22 September 2022 marked an important date for Sierra Leone – an all-new arbitration law, the Arbitration Act 2022 (the "2022 Act"), entered into force. Replacing the previous arbitration law, dating from 1960, the 2022 Act introduces an arbitration regime consistent with modern international standards, establishes the country's first arbitral institution and implements into domestic law Sierra Leone's obligations under two key international conventions – the New York Convention1 and the ICSID Convention2 (together the "Conventions").
The 2022 Act reflects the input of a variety of stakeholders, including Sierra Leone's Law Reform Commission and the Africa Arbitration Academy. In this Legal Update, we highlight the key features of the 2022 Act and comment on the impact that it is likely to have on arbitration and investment in Sierra Leone.
Background to the 2022 Act
On 6 September 2022, President Dr. Julius Maada Bio signed the 2022 Act into law. In replacing the previous legislation based on the long-outdated English Arbitration Act 1950 that Sierra Leone had retained after gaining independence in 1961, the 2022 Act sought to clarify, modernise and improve the law relating to arbitrations and arbitral awards. It was inspired by three guiding principles (akin to those underlying the UNCITRAL Model Law, the OHADA Uniform Act and the English Arbitration Act 1996):
- Arbitration should resolve disputes fairly, impartially and efficiently without unnecessary delay or expense.
- Parties should be free to agree how their disputes are to be resolved, subject only to the safeguards specified in the 2022 Act or necessary in the public interest.
- The Sierra Leone courts should not intervene in arbitration matters, except as provided for under the 2022 Act.
The 2022 Act applies to domestic and international arbitrations with a seat in Sierra Leone, and also contains provisions governing arbitrations to which the Government of Sierra Leone is a party. It applies to all arbitrations commenced on or after 22 September 2022 (unless the parties have agreed otherwise).
Implementation of the Conventions
Sierra Leone became a party to the ICSID Convention in 1966. Now, owing to the 2022 Act, arbitral awards made under the framework of the ICSID Convention will be recognised as enforceable by the Sierra Leone courts without a need for further review at the recognition stage. However, when it comes to execution against Sierra Leone state assets, the Sierra Leone courts may still need to undertake a review with regard to any arguments that such assets are immune from execution under the ICSID Convention.
The New York Convention ("NYC"), to which Sierra Leone is a signatory, upholds arbitral agreements and facilitates the enforcement of foreign arbitral awards in 88% of the world's countries. Section 67 of the 2022 Act specifically implements the NYC, with the effect that an arbitral award made outside Sierra Leone may benefit from the NYC enforcement regime if the following three conditions are met:
- Reciprocity: the country in which the arbitral award was made is party to the NYC;
- Commerciality: the underlying dispute arises out of a legal relationship considered "commercial" under Sierra Leone law; and
- Non-Retroactivity: the relevant arbitration agreement and award were respectively concluded and rendered after the date of Sierra Leone's accession to the NYC (i.e. after 28 October 2020).3
The non-retroactivity condition will mean that many (if not most) awards which are in being now (or will come into being in the near future), will fall outside the scope of the above (Section 67) regime, since they will arise out of arbitration agreements which pre-date October 2020. However, the 2022 Act also provides other avenues for enforcing foreign awards, under Section 81 and Sections 65-66:
- Section 81 confirms that foreign awards which are not enforceable under the NYC will be governed by the Foreign Judgments (Reciprocal Enforcement) Act 1960 (the "1960 Act").This provides a fallback provision, should Section 67 not apply. However, it should be noted that the 1960 Act requires the relevant country to have a bilateral or reciprocal enforcement treaty with Sierra Leone. If this is not the case, parties wishing to enforce a foreign award will only have resort to the enforcement regime under Sections 65-66.
- Sections 65-66 additionally set out a self-contained, but expansive, enforcement regime applicable to domestic and foreign awards and are reflective of international standards.
Other Key Features of the 2022 Act
- The 2022 Act establishes the Sierra Leone International Arbitration Centre ("SLIAC"), a fully independent commercial entity which, once inaugurated, will be Sierra Leone's first arbitral institution. The status of the SLIAC is currently unknown, but a Board of Directors (who will administer the Centre) will be selected in accordance with the procedure in the 2022 Act. Arbitration in Sierra Leone has generally been conducted on an ad-hoc basis, including pre-trial settlement conferences and alternative dispute resolution mechanisms before the High Court. Therefore, while the SLIAC will provide administrative assistance for future ad hoc arbitrations, it will also promote the use of institutional commercial arbitration in accordance with the 2022 Act.
- Third Party Funding is expressly permitted for Sierra Leone-seated arbitrations and for arbitration-related court proceedings within Sierra Leone. The term "Third Party Funder" is broadly defined, and this is likely to cover insurers as well as traditional funders.4 There is an obligation to disclose the name and address of any funder and an arbitrator is obliged to perform conflict checks once they become aware of funding.
- There is a default Sierra Leone seat in the event that the parties have not designated it (or authorised an institution to do so), subject to the tribunal deciding otherwise.
- Where the parties fail to determine the number of arbitrators, the default number is three for international arbitrations and a default appointment process applies in the event that the parties cannot agree the procedure.
- The SLIAC has the power to extend the time for the commencement of arbitral proceedings, or some other pre-arbitral disputes procedure, where the time fixed for such step in the arbitration agreement would, if breached, otherwise bar the claim or extinguish the claimant's right. Likewise, the Sierra Leone courts are also permitted to make such orders in certain circumstances (for example, if one party's conduct makes it "unjust" to hold the other party to the strict terms of the time-bar provision).
- The 2022 Act enshrines the principles of kompetenz-kompetenz (i.e. a tribunal may rule on its own jurisdiction) and the separability of the arbitration agreement from the underlying contract.
- Parties may apply for the appointment of an emergency arbitrator from the designated institution (or the court, if there is no designated institution) when filing their Notice of Arbitration or at any time before the tribunal's formation. The appointment will be made within two working days of the institution/court receiving it.
- The 2022 Act sets out the types of interim measures available from the tribunal, in addition to the applicable tests for the successful obtaining of such measures, which should be a useful tool for arbitrator efficiency. It also permits "preliminary orders", directing the relevant party not to frustrate the purpose of any interim measure. Under the 2022 Act, court-ordered interim measures are also available if the arbitrator, institution (or any person with the power to issue an interim measure) is unable to act effectively for the time being.
- Part IX sets out a list of the Sierra Leone courts' powers to support the arbitral process and relatedly, the 2022 Act includes "Arbitration Proceedings Rules", in the Third Schedule, which apply to all arbitration-related applications filed before the Sierra Leone courts on or after 22 September 2022.
- Arbitrations may be consolidated or concurrent hearings ordered if the parties all agree to confer any such power on the tribunal.
- The Act seeks to promote expeditious proceedings – for example, it mandates an arbitration management conference within 21 days of the tribunal's appointment.
- The Act provides for all information relating to the arbitral proceedings to be kept confidential subject to exceptions where disclosure may be required or necessary.
- The Act further contains detailed provisions relating to party default, including the types of orders a tribunal may make, and acknowledges that cost sanctions may arise from non-compliance with such orders.
- Seven grounds for the setting aside of arbitral awards are identified including, inter alia: (i) invalidity of the arbitration agreement under the substantive law or the laws of Sierra Leone; (ii) the subject matter of the dispute is not arbitrable under Sierra Leone law; and (iii) the award conflicts with the public policy of Sierra Leone.These particular grounds highlight that even where parties have selected a seat outside Sierra Leone, Sierra Leone law or public policy could still be relevant to their dispute in the context of enforcement or to set aside proceedings.
- The 2022 Act includes Arbitration Rules, set out in the First Schedule, which apply to domestic arbitrations in Sierra Leone, subject to any modifications that parties may agree. If the Arbitration Rules conflict with the 2022 Act, the provisions of the 2022 Act will prevail.
How might the 2022 Act impact the use of arbitration in Sierra Leone?
The 2022 Act provides a comprehensive arbitration framework which is in line with international standards and based on a sound set of guiding principles.
The ability to uphold an arbitration agreement and enforce an arbitral award is an important factor for investors when considering potential investment opportunities. By implementing the Conventions into domestic law and by adopting a pro-enforcement approach, the 2022 Act can be expected to promote and facilitate foreign direct investment into Sierra Leone. At the same time, the provisions of the 2022 Act, together with the establishment of the SLIAC, provide scope to increase the awareness, and use, of arbitration in business and commercial activities within Sierra Leone more generally.
In all, the entry into force of the 2022 Act comprises a timely and beneficial reform, with the potential to support and assist Sierra Leone's private sector-led economic development, and to provide clarity and reassurance to overseas investors.
For more information about the topic covered in this Legal Update, please contact any of the authors.
1 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958
2 Convention on the Settlement of Investment Disputes between States and Nationals of Other States
3 Sierra Leone is one of only three States which have so far adopted a retroactivity reservation covering both the arbitration agreement(s) and award(s) – the other two being Ethiopia and Malawi. A small number of other States have carved out the NYC from applying where the award was rendered before their accession date (e.g. Palau, Belize, Bosnia, Iraq, Serbia and Turkmenistan) and Malta has done so where the arbitration agreement pre-dates the accession date (with the award date being irrelevant).
4 It covers "a natural or legal person" who is not a party to a dispute but who enters into an agreement either with a disputing party (or affiliate) or a law firm representing that party in order to finance all or part of the proceedings, "either individually or as part of a selected range of cases and such financing is provided either through a donation or grant or in return for reimbursement dependent on the outcome of the dispute or in return for a premium payment".