Chris Todd

Partner, Bowmans

In 2021, M&A deals with sub-Saharan African involvement were recorded at USD130 billion, four times the 2020 level and the highest recorded to date (according to research conducted by Refinitiv). 

More than half of this involved transactions in high technology sectors, followed by mining and natural resources, and telecoms (each accounting for around 10%), together with financial services, and energy and power.  The focus of investment across sub-Saharan Africa has historically been on natural resources.  Since the Covid pandemic emphasis has shifted to telecommunications, technology and fintech and investors have also continued their focus on businesses in consumer sectors which continue to benefit from growing urban populations and rising incomes.  And a growing number of deals on the continent are “intra-African”, as successful African conglomerates extend their reach across the continent.

Investors into the continent still strongly favour dispute resolution clauses with arbitration conducted in well- established jurisdictions perceived to be neutral, including London, New York, Paris and Singapore.  There are ongoing initiatives to establish effective arbitration centers in key hubs across the African continent as well.  The establishment of the African Arbitration Association (AfAA), which will hold its third annual conference this year from 3-5 November in Accra, is evidence of a growing recognition of the importance of international arbitration across the continent.  The AfAA’s mission is to promote, encourage, facilitate and advance the use of international arbitration within the African continent, and its objectives include acting as the platform for African arbitration institutions, to increase coordination amongst its members in Africa-related international arbitration and alternative dispute resolution activities, and to advance the use of international arbitration and alternative dispute resolution as effective methods of dispute resolution of Africa-related transactions and disputes.   

While there has been significant progress in establishing high-quality arbitration infrastructure on the continent, the number of international commercial disputes referred to arbitration in African jurisdictions remains relatively small. 

There are a number of consequences of this which may be mentioned briefly.  The first is that arbitration conducted in North American, European, and Asian centers remains time-consuming and extremely expensive for African parties.  A second is that relatively few African arbitrators are involved in resolving international commercial disputes that arise from investment into the continent.  Third, significant challenges persist in relation to jurisdiction and enforcement of international arbitration awards involving African jurisdictions. 

While mediation has gained significant traction in many jurisdictions, including for resolving international commercial disputes, there has as yet been little evidence of its use to any significant degree in resolving international commercial disputes involving African investments.  This is a little surprising, both because consensual dispute resolution through mediation provides good answers to many of the challenges facing international commercial arbitration (including cost, delay, jurisdiction, and enforcement challenges); and also because, with consensual dispute resolution embedded in the dispute resolution culture across many African jurisdictions, mediation provides an excellent opportunity for increased involvement of African dispute resolution practitioners.  Mediation of disputes of this kind also provides opportunities for partnering, using co-mediators from different jurisdictions, and paying increased attention to problem-solving that can serve to pre-empt many of the difficulties that arise in the enforcement of international arbitration awards. 

Consider a Southern African natural resources group pursuing an investment in the energy sector in West Africa.  For reasons of tax efficiency and other perceived corporate advantages, it may choose to hold the investment through a subsidiary in Mauritius.  Investments of this kind frequently involve minority shareholders, often because this is either compulsory or desirable under local ownership regulations.  The parties choose arbitration as a dispute resolution method through an established commercial arbitration tribunal in London, but with the procedural law of the arbitration that of Mauritius. 

International arbitration practitioners will perceive various potential obstacles confronting a party wishing to pursue a dispute.  The cost of legal teams across multiple jurisdictions for an arbitration hearing through a London tribunal is very significant.  So too the cost and complexity of steps to enforce any award where this may be required across multiple jurisdictions.  Consider, by contrast, the opportunities for mediation to assist parties to achieve a negotiated settlement of a dispute in this context.  Co-mediators could be appointed from key jurisdictions relevant to the dispute.  The parties could conduct a combination of bilateral and joint meetings in person or across digital platforms, with the assistance of the mediators.  A consensual outcome might build the relationship between the disputants, and at the same time result in a more cost-effective, speedy, and implementable outcome.   And of course, efforts to settle through mediation do not preclude subsequent arbitration if they are unsuccessful.  Mediation has proved effective at narrowing issues even where parties are unable to reach any final settlement of their disputes.

Even in the most complex multi-party dispute the presence of a mediator can change the dynamics of a negotiation process, bringing negotiation, problem-solving, and communication skills to bear on the problem from a position of independence and neutrality.  These are the factors that make progress possible in a mediation where direct negotiations have stalled.  This, in turn, helps to get the right people and the right information to the negotiating table and to identify and focus on the real issues and needs of the parties, and it facilitates communication, “separating the people from the problem”.  All of these qualities of mediation make it a dispute resolution process well suited to cross-border disputes.

Despite the progress that has been made in the use of arbitration on the continent following the establishment of the AfAA, there are clearly still opportunities to increase the use of mediation as a tool for resolving cross-border disputes.  Mediation could involve more African dispute resolution practitioners and could produce wiser and more efficient outcomes more quickly than is possible with arbitration.  This would in turn improve the credibility of dispute resolution capabilities across the African continent, and would surely support continued growth in M&A activity and the economic prospects that drive it.  Greater use of mediation in international disputes would, in short, serve African economies well and would also benefit those investing in them.