Practical Considerations in Arbitrating Investment Disputes: A Look at Nigeria and Ghana
At a recent AELEX webinar themed, “Arbitrating Investment Disputes in Africa: The Nigerian and Ghanaian Framework”, members of the firm’s Arbitration Practice Group considered the recent upsurge in the number of investment disputes in Africa with a focus on the dispute resolution frameworks in Nigeria and Ghana.
They noted that two major factors will also serve to increase investor-related disputes in Africa; first, is that major global economies will continue to promote investments in the continent and the second is the expected rise in intra-African trade as a result of the African Continental Free Trade Act (AFCFTA). In his introductory remarks, Ugonna Ogbuagu a Senior Associate of the firm said,
“In tracking this surge in investment arbitration in Africa, figures at ICSID and the ICC indicate that African state parties are actively involved in investment disputes. As at April 2016, 131 of the 563 cases under the ICSID Convention and Additional Facility Rules involved an African state, 37 more cases have been registered since then, and notwithstanding, the significant global health and economic challenges, six cases were registered at ICSID this year. For ICC, between 2013 and 2019, six investor-state cases were registered. So clearly, there’s an increase in investment arbitration and we expect to see more of these disputes arise as FDI influences the continents growth and state parties continue to engage on the AFCFTA framework.”
These investment dispute cut across construction, energy, tourism, transportation, services and trade, information technology and agriculture, oil and gas, mining and finance and insurance.
Framework in Nigeria
In light of the high flow of FDI in Nigeria, Nigeria enacted the Nigerian Investment Promotion Commission Act (NIPCA) which makes extensive investor-friendly provisions including no expropriation, compensation from expropriation and easy repatriation of profits, and also provides a framework for the resolution of investment disputes. Under the NIPCA, parties are encouraged to resolve their disputes as follows:
- Parties engage in mutual discussions in a bid to reach amicable settlement of their disputes;
- When parties are unable to reach a settlement, parties may resolve such investments through arbitration and can decide which arbitration machinery they would like the by which they would like their disputes resolved;
- When parties have been unable to agree on a machinery for settlement of the investment disputes, and the dispute is between a Nigerian investor and the Nigerian government, the dispute shall be resolved in accordance with the terms of the Nigerian Arbitration and Conciliation Act (NACA), which is an adoption of the United Nations Commission on International Trade model law on international commercial arbitration (UNCITRAL);
- When parties are unable to agree on a machinery for settlement and the dispute is between a foreign investor and the Nigerian government, the dispute should be resolved in accordance with the any dispute method resolution procedure agreed in the framework of any Bilateral Investment Treaty (BIT) or Multilateral Investment Treaty (MIT), which is applicable to the investor state and to the Nigerian government;
- Finally, if all these fails, the dispute will be arbitrated by International Centre for the Settlement of Investment Disputes (ICSID).
Nigeria has also signed 31 BITs with 15 of them in force. Nigeria does not have a model BIT, so each BIT contains individual provisions with some giving provisions for local remedies and others insisting strictly on ICSID or UNCITRAL arbitrations. For instance, the Nigeria-Finland BIT provides that a party can withdraw a case in arbitration any time before an award and proceed to court, while under the Nigeria-Netherlands BIT, parties can proceed straight to arbitration.
Perenami Momodu, a partner at the firm noted, that parties must be careful to note the nuances of the mechanism for arbitration chosen. She said,
“NACA specifically provides that parties can be represented by a legal practitioner of their choice. However, under Nigerian law, a legal practitioner is one whose name appears on the roll of lawyers in Nigeria, so basically a lawyer who is qualified to practice in Nigeria. The implication of this is that if parties were to choose NACA or NACA was automatically applied, then both parties are bound to have a lawyer qualified in Nigeria, even though there are some exceptions to this.”
Framework in Ghana
Foreign Investment is protected under the Ghanaian constitution as well as the Ghanaian Investment Promotion Centre Act 2013. Under the GIPCA, there is a cooling off period of six months, after which a dispute can be submitted to arbitration and the UNCITRAL rules, or alternatively to any BIT between the parties. Kwesi Dadzie-Yorke, an associate in the firm’s Ghanaian office, said,
“At present, there are 28 BITs in Ghana but none are in force. Ghana, however, has a Model BIT that was completed in 2008 which gives parties the option to either submit the dispute to a national court for resolution of the dispute or to arbitration.”
The Ghana Arbitration Act which set up a not-for-profit organization also handles international arbitrations and other experienced settlements. Finally, the Alternative Dispute Resolutions Act 2010, which incorporates the New York Convention on enforcement of arbitral awards, thus, if a party has an arbitral award it will be recognised by any court of competent jurisdiction.
Practical Considerations for Investment Disputes
Funke Adekoya, SAN, a founding partner of the firm identified key issues, she has noticed sitting as an arbitrator that can promote the effectiveness of arbitration, if handled correctly.
First, she recommends that prior to arbitration, both parties should consider whether there are viable mediation routes or settlement options. Furthermore, if the investment dispute is brought under the auspices of a BIT, then during the cooling-off period, when the investor, typically, would engage the state on the possible settlement of a dispute, the state should take the opportunity to attempt to resolve the issue, instead of not responding or providing an inadequate response.
Speaking to the investors, she stated that the NIPC has established a unit that deals with contract monitoring of any contract involving a foreign investor, to provide early warnings of any issues that may arise from the government’s obligations under the contract. Therefore, where there is a dispute, within Nigeria, the investor could approach the NIPC and the NIPC can become actively involved in seeing the dispute resolved, prior to arbitration.
Finally, to the state she advised that once the state is aware of a dispute, “a whole of government team” i.e. a team comprising all governmental arms implicated in the dispute, should be created. She added that once the state is made aware of a dispute, it should put together a budget sufficient to cover costs for the duration of the disputes. Furthermore, she noted that it is imperative for the state, especially emerging countries, to get the best expert witness they can afford who will actively engage with the issue at hand especially on damages, as this can make a significant difference in the way a case is decided.
Addressing a question from a participant on whether developing countries should clamor for state dispute settlement, rather than investor state settlements, which most multinational companies seem to be exploiting against developing countries, she concluded,
“It’s not so much the question of the investor having an unfair advantage over the State, but I believe that it is also for the state parties to prepare themselves, to engage and upgrade their dispute resolution practices, so that these disputes when they arise can be actively managed, such that they may not end up in international dispute resolution space anymore.