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Intra-African investment growth pushes the case for international arbitration skills

17 September 2017 | Dispute Resolution

Intra-African trade and investment is growing, and with it the likelihood that more and bigger commercial disputes will arise. Such disputes should be resolved on African soil and not in boardrooms in Europe. This is what governments such as Kenya’s are working towards.

“As intra-African investment increases, disputes are arising, especially in construction and the extractive industries. We are also seeing disputes occurring as a result of increased investment by private equity firms and other international investors,” says Evans Monari, head of Bowmans’ Litigation and Dispute Resolution Practice in Kenya.

Speaking against the backdrop of the 5th East African International Arbitration Conference taking place on 28 and 29 September in Rwanda, Monari says the Kenyan government has recently taken two major steps in demonstrating its commitment to promoting international arbitration on home ground.

“There has been a policy change regarding international contracts. The policy is now that any international arbitration involving the Kenyan government must include a local component,” he says. “In other words, an international arbitrator must collaborate with a local arbitration partner.”

The second key step is to make Kenya itself, and specifically the Nairobi Centre for International Arbitration (NCIA), the seat of any international arbitration matter involving the government of Kenya. “There is an important rider to that,” says Monari. “Going forward, the seat must be in Kenya but the choice of arbitrator does not have to be Kenyan.”

Resolving African disputes in Africa

Both changes are intended to bolster the country’s – and the region’s – pool of arbitrators with international experience and move away from resolving disputes that arise in Kenya outside the country. International arbitrations held outside of Africa are not only enormously costly but fly in the face of the notion that disputes arising in Africa are best resolved in Africa.

“The thinking is that local knowledge and resources should be used to deal with problems that arise in Africa, rather than arbitrators from outside who do not know the local laws and conditions,” Monari says.

There is also a growing awareness that efficient, effective international arbitration services could open up new lines of business and revenue – as has happened in Mauritius and Egypt, which up to now have been the two main venues in Africa for international arbitrations.

“In competition with Mauritius and Cairo, both Kenya and Rwanda have established regional centres for international arbitration,” says Monari, adding that one anomaly in the field of international arbitration is South Africa. “Since 2009, when South Africa pulled out of various international treaties, including arbitration treaties, it has been slow to put in place a replacement framework,” he says. “This does not affect other African countries for the moment, but it could if a dispute arises that should go to international arbitration and there is no treaty on South Africa’s side.”

In the meantime, East African countries are wasting no time in strengthening their international arbitration capacities and infrastructures. “International arbitration is gaining traction in the region and across Africa,” Monari says. “A major international arbitration matter has yet to happen in Africa but I think the time is coming.”