OHADA arbitration at the crossroads

Publication September 2016

Reform of the OHADA arbitration regime is necessary to restore confidence

Despite the growing number of disputes involving African interests, the majority of Africa-related arbitrations are not conducted using the OHADA arbitration framework. This is, in part, due to inherent flaws in the OHADA arbitration regime and to the perception that arbitrations seated in OHADA Member States are not sufficiently certain in form, substance and enforcement. The system has to change if OHADA arbitration is to become a strong regional contender.

A scaling-up of economic and foreign investment activity across the African continent over the past 20 years has led to an increase in the number of international arbitration proceedings involving African parties or interests, particularly in the mining, oil and gas, telecommunications and construction sectors. Most of these arbitrations are seated outside Africa and do not involve African administering institutions or arbitrators; they are primarily conducted through international institutions such as the ICC or the LCIA.

This is not because of an absence of regional institutions. OHADA arbitration, a supranational African dispute resolution mechanism, was introduced over 15 years ago. Yet that regional regime has not emerged as a favoured dispute resolution method for Africa-related disputes. In this article we look at why that is and what reforms are necessary if OHADA arbitration is to flourish and become a cornerstone of dispute resolution in Africa.

OHADA
The Organisation for the Harmonisation of Business Law in Africa
Established in 1999
A regional organisation aimed at developing economic activity and investment in the territory of its members
Set up to harmonise commercial law in the OHADA zone
Current OHADA Member States:
Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Equatorial Guinea, Gabon, Guinea, Guinea Bissau, Ivory Coast, Mali, Niger, Republic of the Congo, Senegal and Togo

The OHADA arbitration framework

Under the OHADA arbitration framework, parties of OHADA Member States who are either conducting business with each other or with foreign investors have the option to arbitrate under two separate regimes:

  1. The Rules of Arbitration of the Common Court of Justice and Arbitration (CCJA Rules). These are similar to the ICC Rules of Arbitration. Parties may commence an institutional arbitration administered by the CCJA under the CCJA Rules if at least one party is domiciled in a OHADA Member State or if the contract is wholly or partially enforced
  2. The Uniform Act on International Arbitration 1999 (Uniform Act). This is directly applicable in all OHADA Member States. Parties may commence an ad hoc arbitration or institutional arbitration administered by an institution other than the CCJA under the Uniform Act, if the seat of the arbitration is located in an OHADA Member State.

In many respects, these regimes mirror best practice in international arbitration. The Uniform Act and the CCJA Rules both embrace the cardinal principles of international arbitration including party autonomy, autonomy of the arbitration agreement, kompetenz kompetenz (the competence of the tribunal to rule on its own jurisdiction), the independence and impartiality of the arbitral tribunal, and the availability of provisional measures.

However, the fact that the majority of Africa-related arbitrations are not conducted using these regimes is a clear indication of a lack of confidence in the OHADA system. This is, in part, due to inherent flaws in the OHADA arbitration regimes. It is also a consequence of the perception that arbitrations seated in OHADA Member States are not sufficiently certain in form, substance and enforcement.

Certain domestic courts within the OHADA zone remain hostile to arbitration

Even though the Uniform Act and CCJA arbitral regimes incorporate the fundamental principles of international arbitration, not all domestic courts within the OHADA zone satisfactorily uphold those precepts. Under the Uniform Act, for instance, state courts are required, upon request of either party, to declare their lack of jurisdiction when court proceedings are commenced before them in breach of a valid arbitration agreement (article 13). Despite this, some domestic courts have regularly, and without justification, declared themselves competent notwithstanding the existence of a valid arbitration agreement. Such an attitude has unsurprisingly damaged the credibility of the OHADA system.

No uniform exequatur under the Uniform Act

The enforcement of awards rendered under the Uniform Act regime is complicated by a lack of uniformity of procedure across all OHADA Member States. To enforce a Uniform Act regime award, the ‘competent state judge’ must issue an order of exequatur converting the award into an order enforceable within the domestic jurisdiction. There is, however, no uniform exequatur across all OHADA Member States. Instead, parties must apply for exequatur in each state where enforcement will be sought. Further complicating matters, not all OHADA Member States have designated their ‘competent judge’ for this purpose.

These issues are unique to arbitration under the Uniform Act regime and do not arise under the CCJA regime. CCJA regime awards are enforced by an order of exequatur issued by the CCJA (not a state court), and that order is binding and enforceable across all OHADA Member States. This is one advantage of the CCJA regime over the Uniform Act regime.

Potential conflicts of interest in the CCJA

The CCJA acts as an administering institution in which capacity (like the ICC Court of Arbitration) it supports and supervises arbitral proceedings including confirming and appointing arbitrators and reviewing the form of awards before they are made. Unusually however, the CCJA also acts as a judicial court in which capacity it rules on challenges to the validity or enforceability of awards rendered in CCJA arbitral proceedings (amongst other matters). This duality – of supervising arbitral proceedings and then determining the validity and enforceability of awards rendered in those proceedings – is seen as creating a structural conflict of interest and has for that reason attracted criticism.

Moreover, there is concern about potential state influence over the CCJA’s decision-making process. The CCJA judiciary consists of seven judges, elected to renewable seven-year terms by secret ballot from a list of candidates nominated by OHADA Member States. There is no obligation on a Member State to recuse its judicial representative from the CCJA court in proceedings in which it is itself a party. That means, for example, that a state’s judicial representative may preside over proceedings brought by the state to annul an award rendered against it. This is rightly seen by many as a major risk to the integrity of the proceedings.

In addition, some of the CCJA’s judicial rulings have attracted criticism and undermined its credibility within the international arbitration community.

The case of Getma v Guinea (19 November 2015) provides an example of all of these concerns playing out. In this case, on the application of the Republic of Guinea (an OHADA Member State) the CCJA annulled a US$42.2 million award against Guinea in favour of Getma (a subsidiary of a French group). The ground for annulment was that the arbitrators had exceeded their mandate by entering a side agreement with the parties to increase the tribunal’s fees to US$250,000, exceeding the US$66,000 cap imposed by the CCJA in its supervisory capacity.

There have been a number of concerns raised over this decision. It is considered a draconian response and unfairly prejudicial to parties who had spent a significant amount of money conducting the arbitration. In ignoring that Guinea and Getma had agreed to the fee arrangement, it fails to respect party autonomy – a principle on which international arbitration is founded. The cap the CCJA imposed on the arbitrators’ fees is viewed as very low. Also of concern is the tribunal’s claim that when it was appointed, it had received assurances from the CCJA in its supervisory capacity that the tribunal would be able to adjust its fees. Last but not least, Guinea’s judicial representative sat on the CCJA panel that heard Guinea’s application to set aside the award against it.

All of these factors could make CCJA arbitration unattractive for parties, as well as experienced international arbitrators. If OHADA arbitration is to flourish, conflicts of interest – perceived or real – must be avoided. Users of international arbitration must feel confident that OHADA arbitration is reliable, ethical and free of conflicts of interest.

OHADA Member States and state entities are immune from execution

The Uniform Act enshrines the arbitrability of disputes involving OHADA Member States and state entities, and that state parties to arbitration are not entitled to immunity from jurisdiction (article 2). However, OHADA Member States, state-owned entities and public institutions still enjoy immunity from execution under the Uniform Act Organising Simplified Recovery Procedures and Measures of Execution 1998 (article 30). This is irrespective of the activity performed by the entity and of the use of the assets targeted by the enforcement measure. The CCJA has ruled that this immunity is absolute. In 2005, for example, the CCJA granted state immunity to a state-owned Togolese company, even though Togolese law excludes immunity from execution for stateowned companies (7 July 2005).

Seizure of state-owned assets is not possible without an express waiver from the state party. Even in the presence of a waiver, some domestic courts remain extremely reluctant to allow any such seizure.

State immunity from execution therefore remains a substantial limitation to OHADA arbitration involving states or state entities.

Awareness of OHADA arbitration

More could be done to raise awareness of OHADA arbitration among local arbitration stakeholders and within the legal and business communities but there are always budgetary constraints. For instance, ERSUMA (the regional school in Benin which trains judges and officers of OHADA Member States) suffers from budget constraints that impedes the delivery of training sessions to stakeholders.

That said, partnerships with foreign universities, international organisations and law firms are developing fast and these connections facilitate dissemination of information about OHADA law and arbitration. It is hoped that the partnership between the ICC and OHADA, formalised in June 2016, will achieve its objective ‘to promote, professionalise and standardise the practice of arbitration’ in OHADA Member States.

Conclusion

Ultimately, for OHADA arbitration to emerge as a strong regional contender for African-related disputes, what is needed is reform of the OHADA system. In particular, concerns over conflicts of interest and impartiality, and predictability of recognition and enforcement of arbitration agreements and awards (especially where state parties are involved) all need to be addressed. Without this, confidence in the system will remain low, and parties will continue to prefer international alternatives.



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