Arbitration in Africa: Recent developments

The Court of Appeal of the Lagos Judicial Division recently issued a pro-arbitration decision holding that courts may only intervene in arbitral proceedings where specifically permitted by Nigeria’s arbitration law and set aside an injunction obtained ex parte by Nigeria’s state oil company NNPC restraining arbitration proceedings brought by Chevron and Statoil.

Meanwhile, the Democratic Republic of Congo (“DRC“) has become the 150th state to accede to the New York Convention, making a notable reservation that excludes enforcement of arbitral awards that relate to mining interests in the DRC.

Whilst these developments continue the encouraging trend towards international norms in arbitration judicial practice and legislation in parts of Africa, careful planning and an awareness of the continent’s legal diversity remain as important as ever for businesses operating in the region.

Nigerian courts may not injunct arbitration proceedings

Foreign parties involved in arbitrations either seated inside or outside of Africa face the risk of interventionist practices by local courts which may be less familiar with international arbitration.

The Court of Appeal of the Lagos Judicial Division issued a decision on 12 July 2013 which evinced a more pro-arbitration approach. In October 2012, the Nigerian National Petroleum Corporation (“NNPC“) successfully obtained an ex parte injunction from the lower courts in Lagos restraining arbitration proceedings in relation to NNPC’s tax dispute with Chevron and Statoil on the basis that tax matters are non-arbitrable. Chevron and Statoil appealed the injunction.

The injunction was overturned on a number of grounds: in particular, NNPC had failed to comply with the requirements for an ex parte injunction, including its duty to fully and frankly disclose material facts to the lower courts. One such example was the arbitral tribunal’s offer to hear submissions as to arbitrability in a bifurcated proceeding, which NNPC had rejected. NNPC had also failed to prove the urgency that might warrant an ex parte application.

Arguably the most important part of the decision was the Court’s strict interpretation of Section 34 of Nigeria’s Arbitration and Conciliation Act which provides that “A court shall not intervene in any matter governed by this Act except where so provided in this Act.” The Court held that the word “shall” was mandatory and that the Act did not provide any exception to the prohibition on intervention that would permit the court to issue an ex parte interim injunction.

Whilst this decision is good news for parties conducting arbitrations seated in Nigeria, it remains to be seen whether the same approach will be followed by the Court in the appeals pending against NNPC’s injunctions restraining other arbitrations brought by international oil majors.

The DRC’s cautious embrace of the New York Convention

In July 2012, the DRC became a Member State of OHADA (Organisation pour l’Harmonisation en Afrique du Droit des Affaires – Organisation for the Harmonisation of Business Law in Africa) which permitted the enforcement of foreign arbitration awards seated in other OHADA states. About a year later, on 26 June 2013, President Joseph Kabila, signed Law No. 13/023 authorising the DRC’s accession to the New York Convention. As the treaty’s 150th signatory, the DRC has expanded the scope of foreign arbitral awards that may be enforced by its courts, but with four reservations.

The first two reservations are fairly common amongst Convention signatories, being provided for by Article I(3) of the Convention – namely (1) the reservation on the basis of reciprocity whereby the DRC will apply the Convention only to the recognition and enforcement of awards made in the territory of another Contracting State, and (2) only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the DRC. What constitutes “commercial” activities in the DRC are broadly defined by various OHADA Uniform Acts.

The third and fourth reservations appear to signal a protectionist approach by the DRC government as regards its mining industry and to address concerns that accession to the Convention would result in local enforcement proceedings of arbitration awards owned by FG Hemisphere against DRC’s state mining company Gécamines (click here to view our earlier post on this case). The third reservation specifies that enforcement of awards under the Convention will only be possible in relation to awards which post-date the DRC’s accession. The fourth and most notable reservation is that the DRC will not apply the Convention to awards related to immovable property situated in the DRC, thereby excluding real estate, and in particular, mining rights (defined as immovable property by Article 3 of the DRC’s Mining Code).

In 2012, the DRC’s growth rate was 7% and yet the country came in the bottom five in the World Bank’s “ease of doing business” survey. Whilst the extractive industries remain DRC’s largest source of export income, its reservation to the scope of the New York Convention in relation to mining rights will not of itself accelerate in-flows of foreign direct investment into the sector. This will be seen by some as a missed opportunity.

These developments continue the encouraging trend towards international norms in arbitration judicial practice and legislation in parts of Africa. However, it is clear that careful planning and an awareness of the continent’s legal diversity remain as important as ever for businesses operating in the region.

For further information, please contact Craig Tevendale, Partner, Robert Rothkopf, Associate, or your usual Herbert Smith Freehills contact.

This article was originally published here.

A strange thing happened at Africa Downunder

A strange thing happened at the annual Africa Downunder conference in Perth last week, and it had nothing to do with the record attendance of more than 2,500 delegates from Australian and overseas mining companies, service providers, financiers and governments.

It was the vastly different, almost conflicting, messages coming out of senior Australian government ministers who spoke at the conference.In one corner, was Australia’s current Foreign Affairs minister Bob Carr. In the other, was former Prime Minister and subsequent Foreign Minister, Kevin Rudd. Both seasoned political campaigners well equipped to speak of the importance of Africa to the hundreds of delegates that crammed into the Riverside Ballroom.

Carr had clearly studied his briefing notes as he lauded the role that Africa has and will play in Australia’s economic and social development, challenging the conventional wisdom that we were all living witnesses to the ‘Asian century’. In Carr’s words, “what we’ve seen since 2000, could well be an African century”. Heads nodded in agreement, media bulletins were issued. Job done.

Rudd, however, appeared far less interested in talking about Africa, focusing almost his entire speech on the continued rise of China whilst launching the release of the “Fuelling the Dragon” report by the ASPI and the Brenthurst Foundation.

In contrast to Carr, Rudd began his speech declaring that “the core question confronting treasuries and finance ministries around the world at present is what is the near, medium and long term prospects for the Chinese economy.” There was less head nodding, more head scratching. Little mention was made of Africa. In fact, in the entire 20 minute speech Rudd mentioned Africa on fewer than four occasions.

One might readily conclude that Rudd’s last minute call-up in place of the ill Resources minister, Martin Ferguson, meant that a ‘revert to type’ presentation was inevitable for the former Prime Minister. Whatever the reasons, the contrast in the political messages from two of Australia’s most senior government ministers at Australia’s largest mining conference, was striking. But were they conflicting?

One conclusion that is easily drawn from the presentations and discussions with participants during the three day conference, is that they are not conflicting messages – that Africa probably needs China more than it needs Australia, but that China needs Australian expertise, resources and know-how to unlock its growing need for natural resources.

During a conference breakfast, hosted by BDO, Herbert Smith Partner, Michael Walter, joined other panellists to discuss and field questions from the audience on the impact that China’s growing need for “rocks and crops” is having on Australian mining companies’ business plans for Africa, and how we can work effectively with China in our collaborative African mining pursuits.

According to Michael, the huge amount of interest in Africa, and relationships with China, was much in evidence in a great turnout for the breakfast briefing and some thoughtful and searching questioning.
Austrade also hosted a luncheon which saw Senior Trade Commissioner for Sub-Saharan Africa, John Madew, speak about the importance of our government’s role in assisting Africa with the three “A”s – access, advice and advocacy. In his speech, CEO of Fortescue Metals, Andrew Forrest, urged Australian mining companies to replicate the high environment standards that they display in their Australian operations across their African operations. He also highlighted the importance of Australian mining companies investing in corporate social responsibility programs that make a sustainable difference to the lives of the African communities in which they operate.

With the impending merger of Freehills with international law firm Herbert Smith due to launch on 1 October, the conference was a great networking opportunity for the respective Freehills and Herbert Smith mining teams and a tremendous success generally.

Herbert Smith Freehills will provide clients with an impressive global mining practice boasting over 30 years of experience advising across the entire continent of Africa in both French and English. With offices strategically placed in Perth, Singapore, Shanghai, Beijing, Paris, New York and London, and an office to be opened on the ground in Guinea, Herbert Smith Freehills’ mining clients will benefit from seamless service all the way from the office in Australia, China or Europe, to the minesite in Africa.