In the second of two podcasts, hosted by law firm Webber Wentzel, lawyers Vlad Movshovich (Webber Wentzel), Tunde Fagbohunlu (Aluko and Oyebode) and Roland Ziadé (Linklaters) discuss intra-African investment and what protocols are needed for disputes.
The discussion is moderated by Webbers’ Sarah McKenzie with this summary from Africa Legal’s James Mayer.
Speculation continues to build on the content of phase two of the African Continental Free Trade Area (AfCFTA).
This will establish a pan-African investment protocol that will outline how intra-African investments are protected and how intra-African investors could start disputes and where this could happen.
While the delayed negotiations are not due to happen until 2022, the minds of investors in and outside of Africa have been musing about different potential forms the protocol may take.
Roland Ziadé, Global Co-Head of International Arbitration at Linklaters, says, “We have not even seen a draft or a provisional version of the protocol so we don’t really know what’s been done so far.”
Regardless, examining past codes, such as the Pan African Investment Code (PAIC), an instrument adopted in 2017, may offer some guidance for the near future.
Ziade says, “If the PAIC is to serve as a guideline – African states will narrow down and redefine the scope of investors protected – perhaps even linking such protection to the host states.
“We have already seen this approach in a number of agreements including the 2012 BIT and the South African Development Community (SADC).”
Other bilateral and multilateral instruments also provide clues as to elements which are likely to be included.
Tunde Fagbohunlu, head of the Litigation, Arbitration and ADR at Aluko & Oyebode says, “Typical relative protections are likely to include things such as most favoured nation, national treatment protection and absolute protections such as the right to freely transfer income abroad.”
There are some significant deviations expected, especially for expropriation and compensation.
Similarly, the open-ended concept of fair and equitable treatment is also expected to be omitted.
Fagbohunlu says, “Perhaps the negotiators can borrow a leaf from the SADC bilateral investment treaty which replaces fair and equitable treatment with fair administrative treatment so there wouldn’t be a complete abandonment of the fair treatment standard.”
Balance, especially for investor protection, is expected to be a motivating force. In short, “It must be sufficient to attract investment and preserve the regulatory space – it must be done in a way that doesn’t dissuade investment,” says Vlad Movshovich, Partner at Webber Wentzel.
Despite the fragmentation and uncertainty, Ziadé says, “I expect that the upcoming investment protocol will reflect the latest trends and ongoing debates in investment treaty protection both from a procedural and from a substantive perspective.
“We can hope that it improves the predictability, consistency and the legitimacy of the investment protection system on the continent and strikes an appropriate balance between the facilitation of cross border investment within Africa and the promotion of the sustainable development of the host states.”
Fagbohunlu adds, “The massive market that’s going to come into existence as a result of the AfCFTA will need a huge amount of investments to drive and service that market. If that market works well, African countries will benefit - if the agreement works – from sustainable development to poverty reduction to technology transfers and more. The key is going to be coming up with an arrangement that works and that it is not fitfully implemented.”
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