The New York Convention provides that a signatory country must enforce an arbitration award granted in another signatory state as though it were a court judgment of the first signatory. This regime for mutual enforcement is the most powerful tool for pursuing arbitration in the international space because it avails to the enforcing party the court machinery and compelling power of the state where enforcement is sought, ensuring that the arbitral award is successfully executed in the host jurisdiction. This article is the first in a two-part series examining the enforcement regime under the New York Convention in four key African jurisdictions: South Africa, Ghana, Rwanda and Nigeria. Here we look at the legislative framework and the procedure for the enforcement of foreign arbitral awards in South Africa and Ghana and discuss some of the advantages and/or pitfalls in enforcement that are peculiar to each jurisdiction.
After much anticipation, the South African International Arbitration Act 15 of 2017 ("new Act") was welcomed by arbitration practitioners in December 2017. The intention of the new Act has been to incorporate the UNCITRAL Model Law as the cornerstone of the international arbitration regime in South Africa. The South African Arbitration Act 42 of 1965 remains applicable to domestic arbitrations.
One of the most significant changes in the new Act was the incorporation of the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977 ("REFAA Act") which was promulgated to give effect to the New York Convention that was signed by South Africa in 1976. The REFAA Act recognised that a foreign arbitral award is binding between parties and is capable of being enforced by way of application to court, to have the award made an order of court. To avoid duplication of legislation, the REFAA Act has been repealed in its entirety and adopted by the new Act.
The court application to have a foreign arbitral award made an order of a court is a fairly lengthy process. A Notice of Motion and Founding Affidavit is lodged by the Applicant (the party wanting to enforce the award) at a High Court in South Africa that has jurisdiction over the matter. Jurisdiction is usually determined with reference to the principal place of business or the location of the assets of the Respondent (the party against whom the award is being enforced). Under section 17 of the new Act, the application must be accompanied by the original foreign arbitral award and the original arbitration agreement in terms of which the award was made, both authenticated for use in the High Court, together with certified copies of the award and the agreement.
The application is issued by the Registrar of the High Court and served on the Respondent by the Sheriff. The Respondent can then elect to oppose the application or not. Should the Respondent elect to oppose the application, it is required to file a Notice of Intention to Oppose within the time period set out in the Notice of Motion (between 5 to 10 days). Thereafter, the Respondent is required to file an answering affidavit on the Applicant within 15 days of serving its Notice of Intention to Oppose. The Applicant will then be afforded an opportunity to file a Replying Affidavit, within 10 days of receipt of the Respondent's Answering Affidavit.
In accordance with Rule 6(12) of the Uniform Rules of Court, an Applicant is entitled to make an application to the court on an urgent basis. In this instance, the time periods are reduced and general procedure applicable to applications is shortened. However, the Applicant would be required to state why the matter is urgent, for example, that the Respondent is in the process of disposing of all its assets in South Africa. Should the court find that grounds for urgency do not exist; the matter will be enrolled on the ordinary motion court roll.
Advantages and Pitfalls
When it comes to enforcing arbitration awards, time is of utmost importance. When a matter is placed on the ordinary court roll and the application is opposed, the hearing usually takes places approximately 4-6 months after the matter is enrolled – a pitfall with enforcement in South Africa. It is no secret that a successful party to arbitration wants to have the award enforced as soon as possible so as to receive what it is entitled to, and therefore a 4-6 month delay in enforcement can cause prejudice to the successful party. If the application is not opposed, it can be heard approximately 1-2 months after the relevant time period has lapsed for the Respondent to serve notice of intention to oppose.
When a party is considering opposing the enforcement of a foreign arbitral award, section 18 of the new Act is important and sets out the various grounds on which the enforcement of a foreign arbitral award will be refused. There is currently no case law dealing with this section, however, as the wording of section 18 mirrors that of section 4 of the REFAA Act, the below cases remain significant when dealing with refusal of recognition and enforcement of foreign arbitral awards. South African law recognises the principle of judicial precedent. It is very likely that case law decided upon with reference to the REFAA Act will still bear precedential value when deciding case law under the new Act.
In the case of Seton Co v Silveroak Industries Ltd 2000 (2) A 215 (T), the Respondent opposed an application to have an award by a French arbitral tribunal for damages in favour of the Applicant recognised by the High Court, on the grounds that the award was tainted by a fraud committed on the tribunal by the Applicant. The Respondent contended that the South African High Court should refuse the enforcement of the award by virtue of the provisions of section 4(1)(a)(ii) of the REFAA Act in that it was contrary to public policy to recognise an award obtained through fraud. The Respondent conceded that it did not have evidence on the affidavit to substantiate the allegation of fraud, but that there was someone who, if subpoenaed to give viva voce evidence, would give the necessary evidence.
The court held that section 4(1)(a)(ii) of the REFAA Act provided that a court would only refuse to recognise a foreign arbitral award if on the face of the award and the arbitration agreement it was clear that the agreement was contrary to public policy. To successfully claim that the award was obtained under fraudulent means (and therefore against public policy), there ought to be no extraneous evidence to persuade the court that the agreement in question was an illegal agreement. The Respondent was required to approach the French court to have the award set aside on the grounds of alleged fraud and parallel to that, make an application for a stay of the Applicant's application to have the arbitral award enforced, pending the outcome of the Respondent's application to have the arbitral award set aside in France. The South African High Court found no reason not to recognise the award, and therefore the Applicant's application for recognition and enforcement succeeded.
In Phoenix Shipping Corporation v DHL Global Forwarding SA (Pty) Ltd and Another 2012 (3) SA 381 (WCC), Phoenix and DHL approached the Western Cape High Court for an order for the recognition and enforcement of a London arbitral award. Bateman Ltd resisted the application on the grounds that it was never a party to the agreement referred to in the request for arbitration, that the arbitrator had accordingly lacked jurisdiction over it, and that the enforcement of the award would. therefore, be contrary to public policy. DHL relied on the booking note, which provided that the parties submitted to London arbitration. DHL contended that the arbitrator had made an award against Bateman Ltd, and that Bateman Ltd had failed to satisfy the arbitral award, which the court was then obliged to enforce.
The court held that the booking note issued by Phoenix did not, in South African law, constitute a binding contract of carriage for the transportation of Bateman Ltd.'s machinery in terms of which the parties submitted any dispute to arbitration. Arbitration is characterised by its consensual nature and there was nothing to suggest that there ever was a consensus to conclude a contract in terms of which the parties had agreed to submit to arbitration. Both the common law and the REFAA Act recognised the importance of an arbitration agreement as a prerequisite to the enforcement of the arbitral award. In this case, as a fact, there had not been a valid agreement concluded between DHL and Bateman Ltd, agreeing to arbitration in terms of either English or South African law. DHL had accordingly failed to allege and prove a valid arbitration agreement. Absent an arbitration agreement, no arbitrator could claim jurisdiction to determine a dispute and an order for the recognition and enforcement of a foreign arbitral award, which on the face of it was invalid, would be contrary to the principles of public policy.
Whilst it may take some time to have a foreign arbitral award made an order of court in South Africa, parties can be confident that the South African courts will continue to uphold the principles of public policy, and remaining practical and impartial, when deciding to recognise and enforce a foreign arbitral award.
Ghana is a signatory to the New York Convention, which has been directly incorporated into its laws through the First Schedule to the Alternative Dispute Resolution Act, 2010 (Act 798) (the "ADRA"). The Ghanaian courts are generally willing to enforce arbitration awards and do not interfere with enforcement unless one of the grounds set out under section 59 of the ADRA or Article V of the New York Convention has been raised. The grounds under Section 59 of the ADRA are limited and broadly reflect the grounds under the New York Convention. These grounds are as follows:
- The award has not yet become binding on the parties or has been suspended or annulled at the seat of the arbitration;
- The losing party was not given sufficient notice of the arbitration proceedings to enable them to present their case at the proceedings or proper notice of the appointment of the arbitrator;
- A party that lacked capacity was not properly represented;
- The award does not deal with the issues submitted to arbitration;
- Contains a decision beyond the scope of the matters submitted to arbitration;
- Proof that the parties were under some incapacity or that the arbitration agreement is not valid under Ghana law or the law of the seat of arbitration;
- The subject matter of the dispute is not capable of settlement by arbitration under Ghana law;
- The composition of the tribunal or procedure was not in accordance with the agreement of the parties or the law of the seat; or
- Recognition and enforcement would be contrary to the public policy of Ghana.
When none of the above grounds apply, the court can grant leave for the enforcement of the award.
Enforcing an arbitration award in Ghana is straightforward, and simply requires an application to the High Court for leave to enforce the award as a judgment of the court. The application must be on notice to the losing party and involves filing a motion paper with a supporting affidavit setting out the general details of the arbitration and attaching the relevant award and the contract containing the arbitration clause. As a matter of practice, the supporting affidavit must indicate that the arbitral award has not been set aside or annulled at the seat of arbitration and that the tribunal had the requisite jurisdiction. Once the application is filed, the court registry fixes a return date for the application to be heard, which is generally within two weeks of the date that the application is filed. The court registry then serves a copy of the application on the party against whom enforcement is sought.
During the hearing of the application, the court does not examine the merits of the award but only has to satisfy itself, in accordance with section 59(1) of the ADRA, that:
- the award was made by a competent authority at the seat of the arbitration;
- a reciprocal arrangement exists between Ghana and the seat of arbitration;
- the award was made under the New York Convention or any other international convention ratified by Parliament;
- there is no appeal (application to set aside) pending in any court; and
- the enforcing party has produced the original award or an authenticated copy; as well as
- the agreement pursuant to which the award was made or an authenticated copy of it.
Once leave is granted, the award can then be enforced in the same manner as a judgment of the court. This normally involves serving a Notice of Entry of Judgment on the losing party to notify them of the terms of court order (which reflects the arbitration award), and informing them that if they do not comply with the order within seven days, execution will be carried out against their assets. If the award/judgment remains unpaid/unsatisfied, execution then proceeds by regular execution processes such as writ of fieri facias, garnishee orders, charging orders, winding up proceedings etc.
The process for enforcing a foreign arbitral award is straightforward and can be completed within a short period of time if the application for leave to enforce is not opposed. The limitation period for enforcing an arbitral award is twelve years for arbitrations under the ADRA and six years for arbitrations outside the ADRA. Most foreign arbitral awards will, therefore, have six years within which to apply to enforce the award. The Ghanaian courts are also pro-arbitration and do not easily set aside arbitration awards, even where the application for enforcement is opposed on public policy grounds.
Enforcement of an arbitral award may become challenging where the subject matter of the dispute is not arbitrable. Section 1 of the ADRA expressly carves out matters relating to the “national or public interest”, the "environment", the “enforcement or interpretation of the Constitution” and the omnibus "any other matter that by law cannot be resolved by an alternative dispute resolution method" from matters that can be resolved by arbitration. Consequently, enforcement of a foreign arbitral award may be refused if the subject matter of the dispute relates to any of these four areas. This restrictive rule of arbitrability may exclude some disputes from being settled by arbitration. These four areas listed under the ADRA could also raise practical problems in their definition, scope and application, which may negatively impact enforcement.
The term “national or public interest” has not been defined under the ADRA. The term lacks certainty and therefore can be broadly interpreted to cover a number of disputes, which potentially gives a losing party a wide scope to resist an enforcement action. It also leaves room for judicial interpretation because what constitutes a matter of national or public interest may vary from judge to judge depending on the criteria used, providing fertile grounds for contest or litigation. The carve-out of matters relating to environmental issues, while understandable, potentially excludes a number of disputes which may not have the environmental issue as the central issue but only as an ancillary one. This may provide grounds for refusing to enforce such an arbitral award. The same logic applies where the environmental issue arises as a consequence of the central dispute which is not prohibited from being resolved by arbitration, but is inevitably dealt with in the award. The omnibus "any other matter that by law cannot be resolved by an alternative dispute resolution method" can present practical problems. It covers issues that are made non-arbitrable under specific legislation. This means that the scope of this ground is open to encompass issues which may be arbitrable now but may subsequently become non-arbitrable after legislation is passed to that effect. It is, therefore, possible that a party may enter into an arbitration agreement believing that a particular type of dispute is arbitrable, only for the dispute to become non-arbitrable. This is of particular concern in disputes involving the state, which could pass legislation that renders an otherwise arbitrable issue non-arbitrable in Ghana as a basis of resisting enforcement.
The most contested of the four non-arbitrable issues listed under the ADRA is the carve-out relating to the enforcement and interpretation of the Constitution. This issue particularly features in matters where Article 181(5) of the Ghanaian Constitution (the "Constitution") is raised by the Ghanaian state party or state entity. Under Article 181(5) of the Constitution, parliamentary approval is required for international business transactions that the state or government is a party to. The Supreme Court has held that a contract that was not submitted for parliamentary approval in breach of Article 181(5) of the Constitution is null1. It is not clear whether a foreign arbitration award obtained against the state or a state entity will be enforced if the underlying contract required parliamentary approval but none was sought, and particularly where the state entity raised this issue during the arbitration proceedings.
In Attorney-General v Balkan Energy Ghana Limited ("Balkan"), the Supreme Court held that a business transaction is international if it has "a significant foreign element or the parties to the transaction (other than the Government) have a foreign nationality or reside in different countries or, in the case of companies, the place of their central management and control is outside Ghana”2. This requirement applies to all major international business transactions. In Balkan, the Government of Ghana ("GOG") entered into a Power Purchase Agreement ("PPA") with Balkan Energy Ghana Limited ("BEGL"), a company registered in Ghana but with majority of its shareholders being foreigners and the control of the company exercised from outside Ghana. The GOG terminated the PPA in breach of its terms, which led BEGL to institute arbitration proceedings against the GOG. Whilst the arbitration was ongoing, the GOG filed an action in the High Court seeking to restrain the tribunal from hearing the dispute because it involved the interpretation of a constitutional provision (i.e. Article 181(5)). The matter was eventually referred to the Supreme Court where it held that the PPA required parliamentary approval. The arbitral tribunal however heard the arbitration and made an award in favour of BEGL.
The same issue arose in Bankswitch Ghana Limited v The Republic of Ghana (acting as the Government of Ghana)3 ("Bankswitch"). Bankswitch Ghana Limited (a Ghanaian company but 60% Swiss-owned), signed a contract with GOG to provide an electronic platform to process and value imported goods. The GOG terminated the contract which led Bankswitch Ghana Limited to initiate arbitration proceedings. The arbitral tribunal relied on the principle of estoppel to dismiss the GOG's allegation that the contract was void because parliamentary approval was required but not sought. An action was subsequently filed at the Supreme Court, relying on the decision in Balkan, to argue that the underlying contract is void because it did not receive parliamentary approval4.
It is particularly insightful that in both Balkan and Bankswitch, the parties who obtained the arbitral awards in their favour in spite of the position taken by the Supreme Court did not seek to enforce the awards in Ghana where naturally, the majority of the state's assets is located. It is difficult to imagine that this strategy was not informed by the risk that the awards may not be enforced in Ghana. This potential pitfall in enforcement must be taken into account when deciding whether to enforce a foreign arbitral award involving the state or a state entity in Ghana.
The preconditions applying to state-parties Under section 15 of the State Proceedings Act, 1998 (Act 555), certain pre-conditions must be satisfied before enforcement proceedings are commenced against the state. The court must first issue a certificate in favour of the enforcing party containing particulars of the award, which is then served on the Attorney-General and also on the Accountant-General where the award contains an order for payment. The application to the court can only be brought after twenty-one days has lapsed from the date the arbitral award was issued. Both pre-conditions must be satisfied, which inevitably lengthens the enforcement process.
Regardless of the potential legislative pitfalls discussed above, Ghana remains an attractive venue for the enforcement of foreign arbitral awards because the judiciary is proactive in upholding arbitration awards.