Enforcement of awards across Africa – 42 of Africa’s 54 states have now acceded to the New York Convention

On 4 March, 2021, Malawi acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), becoming the 167th state party to the Convention. The New York Convention will enter into force for Malawi on 2 June 2021.  

With Malawi’s accession, 42 of Africa’s 54 states are now State Parties to the Convention. Ethiopia and Sierra Leone were the most recent signatories prior to Malawi. The remaining 12 non-parties are: the Gambia, Guinea-Bissau, Chad, Congo (Brazzaville), Equatorial Guinea, Eritrea, Eswatini, Libya, Namibia, Somalia, South Sudan, and Togo.  It will remain to be seen how many and how quickly of these remaining few will also accede.

The New York Convention is arguably one of the most successful UN treaties in the area of international trade law.  It governs two fundamental aspects of international arbitration, namely how states treat arbitration agreements and how they treat foreign arbitral awards (i.e. awards made in other jurisdictions).

The Convention provides firstly that Contracting States will recognize written arbitration agreements and, at the request of any party, their courts will refer to arbitration any matter brought before them in respect of which there is an arbitration agreement. The only exception is where the arbitration agreement is null, void, inoperative or incapable of being performed.

Secondly, Contracting States agree to recognize foreign arbitral awards as binding and to enforce them in accordance with their rules of procedure. Importantly, there are very limited grounds under the New York Convention on which a party can resist enforcement of an award (as covered below).

The steady uptake of the New York Convention across Africa is an important development for African countries and those investing in Africa. The New York Convention is widely regarded as a beneficial instrument to boost economic growth and international investment.  A recent report examined foreign direct investment inflows before and after a country joins the New York Convention¹ and found that ratification increased foreign investment by around 10% in the four years and around 11% in the eight years after joining. Of course measuring economic growth is not straightforward, however this is a helpful indicator of the beneficial economic impact of the Convention.  

For foreign investors, at its simplest, access to a reliable dispute resolution mechanism with good prospects of enforcement of the resulting award, encourages international investors. This is especially the case in emerging economies, as investors are often concerned that they may not have adequate recourse to domestic courts, alternatively, despite being successful in litigation or arbitration, they might not be able to enforce their court judgment or arbitral award.  The New York Convention offers some comfort as to both a neutral, impartial process and enforcement.

Enforcement is key – an expensive legal fight amounts to a Pyrrhic victory if the judgment or award is ultimately incapable of being enforced against assets.  The New York Convention provides a simple, near global procedure to enforce foreign awards almost anywhere in the world.  There is no equivalent regime for recognition and enforcement of foreign court judgments.

There are very limited grounds for resisting recognition and enforcement, as follows:

• Invalidity of incapacity – the arbitration agreement is not valid  or the parties to the agreement were under some incapacity.
• Lack of notice or due process – the respondent was not given proper notice of the appointment of the arbitrator or of the proceedings or was otherwise unable to present its case.
• Lack of jurisdiction – the award deals with a difference not contemplated by or outside the terms or beyond the scope of the submission to arbitration.
• Procedural irregularity – the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, absent such agreement, not in accordance with the law of the country where the arbitration took place.
• Not binding – the award is not yet binding on the parties, or has been set aside or suspended at the seat of the arbitration.
• Arbitrability and public policy grounds – recognition and enforcement may also be refused if the competent authority where enforcement is sought finds that (i) the subject matter of the dispute is not arbitrable under the law of that country; or (ii) enforcement would be contrary to the public policy of that country.

[1] “Does International Commercial Arbitration promote Foreign Direct Investment?", A Myburgh and J Paniagua, The Journal of Law and Economics 59(3):597-627 (August 2016) (last accessed on 9 March 2020 here)