Welcome to the very first blog entry by the Webber Wentzel international arbitration team.
As we are located in Johannesburg and Cape Town in South Africa, a large portion of our work involves Sub-Saharan Africa. In line with our expertise and passion, our blog entries will focus on developments in international arbitration law in that region. We will also cover issues that are relevant to parties doing business in Sub-Saharan Africa who may need to resort to commercial arbitration or investor-state arbitration to secure their rights.
We hope that this blog will provide you with valuable insights into international arbitration within Sub-Saharan Africa so that you will be better equipped to confront disputes that arise in your Sub-Saharan transaction or project.
The international arbitration landscape in Sub-Saharan Africa is changing rapidly. We highlight some of the key developments below.
International Arbitration Institutions
Several Sub-Saharan African countries are attempting to present themselves as viable international arbitration destinations and there has been growth in a number of regional arbitration institutions. The Kigali International Arbitration Centre, the Nairobi Centre of International Arbitration, Common Court of Justice & Arbitration of OHADA, the Lagos Court of Arbitration Centre, the Lagos Chamber of Commerce International Arbitration Centre, the Mauritian International Arbitration Centre and the Arbitration Forum of Southern Africa (AFSA) are some of the more prominent arbitration institutions in Sub-Saharan Africa.
Recently AFSA, the Johannesburg-based and long-running commercial arbitration institution, of which Webber Wentzel is a founding member, together with the Shanghai International Arbitration Centre, launched the China - Africa Joint Arbitration Centre or CAJAC. CAJAC is an international arbitration centre which aims to provide dispute resolution services to facilitate and enhance business, trade and investments between China and the continent of Africa. The establishment of CAJAC is of great significance as it marks South Africa's first foray onto the international arbitration stage as a regional leader. CAJAC has recently added three new members to its ranks, namely the Beijing International Arbitration Centre, the Shenzhen International Court of Arbitration and the Nairobi Centre for International Arbitration.
AFSA itself is also in the process of getting a new division on its feet - AFSA International - to administer its ever-increasing load of cross-border disputes. The rules which will apply to international arbitrations referred to AFSA International will be based on the UNCITRAL Rules with some international best practice adjustments.
New South African Legislation
South Africa is preparing for the introduction into law of the long-overdue International Arbitration Bill.
In 1999, the South African Law Reform Commission recommended that South Africa adopt an act specific to govern international commercial arbitrations in order to bring South Africa's outdated 1965 Arbitration Act in line with modern international norms. The current Arbitration Act does not deal with international arbitration expressly, and is out of step with developments in modern arbitration law in the last 50 years. Moreover, the Recognition and Enforcement of Foreign Arbitral Awards Act of 1977, deals only with the enforcement of foreign awards. The International Arbitration Act aims to fill this gap by creating a specific system to enhance South Africa's ability to deal with international commercial disputes quickly and efficiently.
Then there is the controversial Protection of Investment Act, for which the South Africa President has yet to proclaim a commencement date. The Protection of Investment Act is the South African government's response to its view that the current international investment arbitration system offers disproportionately more protection to foreign investors compared to local investors.
There are also expected to be forthcoming amendments to the Southern African Development Community's ("SADC's") Protocol on Finance and Investment. In August 2016, SADC proposed a number of amendments to Annex 1 of the SADC Protocol on Finance and Investment that, to a large extent, seem to mirror the provisions of the Protection of Investment Act. As of 17 May 2017, eight of the fifteen member states had signed the amendment agreement. At the time of writing, it is not yet clear when the amendments may come into force. The proposed amendments appear to dilute investors' rights to compensation in the case of expropriation and narrows the standards of treatment applicable to such investors. Further, the proposed amendments remove the provision entitling investors to initiate arbitration proceedings against SADC member states.
Some observations on the future of International Investment Treaty Arbitrations involving African States
With ever increasing amounts being claimed in investment arbitration disputes and with national sovereignty and international relations at stake, the future direction of international investment arbitration has, in more recent years, come under closer scrutiny in many developing countries
Looking further afield, in Latin America, for example, there has been an increase in the number of countries that ignore, denounce or resist the implementation of the International Centre for the Settlement of Investment Disputes ("ICSID") regime. Following the proclamation by the president of Bolivia that developing countries never won investment arbitration cases, Bolivia became the first State to withdraw from the ICSID Convention effective from November 2007. This was followed by the withdrawal of Ecuador in January 2010 and Venezuela in July 2012. Brazil has refused to ratify the ICSID Convention, purportedly for both political and economic reasons, and reportedly Argentina is studying options available to it to reduce the power of ICSID over its investment disputes, including the formal termination or withdrawal of many of its BITs.
Turning to the African continent, a number of countries have not even signed the ICSID Convention, including Angola, Cape Verde, Djibouti, Equatorial Guinea, Eritrea, Libya and South Africa. While these countries have not submitted to ICSID jurisdiction, some have, to an extent, conferred jurisdiction of investment disputes to international arbitration through various BITs. However, in the case of South Africa in particular, the government has taken the decision to phase out a number of its BITs on the basis that, inter alia, such treaties offer disproportionately more protection to foreign investors as compared to local investors and that the Constitution of South Africa already provides adequate protection to foreign investors. To date, South Africa has already withdrawn from BITs with Belgium, Luxembourg, Spain, Germany, Switzerland and the Netherlands.
A number of factors may be behind such developments. Such actions may be indicative of the growth of investor-arbitrations being brought against the countries concerned, and possibly even a perception amongst them that such tribunals are “investor-friendly”. Furthermore, there have been some indications of a desire to better protect developing States’ policy-making space. On the other hand, it is clear that many see too many potential gains from international investment to justify a complete withdrawal from investment treaties and investor-state dispute resolution.
With more investors looking to Africa as an investment and business destination, it is likely that the number of BITs concluded will keep increasing. However, in the light of the above trends, it will be interesting to see what, if any, steps are proposed to help these BITs stand the test of time, whether this be amendments to existing treaties, the promulgation of a new model BIT, or other some other regime potentially broadening the State's ability to legislate more fully.
This article was co-authored by Scheleese Goudy, previously a Senior Associate with Webber Wentzel.