Mediating disputes for African state parties: the way forward for intra-Africa trade under AfCFTA

Foluke Akinmoladun
Trizon Law Chambers, Lagos
​​​​​​​Foluke.a@trizonlawchambers.com

The African Continental Free Trade Area agreement (AfCFTA) creates a free trade area in Africa aiming to form a single market, with free movement and a single-currency union. In addition, the Agreement provides a protocol for the settlement of disputes between state parties. However, there are no provisions for resolving disputes between private parties. This article analyses the possible inclusion of mediation and med-arb under AfCFTA through the AfTFCA Investment Protocol to address this gap.

AfTFCA’s main objective is embodied in Article 3(a) of the agreement, which states that the agreement is to:

‘create a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063.’

This objective can be better understood in light of paragraph 4 of the Preamble, which states:

‘Having regard to the aspirations of Agenda 2063 for a continental market with the free movement of persons, capital, goods and services, which are crucial for deepening economic integration, and promoting agricultural development, food security, industrialisation and structural economic transformation.’

The provisions emphasise Agenda 2063 and deepening economic integration. By necessary implication, deeper economic integration entails increased commerce, trade, and investment between the member states.

With the overarching goal of economic integration and growth, how do the agreement’s dispute resolution provisions minimise disruption to commercial activities caused by disputes? Put differently, will the existing dispute resolution mechanisms be cost and time effective for increased intra-Africa trade?

AfTFCA’s Protocol on Rules and Procedures of the Settlement of Disputes establishes and administers the Dispute Settlement Mechanism, as outlined in Article 20, Part VI of the agreement. The Protocol is modelled on the World Trade Organization’s (WTO) Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), providing a rules-based system for settling disputes with which African states are familiar.^[1] Therefore the Dispute Settlement Body under Protocol only applies to state parties.  Furthermore, the Protocol only envisages disputes concerning the rights and obligations of states under the agreement.

Non-state parties, such as corporate organisations and natural persons, do not have a right of recourse under AfTFCA.^[2] Again, this arrangement borrows from the WTO model,^[3] with a few modifications.^[4] As such, traders and investors wishing to seek recourse against a member state under AfTFCA may only do so by seeking diplomatic protection.^[5] This arrangement is not ideal. It presupposes that the state is willing to bring a claim on its national’s behalf.^[6] States might be unwilling to politicise the process by pursuing claims for their nationals at the Dispute Settlement Board.^[7]

Commentators have opined that AfTFCA’s Dispute Settlement Mechanism ensures a transparent, accountable, fair and predictable dispute settlement process consistent with the agreement provisions.^[8] Therefore, despite the similarities with the WTO DSU, there are still some differences aimed at avoiding the shortcomings of the WTO DSU system.^[9]

Some of the expected challenges with the current dispute resolution system under AfCFTA, similar to other international tribunals, concern enforcing tribunal decisions on recalcitrant states.^[10] This could erode compliance at the state level and permit state parties to set up (and maintain) divergent trade mechanisms and infrastructure within and beyond their borders.^[11]  Further, it diminishes certainty and confidence for both African and foreign investors.

How, then, can dispute settlement measures under AfCFTA address investor rights and allay fears of state intervention in investor operations beyond regulatory compliance in line with international best practices?

Investors and traders could resort to the dispute resolution options operational under the regional economic communities (RECs), some of which provide for mediation and negotiation.^[12] In addition, Article 19 of AFCFTA states that, where AfTFCA and Regional Agreements conflict, AFCFTA shall prevail to the extent of the specific inconsistency. However, this provision does not preclude state parties who are members of other regional economic communities, regional trading arrangements and customs unions, and have attained higher levels of regional integration than under AFCFTA, from taking advantage of such arrangements.^[13]

The implication, therefore, is that the dispute resolution mechanisms under RECs in Africa are available to African investors.  Further still, other mechanisms under other Free Trade arrangements, such as the WTO and the International Centre for the Settlement of Investment Disputes (ICSID), are still open to African private investors.

Another possible option for investors is the AfTFCA Investment Protocol currently being negotiated under Phase II of AfTFCA.^[14] Although the exact provisions of the Investment Protocol are still being discussed and negotiated, one can predict how the Protocol may be structured by looking at the Pan-African Investment Code that the African Union adopted in October 2017.^[15]

In negotiating dispute resolution provisions under the AfTFCA Investment Protocol, member states could consider including mediation and/or med-arb procedures. Indeed, the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention on Mediation) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Arbitration Convention) may support the inclusion of mediation, arbitration and med-arb in AfTFCA Investment Protocol through their respective enforcement mechanisms.

Mediation is a party-driven dispute resolution process that (if successful) results in a settlement agreement between the parties. The use of and discussion on mediation in investor-state disputes have been seen in several international fora such as the International Centre for Settlement of Investment Disputes (ICSID)^[16], United Nations Commission on International Trade Law

(UNCITRAL) Working Group II meetings^[17] and the provision of the IBA rules for investor-state mediation.^[18]

The med-arb process, in essence, is a dispute resolution mechanism that allows for parties to start with mediation and, where there are unresolved issues, those issues can then be taken to arbitration to be finally determined.^[19] Therefore, the mediation settlement agreement can be enforceable under the Singapore Convention, while the arbitration award is enforceable under the New York Convention. However, it is important to note that for this to work in practice, the African States that are signatories to AfCFTA need to ratify and, in some cases, domesticate AfTFCA, the Singapore Convention and the New York Convention.

The next 12 months will be important for economic integration in Africa through the AfCFTA agreement in deepening integration in regional and, by extension, global value chains.^[20] Being able to weather the challenges of economic integration for the prosperity of the continent is critical. Therefore, Africa needs to get it right on investor and trader rights protection to attract foreign investment.