South Africa cements its lead in the African arbitration landscape

15 Jul 2021

Greg Falkof and Ahmed Abdel-Hakam of Eversheds Sutherland review the new 2021 AFSA arbitration rules

The Arbitration Foundation of Southern Africa (AFSA) has released revised arbitration rules, which came into force on 1 June 2021. The 2021 rules have been introduced to account for the growing popularity of arbitration in South Africa and across the African continent, and to reflect current best practice around the world for arbitration procedure, to position AFSA at the leading edge of arbitration in Africa.

Amendments to the 2021 rules

These new rules form part of a wider objective to revitalise arbitration in South Africa which started in 2017 with the adoption of the International Arbitration Act, replacing the 1965 Arbitration Act, which incorporated international legislative best practice (i.e. the UNCITRAL model law) into South Africa’s domestic law.

The AFSA rules had previously been updated to incorporate changing arbitral practices, and this latest update is designed to ensure that the 2021 rules function effectively and efficiently within the new South African legislation and current best practice. Whilst the revisions were almost finalised prior to the Covid-19 pandemic, the 2021 rules have also been informed by the new realities of remote working.

One of the most notable changes is the professionalisation of AFSA’s operations, by introducing the AFSA Court and a secretariat. The role of the court is to oversee the appointment of arbitrators, to deal with the arbitrator challenges and issues of jurisdiction. It is assisted by a secretariat which is responsible for the day-to-day case management. This reflects a similar approach adopted by the main arbitration institutions across the world.

New features of the 2021 rules include an expedited procedure, the appointment of an emergency arbitrator, the arbitral tribunal’s power to dismiss a claim early (and so save substantial time and costs), the arbitral tribunal’s authority to conduct a virtual hearing, the availability of security for costs and rules governing third-party funding. These features are in line with the latest revisions to the LCIA rules (October 2020) and the ICC rules (January 2021), and reflect current arbitral procedure.

Since 2017, AFSA has administered over 55 international matters (with parties from the United States, Europe, the Middle East and Asia) in addition to its domestic caseload of over 500 matters. In 2019, Europe-based companies made up almost 20% of the parties participating in AFSA arbitrations. The 2021 rules provide a solid platform for AFSA to cement its position as the most popular arbitration institution in Africa for the resolution of cross-border disputes, as found by the Arbitration in Africa 2020 Survey conducted by the School of Oriental and African Studies in London.

The growth of arbitration in Africa

The revisions to the 2021 rules come at an interesting time for cross-border trade in Africa. Traditionally, international arbitrations of cross-border disputes with an African nexus have been adjudicated by arbitral tribunals seated outside the African continent (often in London, Paris, Geneva or Dubai), and often determined by tribunals without any African arbitrators.

Although this is now (rightly) highlighted as being in need of long overdue reform, it remains a challenge to address for the African arbitration community. Some of the less commercially-sophisticated national courts in African jurisdictions have not been overly supportive of international arbitration, and international parties have therefore historically chosen to avoid African jurisdictions for their arbitrations. These factors also explain why non-African parties with international or cross-border contracts involving Africa have been reluctant to specify one of the many African arbitral institutions, although local or national disputes are regularly arbitrated locally within African jurisdictions.

Towards the other end of the judicial spectrum, South African courts are perceived as being more supportive of international arbitration. South Africa’s attractiveness for arbitration has been further enhanced by the recent updates to South Africa’s arbitration laws in 2017. AFSA therefore has a unique selling point, because it benefits from South Africa’s arbitration-friendly legislation and supportive courts, which is one of the reasons why AFSA is seeking to position itself as a primary African institution for administering international arbitrations.

Following the implementation of the African Continental Free Trade Area (AfCFTA), arbitration across the continent is expected to increase. Trade barriers started to be lifted from 1 January 2021 and the volume of trade between African nations will inevitably rise once the AfCFTA starts to take effect, with a consequent increase in international disputes. Even before the entry into force of the AfCFTA, the number of cases administered by AFSA had been rising steadily. Between 2017 and 2019 AFSA’s caseload had tripled, and the effects of AfCFTA are expected to cause this to rise substantially in the coming years.

Future outlook

The newly released 2021 rules are likely to strengthen an already dynamic arbitration centre, and will provide parties from Southern Africa, those operating on the continent, and from elsewhere with an increased incentive to arbitrate within Africa, under the auspices of AFSA – which is now seeking to position itself as the most credible African alternative to the main international arbitration institutions. AFSA is already well positioned within Africa to take on this role, and is well placed to benefit from the increase in arbitration cases.

Greg Falkof is a partner and Ahmed Abdel-Hakam is counsel in the international arbitration group at Eversheds Sutherland in London.

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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