if Professor Idornigie was not properly appointed, the parties confirmed his appointment at the Preliminary Meeting.  

Furthermore section 34 of the Nigerian Arbitration and Conciliation Act, 2004 (same as Article 5 of the UNCITRAL Model Law on International Commercial Arbitration, 1985 as amended) gave powers to courts to intervene in arbitral proceedings in limited circumstances and that the issue of the name of the arbitrator was not one of the grounds.   Since the arbitral tribunal is competent to rule on its jurisdiction as provided in section 12(3) of the Nigerian Arbitration and Conciliation Act, the court held that the proper forum to challenge the appointment of the Sole Arbitrator was at the arbitral proceedings.  Instead the Respondent confirmed the appointment of the Sole Arbitrator and participated fully in the arbitral proceedings.  In consequence the court recognized and enforced the award.

Two things were established in this judgment, namely, (a) where there is an application to set aside an award and another to enforce, the one to set aside takes priority; and (b) the grounds for the courts to intervene in arbitral proceedings are limited and the issue of whether the arbitrator was properly appointed ought to have been raised at the arbitral proceedings and since it was not raised, the Award Debtor is deemed to have waived his right.

_______________________

*Professor of Law, Nigerian Institute of Advanced Legal Studies

The Mauritius International Arbitration Centre ("MIAC"), which was recently established in Mauritius to succeed the LCIA-MIAC Arbitration Centre, has published its first Arbitration Rules.

As recently reported in an earlier blog (here), LCIA-MIAC recently terminated operations after the LCIA decided to withdraw from the agreement with the Government of Mauritius under which the LCIA-MIAC Arbitration Centre operated.

The transitional provisions for this change have the effect that arbitrations under agreements providing for LCIA-MIAC arbitration, made before 31 August 2018, will be administered by the LCIA in London (unless the parties reach another agreement in writing). MIAC has said that it will administer arbitrations under agreements made after 1 September 2018, whether providing for LCIA-MIAC or MIAC arbitration.

The MIAC Arbitration Rules have been drafted along familiar lines, based on the UNCITRAL Arbitration Rules. Some notable features include:

• A panel of three arbitrators will be appointed unless the parties agree to a sole arbitrator, or the claimant has proposed a single arbitrator and the respondent fails to respond to that proposal (and the appointing authority considers a sole arbitrator appropriate).
• The Secretary General of the Permanent Court of Arbitration (based in The Hague) is designated as the appointing authority which will appoint arbitrators if the parties do not agree.
• The Rules do not provide (unlike the UNCITRAL Arbitration Rules) for the parties to agree on an appointing authority other than the Secretary General of the PCA.
• The Rules do not provide for expedited or summary procedures, or for the appointment of an emergency arbitrator.
• The seat of the arbitration is deemed to be Mauritius if the parties have not otherwise agreed.
• The tribunal is empowered to grant interim measures but there is no express provision for the tribunal to do so without notice to the party against whom an order is sought.
• The rules provide that awards will be final and binding but do not provide that there can be no appeal from the award (so that, for example, they may not be taken to rule out an appeal under s.69 of the Arbitration Act 1996, if the seat is England).
• The rules do not include provisions for the rates to be charged by the Arbitral Tribunal.

A model arbitration clause providing for MIAC arbitration has been published which does not exclude the right of appeal.

Parties considering entering into contracts providing for arbitration under the MIAC Arbitration Rules should therefore take advice on their intended agreements, and may wish to consider (amongst other things):

It appears that the MIAC rules have been drafted simply, avoiding controversy by being closely based on the UNCITRAL Arbitration Rules. Whilst they lack innovations adopted by many institutions, such as provision for an emergency arbitrator, the format of the rules is at least tried and tested.

The MIAC rules may be contrasted with the rules of the MARC Arbitration Centre, the other arbitral institution based in Mauritius, which was established by the Mauritius Chamber of Commerce and Industry and which recently revamped its constitution, Court and Advisory Board and adopted new arbitration rules. The MARC Rules include emergency arbitrator procedures, an optional appeal procedure and a summary procedure for dismissal of claims or defences "manifestly without merit".

_____________________

* Counsel, Stephenson Harwood

1.     Introduction

The development of international investment arbitration beyond its contractual basis is a relatively recent phenomenon.  Not too long ago, it was inconceivable – unless consent to arbitrate had been given in a concession contract – for private investors to initiate direct arbitration against host States.  But neither Contracting Party to the first bilateral investment treaty (‘BIT’) nor signatory of the 1965 Convention on the International Centre for Settlement of Investment Disputes between States and Nationals of Other States (‘ICSID Convention’)[2] would have foreseen that they had unwittingly participated in a chain of events that would ultimately limit host States’ sovereign powers and open other bases up for direct arbitration by private investors.

Now, the right to initiate arbitration against a host State is not only contained in contracts but also in host State laws, bilateral, regional and multilateral investment instruments. And ever since, investment arbitration has developed considerably, in large part due to a proliferation of BITs and their interpretation and application by arbitral tribunals.  While these developments have seen African States involved in more than a third of the total number of investment arbitrations at ICSID, their role in the development of international investment arbitration has thus far been almost exclusively limited to signing BITs and defending enforcement of BITs against them.

This paper reviews the development of international investment arbitration and the changing role of the African States in it.  In particular, the States belonging to the Common Market for Southern and Eastern Africa (‘COMESA’)[3] and the Southern African Development Community (‘SADC’).[4]  In doing so, it traces the emergence of investment arbitration, its development by the practice of arbitral tribunals and the experience of COMESA and SADC Members with investment arbitration.  It then considers how COMESA and SADC Members have responded to the issues raised in the arbitral practice of BITs.  It concludes by suggesting that their response hints at an evolving shift in roles from mere observers to a more hands-on role in the development of investment arbitration by the African States.

2.     The Emergence of Investor-State Arbitration

Investment arbitration was born out of the need to address the deficiencies of diplomatic protection as a means of resolving investor-State disputes.  In the 1930s, host States had concluded some concession contracts in the mining and oil sectors with private investors. These concession contracts included investor-State arbitration clauses to protect private investors from unilateral changes by the host State.[5]  However, as evidenced by the great oil nationalisation arbitrations of the 1970s, there were significant problems with these types of arbitrations due to the abuse of sovereign powers by host States within a contractual framework.[6]

Furthermore, while the inclusion of these clauses addressed the problems encountered with diplomatic protection, investor-State arbitrations were not possible without a concession contract between the private investor and the host State and only a minority of private investors ever had a concession contract.[7] Accordingly, in the absence of a concession contract providing for investor-State arbitration, diplomatic protection remained the only option for resolving disputes between host States and private investors.[8]

Subsequently, BITs appeared to offer another solution to the investor-State dispute settlement problem.  This solution was in most of the older BITs from the 1960s concluded by the European States mostly with developing States, which contained an umbrella clause.  The umbrella clause – also known as the “observance of undertakings” clause – required either party to “observe any other obligations” it may have entered into with regard to investments by nationals or companies of the other Party.  This clause arguably obliged host States under the BIT to comply with investment contracts concluded with private investors, effectively elevating a contract claim to a treaty claim.  However, the precise scope of an umbrella clause has been the subject of controversy and inconsistent decisions by arbitral tribunals.[9]

Conversely, the genius of the 1965 World Bank ICSID Convention was in embodying an investor-State dispute settlement system in an instrument that bound the Contracting States thus ensuring that any agreements on dispute resolution voluntarily entered into would be honoured.  The ICSID Convention authorised both conciliation and arbitration as a means of resolving investor-State disputes.  Not only did the ICSID Convention create a self-contained system that kept out the national courts, on arbitration, but it also adopted the model of commercial-style arbitration before specialised international tribunals.  These tribunals would issue final and binding awards recognised and enforceable in any ICSID Contracting State as if it were a final judgment of a court in that State.[10]  Accordingly, the ICSID Convention obligated States to comply with ICSID awards as an international law obligation.[11]  Furthermore, in creating ICSID as a neutral forum for the direct determination of investor-State disputes, it depoliticized the process by obviating the need to involve the investor’s home State.

However, mere ratification of the ICSID Convention does not confer jurisdiction on ICSID or its arbitral tribunals – a Contracting State has to have given consent.  As the Report of the Executive Directors on the ICSID Convention states, among other things, consent to jurisdiction needs to be in writing and once given it cannot be withdrawn unilaterally.[12]  Nevertheless, paragraph 24 of the Report provides that it does not require the consent of both parties to be expressed in a single instrument.  On this, it states that “a host State might in its investment promotion legislation offer to submit disputes arising out of certain classes of investments to the jurisdiction of ICSID, and the investor might give his consent by accepting the offer in writing.” Thus, in a first of its kind, the 1984 SPP v Egypt case[13] saw a claimant successfully initiate arbitration at ICSID by accepting a host State’s unilateral offer to arbitrate contained in a 1988 Egyptian investment law to which Egypt had adhered by Law No. 90 of 1971 acceding to the ICSID Convention.

Then in 1987 in the Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka[14] case the claimant, a Hong Kong company, invoked Article 8(1) on ‘Reference to International Centre for Settlement of Investment Disputes’ of the 1980 UK-Sri Lanka BIT to initiate ICSID arbitration.  Sri Lanka did not challenge ICSID’s jurisdiction and this case became the first that ICSID registered based solely on a BIT provision.

Following the AAPL v Sri Lanka case the majority of BITs started explicitly including provisions on investor-State dispute settlement (‘ISDS’) with arbitration under ICSID.  At around the same time, the shortage of capital[15] and the need to attract it had intensified and spurred conclusion of BITs, which had become the preferred method of investment protection following the failure to conclude a multilateral agreement on investment.[16] Like most developing countries, African countries viewed inward foreign direct investment (‘FDI’) as an integral part of their development strategy. As such, the notion that to attract FDI, States have to demonstrate their ability to protect such investment, has, over the decades, been ingrained in the economic mindsets of African States.  Consequently, at the height of their pursuit of such investment COMESA and SADC Members concluded many BITs. These BITs were negotiated on the basis of a pre-existing model agreement drafted by the developed State.

The proliferation of BITs was accompanied by the conclusion of Regional Free Trade Agreements like the 1993 North Atlantic Free Trade Agreement (‘NAFTA’) and multilateral treaties such as the 1994 Energy Charter Treaty (‘ECT’) both of which included arbitration provisions affording private investors the ability to invoke treaty violations directly.  Simultaneously, ICSID membership grew and became the leading forum for the resolution of investor-State disputes with the number of claims filed annually having increased dramatically from barely having any in the 1970s to registering 597 cases by the end of 2016.[17]

3.     Development of Investment Arbitration

As cases at ICSID increased, so did the development of investment arbitration.  While investment treaties provide the framework of investment arbitrations, the treaties need to be interpreted then applied.  But there may be situations faced by an arbitral tribunal that neither the investment treaty concerned nor the applicable law and arbitration rules addresses.  In such cases, there is a general understanding that arbitral tribunals have inherent powers or the discretion to fill the jurisdictional lacuna to enable them to exercise their powers in controlling the arbitration process.

As a result, investment arbitration tribunals have played a significant role in interpreting and applying investment treaties thus developing investment arbitration.  In this regard, arbitral tribunals have, through their practice of treaty interpretation and application, developed – albeit inconsistently – certain areas of investment arbitration in ways that treaty parties had not anticipated.  Such areas have included: (i) expanding grounds for founding jurisdiction by, for example, expansive interpretation of the definition of ‘investment’ and ‘investor’ or through the application of the most-favoured-nation (‘MFN’) clause;[18] (ii) extending the interpretation of the fair and equitable treatment standard (‘FET’);[19]  (iii) establishing the basis for third party participation;[20] (iv) delineating the scope of interim measures;[21] and (v) deciding on the standard for non-expropriation breaches,[22] scope and valuation[23] of compensation.

Whereas some of these developments through arbitral practice have been welcomed by treaty parties and subsequently incorporated into their treaties[24] and institutional arbitration rules,[25] many still have not and have in fact left questions open by rendering conflicting awards.[26] This disconnect between what treaty parties expect from their investment instruments and how arbitral tribunals have interpreted and applied them has caused tension between States and arbitral tribunals.

Consequently, some States have exercised their inherent powers to address some of the issues raised in the interpretation of their treaties.  On this, Article 31(3) (a) and (b) of the Vienna Convention on the Law of Treaties (‘VCLT’) provides that treaty interpretation shall take account of the treaty parties’ subsequent agreements and practice.  Additionally, some investment treaties include provisions stating that the treaty parties can issue joint interpretations (even after arbitration is underway) that will bind investor-State tribunals.[27]  The exercise of this power has divided opinions of investment treaty tribunals.  Some tribunals anxious about ensuring equality of the parties have expressed concern because they consider that a State that is alleging to be issuing an interpretation of a treaty during an on-going arbitration, may, in fact, be making an illegitimate attempt to amend the treaty retroactively.

This issue first arose in Pope & Talbot v Canada [28] when the NAFTA States decided to issue their interpretation on the FET standard.  Although the interpretation was issued after the Award on Merits ruling that Canada had violated the FET standard, the determination of damages had yet to be made.  The tribunal considered this to be an amendment of the treaty designed to interfere with on-going arbitration proceedings but concluded that its findings of liability would stand.

In part, due to the dissonance between States and arbitral tribunals regarding the interpretation of investment treaties an increasing number of developing States, including African countries, are disengaging from the regime of concluding BITs.[29]  Many States are concerned that the unpredictability of tribunal decisions interferes with their ability to regulate by influencing them to make regulatory decisions based on the need to avoid liability to investors under a BIT.  Accordingly, States are seeking to renegotiate current BITs, unilaterally terminating existing treaties or denouncing multilateral arbitration conventions.[30]

4.     COMESA and SADC Experience with Investment Arbitration

Equally, the experience of investment arbitrations by COMESA and SADC Members has soured their perception of BITs.  As at the end of 2014, more than half (61 percent) of COMESA and SADC Members had been involved in a total of 60 investor-State arbitrations, a majority (55) of which were ICSID arbitrations representing 11.11 percent of the total number of ICSID arbitration claims at the time.[31] Despite involving African States, these 60 arbitrations only had 15 African arbitrators as members of the tribunals.

Also by the end of 2014, COMESA and SADC Members had concluded more than 15 percent of the total number of BITs[32] and all BITs they concluded from the 1990s contained investor-State arbitration clauses.  Despite the increase in the number of BITs they concluded, there was no corresponding increase in the percentage of FDI inflows into COMESA and SADC regions.  Furthermore, not only did the increase in the number of concluded BITs fail to show a corresponding increase in FDI inflows, but there was a gradual increase in the number of investor-State arbitrations involving COMESA and SADC Members.

This rise in investor-State arbitration claims in COMESA and SADC regions is alarming.  It raises concerns not only about the investment climate in these States and their ability to comply with their BIT obligations – but given their developing status – it also raises concerns about the detrimental impact on their economies as a result of the amount of money spent on defending claims and paying damages to successful investor Claimants.

Out of 39 concluded cases, 13 were settled; three were discontinued; four were dismissed; 11 were in favour of the investor; seven were in favour of the host State; and two had no information available for review.  Given that the settled arbitrations involved some monetary compensation to the investors, it is reasonable to conclude that the host States lost more cases than they won.

The underlying causes of the rise in investment arbitration claims in these States included (a) a violent change in government; (b) legal and political instability in the aftermath of anti-government protests; (c) conflict situations due to civil strife; (d) corruption; (e) a change in government policy or law; and (f) insufficiently developed tax regimes.  The most common cause of investment disputes was a change of policy or a change of law.  Such changes raise the issue of the regulatory space required by developing States to be able to adopt new laws and policies designed to improve their economies and the lives of their citizens without the fear of being challenged by foreign investors.  While most of these causes for investment disputes can arise in any given country, they are invariably more common in developing States, and the longer they remain unaddressed, the more crippling they are on the capacity of developing States to adhere to the rule of law, let alone comply with their BIT obligations.

Additionally, provisions in BITs – especially those in the older BITs – were rather vague.  Not having participated in their drafting, COMESA and SADC Members are more likely to interpret their provisions differently from the predominantly “Western” or developed country arbitral tribunals.[35] The fact that African arbitrators are very rarely appointed in such arbitrations is disadvantageous because the African perspective in the development of investment arbitration by way of interpretation of their BITs is lacking.

5.     The Shaping of Investment Arbitration by COMESA and SADC

Given the preceding, COMESA and SADC Members decided to attempt a regional approach to regulating FDI.  They did so by concluding regional investment instruments.  In 2007 COMESA concluded the COMESA Common Investment Area Agreement (‘CCIA Agreement’).[36] In 2006, SADC concluded the SADC Protocol on Finance and Investment (‘FIP’), which came into force in 2010.[37] Annex I of the FIP on Co-operation on Investment was amended in August 2016.  However, the changes have yet to be ratified[38] and the amended FIP is not publicly available for review.  Additionally, in 2012, SADC concluded the SADC Model Bilateral Investment Treaty.[39]

Even though the CCIA Agreement is yet to enter into force and the amendments to the FIP are yet to be ratified, and the SADC Model BIT is currently being revised,[40] these instruments show a significant change in the focus of attention in investment instruments. This change is evident not only in the level of detail but also in the new provisions introduced as well as in the restriction or omission of certain traditional standards of protection. These instruments include provisions aimed at addressing some of the concerns raised in the practice of investment tribunals, with the specific aim of shifting the emphasis away from the protection of investments.

5.1.      Standards of Treatment

Although the FIP includes the FET standard, it qualifies it by providing that it shall be no less favourable than the treatment granted to investors of a third state.[41] As such, it links FET to MFN treatment, which should limit potential damages by ensuring that all foreign investors receive the same level of compensation. In the amendments to the FIP, the FET standard has been deleted.[42]  The FIP does not provide for national treatment (‘NT’); instead, Article 7 allows the Member States to grant preferential treatment to their nationals in accordance with their domestic legislations to enable them to achieve national development objectives. However, it requires the Member States to ‘eventually harmonize their respective domestic policies and legislation within the spirit of non-discrimination.’[43] The amendments to the FIP offer NT on post-establishment rights of management, operation and disposition of investments.[44]

FET has been given special attention in the CCIA Agreement and the SADC Model BIT because it is the most frequently invoked standard. In this regard, the CCIA Agreement obliges Member States to apply FET to investors and their investments in accordance with the customary international law minimum standard[45] and clarifies that this ‘does not require treatment in addition to or beyond what is required by that standard.’[46] It acknowledges that the Member States have different forms of administrative, legislative and judicial systems and that they understand that different levels of development may not achieve the same standards at the same time.[47] This approach differs from the traditional one to the international minimum standard by introducing a degree of flexibility in its interpretation based on the level of development of the respondent country.[48] Moreover, the CCIA Agreement excludes the full protection and security provision.

The SADC Model BIT recommends not to include the FET standard and suggests an alternative standard called ‘Fair Administrative Treatment.’ This standard requires, taking into consideration the level of development of the Member State in reviewing its approach to procedural justice or due process in administrative, legislative, and judicial processes so as to ensure that these do not operate in a manner that is arbitrary or that deny justice or due process to investors or their investments.[49] While it recommends excluding the FET standard, it does include it as an option but links it to the customary international law minimum standard by using the specific language of the Neer case,[50] which is known for its high threshold.[51] While the SADC Model BIT includes a provision on ‘protection and security’, it makes it a standalone provision that is not linked to FET, but instead to non-discriminatory treatment.  Furthermore, compensation relates to losses suffered as a result of war or another armed conflict, which is determined on a non-discriminatory basis.[52]

Similarly, to avoid uncertainty in the interpretation of the phrase ‘like circumstances’ with respect to non-discrimination provisions, both the CCIA Agreement and the SADC Model BIT require an overall examination on a case-by-case basis of all the circumstances of an investment so that a broad view is taken as opposed to merely looking at whether the investors are in the same sector or a related or competitive sector.[53] The amendments to the FIP contain a similar provision.[54]  Both the CCIA Agreement and the SADC Model BIT exclude NT for measures included in the exceptions or exclusion lists, and the SADC Model BIT also allows for the exclusion of NT to certain sectors.

The MFN clause has been excluded from the SADC Model BIT. Also, unlike the CCIA Agreement, which confers NT for both pre-establishment and post-establishment rights, the SADC Model BIT only covers non-discrimination for post-establishment rights of management, operation and disposition[55] to limit the potential for claims.

The regional investment instruments of COMESA and SADC include provisions on expropriation and compensation. While the FIP still adopts the typical BIT standard for compensation, the CCIA Agreement requires ‘prompt’ and ‘adequate compensation’, which may be adjusted to ‘reflect the aggravating conduct by a COMESA investor or such conduct that does not seek to mitigate damages.’[56] However, the amendments to the FIP provide for “fair and adequate” compensation.[57]  Similarly, the SADC Model BIT departs from the typical expropriation provision in at least two ways.  Firstly, it does not require an expropriation to be non-discriminatory to be lawful. The explanation given for this is that expropriations are commonly targeted and specific and could, therefore, be viewed as discriminatory anyway. Secondly, it adopts a different standard of compensation for expropriation, which is ‘fair and adequate’ to be paid ‘within a reasonable period of time.’[58]

Both the CCIA Agreement and the SADC Model BIT allow host States to pay awards that are ‘significantly burdensome’ in instalments, i.e. on a yearly basis ‘over a period agreed by the Parties, subject to interest at the rate established by agreement’ of the disputants or by a tribunal.[59] However, compensation will not be payable for ‘the issuance of compulsory licences granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights to the extent that such issuance, revocation, limitation or creation is consistent with applicable international agreements on intellectual property.’[60] Similar provisions are included in the amendments to the FIP.[61]

Furthermore, a measure of ‘general application shall not be considered an expropriation of a debt security or loan covered by these agreements solely on the basis that the measure imposes costs on the debtor that cause it to default on the debt.’[62] In addition, both instruments affirm the right of a host State to regulate for the public good by providing that regulatory measures taken by a host State ‘designed and applied to protect or enhance legitimate public welfare objectives, such as public health, safety and the environment’ will not constitute an indirect expropriation.[63]  This provision is also adopted in the amendments to the FIP.[64]

As seen above, provisions on standards of protection in the COMESAfa and SADC investment instruments show a clear restriction in coverage compared to similar provisions in traditional BITs. There is also a complete exclusion of some of the standards of protection typically found in BITs.

5.2.      Host States’ Rights

To further limit the coverage of the standards of protection, the regional investment instruments introduce host States’ rights. In this regard, the CCIA Agreement permits a host State to take ‘emergency safeguard measures’ if it suffers injury as a result of economic activities under the CCIA Agreement[65] and to take ‘measures to safeguard balance of payments … external financial difficulties’ by applying restrictions on investments with respect to which it has undertaken commitments on transfers of assets, NT, MFN treatment and expropriation if it suffers a serious balance-of-payment and external financial difficulties.[66]

The FIP includes a specific article on the ‘Right to Regulate’ that allows the Member States to regulate in the interests of the public. Through this provision, Member States can ‘adopt, maintain or enforce any measure’ considered appropriate for ensuring that ‘[i]nvestment activity is undertaken in a manner sensitive to health, safety or environmental concerns.’[67] This provision has been expanded in the amendments to the FIP to allow a host State to ‘take regulatory or other measures to ensure that development in its territory is consistent with the goals and principles of sustainable development, and with other legitimate social and economic policy objectives.’[68]

Similarly, the SADC Model BIT includes a provision on the ‘Right of States to Regulate.’[69] It provides that a host State ‘has the right to take regulatory or other measures to ensure that development in its territory is consistent with the goals and principles of sustainable development, and with other legitimate social and economic policy objectives.’[70] This right is to be ‘understood as embodied within a balance of the rights and obligations of Investors and Investments and host States.’[71]

The SADC Model BIT also bestows upon host States the right to pursue development goals. In this respect, a host State ‘may grant preferential treatment’ to any enterprise ‘in order to achieve national or sub-national regional development goals.’[72] A host State may also ‘support the development of local entrepreneurs’ and ‘seek to enhance productive capacity, increase employment, increase human resource capacity and training, research and development.’[73] Finally, a host State may take measures to ‘address historically based economic disparities suffered by identifiable ethnic or cultural groups due to discriminatory or oppressive measures.’[74] It appears that the introduction of provisions on host States’ rights in these regional instruments aims to balance out the rights and obligations of host States and investors.

5.3.      Investor Obligations

In developing the balancing act, the regional investment instruments introduce provisions on investor obligations. In this respect, the FIP requires investors to abide by the laws, regulations, administrative guidelines as well as policies of the host State.[75] The amendments to the FIP require investors to abide by this provision for the ‘full cycle of those investment’.[76] Similarly, the CCIA Agreement requires investors and their investments to comply with all applicable domestic measures of the host State.[77] The SADC Model BIT has several provisions placing obligations on investors. These include an obligation against corruption,[78] compliance with domestic laws,[79] provision of information,[80] environmental and social impact assessment,[81] environmental management and improvement,[82] the minimum standard for human rights, environment and labour;[83] corporate governance standards,[84] investor liability,[85] as well as transparency of contracts and payments.[86] In deviating further from the approach of the traditional BITs, these regional instruments take into account host State concerns by incorporating investor obligations to integrate environmental, social and governance issues in investment decision-making.

5.4.      Dispute Settlement

While retaining the BIT practice of including ISDS provisions, the regional investment instruments take a more restrictive approach to allowing recourse to arbitration. They also allow counterclaims intended to achieve a more balanced access to investment dispute resolution. All the regional investment instruments confer on investors the right to bring direct claims against a host State but make this conditional upon attempting an amicable settlement of disputes.  The FIP requires that (after failing to settle the dispute amicably), investors should exhaust local remedies before resorting to arbitration.  However, the amendments to the FIP do not include an ISDS provision and provide only for State-to-State dispute resolution.[87]

The CCIA Agreement obliges disputing parties to seek to resolve their disputes through amicable means, both before and during the cooling-off period.[88] The cooling-off period is a minimum of six months. If no alternative means of resolving a dispute is agreed, a disputing party is obliged to seek the assistance of a mediator to resolve it during the cooling-off period.[89] If three months before the expiration period of the cooling-off period the disputing parties have failed to agree on a mediator, the President of the COMESA Court of Justice, or his designate, shall appoint a mediator from the COMESA Secretariat’s list. The appointment shall be binding on the disputing parties.[90]

The SADC Model BIT does not make it obligatory to resort to mediation, it does, however, provide that either disputing party may request mediation of the dispute after a notice of intent has been submitted, and the other disputing party may agree to such mediation.[91]

Additionally, both the CCIA Agreement and the SADC Model BIT impose a three-year cut-off period for submission of an arbitration claim.[92] Like the FIP, the SADC Model BIT requires the exhaustion of local remedies before arbitration proceedings are commenced. If local remedies have been exhausted the time limit for bringing an arbitration claim under the SADC Model BIT is one year from the conclusion of the request for local remedies.[93] Moreover, the SADC Model BIT prevents the initiation of arbitration under a BIT if the issue in dispute would be covered by choice of forum clause contained in any investment law, regulation, permit or contract.[94]

Whereas the CCIA Agreement and the SADC Model BIT provide investors with a choice of forum for bringing claims against a host State, including arbitration under the ICSID Convention and ad hoc arbitration under the UNCITRAL  Arbitration Rules or under any other arbitration institution or rules,[95] they also attempt to limit the potential for multiple claims by including fork-in-the-road clauses that prevent an investor from choosing another forum after having initiated proceedings for a claim relating to the same subject matter.[96]

The CCIA Agreement and the SADC Model BIT allow host States to bring counterclaims against investors. Under the CCIA Agreement, the host State may do so as a defence, counterclaim, right of set-off or a similar claim.[97] Under the SADC Model BIT, a host State may counterclaim for damages or other relief resulting from an alleged breach of the BIT.[98] The SADC Model BIT also allows the initiation of a civil action by the host State, political subdivisions or private entities in domestic courts against an investor or investment for damages arising from an alleged breach of the obligations set out in the BIT.[99] In reformulating their dispute resolution provisions, the regional instruments attempt to shift the focus away from investment protection.

6.     Conclusion

Investment arbitration developed in response to the need to better protect foreign investors and their investments.  This protection was achieved by establishing ICSID to provide a more effective forum for the resolution of investor-State disputes.  Simultaneously, developed States drafted and concluded BITs mostly with developing States, which later offered arbitration under ICSID and are seemingly skewed in favour of investors.  However, the prominence of ICSID as the preferred forum for ISDS and the proliferation of BITs as well as investment tribunal practice, have not been favourable to COMESA and SADC Members who have had to defend a relatively high percentage of ICSID arbitrations.

While COMESA and SADC Members signed several BITs at the height of their pursuit of FDI, they had little if any input in their drafting or the subsequent development of investment arbitration.  In recognition of the failure of BITs as a tool for attracting FDI and the need to prevent the rise of investment arbitration claims, COMESA and SADC Members concluded regional investment instruments.  It is evident from the content of these investment instruments that they are in response to the arbitral practice of investment tribunals as they shift the focus of their purpose away from the protection of investors and their investments.

This approach is apparent not only in the inclusion of specific provisions aimed at balancing out the rights and obligations of host States and investors but also in the limitation of coverage or omission of certain investment protection provisions.  Viewed holistically, the deliberate shift away from an emphasis on protection demonstrates the changing role of these African States in the international investment regime from mere observers to fully fledged participants keen to shape the development of investment arbitration.

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* Secretary General, AfAA and Managing Director, AILA.

**Rukia Baruti, ‘Investment Facilitation in Regional Economic Integration in Africa: The Cases of COMESA, EAC and SADC’ Journal of World Investment & Trade 18 (2017) 493–529).

Link to Footnotes