In the bustling streets of Mogadishu and the quiet offices of Somali diaspora investors abroad, a familiar question echoes: What happens if a business deal goes wrong? In Somalia today, the answer is not reassuring. Investors—both local and foreign—find themselves tangled in a web of outdated laws, overburdened courts, and informal mediations that lack enforceability. With no specialized commercial arbitration system in place, resolving business disputes is slow, uncertain, and often costly. That uncertainty is silently stifling the country’s economic resurgence.
Yet Somalia stands at a moment of promise. Its untapped natural resources, youthful population, and renewed engagement with international financial institutions are opening the door to investment opportunities long considered out of reach. But opportunity without confidence is fragile. What Somalia urgently needs now is not just investment incentives or infrastructure—it needs a modern Commercial Arbitration Court, a dedicated institution that can resolve complex business disputes quickly, fairly, and transparently.
A Broken System in a Fragile Economy
Today, when a commercial dispute arises—whether over a cross-border contract, joint venture, or financing arrangement—Somali businesses face a fragmented and fragile legal system. Dispute resolution typically falls to either customary xeer systems rooted in oral agreements, Sharia courts with limited commercial jurisdiction, or a formal judiciary still recovering from decades of conflict, lacking both efficiency and capacity. As a result, most disputes drag on for years or are resolved informally, without written rulings or legal safeguards. The absence of a reliable arbitration process has become a bottleneck for growth—and a red flag for serious investors.
Even the U.S. State Department’s latest investment climate report noted Somalia’s inadequate legal mechanisms for enforcing contracts and settling disputes. Without robust dispute resolution, businesses hesitate to invest, fearing lengthy and unpredictable legal battles that can erode profits and stall projects.
Neighbors Show What’s Possible
Somalia doesn’t need to reinvent the wheel. Just across the border, Kenya’s Nairobi Centre for International Arbitration (NCIA) has become a regional model, resolving cases in months at low cost. It provides tribunals the power to allocate legal fees fairly and is backed by strong bilateral investment treaties. Further east, Dubai’s DIAC and DIFC-LCIA centers have turned the UAE into a dispute-resolution hub. In 2023 alone, DIAC handled over 300 new arbitration cases, collectively valued at more than $1.5 billion USD.
What these countries understand—and Somalia must realize—is that confidence in the rule of law is not just about the constitution. It’s about what happens when contracts break down. And that’s where arbitration shines.
A Somali Model That Respects Tradition
Some will argue: But Somalia is different. We have our own systems. They are right. But a Somali Commercial Arbitration Court doesn’t need to erase tradition. In fact, it can build on it. Imagine a hybrid model—one that:
- Adopts the globally recognized UNCITRAL Model Law as a legal backbone.
- Builds on Somalia’s Investor Protection Act of 2023, which already references international arbitration norms.
- Integrates Sharia principles and xeer traditions, ensuring contracts are both fair and culturally grounded.
Such a system wouldn’t just meet international expectations—it would feel Somali, too. It could offer rulings that respect Islamic finance values while ensuring enforceability under international conventions like the New York Convention and ICSID—once Somalia accedes to them.
Building It Won’t Be Easy—but It’s Possible
Creating a Somali Commercial Arbitration Court will require legislation, training, and investment. But it is within reach. Here’s a roadmap:
- Legal reform: Draft a modern arbitration law by 2025, harmonized with UNCITRAL and Somali investment policies.
- Capacity building: Train Somali judges, arbitrators, and lawyers in dispute resolution techniques, in partnership with UNDP and legal networks.
- Institutional setup: Establish an independent arbitration center with transparent procedures, digital case management, and a fee structure tailored to local realities.
- Public awareness: Educate the business community—both at home and in the diaspora—about the advantages of arbitration.
Arbitration Is an Economic Necessity
This isn’t just a legal fix. It’s an economic imperative. Arbitration cuts legal costs and time—disputes can be settled in months instead of years. It provides expertise—arbitrators trained in commercial law, Sharia, and xeer deliver consistent and fair rulings. It boosts investor confidence—companies are far more likely to invest when they know disputes can be resolved swiftly and impartially.
Beyond legal efficiency, establishing such a system could make Somalia a regional leader in harmonizing plural legal traditions with global standards—a pioneering voice among post-conflict economies.
The Time to Act Is Now
For Somalia to unlock the full potential of its economy, it must build a foundation of trust—and that begins with justice. Without a reliable, respected system to resolve commercial disputes, every business deal carries too much risk. A Somali Commercial Arbitration Court is not a luxury. It is the infrastructure of confidence.
If we are serious about attracting investment, supporting Somali entrepreneurs, and building a stable economy—then we must get serious about dispute resolution. The first step is clear: Somalia must establish a Commercial Arbitration Court. And the time to do it is now.
Ismail Abdalla ALi, Researcher
