Aisha Abdallah
Anjarwalla & Khanna, Nairobi
aa@africalegalnetwork.com

Abbas A Esmail
Anjarwalla & Khanna, Nairobi
aae@africalegalnetwork.com

Arbitration is one of the most preferred options of dispute resolution in cross-border commercial transactions. This is informed by various considerations, including:

• party autonomy;
• having one’s dispute determined by independent and competent arbitrators with niche expertise in the area of dispute;
• the increase in recognition and enforcement of awards; and
• the comfort of finality that accompanies the outcome subject to the limited grounds where an appeal to an arbitral award is allowed (eg, in the case of bribery, fraud, or corruption).

In Africa, the referral of disputes to arbitration has risen along with the continuous increase in the number of countries that are ratifying the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Kenya is one of the countries that has ratified the New York Convention.

The New York Convention is the bedrock upon which international arbitration is founded; it is the most important international treaty in the recognition and enforcement of foreign arbitral awards. To provide a more focused analysis of challenges in recognition and enforcement of arbitral awards, this article looks at general contexts in Africa and an in-depth analysis focusing on Kenya.

Malawi ratified the New York Convention in March 2021, and it came into force in Malawi on 2 June 2021. Following Malawi’s accession to the New York Convention, the number of African countries that have ratified the Convention has increased to 42 out of 54 countries.^[1] The increase in the number of African countries that have ratified the New York Convention is a major step in the right direction when it comes to harmonising the recognition and enforcement of arbitral awards on the continent.

The various arbitration regimes in Africa

The approach taken by Africa when it comes to arbitration is two-pronged:

• domestic, institutionalised and ad hoc arbitration; and
• international arbitration.

In the context of domestic, institutionalised and ad hoc arbitrations, the number of arbitral centres/institutions across the African continent is growing rapidly. Africa currently has over 75 arbitral centres/institutions.^[2] These include centres/institutions such as:

• the Nairobi Centre for International Arbitration (NCIA) in Kenya;
• the Kigali International Arbitration Centre in Rwanda;
• the Mauritius Chamber of Commerce and Industry Arbitration and Mediation Centre in Mauritius;
• the Casablanca International Mediation and Arbitration Centre in Morocco;
• the Lagos Regional Centre for International Commercial Arbitration in Nigeria; and
• the Cairo Regional Centre for International Commercial Arbitration in Egypt.

As the African markets mature, governments, arbitration lawyers and arbitrators are pushing for disputes to be settled in Africa rather than ‘exported’ to international centres. This is particularly the case for jurisdictions such as Kenya, Nigeria, Ghana and South Africa. Additionally, with the commencement of trading under the Africa Continental Free Trade Area (AfCFTA) – Africa’s largest and most ambitious development vehicle – on 1 January 2021, it is anticipated that such trade would need dependable fora for disputes arising from and relating to the AfCFTA agreement. The AfCFTA agreement has been ratified by 38 African countries and, in addition to establishing a dispute settlement mechanism (DSM) under Article 3(1) and Article 20 of the Protocol on Settlement of Disputes (the AfCFTA Protocol), it also provides for arbitration as an alternative route to resolving disputes under Article 27 of the AfCFTA Protocol.

According to the AfCFTA Protocol, the state parties that resort to arbitration through a mutual agreement may not simultaneously refer the same matter to the DSM. Additionally, the parties may agree on the procedures to be used in the arbitral proceedings. This signals confidence in arbitration.

Although Africa-based arbitration centres are mushrooming, international institutions are still very popular. This is largely because of the use of international counsel, who are perceived as being more familiar, independent, dependable and who draw from a very robust pool of expertise (expertise that Africa is still building). Further, there is an impression that African governments are not always pro-arbitration, and that enforcing international arbitral awards in African countries is difficult. This is further analysed below.

Some popular international centres include:

• the International Centre for Settlement of Investment Disputes, ratified by 155 countries;^[3]
• the International Chamber of Commerce, present in over 100 countries;^[4] and
• the Permanent Court of Arbitration, ratified by 122 countries.^[5]

It is an open question whether the choice of arbitration institution plays a part in the recognition and enforcement of awards in the context of Africa.

The challenges facing recognition and enforcement of arbitral awards in Africa

While it is difficult to generalise the challenges facing recognition and enforceability of arbitral awards across the region, it is arguably a common theme that the challenges stem from the different levels of development of arbitration regimes in the various unharmonised African countries. Wven where similar regimes do exist, the decisions reached by local courts when it comes to the recognition and enforceability of arbitral awards may vary.

For example, Article 34 of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (which forms the basis of various national arbitration laws in Africa) mirrors Article V of the New York Convention, which provides for seven grounds upon which a party can rely on to oppose recognition and enforcement of an arbitral award, notably the public policy ground.^[6] Although this may feature in the various national arbitration laws, there has been a liberal and inconsistent approach when it comes to its interpretation that may affect the recognition and enforcement of arbitral awards from one jurisdiction to the other.

A good example of this diversion in interpretation is the construction of what goes against public policy under Mauritian law. In the Mauritian Supreme Court decision of State Trading Corporation V Betamax Limited,^[7] the Court considered that, under the Mauritian Public Procurement Act 2006 (PPA), the applicant was a ‘public body’ and the contract of affreightment (CoA) entered into by the respondent and the applicant was a ‘major contract’ which should have been considered and approved by the Central Procurement Board.  Consequently, the CoA was considered to have been illegally awarded, in breach of the mandatory procurement rules of the PPA and was therefore in conflict with the public policy of Mauritius. There being no dispute that the PPA provisions had not been followed, the Court set aside the final award for contravening the public policy of Mauritius.

Similarly, in the Egyptian case of Court of Cassation, Challenge No. 282 of 89 JY^[8], the defendant (the prevailing party in the arbitration) obtained an order from the Cairo Court of Appeals permitting it to enforce a London Court of International Arbitration (LCIA) award which, in the absence of the agreement of the parties, ordered the appellant to pay a compensation with an interest rate of 8 per cent and a compounded post-award interest rate of 4 per cent. In response, the appellant challenged the Court of Appeal’s enforcement order before the Court of Cassation. The Court of Cassation affirmed that, without the agreement of the parties, Article 227 of the Civil Code would apply. This provision caps the interest rate at 5 per cent. Such a percentage is considered a rule of public policy that cannot be contravened. In accordance, the Court partially rejected the enforcement of the LCIA award and ordered the interest rate to be reduced to 5 per cent per annum. The unique contexts of the different African countries shapes how they construe grounds that parties can rely on to oppose the recognition and enforcement of an arbitral award.

Further, the recognition and enforcement of foreign arbitral awards is usually dependent on national courts^[9]. It is not uncommon for national courts in Africa to be unsupportive of international arbitration.^[10] An example of such an instance is where, despite many African countries adopting the UNCITRAL Model Law and ratifying the New York Convention, their arbitration statutes and judicial attitude is not pro-enforcement.^[11] National courts in Africa have, in some instances, interpreted the grounds relating to the recognition and enforcement of arbitral awards broadly-  frustrating attempts at recognising and enforcing foreign arbitral awards and at times overstepping their mandate as seen from the examples demonstrated above.^[12] 

Although similar grounds relating to the recognition and enforcement of arbitral awards may feature across various jurisdictions in Africa, there are discrepancies how well versed the national courts and judges are in arbitral law and practice, and whether the courts and judges refer to the decisions made by other national courts in other African countries to ensure that the rationale for interpretation is similar. National courts also sometimes use national rather than international public policy to defeat the recognition and enforcement of awards. This has resulted in a broad interpretation of grounds relating to the recognition and enforcement of arbitral awards, and inertia in their recognition and enforcement. Moreover, several countries in the African region are yet to ratify the New York Convention, leading to different legislative approaches to the enforcement of awards.^[13]

On the other hand, national courts have taken a pro-arbitration approach in some African countries by recognising and enforcing arbitral awards, even when it is against a state-owned company without any contention. A good example is the enforcement of a US$65m award against the Tanzania Electric Supply Company (TANESCO) by the Tanzanian courts, in the case of Tanzania Electric Supply Company Limited v (1) Dowans Holdings SA and (2) Dowans Tanzania Limited. In finding in favour of Dowans Holding SA, the Tanzanian High Court held that an arbitral award is final if obtained without fraud or misconduct. Additionally, in the Nigerian case of Mutual Life and General Insurance Limited v Kodi Iheme,^[14] the Nigerian Court of Appeal disallowed a request to set aside the arbitral award on grounds of misconduct and error on the face of the award. This was a significant decision in Nigeria because it demonstrated that Nigerian courts are more willing to enforce awards where the parties freely agreed to resolve their dispute by arbitration. Furthermore, it indicates that Nigerian courts will decline merit reviews of final awards. This was further reiterated in the Nigerian case of Shell Trustees (Nig.) Limited v Imani & Sons (Nig.) Limited^[15] where it was held that, once the proceedings for recognition and enforcement of an award are properly initiated and the award is recognised, it is immediately enforceable as if it were a judgment of the court in Nigeria.^[16]

In some African countries, an increase in investment and commercial activities has resulted in pro-arbitration legislative frameworks being put in place. According to the African Development Bank (AfDB), the real gross domestic product (GDP) of Africa is projected to grow by 3.4 per cent in 2021, after contracting by 2.1 per cent in 2020.^[17] This economic outlook will potentially see African states prioritising ways to attract investment; one such way is by being pro-arbitration and guaranteeing that recognition and enforcement of arbitral awards will not be arbitrarily set aside.

The challenges facing enforcement and recognition of arbitral awards as contexualised in Kenya

Arbitration in Kenya is mainly governed by the Constitution of Kenya, 2010 and the Arbitration Act, 1995 (the Arbitration Act). In the context of arbitration in Kenya, the Nairobi Centre for International Arbitration Act, 2013 established the NCIA while the Chartered Institute of Arbitrators (CIArb) also has a Kenyan branch that handles arbitrations in Kenya. Courts have generally encouraged arbitration as a dispute resolution mechanism adopted by parties and have been reluctant to interfere with parties’ agreement to resolve their disputes through arbitration. They have restricted their role to either recognising or setting aside arbitral awards. However, recent jurisprudence from the Supreme Court of Kenya has confirmed that it is possible, in limited circumstances, to appeal the decision of the High Court with respect to an arbitral award, as will be seen in the examples below.

There are two types of awards in arbitration; a partial award and a final award. Both awards must be registered in court for recognition and enforcement as a decree of the court. If no party has filed an application to set aside the award within three months, the High Court will issue the decree, making it fully enforceable and recognised. Key amongst the challenges facing enforcement of arbitral awards in Africa is the divergence of what is considered arbitrable in any given jurisdiction. For Kenya and Uganda, whose arbitration regime is modelled around the UNCITRAL Model Law, and where the subject matter of the dispute is not capable of settlement by arbitration under their respective laws, enforcement of arbitral awards may fail.

To illustrate this further, in two Kenyan decisions – namely A. Ayyasamy v A. Paramasivam & Others (2016) and Gerick Kenya Limited v Honda Motorcycle Kenya Limited (2019) – it was made clear that disputes like criminal offences of a public nature, those arising out of illegal agreements and disputes relating to personal statuses (such as divorce) cannot be referred to arbitration. Additionally, patent, trademarks, copyright, anti-trust/competition laws, insolvency/winding up, bribery/corruption and fraud are also not arbitrable in Kenya.

Another challenge faced by parties is the amount of time it takes to have an award enforced and recognised in Kenya.^[18] A limited number of specialised judges in the country sometimes leads to erroneous decisions by some courts, and the handing out of judgments is perceived to be an intrusion on the finality of awards issued in arbitrations. Parties also tend to apply for awards to be set aside without a proper legal basis as a delaying tactic. The grounds for refusal of enforcement of awards under the Arbitration Act are similar to those outlined in the New York Convention and are prescribed under Section 35 of the Arbitration Act.

However, the Kenyan Court of Appeal in Kenfit Limited v Consolata Fathers^[19] determined that partial awards are not recognisable and enforceable if the arbitrator has reserved the issue of costs for later determination. This tends to cause delays in the recognition of awards, therefore prolonging the realisation and implementation of the award.

Under the Arbitration Act, which mirrors the New York Convention, if the granting of the award was induced or affected by fraud, bribery, corruption, undue influence^[20] or the award is against the public policy of Kenya^[21], this will result in the refusal to recognise and enforce arbitral awards. For example, in Tanzania National Roads Agency v Kundan Singh Construction Limited,^[22] the failure of the arbitral tribunal to apply Tanzanian law as the governing law of the contract (English law was applied instead, against the express provisions of the contract between the parties) led the Kenyan High Court refusing to enforce the award based on public policy considerations. This is also aligned with the Arbitration Act, which provides that the recognition and enforcement of an award may be refused if the arbitration procedure (including applicable law), is not in accordance with the agreement of the parties.

Nonetheless, until the ground-breaking decision in the Supreme Court case of Nyutu Agrovet Limited vs. Airtel Networks Limited^[23] was established in 2019, it was unclear if a decision as to the recognition or enforcement of an arbitral award would be appealable as there were conflicting decisions on this issue^[24]. In Nyutu, the Supreme Court determined that:

‘The only instance that an appeal may lie from the High Court to the Court of Appeal under Section 35 [of the Arbitration Act] is where the High Court, in setting aside an arbitral award, has stepped outside the grounds in the said Section and thereby made a decision so grave, so manifestly wrong and which has closed the door of justice to either of the parties.’

The Supreme Court took a decision protective of arbitration, considering it was held that a party aggrieved by a decision to set aside could appeal the decision implicitly, which suggested that there is no right to appeal a refusal to set aside an arbitral award. This was a pioneering and eye-opening decision after which arbitration in Kenya has seen new heights.

The Supreme Court reiterated the principle in Synergy Industrial Credit Limited v Cape Holdings Limited^[25] by holding that the purpose of Section 35 of the Act is to ensure that courts can correct specific errors of law which, if left unchallenged, would lead to a miscarriage of justice.

These cases make it clear that, while there are certain challenges faced by some parties at the last leg of the arbitration process, Kenya is an extremely arbitration-friendly jurisdiction and courts are continuously trying to enhance this area of law. Kenya has established significant jurisprudence in the recognition and enforcement of international arbitral awards.

While the courts are strict in scrutinising arbitral awards to ensure they align with Kenya's threshold of justice, there is a progressive view that supports the recognition and enforcement of international arbitral awards and arbitration in general, as well as promoting the rights of parties to the arbitration. A notable case in this regard is that of Glencore Grain Limited v TS.S.S Grain Millers Limited.^[26] The court determined that the applicant seeking the recognition and enforcement of an international arbitral award in Kenya should not be turned away from the seat of justice on account of the lapse of the limitation period, within which the award ought to have been recognised and enforced, due to the Court’s delay in rendering a directional judgment in time to enable the applicant to progress to recognition and enforcement of the award. Under the Kenya Limitation of Actions Act, 1968, an action to enforce an arbitral award cannot be brought after six years from the date on which the cause of action accrued.^[27]

Conclusion

Africa is gradually overcoming some of the challenges that made the region unsuitable for arbitral proceedings – corruption, interference by the courts and so on. Countries like Nigeria, Rwanda and Mauritius are now seen to have friendlier arbitration rules which have made enforcement and recognition of arbitral awards a smoother process for parties. Additionally, the steady uptake of the New York Convention across Africa is an important development for African countries and those investing in Africa. While countries like Kenya occasionally face some challenges in enforcing and recognising valid awards, they are making huge strides; Kenya is well underway in its journey to becoming a safe arbitration seat within Africa.

To continuously achieve the goal of being served properly by the arbitral process, governments and legal practitioners in African jurisdictions may need to invest greater resources and allow arbitration-related matters to be fast-tracked to experienced specialist judges, as is the case in Mauritius. This would eliminate delays, as well as issues of incoherent interpretation and application of the law relating to arbitration.

It is also imperative that the principle of finality of arbitral awards is promoted and protected across all jurisdictions, to ensure that Africa is recognised as arbitration-friendly. The courts have a pivotal role to play in upholding this principle. The New York Convention offers some comfort as to both a neutral, impartial process and enforcement; it will be interesting to see when and if the remaining countries ratify the New York Convention to completely harmonise the recognition and enforcement process.^[28]