- Enforcement of Arbitral Awards in Sub-Saharan Africa—A Risky Business?
- December 20, 2011 | Authors: James Morris; Kwadwo Sarkodie
- Law Firm: Mayer Brown International LLP - London Office
Sub-Saharan Africa1 is currently among the fastest growing regions in the world. The Economist Intelligence Unit forecasts that the sub-Saharan African regional economy will grow by almost 5 percent per annum between 2012 and 2015.2
The number and value of projects in sub-Saharan Africa, across a range of sectors (including modernisation and infrastructure, mining, energy and telecommunications) are forecast to grow significantly in the coming years. This will doubtless attract the attention of investors, contractors and consultants from around the world, but what are the risks and pitfalls? Do greater growth and investment mean a greater number of disputes? How effective can arbitration be in helping parties resolve such investment and contractual disputes when they do arise? All of this serves to highlight the importance of the ability of contracting parties to enforce arbitral awards in the region.
Sub-Saharan Africa is a large and diverse region, encompassing legal systems influenced by, and based on, a wide variety of legal traditions (including common law, civil law, customary law and shari’a). The degree to which principles such as the separation of powers and the rule of law are upheld, and the prevalence of factors (such as corruption) which can significantly impede enforcement of arbitral awards, differ markedly from one state to another. In this article, we discuss some of the considerations, issues and risks associated with the enforcement of arbitral awards in sub-Saharan Africa. Where appropriate, reference is made to particular states, issues and case studies by way of illustration.
The New York Convention
Some 26 sub-Saharan African states (more than half of the total) are party to the New York Convention3 (the NY Convention), which offers an effective tool for the enforcement of arbitral awards. The NY Convention provides for the recognition and enforcement of international arbitral awards in a broad range of circumstances, subject only to a limited number of expressly stipulated exceptions (set out in Article V of the NY Convention).
Ghana, for example, is a signatory to the NY Convention. Arbitration in Ghana is governed by the Alternative Dispute Resolution Act 2010 (the Act), which explicitly provides for the enforcement of international arbitral awards under the NY Convention. Section 59 of the Act provides that the High Court of Ghana will enforce a foreign arbitral award made under the NY Convention that is not subject to a pending appeal.
The circumstances in which enforcement will be refused are limited and broadly reflect the grounds set out in Article V of the NY Convention (Section 59(3) of the Act). One point of interest (and potential uncertainty) is that Section 59 of the Act does not include an express exemption from enforcement on the grounds of public policy (either domestic or international). It is, however, thought unlikely that the Ghanaian courts would be prepared to enforce an arbitral award that directly contravened Ghanaian public policy, so that it remains to be seen how the Ghanaian courts might proceed if this issue arose.
UNCITRAL Model Law
Several states in sub-Saharan Africa, including Kenya, Nigeria and Uganda, have adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law (the Model Law). Chapter VIII of the Model Law addresses the recognition and enforcement of awards.
Unlike the NY Convention, which only concerns the enforcement of arbitral awards made outside the state where enforcement is sought, the Model Law also deals with domestic arbitral awards. The approach is to treat all awards uniformly, irrespective of where they are made. Pursuant to Article 35(1) of the Model Law, any award is to be recognised as binding and enforceable, subject to the provisions in Articles 35(2) and 35(6). Reciprocity of the enforcement of awards is not a condition of enforcement under the Model Law, nor is the presentation of the arbitration agreement.
The grounds on which recognition can be refused (set out in Article 35(6) of the Model Law) reflect those listed in the NY Convention.
OHADA Uniform Arbitration Act
Sixteen4 sub-Saharan African states are currently members of the Organisation for the Harmonisation of Business Law in Africa (OHADA), an organisation that aims to modernise, standardise and harmonise commercial law in Africa. The majority of those countries are francophone (although not exclusively so), with legal systems based on the civil law tradition.
Each OHADA member state has adopted a Uniform Arbitration Act (Uniform Act), which puts in place a framework for arbitration in terms similar to the Model Law. This supersedes the national laws on arbitration to the extent that any conflict arises. Importantly, the Uniform Act provides that arbitral awards with a connection to one OHADA member state are given final and binding status in all OHADA states. It sets out a straightforward mechanism for enforcement of both domestic and international awards.
To enforce an award under the Uniform Act, a party must obtain an exequatur,5 i.e., a legal document recognising the right to enforce the award, from a judge in an OHADA member state. Notification of an application for an exequatur must be given to the party against whom enforcement is sought. However the grounds on which an application for an exequatur can be refused are very limited. For instance, the public policy exemption is limited to international public policy (i.e., it must be shown that the award was “manifestly contrary to international public policy of the member states”). This is narrower than the domestic public policy exemption provided for by the NY Convention (Article V(2)(b)). A party seeking to oppose an award enforced under the Uniform Act would need to make a separate application to nullify Article 31(4). Once obtained, an exequatur can be enforced in another OHADA member state.
Issues, Pitfalls and Risks
Some of the common issues, pitfalls and risks with regard to enforcement of arbitral awards are summarised below. Among other things, the degree of risk will depend upon the type of award being enforced, the state where enforcement is sought and the international conventions and/or legal structures in place in that state.
Time to Enforce an Arbitral Award
The length of time necessary to enforce an arbitral award varies significantly between states and, of course, from case to case. Even in those sub-Saharan African states with more advanced regimes for the enforcement of arbitral awards, enforcement periods range from six months to over a year, and courts in the region frequently struggle with large case backlogs. In the worst cases, enforcement proceedings can drag on for many years before final resolution.
Research by the World Bank indicates, however, that overall, average enforcement periods in sub-Saharan Africa do not compare particularly unfavorably with the rest of the world. A recent World Bank report6found that on average, it takes approximately six months to enforce an arbitral award in the sub-Saharan African states surveyed, compared with a 118-day average in “high income” OECD countries.
Cost of Enforcing an Arbitral Award
Bringing a claim via arbitration will naturally entail significant cost and resources. This is partially a function of the time taken to obtain and enforce an arbitral award, but the costs of travel to and from the state where enforcement is sought (by the legal team and, if necessary, witnesses) can serve to increase costs. Visa requirements and restrictions can also be onerous, adding a further layer of cost and administrative burden.
Another factor that can increase cost is a lack of developed jurisprudence with regard to arbitration and enforcement in many states of sub-Saharan Africa. This can give rise to a need for appeals and references to higher courts regarding matters which might have been disposed of in a more straightforward manner in jurisdictions where the courts have greater experience with such matters.
The degree to which constitutional principles (such as the rule of law and the separation of powers between the executive and the judiciary) are upheld is patchy across the sub-Saharan African region. This can place further obstacles in the way of a party seeking to enforce an arbitral award, especially where a state-owned or quasi-state entity is involved. In particular, this raises the risk that political pressure will be placed on the courts when considering matters of enforcement, and that the courts will be reluctant to make or enforce decisions and orders that are perceived to run against state interests.
An interesting development, with significant implications for the enforcement of international arbitral awards, has been the increasing number of instances where non-governmental organisations have sought to intervene in legal proceedings in African states on an amicus curiae basis. The Uniform Act does in fact make express provision (at Article 25(4)) for a third party to oppose the recognition and enforcement of an arbitral award by means of an amicus curiae intervention.
Such interventions involve a third party or parties seeking to assist the court by advancing arguments to support one party to the proceedings. With regard to enforcement of arbitral awards, such applications are often made on behalf of sub-Saharan African state entities or institutions in disputes with large multinational investors, funders or contractors, where there may be a perceived lack of equality of resources. Such non-governmental organisations can sometimes have substantial financial, legal and public relations resources at their disposal, and their intervention can therefore be telling.
Such interventions may, of course, increase the delay, cost and complexity associated with efforts to enforce an arbitral award. However, and as the amici curiae may argue, such interventions may also benefit arbitration and enforcement in the state concerned (and perhaps in the region more generally) by assisting in promoting better tribunal decision-making and enhancing the legitimacy of the arbitral and enforcement process.
States That Are Not Party to International Conventions
Some 15 sub-Saharan African states (e.g., Angola, Cape Verde and Sudan) are not parties to any of the major conventions with regard to enforcement or recognition of arbitral awards (e.g., the NY Convention or OHADA) and have not adopted a model arbitration law (e.g., the Model Law or the Uniform Act).
As might be expected, the provisions for enforcement of arbitral awards vary widely among such states and are generally more haphazard. Broadly speaking, foreign arbitral awards will be recognised in more limited circumstances and enforcement is often conditional on reciprocity between the state where the award was made and the state where enforcement is sought.
Political and civil unrest and instability, which are unfortunate facts of life in certain states within sub-Saharan Africa, can naturally present fundamental obstacles to the conduct of arbitral proceedings and/or the enforcement of awards. It is likely that recent political upheavals in North Africa will only serve to increase the concern with which many view the continent as a whole.
Particularly over the last decade, the majority of sub-Saharan African states (examples include Tanzania, Ghana and Botswana) have, however, shown a considerable degree of political stability. Concerns over civil unrest should not, therefore, necessarily deter arbitration and/or enforcement in sub-Saharan Africa. On the contrary, this issue is better considered on a case-by-case basis, giving careful consideration to the state in question (or even, in some instances, the region within that state).
Case In Point
The recent decisions in IPCO (Nigeria) Limited (IPCO) v. Nigerian National Petroleum Corporation (NNPC)  All ER (D) 385 (Apr) and  All ER (D) 249 (Apr) illustrate some of the issues discussed above.
In 2004 a Nigerian domestic arbitral tribunal made an award of US$152 million in favor of IPCO. NNPC applied to the High Court of Nigeria to set aside the award, while IPCO applied to the High Court to enforce the award. A delay of several years then ensued as a consequence of NNPC’s applications seeking the transfer of the case to a different judge and appeals to the Nigerian Court of Appeal on other matters.
As it was clear that many years were likely to elapse before these issues were resolved, IPCO applied to the English High Court to enforce the award. Section 101 of the Arbitration Act 1996 permits the English courts to enforce an award made in the territory of another state that is party to the NY Convention. The English High Court held that the NNPC had no realistic prospect of success in relation to most of its challenges to the award and granted partial enforcement of the award against NNPC.
While development and harmonisation are gradually expanding in sub-Saharan Africa, international contracting parties doing business in the region need to be aware of the risks inherent in resolving disputes and enforcing arbitral awards. Although the preference of such parties will often be for an arbitral seat in one of the more established jurisdictions, such as London or Paris, this may not always be open to negotiation. African governments are becoming increasingly assertive in insisting on a local seat of arbitration and the application of local laws in relation to projects where they are the client. In any case, regardless of the seat of arbitration, where the significant assets of a party against which a claim is pursued are held in sub-Saharan Africa, the need for enforcement in the region may prove unavoidable.
Arbitrating and/or enforcing arbitral awards in sub-Saharan Africa does carry certain risks, but it is possible to limit or manage many of these. This is particularly so if contracting parties ensure that they are informed from the outset as to what the contract provides in the event of a dispute and know where assets are located should enforcement of an award be necessary. An accurate assessment of the difficulties that might be faced if a dispute arises should therefore form an integral part of any commercial risk assessment. So long as international contracting parties appreciate the challenges and the risks they face with regard to the enforcement of arbitral awards, such issues need not deter them from capitalising on the benefits of contracting and investing in sub-Saharan Africa.
1. For the purposes of this article, “sub-Saharan Africa” excludes the North African countries of Algeria, Egypt, Libya, Morocco, Tunisia and Western Sahara.
2. The World Bank is also forecasting similar annual growth percentages: 5.5 percent for 2012.
3. The NY Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
4. The Democratic Republic of Congo is in the process of seeking accession.
5. An exequatur is a legal document issued by a sovereign authority allowing a right to be enforced in the authority’s domain of competence.
6. See World Bank, Investing Across Borders 2010: Indicators of Foreign Direct Investment Regulation in 87 Economies (2010), p.63.