Reform laws on international arbitration in African countries – Dame urges global lawyers

The Attorney-General and Minister for Justice, Godfred Yeboah Dame, has emphasised the need to reform the legal regulatory processes governing international arbitration in Africa. In his view, the rapidly evolving business climate in Africa and the increasing tendency for the introduction of alternative dispute resolution clauses into commercial agreements the impact of arbitration on the economies of African countries cannot be underestimated.

“For all its touted advantages, it is indisputable that the nature of arbitration itself, especially the secrecy of proceedings and finality of awards, except in few very exceptional circumstances, implies that in some situations, it becomes an unwitting vehicle for perpetrating fraud and abuse against the people of Africa.

“It is quite curious that in some instances, companies which fail to make out any claim in domestic courts of African countries succeed in extremely huge international arbitration actions, sometimes mounted on the back of contracts which have failed to receive the relevant statutory and constitutional approvals of the countries in which they operate.

“This phenomenon is not because of a weakness of the judicial systems of African countries but simply because of the nature of international arbitration, particularly the secrecy of proceedings, flexibility of rules and the finality or non-appealability of awards, which I have just alluded to,” Godfred Dame stated.

Mr Dame made these and other remarks in his keynote address as guest of honour at the African Regional Forum held as part of the International Bar Association’s annual conference in Mexico City, Mexico on Thursday, 19 September 2024.

Founded in 1947, the International Bar Association is the foremost international bar association of international legal practitioners, bar associations, and law societies.

The membership comprises of over 80,000 individual international lawyers from the world’s leading law firms, 190 law bar associations, and law societies in over 170 countries.

The annual conference of the International Bar Association opened on Sunday, 15 September 2024 with remarks from former Mexican President, Ernesto Zedilo.

The Attorney-General observed that international arbitration has become the principal means for resolving disputes between governments and private persons. Rather unfortunately, he noted that such disputes often end up being contested at huge cost outside Africa, with London, Paris and New York being the most popular seats for arbitration.

Even when African disputes involve two African parties, the cases tend to be subject to either the rules of the International Chamber of Commerce (ICC) or London Court of International Arbitration (LCIA) rules and arbitration takes place with the seats being London, Paris, New York or Singapore.

He noted that this development limits the opportunities for African arbitrators and stunts the development of the continent’s prowess in arbitration whilst also coming at enormous expense to the continent.

Referring to a recent arbitration award of over 11 billion US dollars (US$11bn) against the Government of Nigeria in international arbitration in a claim by a small offshore gas company, Process & Industrial Development Limited (P&ID), which was eventually set aside by the High Court of London in October 2023, Mr Dame stated that Africa suffers a lot of prejudice in the international arbitration arena.

“Whilst international arbitration is touted to assure neutrality, privacy and efficiency in the adjudication of disputes, it cannot be disputed that African countries have been at the receiving end of some obnoxious and perverse awards.

“We cannot discount the prejudice Africa often suffers in international arbitration fora. We must all work towards the establishment of a justice system that guarantees all elements of the rule of law necessarily produces a business operating environment characterized by transparency, certainty, and fairness.”

Mr Dame deplored the negative aspects of international arbitration which harm Africa and stated that there was a need to reform. “I should not be misconstrued as saying that Africa should shy away from international arbitration. Far from that.

“What I advocate for is a sober reflection on the regime for handling international arbitration on the African continent and a reform of same. The vulnerability of arbitration to abuse and fraud exposes the need for more robust safeguards in commercial disputes involving state parties, where the hard-earned purse of the nation is at stake.

“I deem it incompatible with the sovereignty of African nations for most of our international arbitration matters to be heard in foreign jurisdictions and with foreign countries being the seat of arbitration. It is a truism that an arbitration is international not because of the forum or place of hearing, but largely because of the parties involved and the underlying transaction.

“If this is the case, then there is a need to work to make Africa a highly respected home for arbitration in cases emanating from Africa. I suggest that African nations take steps to ensure that most international arbitrations involving them take place in their respective countries and are regulated by the laws of their own countries,” Dame remarked.

The Attorney-General cited the case of Ghana which he noted, is taking steps to reform the regime for the conduct and hearing of arbitration involving the nation.

“It is pertinent to indicate that Ghana seeks to make further reform to the pursuit of arbitration against the state. The nation is currently undertaking processes to ensure the passage of a law, an amendment to her State (Property and Contracts) Act, 1960, to mandate all contracts involving the State and its agencies as parties, to not only stipulate Ghana law as the governing law but also to have Ghana as the seat of arbitration and with the ADR Centre in Accra being the venue for the arbitration.

“With this amendment, the practice whereby the State and Ghanaian lawyers travel to various jurisdictions – Paris, New York, London, Singapore, etc. for the conduct of arbitration involving the Government of Ghana and where arbitral awards are enforced all over the world at enormous cost to the State, and in jurisdictions with legal systems alien to Ghana’s, will cease and will be consigned to history”, the A-G stated.

Remove global regulatory barriers

The Attorney-General and Minister for Justice also urged global leaders, particularly regulators of the legal profession around the world, to take a second look at rules regulating the practice of law across borders given the circumstances in which the world finds itself.

Mr Dame observed that “a virtualised world”, which the global community now is, implies that “law practice generally has assumed cross-border characteristics. The local jurisdiction in which law is practised is open to the world.

“African lawyers thus have to be world-class, working as part of an open global community to resolve modern-day disputes, many of which have cross-border elements.” Reflecting on the nature of legal practice around the continent and the world and the effect of globalisation on law practice, the Attorney-General had this to say.

“If our practice is essentially and unavoidably international or cross-border, then there must be a rethink of the legal framework regulating the practice of lawyers in our respective domestic settings. We must remove the barriers of licensing regimes that constrain the capacity of lawyers to appear in jurisdictions other than where they were trained to practise, if our practice is indeed, international.”

Mr Dame however said he was realistic in this call h and that he was aware that countries may have different legal systems, different systems for training of lawyers, different licensing regimes, and different standards for scrutinising and assessing compliance with rules of professional conduct and ethics.

However, in his view, “international legal practice has shown the way. Nations appear before regional courts, international tribunals, and arbitration panels constituted to adjudicate cases by law. The lawyers representing them do not require specific licensing to appear before such panels.

“Therefore, it can be done. We can begin with a common understanding to provide for state counsel or lawyers who are constitutionally and statutorily empowered in their respective countries to represent nations in disputes, to be able to, without the inhibition of the requirement for a licence to practise, appear freely in domestic courts of other countries when disputes involving the nation occurs”.

Godfred Yeboah Dame further stated that “for instance, it is incongruous for state counsel to be able to appear before an arbitration panel seated in London or Nairobi without the requirement of a specific licence but the same state counsel cannot appear before the London High Court or the Nairobi High Court to defend his nation in proceedings to enforce the award resulting from the arbitration after the conclusion of the arbitration proceedings, simply because the state counsel is not qualified to practise in either London or Nairobi, as the case may be.

“We ought to begin the process of removing the regulatory barriers to the appearance of lawyers qualified in other jurisdictions in such proceedings. Such an exception will become the fulcrum for the development of a blueprint for a gradual harmonisation of legal training standards and ethics and the removal of regulatory barriers,” Dame suggested.

Impact of AfCFTA

Ghana’s Attorney-General and Minister for Justice also spoke about the impact of the integration of the African continent on law practice. He observed that the African Continental Free Trade Area, expected to connect 1.3 billion people, create a $3.4 trillion economic bloc, and above all boost commerce within the African continent, is envisioned as the largest free zone since the establishment of the World Trade Organization in 1994.

“The African lawyer’s role in the resolution of disputes has been heightened by the setting up of AfCTA. Whereas countries have their own courts of first instance and appellate structures, the AfCFTA also has an established dispute settlement mechanism to hear trade disputes brought by aggrieved State parties.”

Godfred Dame noted that the setting up of the AfCFTA Dispute Settlement Body tends to raise questions bordering on conflicts with the statutorily recognised structures for dispute resolution in individual countries as well as questions bordering on the sovereignty of nations.

He stated that the political endorsement by African states of the Dispute Settlement Body will ensure that the rulings of panels and the Appellate Body of AfCFTA will become part of the legal acquis of African legal systems to bring legal security, certainty and predictability, and transparency.

Godfred Dame further observed that in addition to the firm political will of African states, the authority of the AfCFTA’s dispute resolution mechanisms can only be established through the cooperation of lawyers around the continent.

“I urge you all to support the AfCFTA in its work, particularly, in ensuring that the dispute settlement body launched 3 years ago succeeds. Respectfully, there must be a deliberate effort to train the African lawyer in the benefits, complexities, and requirements for dispute adjudication in the regional integration body. African lawyers have to be voices in promoting the benefits of regional integration and the global multilateral trading system,” Dame stated.