China is Africa’s largest trading partner today. Significantly, in 2016, China invested more than USD 14 billion in Africa. Its capital investment into Africa up to July 2016 notably increased by 515% from full year 2015 figures. In addition, the number of investment projects into Africa from China has also been exponentially growing, with 36 projects recorded from January to July 2016 alone.
Given the countless commercial contracts concluded every day between the two partners, the establishment of proper safeguards for Chinese and African investors – in particular with respect to the settlement of international and regional disputes – was a natural and indispensable feature. Until recently, the options available to the Chinese and African parties to a dispute were as follows: Chinese or African investors could either (i) pursue their claims in local courts; (ii) submit their dispute to local arbitration in China or South Africa or; (iii) submit their dispute to an international arbitration institution or to an ad hoc arbitration. While these available options were welcome, they soon appeared insufficient, with concerns raised with respect to inefficiency, uncertainty and regulatory obstacles related to the settlement of disputes by local courts or domestic arbitration, as well as the length and costs, and overall effectiveness of the resolution of China-African disputes by international arbitration. It is noteworthy that the China Law Society made clear that its members do not wish to have their disputes submitted to arbitration in the major European arbitration centres. (“Announcement of the China-Africa Joint Arbitration Centre”, 17 August 2015, AFSA official webpage, available at http://arbitration.co.za/pages/CAJAC.aspx).
In the summer of 2015, a wide range of delegates from Africa and China, as well as African and Chinese trade commissions, arbitral bodies and universities joined forces to call for the establishment of a specific joint dispute resolution framework to resolve trade and investment disputes between nationals, legal entities and authorities of China and Africa. One of the key motors for this initiative was the China Law Society, which contributed to the signing of the Beijing Consensus on 5 June 2015, echoed by the Johannesburg Consensus on 17 August 2015. The purpose and intent of the Beijing Consensus is to “review the traditional friendship existing between China and Africa; to observe the latest development trends of international arbitration: and to envision the cooperative prospects of establishing the China-Africa Joint Dispute Resolution Mechanism.”
Following more than two years of intense negotiations between the Chinese and African delegations, an agreement was finally reached by the Arbitration Foundation of Southern Africa (“AFSA”), Africa ADR (AFSA’s external arm), the Association of Arbitrators and the Shanghai International Trade Arbitration Centre: the China-Africa Joint Arbitration Centre (“CAJAC”) was born in August 2015.
The CAJAC was set to initially operate from both Johannesburg – for disputes arising out of Chinese business activities in Africa, and Shanghai – for disputes arising out of African business activities in China. Importantly, CAJAC is supported by the China Law Society, which has substantial government support, and will be the authorized China-Africa arbitration and mediation institute.
Although its African arm is established in Johannesburg – in line with South Africa’s recent legal reforms increasing the State’s attractive index for foreign investors, including the establishment of AFSA international which will administrate all international disputes beyond the scope of CAJAC – the mission of the Centre extends to the African continent as a whole. In fact, the plan is to expand it to other areas of Africa in due course.
CAJAC will provide dispute resolution services that will include arbitration, mediation and conciliation. It will have an arbitral committee consisting of arbitrators nominated by both China and South Africa. The parties to the dispute will be able to appoint arbitrators from this committee. CAJAC Johannesburg and Shanghai are currently working to establish CAJAC arbitration rules. Its model clause for the reference to arbitration and its own rules for the conduct of arbitration administered by it have just been published. It is understood that CAJAC Johannesburg is currently officially hearing matters and is in the process of setting up numerous committees to further its role.
With the establishment of CAJAC, African States and China demonstrate a clear wish to make a notable leap in their commercial and investment relations. It remains to be seen how effective this Centre will be and to what extent its activities will extend outside of South Africa, and in particular in the 53 member states of the China-Africa Cooperation Forum (namely, Algeria, Angola, Benin, Botswana, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, China, Comoros, the Republic of Congo, the Democratic Republic of Congo, Cote d’Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Seychelles, Senegal, Sierra Leone, Somalia, South Africa, South Sudan, Sudan, Tanzania, Togo, Tunisia, Uganda, Zambia, and Zimbabwe.)
Further, it will be interesting to assess, once activity has picked up at the Centre, whether it will in effect become a preferred institution for the resolution of disputes between China and Africa, in comparison with other international arbitration centres, especially the China International Economic and Trade Arbitration Commission (CIETAC) and the Mauritius Centre for International Arbitration (MIAC), the latter, like CAJAC, established with a focus on resolving disputes between Asian and African parties.
*Associate (New York Qualified), Clyde & Co., London, UK.