Over 30 cases adjudicated by the International Centre for Settlement of Investment Disputes (“ICSID”) alone involve Egypt. While Egypt was able to win a few notable cases, the scale may soon tip in favor of investors, however, as several new cases are currently being disputed before ICSID. 

The primary question, though, lies not in the improvement of Egypt’s record, which is largely due to its ability to select competent counsel, but in the reasons that caused such a high number of cases to be filed in the first place. In other words, Egypt should focus on conflict prevention rather than conflict resolution.  There are several reasons for the surge in cases against Egypt in recent years, [2] four of which stand out:

I.                 THE DANGERS OF CONFLICTING LEGISLATION

In 2000, East Mediterranean Gas (“EMG”) was established as a free zone company for the purpose of exporting gas to neighboring States. EMG’s free zones status attracted investors from several jurisdictions, including the USA and Poland. However, in 2008, EMG’s free zones status was unexpectedly revoked, which led to the imposition of a 20% corporate tax on the company. With negotiations failing, Polish and US investors brought investment claims against Egypt under the applicable bilateral investment treaties (“BITs”) for creeping expropriation resulting from the withdrawal of the tax breaks and other breaches. ICSID and UNCITRAL tribunals sided with the claimants, costing Egypt both time and money (see Ampal v. Egypt, ICSID Case No. ARB/12/11 (“Ampal”); and Maiman and others v. Egypt, PCA Case No. 2012/26 (“Maiman”)).[3] This could have been avoided but for the hasty decision to suddenly and unexpectedly withdraw the tax benefits granted to EMG.

The EMG cases bring to light the classical tension between a State’s freedom to legislate and an investor’s right to a safe, secure, and predictable investment. While an analysis of this dichotomy is beyond the scope of this article, the fact remains that by failing to consider the investors’ interests, the haphazard manner in which members of parliament (“MPs”) and other officials proceeded with legislating without assessing the impact of their actions on investors put the country at risk of facing claims by disgruntled investors.

An important area to be cautious is the Law on Special Economic Zones. This law was promulgated in 2002 to offer incentives and tax breaks to industrial projects operating within designated special economic zones. This naturally attracted foreign investors to these industrial zones, where they established impressive industrial projects, including Africa’s largest manufacturer of fiberglass pipes. However, ten years later, the Income Tax Act (a completely different law) was amended to specifically impose a 20% withholding tax on short-term loans repaid by projects within the zone.[4] Admittedly, while this withholding tax did not appear to affect projects within special economic zones (special economic zones have proved to be a success thus far), in 2016 Egyptian legislators spiced things up a little by enacting a Value Added Tax Law to “override any conflicting provision under a different law” including the Law on Special Economic Zones. There is a need to be vigilant and to avoid situations of legal uncertainty that can fuel future investment disputes against Egypt.

While investors have successfully brought claims against Egypt under various BITs, we have yet to witness a case challenging the gradual withdrawal of incentives offered by the Law on Special Economic Zones. For this reason, it is essential for Egyptian legislators to learn from the lessons of the past and avoid, in their keenness to legislate, creating to domestic conflicts of laws.

II.               LAWS DO NOT ALWAYS REFLECT ACTUAL PRACTICE

As in the case of economic and investment laws, Egyptian MPs must also consider the impact of non-economic laws on investors. To this end, and in line with the importance of ensuring predictability for both States and investors, States must ensure that their laws reflect actual practice, otherwise the risk of successful investor claims increases.

The first case that comes to mind is the oft-cited Waguih Elie George Siag and Clorinda Vecchi v. Egypt, ICSID Case No. ARB/05/15 (“Siag”), which turned on the tribunal’s approach to interpreting a provision of Egypt’s Citizenship Law which, in practice, was not applied. The facts, as outlined by the award on jurisdiction, suggest that Mr. Siag, an Egyptian by birth, owned a tourist development project in Egypt. In March 1990, he applied for Lebanese citizenship, which he acquired in June 1990.  Three years later, in May 1993, he obtained Italian citizenship through his marriage to Clorinda Vecchi, the co-claimant.

Mr. Siag’s project faced certain difficulties that ultimately led him to initiate an ICSID claim against Egypt under the Italy-Egypt BIT despite the fact that he appeared to consider himself Egyptian following his acquisition of Lebanese and Italian citizenship, which should have precluded the tribunal from hearing the case.[5] However, Mr. Siag’s lawyers relied on a provision of Egypt’s Citizenship Law (Article 10(3)) that is rarely -if ever- applied, to argue that he had lost Egyptian citizenship by the force of law in 1991, one year after his acquisition of Lebanese citizenship since he did not notify the Egyptian authorities of his wish to retain Egyptian citizenship following naturalization.

In his support was an expert opinion by Professor Fouad Riad, the leading authority on Egyptian citizenship law at the time, and a High Administrative Court judgment, although a reading of the judgment reveals that it dealt with a different question, and that the Court’s relevant remark was clearly obiter dictum. In other words, there was no precedent supporting Mr. Siag’s claim. The tribunal indulged, notwithstanding Egypt's legitimate claim that the claimant’s interpretation of the Article in question was not supported by jurisprudence or practice. In other words, Egypt maintained that Article 10(3) of the Citizenship Law was for all intents and purposes a dead-letter law.

The tribunal also ignored the fact that following his acquisition of Lebanese citizenship, the trinational residing in Egypt (i) acted before the commencement of his investment (and thereafter) as an Egyptian citizen; (ii) was provided by the government with numerous Egyptian nationality certificates between 1991 and 1997; and (iii) made several declarations concerning his nationality status to the Egyptian authorities for the purpose of his project (i.e. represented himself as an Egyptian before Egyptian regulatory bodies).

Mr. Siag won based on a provision of the Citizenship Law that was not applied in practice (at least at the time the cases were disputes). Leaving any comments on the tribunal’s reading of the Citizenship Law aside, the Siag arbitration raises an important question of significant relevance to investment arbitration; that of the gap between what the law says on paper, and how it is applied in practice. The tribunal applied the letter of the law, disregarding how it's interpreted and applied in practice. 

In the absence of a consistent approach by tribunals as to how to deal with the gap between law and practice, both investors and States risk being penalized due to unpredictability. In Siag, had the tribunal deferred to the State’s application of its own law, the outcome would have been very different. While such unpredictability, which is at odds with both the investors’ and States’ legitimate expectations, is a result of the inconsistent approach by tribunals towards this issue, fundamentally, it can be avoided if States ensure their laws reflect practice. 

III.              THE ATTRIBUTION CONUNDRUM

Understanding the rules of attribution is fundamental to determining whether the acts of third parties can be ascribed to a State for the purpose of defining its responsibility for wrongful acts. When domestic laws do not clearly outline the relationship between entities, confusion ensues, and so does the risk of liability.  Here is a brief explanation. 

It is common for the Egyptian government to contract with investors through government-owned statutory bodies that were converted from “public authorities created in the public interest” to authorities acting as commercial entities (e.g., the Suez Canal Authority (“SCA”) or the “Authority”) or referred to as corporations or companies (e.g., the Egyptian General Petroleum Corporation (“EGPC”), the Egyptian Natural Gas Holding Company (“EGAS”)). 

While for purposes of attribution to the State these institutions may arguably be considered independent from the State (since they appear to take the form of corporations), the challenge with this argument is that the constitutive statutes of these so-called corporations send mixed signals to investors and tribunals regarding these entities’ real nature. For example, the SCA’s constitutive statute provides that the Authority “has an independent budget” a fact that suggests it is separate from the State, before adding in the same Article that such a budget is to be “subject to the supervision of the Accountability State Authority” and “ratified by Presidential decree”.[6] An investor must wonder if the SCA is genuinely independent, why is it regulated by law and not governed by a corporate bylaw? Why is its budget subject to the supervision of the government? And why does the President have to burden himself every year with issuing a decree ratifying that budget? Despite the foregoing, the tribunal in Jan de Nul N.V., Dredging International v. Egypt, ICSID Case No. ARB/04/13 (“Jan de Nul”) found that the acts of the SCA could not be attributed to the State, a conclusion that was made easier by the fact that in this specific dispute, the SCA’s impugned acts were purely commercial. Does this mean that if such acts were not purely commercial, the tribunal would have ruled otherwise? The answer is not entirely clear, and the confusing manner in which the SCA’s constitutive statute is drafted does not provide any concrete answer either. 

In the absence of clear boundaries between the State and statutory bodies acting on its behalf, investors will not shy away from filing Investor-State arbitrations in the hope of having tribunals determine that a connection with the State can be established. Armed with local counsel that can provide rational and contextual explanations of such cryptic constitutive statutes in light of applicable domestic jurisprudence, the investors’ chances of success will increase, which is exactly what happened in arbitrations involving EGPC, another government-controlled entity, whose opponents were represented by a team of international and local counsel familiar with the intricacies of Egyptian administrative law, the domestic law governing attribution matters. While EGPC is referred to in English as a “corporation”, which suggests that it is an independent corporate entity, the claimants in Maiman and Ampal demonstrated that it is a corporation in name only, since an examination of EGPC’s constitutive statues revealed that it is:

§   An entity that has no shareholders, partners, or quota holders;

§   its structure does not contain a general assembly;

§   the Board of Directors is not subject to the oversight of a general assembly (as is typical of corporations); but is subordinate to the Minister of Petroleum; and

§   its board of directors is mostly composed of Government officers acting in their official capacities.

The clear control of the government over EGPC has cost Egypt at least two recent Investor-State arbitrations involving EGPC and its subordinate entities (Ampal and Maiman). 

The problem with attribution is not limited to the SCA and EGPC. Similarly structured entities exist in several other industries including mining, rail transport, telecommunications, and aviation and airport affairs to name but a few. With investments increasing in these sectors, and as the relationship between these statutory bodies and the State remains ambiguous, one would expect more arbitrations in the future, more uncertainty, and more money spent on lawyers and arbitrators.  

IV.             INEFFECTIVE BLOCKING LEGISLATION

To engage in business in Egypt, foreign investors must set up a local entity, which can take the form of an incorporated special purpose vehicle (“SPV”). These local SPVs often execute administrative contracts that contain arbitration clauses. However, Egypt has enacted blocking legislation amending the Arbitration Act to subject the initiation of commercial arbitrations involving administrative contracts to the approval of the concerned Minister. This is a public policy norm.[7]  Without such an approval, Egyptian administrative courts would have automatic jurisdiction. The Minister will rarely grant such an approval absent higher national interests.

An administrative contract under Egyptian law is a contract that is:

§   Executed by or on behalf of a public law person;

§   In relation to the management or functioning of public utility; and

§   that contains exorbitant clauses (e.g., discretion to amend terms, termination in public interest, amend prices following a regular review process).

This means that most supply and infrastructure-project-agreements concluded with the government will be deemed administrative contracts that may not be resolved by means of commercial arbitration unless the Minister deems otherwise.

While such blocking legislation may preclude SPVs from filing commercial arbitration against the State, it does not prevent these SPVs’ shareholders from initiating Investor-State arbitrations since their activities in Egypt (including owning shares in a local SPV) qualify as an “investment” under most applicable BITs. It follows that while under a build operate and transfer (“BOT”) contract for the construction of a refinery, airport, or similar structure, the SPV contracting with the government may fail to secure the Minister’s approval to exchange swords in commercial arbitration, the SPV’s shareholders will not be precluded from soliciting the ISDS mechanism.

Needless to say that many claimants resorting to ICSID recognize that it has greater benefits than commercial arbitration, chief among which are publicity of the cases and easier enforcement procedures. The blocking legislation, therefore, may not be so effective after all, and may actually be more counterproductive. This calls for a careful reconsideration of the efficacy and need for such blocking legislation.

CONCLUSION

Egypt is an investor-friendly State that strives to offer investors significant opportunities for growth. Yet despite having an active Ministry of Investment, it has struggled with a large number of ICSID and other Investor-State claims which could have been avoided but for structural legislative challenges. Absent legislative amendments, the risk of investor claims will persist. There is therefore an urgent need to address the rising trend of investment disputes through a dispute prevention lens that addresses the structural roots of the problem to guarantee Egypt’s continued ability to attract foreign investors.

[1] Partner, Shahid Law Firm, Egypt. The views expressed in this article are those of the author only and do not constitute legal advice. Tarek Badawy can be reached by email at tarek.badawy@shahidlaw.com.

[2] While the number of arbitrations filed against Egypt increased following the 2011 Revolution, this article addresses structural problems which also exist in times of political and economic stability.

[3] While Ampal and Maiman were initiated after the 2011 Revolution, the revocation of EMG’s free zones statues took place in 2008.

[4] Income Tax Act (as amended), Art. 56.

[5] Article 25 of the ICSID Convention precludes citizens from suing their State under the ICSID Convention.

[6] Law No. 30 of 1975 on the Suez Canal Authority, Art. 4.

[7] Court of Cassation, Cases No. 13313, 13460 / 80 JY, judgment dated 12 May 2015.

Introduction

Recently, the Supreme Court in Mauritius invoked its powers under section 39(b)(ii) of the Mauritius International Arbitration Act 2008,[1] to set aside an arbitration award on the ground that the enforcement of the underlying contract was in flagrant and concrete  breach of the Mauritius Public Procurement Act therefore, the award was a violation of the Mauritius public policy.[2]

This article will attempt to address whether the Nigerian courts would hold a similar view as the Supreme Court in Mauritius, that a breach of the Nigerian Public Procurement Act should be held as so fundamental as to amount to a breach of the public policy of Nigeria warranting the refusal of the enforcement of an award arising from such a breach.

Background Facts of the Mauritius Supreme Court Decision

Betamax, a shipping company had entered into a contract with the Mauritius State Trading Company for the freight of petroleum product from India to Mauritius. Subsequently, the contract was terminated by the Mauritius government on the basis that the contract was entered into in breach of the Public Procurement Act of Mauritius. Betamax commenced arbitration against the government of Mauritius for breach of contract, and the tribunal decided in favour of Betamax. Betamax thereafter sought to enforce the award in Mauritius. However, the Mauritius government challenged the enforcement and also applied to set aside the award on the basis that the contract was illegally concluded. Therefore, the enforcement of the award will be in breach of the country’s public policy. The Supreme Court set aside the award after holding that the contract would violate the fundamental legal order of Mauritius because it was “in flagrant and concrete breach of public procurement legislation enacted to secure the protection of good governance of public funds”. The Court added that “such a violation breaks through the ceiling of the high threshold which may be imposed by any restrictive notion of public policy”.

Refusal to Enforce an Award on Grounds of Public Policy under Nigerian Law

The concept of public policy is quite broad and does not have any statutory definition in Nigeria. However, judicial decisions exist where attempts were made to define the term, public policy. For instance, in Okonkwo v. Okagbue,[3] the Supreme Court viewed the term as the ideals which for the time being prevails in any community as to the conditions necessary to ensure its welfare, so that anything is treated as against public policy if it is generally injurious to the public interest.  Furthermore, in Total Nigeria Plc. v. Ajayi,[4] the Court of Appeal stated that “the principle of public policy is to protect public interest by which the courts would not sanction what is injurious to public welfare or against the public good. The phrase public policy, therefore, means that policy of the law of not sanctioning an act which is against the public interest in the sense that it is injurious to public welfare or public good.”

The nebulous feature of the notion was also recognized by the Supreme Court in Sonnar Ltd. v. Nordwind,[5] where Eso, J.S.C. said “Surely, public policy is an unruly horse and judges are not such masters of equestrian ability to take on such experience”.

The above decisions of the Supreme Court and the Court of Appeal reveal that when courts are confronted with the issue of public policy as a defence against the enforcement of an arbitral award, the courts usually take a restrictive approach in its interpretation of the concept. In Agro-Allied Development Ent. Limited. v. United Shipping Trading Co. Inc.,[6] the Court of Appeal upheld a High Court decision which made a recognition and enforcement of an award order despite the argument of the appellant that the award was against the public policy of Nigeria. The Court considered that there was no perversity in the judgment of the High Court and that the award is not contrary to any public policy in Nigeria. Furthermore, in Nigerian National Petroleum Corporation (NNPC) v. Lutin Investment Limited & Anor[7], the appellant argued that the arbitrator be removed because he had acted against public policy by moving the seat of arbitration to London at the expense of the parties when the agreement was governed by Nigerian law. The Supreme Court unanimously dismissed the appeal and recognized the power or discretion of the arbitrator to go abroad to hear evidence from witnesses.

Notwithstanding the nebulous nature of the term “public policy”, courts have held that illegal contracts are against public policy. In effect, where an arbitration agreement is classified by a court as an illegal contract, the court is likely to find that an award made on the basis of that arbitration agreement is unenforceable for being a product of an illegal contract. So, if the arbitration agreement is prohibited by statute, an award from it may not have favourable recognition from courts. In Fasel Services Ltd & Anor. v. NPA & Anor,[8] the Supreme Court stated that “without getting unduly enmeshed in the controversy regarding the definition or classification of that term (illegal contract), it will be enough to say that contracts which are prohibited by statute or at common law, coupled with provisions for sanction (such as fine or imprisonment) in the event of its contravention are said to be illegal.” Furthermore, in Oguntuwase v. Jegede[9] the Court of Appeal stated that “the general principle of the law that an illegal contract will not be upheld and enforced by the Court is founded on the public policy embodied in the maxim,in pari delicto, potior est conditio defendentis and ex-trupi causa non orituractio, that is, a party who is himself guilty of an action, does not have a right to enforce performance of an agreement founded on a consideration that is contrary to public interest or policy”.  Therefore, an award arising from an illegal contract may be set aside on the grounds of public policy.

Breach of the Public Procurement Act and the Public Policy Ground for Refusal of Enforcement

The Public Procurement Act 2007 (‘the PPA’) was enacted to ensure a fair, competitive and transparent standard for the procurement and disposal of public assets. It governs the manner in which public funds are used to purchase public goods and services. Therefore, provisions of the PPA impacts on public policy because a flagrant violation of the PPA could result in the award of a major procurement contract to an unqualified contractor or the purchase of substandard goods or services, which would be injurious to public welfare and interest.

It may be argued that not every violation of the PPA should be treated as a breach of public policy, and that some provisions should be treated as directory, as the Court of Appeal in Revenue Mobilization, Allocation and Fiscal Commission v. Onwuekweikpe Esq.,[10] has muted: “it is not every non-compliance with the provisions of a statute that is fatal. A breach of mandatory enactment renders what has been done null and void. But if the statute is merely directory, it is immaterial, so far as it relates to the validity of the thing done, whether the provisions of the statute are accurately followed out or not.” However, section 58 of the PPA makes it a punishable offence for natural or legal persons to contravene “any provision of this Act”. This section connotes that the provisions of the PPA cannot be treated as merely directory.

The effect of a contract which breached statutory provision is aptly stated by the Supreme Court in Corporate Ideal Insurance Ltd v. Ajaokuta Steel Company Ltd & Ors[11]  albeit in relation to the Insurance Act 2003. The Apex court stated that “A contract which violently violates the provisions of a statute as in this case, with the sole aim of circumventing the intendment of the law maker is, to all intents and purpose, illegal, null and void and unenforceable. Such a contract or agreement is against public policy and makes nonsense of legislative efforts to streamline the ways and means of business relations”. It is opined therefore, that the PPA, which affects public interest is not just a directory statute, but a mandatory enactment which contravention will render a contract based thereon, illegal and against public policy.

In context of a challenge to the enforcement of an award on the public policy ground, the courts would have to consider the alleged breach in juxtaposition with the provisions of the PPA and determine whether there has indeed been a violation of the PPA. Where it determines that the PPA was violated in awarding the contract, the court may align with the position of the Mauritius Supreme Court by setting aside or refusing recognition of an arbitral award arising from the contract.

Conclusion

From the provisions of Nigerian case law on public policy, it has been established that the Nigerian courts adopt a restrictive approach in applying the public policy ground for setting aside or refusing the enforcement of an arbitral award. However, it is also established that illegal contracts are contrary to public policy, and that a contract is illegal where it violates mandatory provisions of statute.  Due to the mandatory nature of the PPA, which was enacted to protect public interest in the procurement of goods and services and which sanctions the contravention of its provisions, it is believed that the Nigerian courts would consider a contract executed in breach of its provisions in a similar manner as the Mauritius Supreme Court in the Betamax case and set aside or refuse the enforcement or an award arising from such a contract on the public policy ground.

____________________________

[1] Similar to Section 48(b)(ii) of the Nigerian Arbitration and Conciliation Act CAP A18, LFN 2004 and Article 34(2)(b)(2) of the UNCITRAL Model Law 1985, amended in 2006.

[2] Paray N.B, Dabee, S and Maxime, S.P (2019). The Supreme Court of Mauritius sets aside award on grounds of breach of domestic public policy [online]. Lexology. Available from:https://www.lexology.com/library/detail.aspx?g=dbac875b-12f7-44d9-b921-f2fd0e8fe677 [accessed 6 June 2019].

[3] (1994) 9 NWLR (Pt. 368)

[4] (2003) LPELR-6174(CA)

[5] (1987) 4 NWLR (Pt. 66) 520

[6] [2011] 9 NWLR (Pt. 1252) 258

[7] (2006) 2 CLRN 1 (SC)

[8] (2009) LPELR-1245(SC)

[9] (2015) LPELR-24826(CA)

[10] (2008) LPELR-8398(CA)

[11] (2014) LPELR-22255(SC)

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.

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* 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.

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* 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.

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*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.

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*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.

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*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".

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* Counsel, Stephenson Harwood