Arthur Zysman is a graduate of the Paris Bar School, and is waiting to be sworn in as a French avocat practicing international dispute resolution. His LinkedIn profile is at https://www.linkedin.com/in/arthur-zysman-11b2a113b/. 

Introduction

As part of the creation of the African Continental Free Trade Area (the “AfCFTA”) in 2018, member states concluded protocols to structure trade between member countries. One such protocol is particularly of interest as it reflects the recent upheaval in the EU following the end of intra-EU BITs: the AfCFTA Protocol on Investment (the “Protocol”). 

The Achema ruling of March 6, 2018[1] led to the agreement to dismantle intra-EU BITs that entered into force on or before May 29, 2020.[2] As a result, investors making in Europe likely cannot be able to expect the same level of compensation as they could obtain in arbitration proceedings under the prior BITs.[3] Indeed, the EU courts’ goal is, above all, to ensure that member states comply with EU laws.[4] 

Pursuant to Article 49(1) of the Protocol, all BITs concluded between member states shall be terminated within five years from the Protocol’s entry into force, i.e., on May 30, 2019, including survival clauses. The Protocol supersedes all prior intra-African BITs, and member states shall make best endeavours to review and revise investments agreements adopted by the Regional Economic Communities (Article 49(3) of the Protocol) and may consider the provisions of the Protocol when reviewing existing agreements concluded with third parties (Article 49(4) of the Protocol), thereby acknowledging that some African countries are also members of the Organisation for Islamic Cooperation. 

Accordingly, in light of the similar process in the EU, the logical question to ask is, "What is the legal impact of the Protocol on the resolution of disputes between African investors and states through arbitration?"

When BITs between AfCFTA member states are terminated, the Protocol will be the sole investment treaty on the continent (I), giving an implicit priority to regional arbitral institutions (II). Nevertheless, the Protocol may have little impact on investments in the region, in light of the percentage of investments coming from outside of Africa (III).

The rise of an African multilateral investment treaty

Unification of the investment protection standards

The Protocol is intended to be a multilateral treaty for the protection and development of investments by nationals of the 48 states that are parties to the AfCFTA.[5] Nevertheless, investors should pay attention to their legal obligations and rights under the Protocol.

In contrast to the EU’s laws and regulations, the Protocol presents a clear text tailored to investment-related disputes, retaining the same standards and legal concepts as in the prior BITs. One exception is the concept of fair and equitable treatment ("FET"), the well-known standard for treatment of investors that often acts as a catch-all. Indeed, the Protocol provides for the Administrative and Judicial Treatment in Article 17, which aims to redefine the prior concept of FET and eliminating any future comparison to the prior FET standard.[6] 

The Protocol provides for exceptions to the standard protection investors typically expect. For example, a member state can take regulatory and measures “to protect or enhance legitimate public policy objectives such as public morals, public health, safety and the protection of environment […]”, “to achieve national development objectives or address the internal needs of designated disadvantaged persons, groups, or regions […]” or “to comply with its international obligations under other international agreements […]”[7]

These exceptions are not intended to weaken protection for investments but to clarify for investors and host states the boundaries on the investment protection. This approach is consistent with the evolution of investments treaties over the years to incorporate such explicit exceptions to investment protection. Such provisions facilitate parties' understanding of the issues in their disputes and, consequently, avoidance of those issues as much as possible by informing the parties of the limits of the obligations incumbent on states.

When rights entail obligations

BITs walk a fine line between providing sufficient protection for investments and imposing obligations upon investments made in states. Indeed, in such agreements, the host state accepts various obligations protecting investors in order to promote and encourage investments in its territory, but those treaties often do not impose significant obligations upon the investor. 

However, the Protocol is different, as it sets obligations on investors and thereby sheds light on the risks investors may take by investing in Africa. Although it may seem destabilizing (or at least disincentivizing) to have set obligations on investors, it may conversely encourage more investment as it again clarifies the parties’ commitments to one another in a more specific way.

In particular, the obligations under the Protocol include compliance with laws and policies to protect human rights, labour rights, the environment, anti-corruption and anti-bribery measures and laws and policies to protect the rights of indigenous peoples.[8] Such written obligations are mostly welcomed in order to clearly establish substantive rules and obligations within the continent in areas that have been highlighted as potentially problematic within the field of international investment law and arbitration (corruption, bribery and human rights violations).[9]

Under Article 47, the Protocol also establishes investors’ civil liability for any acts, decisions or omissions made in the host state in relation to their investments that caused damage, personal injuries or loss of life in the host state. 

Implicit priority given to regional arbitral institutions

Prior to any arbitration, the Protocol requires the parties to seek amicable dispute resolution with the support of national focal points which aim to facilitate intra-African dispute settlement.[10] 

However, the Protocol does not provide for investor-state dispute resolution. Article 46(2) of the Protocol refers to an Annex that has not yet been adopted[11] that proposes dispute resolution under the aegis of any African arbitral institutions[12], the ICSID, any other arbitral institutions, or under the UNCITRAL arbitration rules. Although the choice of the arbitration centre is not imposed, the numbering of these institutions suggests an incentive to African institutions, which is in line with the purpose of the AfCFTA. 

As a result, the Protocol seems to have been drawn up so that African investors can benefit from all legal remedies and services in Africa.

The impact of the Protocol on investments

It is important to bear in mind that the Protocol’s dispute resolution mechanisms only apply to disputes solely involving African parties. The vast majority of investments on the continent come from countries outside Africa. Amongst the top 10 investor economies by foreign direct investment stocks in 2022, 65% are from Europe, 16% from Asia, and 11% from the USA, while only a small percentage comes from the continent itself, such as South Africa with 8%.[13]

While the actual scope of this agreement is likely to be limited, it laudably encourages the development of African countries’ investments and the promotion of the continent's institutions. In addition, the harmonization of investment rules is similar to the harmonization of business law for Francophone African states through OHADA, an organization that has proved valuable for many years, but which involves far fewer countries than the AfCFTA will.[14] 

By adopting the Protocol, Africa signals that it wants to continue encouraging investments on the continent by offering arbitration as a means of resolving disputes, pending adoption of the Annex. Conversely, the EU has opted for judicial sovereignty. 

Studying the investment laws of major African economic powers indicates their position on dispute resolution; many major African countries are in favour of ISDS provided they give their consent.[15] In addition, the draft of the Annex differentiates between inter-state dispute (Article 1) and investor-state arbitration (Article 6).

If the final Annex does not provide for arbitration, and the parties are unable to reach an amicable settlement pursuant to Article 46(1)[16], an investor would only be able to seek redress through domestic courts. This contrasts with the international features of arbitration expected by investors. And if the investor’s home state elects to act on its behalf, the investor may forfeit its status as the principal party to the dispute.[17]

As far as non-African investors are concerned, they will still be able to benefit from the BITs between their countries of origin and African states, by continuing to utilize the dispute resolution mechanisms with which they are familiar.

[1]     Achmea BV v. Republic of Slovakia, Case C-284/16, 6 March 2018.

[2]     EU Member states sign an agreement for the termination of intra-EU bilateral investment treaties.

[3]     Andrea Francovich v. Italie, Cases CJUE C-6/90, C-9/90 et C-9/90, 19 November 1991: individuals can seek damages before the ECJ thanks to the “Francovich” action, but the lack of domestic courts data makes it hard to assess this remedy’s true effectiveness.

[4]     Consolidated version of the treaty on the functioning of the European Union, Section 5 – The Court of Justice of the European Union.

[5]     AfCFTA's official website, home page, <https://au-afcfta.org>.

[6]     Bethel Kassa, ‘The Faith of the Fair and Equitable Treatment Clause in Africa’ (Kluwer Arbitration Blog, 11 February 2024)

<https://arbitrationblog.kluwerarbitration.com/2024/02/11/the-faith-of-the-fair-and-equitable-treatment-clause-in-africa-2/>

[7]     E.g. Article 13 of the AfCFTA investment protocol.

[8]     A set of 10 obligations are provided for in the protocol from Articles 31 to 40.

[9]     Transparency international, ‘Corruption Perception Index’ (Transparency International, 2024) <https://www.transparency.org/en/cpi/2024>: apart from Cape Verde, Botswana, Mauritus and Seychelles, all the African countries have a corruption score under 50/100.

[10] Bilaterals, ‘Annex 1 - rules and procedures governing the management and settlement of disputes under the protocol on investment to the agreement establishing the AfCFTA’, (Bilaterals.org, November 2021) <https://www.bilaterals.org/IMG/pdf/afcfta_protocol_on_investment_first_draft.pdf>, Article 2, p.33.

[11]   Article 46(3) of the Protocol initially required the Annex to be finalised by February 19, 2024, at the latest.

[12]   Onyema Arbitration, ‘Institutional Centres for Arbitration in Africa’ (Onyema Arbitration, 2024) <https://onyema-arbitration.co.uk/wp-content/uploads/2024/02/Institutional-Centers-for-Arbitration-in-Africa.pdf>

[13]   Datawrapper, ‘Africa: Top 10 investor economies by foreign direct investment stock’ (UN Trade and Development (UNCTAD), FDI/MNE database) <https://www.datawrapper.de/_/pT5qo/>

[14]   OHADA’s official website, home page, <https://www.ohada.com/#:~:text=17%20États%20sont%20membres%20de,le%20Tchad%20et%20le%20Togo> 

[15]   Investment Law Navigator (UN Trade and Development (UNCTAD) <https://investmentpolicy.unctad.org/investment-laws> 

[16]   For instance, South Africa promotes mediation as a means of settling investor-state dispute, but mediators must be appointed from a list made by the state (2015 Investment Act).

[17]   Article 44(2) of the Protocol and Article 13(5) of the South African Investment Act 2015.