Bringing the ICCA 2018 message home: Managing and resolving complex disputes on major projects on the African continent and beyond
From 15 to 18 April 2018, our international arbitration team represented Webber Wentzel at the ICCA (International Council for Commercial Arbitration) 2018 Congress held in Sydney, Australia. The theme of this years' congress was "Evolution and Adaption: The Future of International Arbitration".
We joined forces with our Linklaters and Allens colleagues for a breakfast seminar hosted on 16 April 2018. The seminar covered a number of items related to the congress theme. We set out below our thoughts on prominent issues around regulatory and prudential issues which impact on international arbitration and multi-party and multi-tiered disputes, particularly in the context of South Africa's adoption of new arbitration legislation in accordance with the UNCITRAL (The United Nations Commission on International Trade Law) model law:
- Fundamentally, disputes and arbitrations on big projects are not necessarily of a different character to other contexts. The scale of the disputes, the projects’ interrelationship with considerations of state sovereignty and the multiplicity of parties engaged in the dispute or other stakeholders makes project disputes a petri-dish of some of the most difficult and contemporary issues in international arbitration.
- Dispute resolution and prevention dovetails around risk management. In the case of large projects, management of risk in respect of disputes needs to begin from the time that the project is conceived. Risk management can take multiple forms and has to be sensitive to the nature of the potential actors and interests involved.
- From a legal perspective, the failure to adhere to a regulatory or consultative requirement may invalidate the contractual or other bargain and any legitimate investment-backed expectations (or even make the investor liable in damages to third parties). From a social perspective, a better relationship with the multiplicity of actors and a more nuanced understanding of the socio-economic context is likely to result in fewer disputes emanating or aggravating.
Anticipating and pre-empting the challenges around local interest and laws can be critically important for the successful implementation of a project. For African-based projects in particular, we set out below issues to consider:
- It is good practice to consult with entities such as affected community groups (traditional and indigenous) often and comprehensively, so as to ensure inclusivity and buy-in. Often, social and economic development plans and partnerships are created by investors, even without government prompting. Sometimes, however, community participation and consultation are specifically legislated. Also, frequently, land in respect of which projects are developed is owned by traditional communities, under the custodianship of a chief or traditional council.
- Proper legal advice and consultation are critical in relation to overlapping interests in land such as farming groups and mining right holders.
- Corruption and bribery can be very real. One should be wary of facilitators. This can have implications far beyond mere illegality and embarrassment before an arbitrator tribunal. There are various national and international laws prohibiting corrupt conduct and rendering malfeasors and beneficiaries of proceeds of crime liable for massive administrative and criminal penalties (including imprisonment), quite apart from notoriety. In this context, the duty is not only on the parties to ensure good governance and eschew corruption. An arbitrator who has well founded suspicions of corrupt conduct has a duty not to facilitate such conduct or lend his/her imprimatur to it, by, for instance, ordering the delivery of a performance in terms of an instrument tainted by turpitude. This is notwithstanding the general position that the arbitrator’s mandate is limited to deciding the dispute referred to him/her by the parties. A failure to probe credible concerns of fraud or corruption may amount to aiding and abetting corrupt activity.
- Quite apart from avoiding involvement in any positive malfeasance, it is important to do a proper due diligence on whether all the regulatory and constitutional requirements in respect of the project have been fulfilled by (usually) government actors. A failure to ensure and verify compliance from the outset may result in the project and project documents being declared invalid and being set aside, with potentially calamitous financial consequences, where the investor is not only unable to enforce the benefit of the bargain, but is required to restitute payments already made despite performance having been rendered. In this respect, it is noteworthy that ordinarily the doctrines of estoppel or ostensible authority cannot be used to bind the state to an illegality.
- Despite the prevalence of the New York Convention of 1958 and other transnational instruments, many jurisdictions have idiosyncratic requirements for the recognition, enforcement or review of arbitration awards. It is, in this light, critical to structure the transaction properly where the right forum and seat are chosen, arbitration rules fit the jurisdiction and any treaties protections are maximised through the investment vehicle. This requires knowledge of the parties against whom enforcement may be sought in due course and the jurisdictions where this might occur. Just as critically, once a referral to arbitration has taken place, it is important to ensure that the arbitration is conducted in such a way that it complies with the law where enforcement may be sought and that it concerns subject matter and issues which are arbitrable in the principal enforcement jurisdictions. In this context, it is parlous to assume any universal standards of public policy, arbitrability and even procedural requirements. That kind of uniformity does not exist.