International contractors are driving disputes in Africa. Tim Tapper, turner townsend The other is through an 'advisory' role, where we advise clients who are obtaining financing from the international investor community. That is more of a challenge because you are dealing with international investors rather than three or four other banks. While banks may have different credit appetites for different products, we think very similarly and it is easier to manage than a numerous and disparate group of international investors. James wood: Are there situations where arbitration is necessary? Mitzi berberi, fox International Channels: we have been looking paperless at backing ourselves contractually putting in place hybrid clauses, which, depending on the type of conflict, will determine whether we go to arbitration, because we want a panel of experts to come in and judge,. It depends on the type of dispute. We are taking into consideration different avenues. We have done a study to see whether we would prefer international arbitration because it is not influenced locally.
Rob Horne: Is it not the case that one of the key parts of the decision-making process is where the money is coming from? I am really interested in whether banks are getting drawn. Where contracts are coming to an end, or they are suddenly in distress, are the parties themselves coming back to the banks and saying: 'we need more money. We need to change what we have done on the financing?' because you are already in for a lot of money, you have to do something to maintain your investment, so how do you resolve that? Amol Prabhu: Yes, it does happen, in two ways: one is through lending, where we have lent to a specific client for their general corporate purposes or on a particular project. Particularly in the latter case, we are often focused on the revenues from that project to be repaid. Should signs of distress start to show, you enter into discussions often as one of a syndicate of banks. Banks generally will look to restructure for the betterment of the deal with a view of being repaid over a longer period of time.
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The Chinese have decided it is worth being in Africa. When you leave kampala airport, you are wished goodbye in Mandarin. Robert gaitskell qc, keating Chambers, tim Tapper: we do not want to get too negative. There is an awful lot of investment still in Africa. There are disputes, but there is an awful lot of work going. Robert gaitskell QC: The Chinese have already taken a decision that it is worth being in Africa. I tense am encountering Chinese counterparties all the time.
They are there for the long term; they are absolutely not hitting and running; and they are deeply involved in setting up lots of infrastructure. When you leave kampala airport, you are wished goodbye in Mandarin this tells you something. James wood: Is the influx of Chinese and Indian money into Africa changing disputes? Donor governments have grown sick of corruption issues and have pulled funding. Katrina White, acacia mining, philip Norman, simmons simmons: The question is more fundamental than that, which is to what extent do international participants going into African countries bring experiences from their home jurisdiction, or from their work in other parts of the world, to bear. Participants might have different views about how much cash flow they are willing to commit to it hoping that things will go right. There could be contractors or suppliers from certain countries who will be absolutely committed above all else to delivering the job they had promised to deliver, and they will suffer that 100m-worth of loss as a contractor, because they are hoping it will turn out.
If you say it worked in Angola you will be shocked if it doesnt work in mozambique. Tamara Egbedi, spectrum geo. The other key factor is your relationship with the government. In many African countries, the decision-making for resolving an arbitration or trying to find a workable solution is often in the hands of only a few people, so you need to identify who those people are, whether you can get access to them and should. The flipside is political risk governments can change very quickly, so how well do you know the key stakeholders in the majority opposition party?
Eric pietrac, walgreens boots Alliance: we have to think about what the bet we have in Africa. Is it a long-term bet? Do we believe in Africa? If the answer is yes, it has a big consequence on what we do today: on the arbitration, on whether we try to get the best offers and deals and move away, or on whether we try to stay and keep the partnership we have. For me, this is the million-dollar question. Do we believe in Africa in the coming ten, 20, 50 years? If so, we will ask our lawyers to manage it smoothly. If we do not believe in Africa, we just say, 'take the money and leave.'.
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Making sure you shakespeare have the networks and contacts in all of those jurisdictions has also become a priority. You have to be able to move if you do need to go into an arbitration or adjudication in a hurry. Amol Prabhu: Conversations with external counsel are critical in terms of understanding not only the day-one risks, but also, if things are going wrong, what your rights are: what have you negotiated, what have you agreed to and, importantly, what is the arbitration forum? It is also important to recognise that beautifully drafted and negotiated contractual documentation will only get you so far. You need be forensic, do your homework on the different countries you are looking to operate. Yes, there are the 'unknown unknowns' that you just have to deal with but you can certainly protect yourself to a certain level by having robust legal documentation and well-balanced legal advice. You need to diversify your contracts.
They are also bringing their dispute practices to the market. Nobody will take a decision in a government because of the responsibility. Jayne bentham, simmons simmons, katrina White: There is a heavy reliance on donor funding, and with the global prices that we have, that is drying up and it is also becoming far more conditional. Donor governments have, essentially, got sick of corruption issues, and have pulled funding in many cases. It really is a perfect storm of government and commercial pressures. James wood: What would you advise to mitigate that risk, or is it a risk you cannot easily protect against? Katrina White: It leads people to focus far more heavily on the dispute resolution processes in each of the jurisdictions. Certainly i have had more discussions with arbitration and disputes counsel in the last six to 12 months than in the previous five years.
all of their profitability and allow them at a government level to do anything else. Amol Prabhu, barclays: The point about government involvement here is key: governments feel compelled from a public policy perspective to get involved and question the commercial arrangement, even though they may not have been in power when the arrangement was made. It puts a lot of pressure not only on that particular arrangement, but also on your wider business franchise in that country. Tim Tapper, turner townsend: It is wider than the natural resources market as well. The money coming out of the natural resources market means that companies are no longer investing in countries in Africa. The impact of international contractors has had a big effect, Africa is being built by international contractors a lot of Chinese, but also a lot of European contractors, particularly Spanish and French. Those guys are suffering the same issues.
Talk turned quickly to the geopolitical and economic factors at play currently and the effects they are having on disputes. james wood, legal Business: have commodity prices led to a noticeable increase in disputes, or at least put stress on contracts? Katrina White, acacia mining: Certainly, not just in the commercial context but also in dealing with governments that dissertation are feeling the pinch of reduced revenues. Robert gaitskell qc, keating Chambers: The drop in prices translates very quickly into premature terminations. Right across Africa you can see premature terminations for all sorts of projects, and you can trace it back to commodity prices. Even the threat of arbitration can dismantle a relationship with a government. Mike walsh, delonex, steve husbands, slr consulting: Commodity price falls means that regret costs have increased a lot, and put pressure on historical sale and purchase agreements (SPAs). In a bull market people might ride with it but at the moment they are instructing lawyers to look for reasons to open negotiations.
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With economic strife putting pressure on Africa's foreign investments, effective dispute resolution mechanisms are vital. We teamed up with Simmons simmons to ask general counsel their experiences of disputes on the continent. As we reported in our dispute resolution Insight 'Clause and effect' last year, Africa has become a essay disputes hotspot. With a fall in commodities prices leading to abandoned projects, disputes work is becoming even more plentiful. Discussing dispute resolution in a developing continent comprising 54 disparate jurisdictions can lead to huge generalisations, but when it comes to arbitration there seems to be a case for a pan-African focus. The uncitral model Law on International Commercial Arbitration has been implemented in a number of African countries, while the Organisation for the harmonization of Business Law in Africa (ohada) covering 17 states in west and central Africa has created a legal community with unified arbitration. There has also been a proliferation of arbitration institutions throughout Africa. However, many of these institutions remain untested and do not have the support of the court system.