Effective Dispute Resolution in Africa – Use of Courts, Arbitration and ADR
Africa Focus
The entitlement and right of individuals and business entities to seek redress through the courts of a particular country is a right enshrined in almost all jurisdictions and constitutions.
Law Update: Issue 370 - From Africa to Asia: Legal Narratives of Change and Continuity
Paul TaylorPartner, Regional Head of Arbitration
Khaled AttiaPartner, Head of Dispute Resolution - Egypt
Africa is undergoing a rapid transformation, with increased economic development activity and cross-border trade. As a result, the need for efficient and effective dispute resolution mechanisms has become increasingly critical.
The entitlement and right of individuals and business entities to seek redress through the courts of a particular country is a right enshrined in almost all jurisdictions and constitutions. Those national or local courts are the ‘default’ forum in which to bring grievances, complaints and disputes and in which to seek remedies and enforce rights.
That is equally true of Africa too, with the courts being the legal default venue in which to sue or be sued. Depending on the origin and history of a particular country and its legal system, those courts might follow the ‘common law’ model (primarily derived from English law) such as in Uganda, Kenya and Nigeria, or the ‘civil law’ model (primarily derived from French or Egyptian law) such as in Egypt, Algeria, Morocco and Libya, but with a mixture of elements in both systems of Sharia law also.
At the same time, several alternative fora in which to bring legal proceedings have developed as a result of the demands and requirements of domestic and international business being conducted under bigger and more specialist contracts and commercial arrangements, and often involving cross-border business transactions between different jurisdictions and sometimes different legal systems.
Of these alternative methods, the most widely used and preferred by the business community has been arbitration, and to a lesser extent other alternative dispute resolution methods such as adjudication, mediation, or conciliation. Each of these has its own nuances and its own suitability to different types of disputes and different ways in which parties wish to resolve any disputes that arise between them.
To be effective, it is worth looking at the structure and evolution of dispute resolution in various African countries to try to understand what works best and what outcomes are dictated by the relevant forum chosen for resolving disputes.
Africa has a myriad of diverse legal systems with historic roots often found in colonial history and/or with the Sharia law. Litigation in state courts and arbitration/ADR in private tribunals often thrive side by side, and it is by consent that parties agree to engage in those alternative methods outside of the local court regime.
Throughout Africa, the nature, size and complexity of commercial contracts, construction, infrastructure and power projects (EPC, BOT, BOOT, D&B etc) and different financing methods (such as PPP/concessions) have driven the demand from stakeholders for effective and efficient forms of dispute resolution to be agreed and adopted, especially arbitration and expecting the law in any given country to enshrine and protect the right to arbitrate.
The widely recognized advantages of using arbitration as a forum can be viewed in general terms as follows:
Expertise and credibility of using a recognized arbitral institute to administer the case and its arbitration rules through a tribunal of selected qualified arbitrators with subject matter expertise.
Efficiency and speed of the arbitral process, supported by an arbitration law or statute.
Enforceability of the arbitral award (which is perhaps the key consideration as ultimately, that is where the arbitral process has to ‘have teeth’). As explained below, the New York Convention is central to this too.
By way of example, Egypt has become arguably the leading arbitral centre in Africa by the establishment of the Cairo Regional Centre for International Commercial Arbitration (CRCICA) and the CRCICA Rules of arbitration since early 1980s, and its adoption of the Egyptian Arbitration Law in 1994 (Law No. 27 of 1994), all of which have created a tried, trusted and tested process that allows for arbitration and enforcement of any Award in the courts.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) is an international recognized and accepted treaty that, in simple terms, allows a foreign arbitration award rendered in one signatory country to be enforced in the courts of another signatory country. In Africa, the vast majority of states have accepted the New York Convention (albeit some with qualifications which should be assessed on a case-by-case basis).
The influence and importance of the AfCFTA in cross-border trade disputes between African States has also helped develop the use of effective alternative dispute resolution methods. This has been achieved by establishment of a harmonized and standardized ‘Dispute Settlement Mechanism’ (DSM) as between member states, and Dispute Settlement Panel (DSP) comprised of experts in international trade law to hear and decide such disputes.
AfCFTA's emphasis on uniform trade regulations across member states is creating a more predictable business environment, which in turn fosters trust in arbitration as a reliable dispute resolution mechanism. To accommodate the growing demand for arbitration services, there is a developing trend towards establishing regional arbitration centers within Africa, promoting local expertise and capacity building.
Moreover, Online Dispute Resolution (ODR) emerges as a promising solution to address the challenges posed by cross-border trade within the continent. This is particularly crucial for small and medium-sized enterprises (SMEs) that often face hurdles in traditional dispute resolution. In this regard, the AfCFTA is building standardizing processes, strengthening capacity, and creating a supportive legal and regulatory environment, which includes recognizing and enforcing ODR decisions, investing in digital infrastructure, and integrating ODR with existing dispute resolution mechanisms.
However, the AfCFTA dispute resolution process is still developing and may face challenges along the way to ensure it is as widely used and recognized across all fronts as it might be.
In many African business sectors (and financing bodies such as World Bank (WB) and the International Monetary Fund (IMF)), recognized forms of contract are used to create international standards used by that industry. For example, construction and infrastructure projects in Africa regularly use the FIDIC forms of contract which in themselves have bespoke dispute resolution clauses that allow for tiers and escalation of disputes through amicable settlement process, adjudication process and finally arbitration.
Given the rise and promotion of a myriad of non-court processes, has the role of domestic courts in African countries diminished or been overtaken by those other ADFR forms?
The first thing to remember is that arbitral awards are generally fully reliant on the local courts of a country implementing its laws to allow any enforcement.
Aside from that, there is no overriding trend that suggests that courts are not being used for the majority of domestic disputes (and some cross-border disputes) where the subject matter and nature of the dispute is better suited to resolution by judges in such local courts giving judgments on all and any type of personal or corporate disputes.
Culture, custom and practice often dictate that certain types of disputes are best suited to the national courts (and in some cases are reserved to the courts rather than being allowed to be arbitrated) for a range of reasons that might include public policy, cost, expediency, political requirements, language and familiarity with subject matter.
Take by way of example, a straightforward debt case that is being pursued for a relatively small sum between two traders in one country. The best and most efficient forum is likely to be the courts in the language and custom of that country, and the processes and procedures of what might be a 12-month arbitration are simply not necessary or efficient for such a scenario.
Again, by way of example, the use of courts is seen to be widespread in relatively small-scale transactions and domestic contracts while arbitration is the preferred dispute resolution mechanism for construction, energy and infrastructure disputes.
Clients and stakeholders in the ever-developing African market want efficient, effective and fair resolution of disputes that arise in their day-to-day business.
The reality is that depending on a range of commercial, political, legal and practical factors, the choice of dispute forum for the types of dispute that have developed within the growth and development of Africa does not always require anything other than what is already in place as the ‘default;’ right to be heard in the national courts – and that is how it should be ‘horses for courses’ when assessing the relative benefits of one forum versus another forum.
By strengthening judicial systems and alternative dispute resolution mechanisms, fostering cooperation, and developing specialized legal frameworks, Africa can create a more favorable environment for businesses and investors.
For further information,please contact Paul Taylor and Dr Khaled Attia.
Published in September 2024
