Establishment of Center for Commercial Dispute Resolution (ACDR) in Afghanistan

ACCI and Harakat (Afghanistan Investment Climate Facility Organization) signed an official agreement to launch the Afghanistan Commercial Dispute Resolution Center Project. This program tackles one of the most pressing needs of the private sector: commercial disputes.

The Afghanistan Commercial Dispute Resolution Center (ACDR) aims to institutionalize commercial dispute resolution and mediation for the private sector that commercial disputes to be resolved faster and at lower costs. This program includes transferring skills and know-how to judges, lawyers and other players involved in the Afghan dispute resolution practices. The project aims to activate an independent pilot mediation center that provides professional mediation services to the private sector clients.

Both organizations signed the agreement in attending of Mr. Mohammad Ashraf Rasouli, Legal Advisor to First Vice President, Mr. Ramazan Jumazada, Member of Lower House of Parliament and ACCI’s Board of Directors at a press conference on 6 July 2014.

Mr. Alkozay, First Vice-Chairman of ACCI highlighted importance of ACDR in resolving commercial disputes in Afghanistan and hoped that establishment of ACDR will cause that commercial disputes to be resolved sooner and faster than courts.

He also said that ACCI has created a board in collaboration with HARAKAT in composition of ACCI, Parliament, prominent lawyers, Ministry of Justice and other relative entities that will oversee all activates of ACDR. This board has also gotten training in this regard.

Mr. Atiqullah Nusrat, Acting-CEO of ACCI said that since creation of ACCI in 1931, the chamber has provided arbitration services to private sector and in fact the chamber has been made accordingly. Currently, ACCI provides the arbitration service based on 8th provision of Law on ACCI.

Mr. Naseem Akbar, CEO of HARAKAT underlined importance of such arbitration centers in Afghanistan in attraction of investments. “Our research indicates that absence a standard and professional arbitration center in Afghanistan has caused reduction of investments. Therefore, we, ACCI and HARAKAT intended to establish such arbitration center and started our preliminary studies since two years back.” He said

Mr. Ramazan Jumazada, Member of Lower House of Parliament and Deputy of Economic Committee of the house talked about essential needs to move forward a sustainable economy. “Afghan private sectors need to get training and modernize their business activates accordingly.” He said

Mr. Mohammad Ashraf Rasouli, Legal Advisor to First Vice President talked about effectiveness of ACDR in spending cost and time for resolving commercial disputes. “Courts review the commercial cases in late and biasedly decisions. But when a commercial case is referred to arbitration center, both parties in the case are satisfied due to cost and time spent.” He said

Disputes regularly arise between commercial firms, often resulting in lengthy, costly and time-consuming processes. Most of these disputes gradually become adversarial, which in most cases damage business relationships between the disputing firms. Over the past 30 years, Alternative Dispute Resolution (ADR) has encouraged more cost-effective and collaborative resolutions to such problems, enabling companies to preserve relationships.

According to the World Bank/IFC Doing Business Report 2014, contract enforcement in Afghanistan involves 47 procedures and takes over 1642 days. An average of 25 percent of the claimed amount is spent on dispute settlement in the formal justice system. The realities of the existing contract enforcement clearly demonstrate inefficiencies in the court system. Ultimately, lack of effective contract enforcement serves as a crucial disincentive for foreign investment. It is a barrier to domestic and foreign investment, negatively impacting the business environment.

Further, more than 350 representatives of the private sector gathered from across the country at Afghanistan National Business Forum (Harakat and ACCI Initiation) on 27 February, 2013 with an aim to discuss and analyze the barriers that impede the private sector in Afghanistan and recommended possible practical solutions. Establishment of a center for commercial dispute resolution was one of the urgent recommendations for the new administration in Afghanistan which will help ease dispute settlement both in terms of cost and length in the country.

ACDR designed to address several aspects of the current problems. First, it will simplify the contract enforcement in Afghanistan. Second, it is expected to shorten the length of dispute settlements through mediation mechanisms, subject to nature of disputes and the willingness of the disputing parties. And third, it will reduce the duration of dispute resolution from the current 25% of total claimed amount to an affordable amount.

Harakat will provide technical assistance and funding for the establishment of ACDR which consist of the following components:

  1. Set up the Afghanistan Center for Dispute Resolution (ACDR) within the physical space provided by ACCI;
  2. Operate the center for the first year under a partnership agreement between Harakat and ACCI;
  3. Establish an international practice with involving a number of highly reputable and well-known  international mediators and developing technical partnerships and agreements with other mediation centers to transfer the know-how to local professionals for future sustainability;
  1. Propose ADR systems within the public sector, including a yearly excellence award for several mediation practices
In addition, ACDR will be institutionalized in the long term in Afghanistan. Between 2015 and 2017, this center will accomplish these achievements:
  1. Design and develop the Afghanistan Commercial Arbitration Center
  2. Establish ACDR office across Afghanistan
  3. Propose a draft bill to legislate ADR law and reform the other necessary laws
  4. Embed ADR in curriculum of Law Faculties & Law Schools at the appropriate universities and colleges
  5. Train the trainers
  6. Design the terms of reference for mediation centers within other relevant institutions
  7. Make the case for code of practice, standardization and certification for the ADR industry

It is worth mentioning that the private sector in Afghanistan for the first time in 1931 came together to integrate their business activities and also defend their rights, and therefore, established Commercial Arbitration Association. In fact, the association has been main foundation of existing ACCI. According to 8th provision of Law on ACCI, currently, the chamber provides arbitration services to private sector by “Arbitration and Legal Services Department”. This department has received more than 100 cases of commercial dispute during 2012 and 2013 and even resolved in some cases.

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