Angola - The latest signatory to the New York Convention
Angola and the New York Convention
On 12 August 2016, by virtue of resolution number 38/2016, the Angolan National Assembly approved Angola's accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention. It will become the 34th African country and the 157th overall signatory to the New York Convention once the ratification takes effect.
Under Article XII(2) of the New York Convention, effective accession will occur 90 days after Angola formally notifies the United Nations of the ratification by depositing an instrument of ratification with the Secretary-General. It is as yet unclear when Angola will kick-start this process.
Arbitration proceedings offer attractive features which are not usually available to parties litigating through domestic court systems; it can be less expensive, less time consuming and a more efficient approach. The New York Convention gives arbitration an additional appeal, by providing arbitral awards with much simpler international recognition than court judgements.
The New York Convention is widely recognised as a fundamental instrument in international arbitration, developed as an international effort to increase certainty in arbitration. It does this by requiring the courts of signatory states to recognise and enforce arbitral awards made in other signatory states. It also limits the grounds upon which the domestic courts in a signatory country can refuse to recognise and enforce a foreign arbitral award.
Where the New York Convention does not apply, parties are only able to enforce awards against assets via the domestic courts where individual states have enacted laws which permit for the reciprocal enforcement of foreign judgments. Uncertainty and inconsistency remain a major barrier to enforcement in jurisdictions where the New York Convention does not apply.
The New York Convention and investment in Angola
More than half the states across the African continent are party to the New York Convention. Angola follows the Democratic Republic of Congo, Burundi and Comoros, as African nations which have recently acceded to the New York Convention.
Over the last decade, Sub-Saharan Africa has been viewed as one of the fastest growing regions in the world; Angola, specifically, has made substantial economic and political progress. However, since 2014, growth has slowed. Angola's economy has been negatively impacted by falling commodity prices in relation to oil and gas, its main exports. Combined with other challenges such as diversifying its economy (beyond the oil industry) and developing its infrastructure, Angola would benefit significantly from international investment.
The signing of the New York Convention is likely to be a step towards promoting Angola as an attractive location for foreign investors. As a result of the certainty it affords to arbitration proceedings, the New York Convention is widely considered to be a driving force behind international investment. It provides reassurance to international investors that arbitration awards can be enforced against assets in foreign countries, enhancing their sense of security in their investments there.
The New York Convention may be especially helpful to Angola given the sectors in which it trades. Whilst any investment is subject to risk and the potential of disputes, sectors which are affected by fluctuating commodity prices, such as oil and gas, generally face a higher risk in this respect. By acceding to the New York Convention Angola will represent that it is actively taking steps to promote a stable investment climate, which again may make it more attractive to investors in these sectors.
Whist several countries in Africa such as Chad, Somalia and Ethiopia have yet to become signatories to the New York Convention, it is possible that Angola's initiative may encourage other countries in the region to follow suit.
Whilst Angola being on the path to the effective ratification of the New York Convention is good news which is likely to have a positive effect on local investment, it is as yet unclear how the New York Convention will be implemented by local courts in Angola in practice.
Even where the domestic courts of signatories comply with the New York Convention and directly recognise and enforce awards under it, the effectiveness of such enforcement will depend in practice on the effectiveness of the court systems themselves. That is, the enforcement of awards in Angola will depend on the quality of the court system overall. Currently, the Angolan legal system suffers with issues of capacity and inefficiency. The World Bank's Doing Business in 2016 survey ranks Angola at 185 out of 189 on contract enforcement, and estimates that enforcement of a claim will be affected by this, unless some sort of fast track system is adopted.
Further, it remains to be seen whether and when Angola will enact domestic legislation to give effect to its new obligations under the New York Convention. Examples of major delays in enacting the required domestic legislations exist, such as the case of Myanmar, which acceded to the New York Convention in July 2013 but only implemented the necessary legislation in January this year. During this period, any award obtained outside the jurisdiction could not be enforced in Myanmar under the New York Convention. If Angola encounters a similar delay in implementing domestic legislation, it could be months or even years before the New York Convention can fully take effect in the country.
Partner, Dispute Resolution United KingdomView profile
Managing Associate, Commercial Disputes