Countering corruption is vital to post-conflict business investment

Businesses recognise the virtue of a strong legal system. Gulf countries are supporting Afghanistan in reconstructing its legal structure.

Above, American University of Afghanistan students at the 2015 MENA Vis pre-moot competition.

Afghanistan, along with Nigeria, is a fantastically corrupt country. So said David Cameron, the British prime minister, to Queen Elizabeth II in a conversation caught on video on May 10, and widely broadcast.

Muhammadu Buhari, the president of Nigeria, was magnanimous in response. Instead of demanding an apology, he asked the UK to return some of the ill-gotten gains spirited out of Nigeria by his predecessors, and washed clean (or cleanish) through British territories such as the British Virgin Islands, and Cayman Islands. At an anti-corruption summit, that hit home.

The Nigerian president, along with his opposite number from Afghanistan, Ashraf Ghani, was among those in London for the summit, an event overshadowed – as with almost everything else on the UK’s political agenda at the moment – by the upcoming referendum on the UK’s continued membership of the EU.

Still, Mr Cameron's frank words ensured the event got media coverage, including an extensive radio interview with the Afghan president on BBC Radio 4's flagship news and current affairs programme, Today.

In the interview, Mr Ghani spoke of the need to encourage foreign direct investment (FDI) to Afghanistan. That is easier said than done in a post-conflict environment. The rule of law, and the judiciary who give effect to it, are inevitable casualties of war.

In a recent scoping note, the IMF spoke of “the special case of conflict and post-conflict countries”, noting they “face a specific set of challenges … [including] weakened institutions and rule of law, major losses in investor confidence …”.

Any attempt to rebuild after hostilities will face a Catch-22 situation: fragility will discourage investment, lack of investment will create economic uncertainty and economic uncertainty will perpetuate fragility.

It is difficult to break free from the centrifugal force of such a vortex. Over the past decade and more, Afghanistan has been a fragile state.

All the while, Afghanistan is rich in mineral and other natural resources (to the possible tune of US$3 trillion) which, properly exploited, could reverse the trend. Economic reliability would give confidence to investment, which, in turn, would create national – social, financial and political – stability. What can be done? Three things: education, capacity-building and support for strong, independent, private dispute-resolution mechanisms.

The study of law is thriving in universities in Afghanistan. This is valuable in itself. The more young adults who recognise the social utility of law, the more likely it is that society will prioritise peaceful and orderly solutions to disputes, over more bloody alternatives.

More specifically, law students are tomorrow’s law practitioners, academics and judges, who will rebuild the legal system. That takes time, but the process can be given a helping hand by, for example, encouraging competition in moot – legal argument – competitions. It is no small commitment to participate, involving six months of consistent extra-curricular work by the student competitors.

The Arabian Gulf has a proud record in this regard. In February, the Mena Vis pre-moot competition, held this year in Bahrain, hosted teams from several Afghan universities. Not only did the students gain valuable experience, they also interacted with like-minded colleagues from the Gulf and wider region.

The competition is pan-Gulf, having been hosted by Oman, Abu Dhabi and Qatar among others, in previous years.

Education is only one part of broader capacity-building. Over the past couple of years, the Afghan Centre for Dispute Resolution has been established in Kabul. As well as building the physical facilities, the centre has put in place a full administrative structure, including the training of case managers. The Afghan ministry of commerce and industry has supported its development. A significant part of the training and capacity-building has taken place in the Gulf.

The regeneration of a national judicial system in the aftermath of conflict will take years. A basic framework may be re-established quite quickly but business law issues require specialised knowledge and expertise.

During the regenerative process, a country cannot function in a legal void, but opting for arbitration can help to fill the gap. In the absence of a fully reliable or effective court system, private measures for dispute resolution are crucial to instilling investor confidence and attracting FDI that is so essential for economic recovery.

Post-conflict reconstruction is, of course, a painstaking multi-stage process. Arbitration is not a magic bullet but it can make a unique contribution to turning a vicious circle into a virtuous one.

Business communities around the world recognise the core virtues of arbitration (confidentiality, ease of enforcement, relative speed and cost-effectiveness) in tandem with a strong court system. Each mode of dispute resolution is made stronger by the other’s presence.

In parts of the world that are fragile, through conflict or corruption, where the court system is broken and the judiciary is non-existent, unreliable or bribe-prone, one leg of that dual-limbed system is missing.

In such countries, arbitration is not alternative dispute resolution. There is no alternative. Where functioning courts are absent, businesses will only invest – and, thereby, help embryonic good governments to attract essential foreign direct investment – if private means of dispute resolution are encouraged to flourish.

Other fragile states can easily be identified. Syria, Libya and Yemen come immediately to mind. What has been happening in Afghanistan during the past two years, in part with Gulf support, may also help to stabilise those countries when the time is right.

Michael Patchett-Joyce is a commercial lawyer and arbitrator, based in London and the UAE.

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