African Arbitration: Has the Elephant Bolted?

As part of LIDW24, Morrison Foerster, Brick Court Chambers, and Essex Court Chambers hosted an in‑person panel session discussing the issue of corruption in international arbitration as a follow up to our first discussion on this topic, “Arbitration and Corruption – Addressing the Elephant in the Room”.

The recent P&ID judgment and trends regarding setting aside Awards against African states on fraud and corruption grounds, were the starting point for a lively discussion at our panel session titled, “African Arbitration – Has the Elephant Bolted?” 

The key takeaways were:

• Tribunals need to do more to identify and investigate these issues where they have concerns or cause for suspicion – and not only when they are raised by a party.

• The present disclosure regime in arbitration is ill equipped to deal with issues of fraud and corruption. Should there be a positive duty on a party and its counsel to disclose all materials including adverse materials?

• There was a lively debate as to whether or not the arbitral process needs to be more transparent – including whether there should be a reassessment of the basic assumption and rule of law that all arbitrations are private and confidential.

• It is important that states implement appropriate protocols and procedures so that investment agreements and similar contracts need to be properly vetted and approved in order to become enforceable.

Discussion

The session started with MoFo partner, Chiraag Shah, highlighting some recent trends regarding the setting aside of Awards against African states on fraud and corruption grounds. It was noted that the French courts have taken a much more pro-active approach in this respect on the basis of international public policy and that the P&ID decision by the English courts was therefore a significant development. Chiraag summarised some of the key issues distinguishing the P&ID judgment and then opened the panel discussion with a focus on the following core topics: 

When an allegation of corruption is raised, is the Tribunal under a duty to investigate the allegation, and if so, what is the extent of that duty? Failure to investigate corruption may lead to an award being set aside on the ground of public policy. But a Tribunal is supposed to remain impartial and objective and must confine itself to the issues before it, lest it acts ultra vires the scope of its authority – that could also lead to the award being set aside. How does a Tribunal balance these two conflicting obligations?

Emilia Onyema advanced the argument that Tribunal’s needed to do more – and that they should not be hamstrung by the cases put forward (or not) by the parties. Where a Tribunal suspects corruption, it should raise it as an issue and give the parties the opportunity to address its concerns. As long as both parties were given an opportunity to respond, the question of impartiality or bias should not arise. 

In P&ID, the abuse of process and bribery only came out on disclosure compelled by national courts at the setting aside stage. But a Tribunal does not, in most cases, have the same power to compel disclosure – especially from third parties. 

Ricky Diwan KC argued that the present arbitration regime was inadequate and that the IBA Rules could operate as a baseline, but there needs to be a positive duty on a party and its counsel to disclose all materials (including adverse documents) – similar to the common law rules. This sparked a lively debate around (i) the drive to actually restrict disclosure so as to increase costs and time efficiencies; (ii) the risks posed by AI and deepfakes and how this could be mitigated; and (iii) whether all arbitration counsel should be subject to the same ethical and regulatory standards so as to ensure a level playing field. The panel also discussed some of their own experiences and frustrations – both as counsel and arbitrators. 

One of the criticisms about arbitration (particularly, State related disputes) is the lack of transparency which provides opportunity for bad actors to conceal their acts and omissions – and it was noted that no allegations of fraud or corruption were even placed before the Tribunal in P&ID. It was put to the panel that there may well be a case for increased transparency and monitoring of State related arbitrations so as to allow third party scrutiny and increase accountability. 

Harry Matovu KC argued that there should be no automatic right to confidentiality – irrespective of whether it was a state related arbitration or a typical commercial arbitration. He argued that there should be no assumption of confidentiality and that this would actually promote the spirit of democracy and fairness in the resolution of disputes. This led to an animated debate with some members of the panel and the audience arguing for greater transparency but others flagging that this would drive a spear through one of the very tenets of arbitrations – the concept of party autonomy and consensus. It was noted that even if there was no automatic right of confidentiality, this would simply be secured through appropriate contractual wording and agreement between the parties. 

Joseph Siyaidon also observed that in his experience of advising states on public sector and investment contracts, it was actually the State that often wanted to ensure that any dispute resolution was confidential. Publicity of ongoing disputes could impact investor confidence which would be more damaging in the long term. 

Are there lessons to be learnt/implemented from the circumstances of the P&ID saga? 

Joseph noted that following the P&ID saga, the Nigerian government had implemented various protocols to ensure that any relevant contracts were reviewed and approved at multiple levels. The panel also suggested that a state could enact laws requiring that any state or state entity related contract had to be signed off and ratified through a specified process and that failure to complete that step would render such contract unenforceable. Joseph noted that there were directives to this effect already in place in Nigeria but that had only led to further disputes about whether the directive was binding and enforceable. 

It was agreed by all panellists that better training and capacity building within government legal departments on these issues was important but that this would still not preclude the re-occurrence of a P&ID situation where the fact and extent of the fraud and corruption remained unknown until the extensive disclosure secured (to common law standards) from various jurisdictions. 

This prompted a lively discussion, including with various comments from the audience around what the applicable standard of proof should be in civil matters where fraud was alleged (under Nigerian law, allegations of fraud and wrongdoing need to be proven to the criminal standard and not the civil standard); whether an investor’s home state should also be held accountable for the fraudulent/corrupt acts of the investor; and whether and to what extent a national court should permit the re-opening of issues and allegations that may have been addressed by the tribunal. In respect of the latter, a comparison was drawn between the approach historically adopted by the French courts versus the English courts.