LANDSCAPE, OPPORTUNITIES AND CHALLENGES FOR THE PRACTICE OF INTERNATIONAL ARBITRATION IN EAST AFRICA
by Richard Mugisha
(President East Africa Law Society – 2016/2018)
{A Keynote Address delivered at the 5th Annual East Africa International Arbitration Conference (EAIAC) on 29th September 2017 in Kigali, Rwanda}
Ladies and Gentlemen,
Welcome to the Land of a Thousand Hills.
It is with great delight that I stand before you this morning to speak on a subject that not long ago was viewed as a preserve of elite lawyers from the West. Thanks to the generous work of bodies like GBS Africa, and the East Africa International Arbitration Conference, we can today confidently debate the subject of international arbitration within the context of our region; the East African Community. I represent a body of lawyers, stretching from beyond the slopes of Mount Kenya, West to iconic Lake Victoria and even further to Mille Collines where we are seated today. East Africa Law Society draws its membership from Tanganyika Law Society, Uganda Law Society, Law Society of Kenya, Burundi Bar Association, Zanzibar Law Society, and Rwanda Bar Association. We are an expanding organization and currently eyeing more membership from South Sudan and Ethiopia.
My address today will focus on the East African Community and what it offers in the pitch of international arbitration. The address is aptly titled Landscape, Opportunities and Challenges for the Practice of International Arbitration in East Africa.
Landscape
The rise in global trade and the expansion of technology has continued to connect East Africa with the rest of the world. The local practitioners have responded to opportunities presented by globalization by setting up institutional mechanisms which could help them exploit the benefits of increased trade activities. An increasing number of lawyers from East Africa are recognized yearly by global leaders like Chambers Global and Legal500 as experts in international arbitration, thus giving hope that the growth in this area of practice is visible to the world.
Not far from where we are seated is Kigali International Arbitration Centre. Just under two hours away by flight sits Nairobi International Arbitration Centre. In the same city of Nairobi resides the Chartered Institute of Arbitrators (Kenya Chapter), and at the heart of Arusha is the East African Court of Justice which also has special jurisdiction to sit as a court of arbitration.
The East Africa Community now offers conducive environment for practice of international arbitration. The various international arbitration centers have set up elaborate rules which are benchmarked with their global peers. Beyond the rules, the centers have set up world-class hearing facilities capable of hosting any kind of international proceedings.
To complement the facilities and the rules, local courts have firmly established judicial precedents recognizing awards made by international arbitration tribunals. The consistency in court decisions has fortified East Africa as an international arbitration hub, and promises to present better opportunities for investors flocking the region and the neighbouring states.
East African states are increasingly finding themselves involved in international disputes with investors. The number of investor-state disputes involving East Africa states has grown over the years. Most of these disputes are handled by the International Centre for Settlement of Investment Disputes (ICSID) in Washington DC. In 2014, for instance, cases involving Sub-Saharan countries (including East Africa Community states) accounted for at least 20% of cases filed at ICSID.
To appreciate the involvement of the region in investor-state arbitrations, a glance at the records at ICSID reveals that about 18 cases have been filed in recent times against the East African Community states. These matters mainly originated from mining and energy sectors. Out of these matters, 6 are against the Republic of Tanzania, 3 against the Republic of Kenya, 3 against the Republic of Uganda, 4 against Burundi, and 1 against Rwanda and South Sudan each.
In 2016, the number of cases submitted for administrative actions by the International Court of Arbitration of the International Chamber of Commerce set a new record high. Out of these, the Sub-Saharan Africa recorded a rise of at least 50% in new cases submitted to the ICC. I have no doubt that significant number of cases forming part of this statistics originated from or involved parties from the East African Community.
Opportunities
East Africa Community has grown into an important economic hub. We are witnessing increasing competition among global investors in the extractive industry, infrastructure, energy and in various service industries. With the increase in trade comes the need to ensure acceptable dispute resolution mechanisms. International arbitration has become a dispute resolution method of choice to many international businessmen, due to its notable advantages.
Local lawyers have the best opportunity to act in international arbitration matters involving international business deals performed locally. This is mainly due to their understanding of the local circumstances and ability to quickly collect evidence which is the backbone of the arbitral proceedings. All they need to do is to position themselves for these opportunities; by continuously building their capacities and seeking out the opportunities right at the contract formulation stages.
Of the disputes involving East African states at ICSID all, except for one by against Burundi, involved representation by overseas counsels on behalf of the East African states. In many cases, records show that the overseas counsels partnered with local lawyers. In the case of Uganda, all the cases have been handled by overseas counsels with no indication of partnership with local lawyers.
While one would expect that East African lawyers are actively involved in representing their states in these proceedings, the above statistics show that there is low involvement of the international arbitration experts from among our membership. Sadly, even our own states appoint their legal representatives and tribunal members from further afield. Even in situations where local experts are involved, they serve to provide local content to their foreign counterparts. The situation obtaining today has caused unfair leverage to our overseas counterparts who continue to get exposure and skilled at the expense of the local lawyers. This, in my view, could be addressed by varying current policies to empower local experts to drive the cases while seeking assistance of their overseas counterparts on need basis.
I am happy to report that East Africa Law Society is actively negotiating with ICSID to host one of its African seats at one of our international arbitration facilities here in Rwanda, or in Kenya, or in Tanzania or among any of our member states. This is an exciting opportunity for us to showcase to the world our capabilities in handling international arbitration. I only hope that policy makers in the region will view this development as a sign that international arbitration in East Africa has come of age, and progressively start sending bulk of instructions to our homegrown experts.
The growth of China-African trade with East Africa states and businessmen has presented an opportunity which local lawyers should quickly unlock for their benefit. The recent launch of Belt and Road Initiative by the Chinese government has already seen a sharp rise in involvement of Chinese corporations in large-scale infrastructural investments in East Africa. In 2016, the Chinese investment in Africa grew by 64^ compared to previous period. There is need for the legal profession in East Africa to move with speed and address the unique business needs of this relationship and exploit our easily accessible international arbitration facilities as dispute resolution centers.
Challenges
Paradoxically, the increase in opportunities for international arbitration in East Africa has not translated into significant excitement in the trade-in-legal services market in the region. One may wonder why. In my view, the legal practitioners have not surmounted the challenges which face international arbitration in the region thus inhibiting their capacities to fully realize the benefits of international arbitration. Amongst the numerous challenges we are facing, I will focus on three which I consider significant:
- Lack of synergy among international arbitration bodies in the region –While the existence of the multiple institutions in themselves is an indication to the world the East Africa is a hub of international arbitration, absence of synergy between them has served to undermine their abilities to effectively realize their objectives. I look forward to a day when these institutions will forge a common framework for collaboration where they will complement each other. Such collaboration will afford the international arbitration centers joint marketing front which enables them make better use of their existing capacities.
- Lack of synergy among training institutions – legal education providers in the East African Community have not forged a collaborative framework to leverage on their abilities to handle emerging areas of practice which, paradoxically, generate major international arbitration briefs. I believe that if the various legal education trainers in the region forged a common working relationship they could present a viable front through which the region to partner with oversea experts to provide desired trainings to locals. This could help the locals obtain much sought skills at affordable costs given the power of a common front and the economies of scale resulting from the unity.
- Limited in-depth knowledge of sectors generating international arbitration briefs– recent trends show that international arbitration briefs arise from the excractive industries, oil and gas, maritime, and international trade. Unfortunately, the levels of training in these areas are limited in East Africa. Emergence of international arbitration as a dispute resolution method of choice has gradually exposed the Achilles heels of many legal practitioners in East Africa; that they are not adequately equipped to compete for jobs at the international market.
Our centers for legal education have not fully integrated studies in the above sectors into the curriculum.
Even among in-house counsels in the region, capacity to handle international arbitration right from the contract formulation stage is diminished by the lack of in-depth knowledge in the various subjects which may lead to rise in international arbitration brief. It is therefore not surprising that most international contracts made and performed locally contain international arbitration clauses providing for rules and seats across the oceans. While this situation could be attributed to many factors, lack of adequate capacity to negotiate for consideration of our homegrown international arbitration centers ranks high among them.
- Government policies – even with increased attempt to promote international arbitration as an area of legal practice in East Africa, the slow response by the respective states to make policies addressing needs of legal practitioners has served to slow the pace of progress. It is a fact that no state in the world has ever prospered by undermining its own professionals.
While we acknowledge efforts by our governments to promote conducive environment for trade, a lot more remains to be done if legal practitioners in the region hope to realize adequately the benefits of international arbitration. Our governments still prefer to send international arbitration briefs to firms residing outside the continent. In my view, even though this could be justified on the basis that there is limited capacity locally, the best way to address this is to seek that the local firms partner with an external firm with capacity.
Further, the policies could require that the local partners be trained on specific aspects of the brief as a condition of award. This, ladies and gentlemen, is the surest way to build our capacity in international arbitration; by doing the actual work, with assistance of our colleagues from beyond our borders who are already well equipped in the subject.
Way Forward
My address will be inadequate if I offer critique without preferring solutions. I believe the challenges alluded to have their solutions within our reach. We could easily address the issue of multiplicity of institutional roles if we negotiated a collaboration framework under which the role of branding and marketing the centers, among other areas, could be fronted jointly by the regional players. This will not only ensure maximization on resources but also present to the world a united front which can compete effectively with peers like Kuala Lumpur International Arbitration Centre.
The regional bar association, East Africa Law Society, presents the single most important opportunity for marketing our international arbitration centers to the world. Leveraging on its global reach and reputation amongst potential clientele in public and well as private spaces, the regional bar provides an effective front both short term and long-term in creating a lasting brand for the centers. I urge the decision-makers Kigali International Arbitration Center, Nairobi International Arbitration Centre and other institutions involved in the sector in the region to urgently consider a round-table dialogue towards this end. East Africa Law Society looks forward to providing leadership to realize this aspiration.
The deficiencies in knowledge and exposure in the subject areas specific to international arbitration briefs can be addressed by reviewing legal education curriculum and recognizing those areas as subjects worth administering right from the foundation of law training. Increased exposure to these areas through seminars, conferences and online trainings could also serve to shore up capacity among our eager professional body.
Finally, there is need to debate government policy in the area of award of professional jobs more so in international arbitration. The discourse should be aimed at ensuring that the policies are tailored to promote, and not to stifle, international arbitration among the local professionals. The policy should aim at shaping beneficial business partnerships between local professionals and their oversea counterparts in international arbitration, extractive industries, oil and gas, international commercial transactions and other areas known for generating international arbitration briefs.
Conclusion
I will conclude my address with where I commenced; by thanking the organizers of this colourful event which seeks to exhibit to the world East Africa’s potential in international arbitration. The heaviest of accolades this morning, however, is reserved for the delegates seated in this room who have taken time off busy schedules and committed resources to travel from various destinations to make this event a successful.
Thank you.