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Alternative Dispute Settlement Procedures for Trade-related Disputes in Africa


Alternative Dispute Settlement Procedures for Trade-related Disputes in Africa

Alternative Dispute Settlement Procedures for Trade-related Disputes in Africa

African State are not active users of the Dispute Settlement Understanding (DSU) of the World Trade Organization (WTO). The explanations point to Africa’s small share of global trade and the fact that preferential trade arrangements (which traditionally lack formal dispute settlement procedures or are based on unilateral schemes such as AGOA and the GSP of the EU) account for most of their international trade. Industrialization is generally at low levels and market access arrangements for trade in services are in their infancy. This may suggest that dispute settlement is not a priority. It is also said that dispute settlement is costly, that expertise is lacking, and that formal dispute settlement is not a priority.

These explanations may, to some extent, account for the lack of participation in global dispute settlement arrangements such as the WTO. However, they cannot be true of all African nations and cannot form the basis for advancing Africa’s own interests. African states do not litigate against each other either, even though their Regional Economic Communities (RECs) include dispute settlement mechanisms. 

The absence of dispute settlement mechanisms is costly. The benefits associated with the predictability and finality brought by the removal of uncertainties in markets and about the meaning of the applicable law and the scope of rights, are forfeited. These considerations apply to intra-African trade too.

It is said that African governments prefer diplomatic channels for settling their differences. There is no evidence that this option is actively or successfully pursued. The example of how Zimbabwe had, with impunity and despite complaints by the private sector, violated its obligations under the SADC and COMESA trade Protocols over recent years, points to a serious flaw in how intra-African trade is officially conducted. African Governments value “sovereignty”. They do not favour regional institutions with the power to monitor compliance with obligations and do not employ the services of regional or international courts (the settlement of border disputes is the exception). The truth is that sovereignty is not an obstacle to good governance. It is an act of sovereignty to conclude international agreements and to respect mutually agreed rules; adopted to serve the common good.

The informal or diplomatic settlement of trade-related disputes is not the way forward for reaping the benefits of certainty and predictability made possible by binding dispute settlement procedures. There seems to be a systemic deficit here and the private sector stands to suffer most of the consequences. Transparency, respect for the rule of law, control over the exercise of executive powers and good trade governance are undermined. Many African Governments do not actively pursue domestic rules-based trade governance. Access to official information is often problematical, while the domestication of international and regional standards and decisions tends to be neglected. Non-tariff barriers remain a major problem. Trade remedies (anti-dumping and countervailing measures, as well as safeguards) are mostly absent.[1] Regional secretariats tend to display the same deficiencies.

Could African Governments be persuaded to give formal dispute settlement a genuine chance? In another tralacBlog featured in the September Newsletter, the Dispute Settlement Protocol of the African Continental Free Trade Area (adopted in March this year) is discussed. It is the most recent indication of Africa’s intention regarding dispute settlement involving trade amongst themselves. They opted for the WTO model.

The objective behind the AfCFTA is to boost intra-African trade and presumably to do so in a rules-based manner. This arrangement even confesses to be a single undertaking.[2] The settlement of disputes through adjudication is thus a binding obligation for all the State Parties.

What needs to be done to emulate the success of the DSU in Africa? The success of the DSU lies in Members’ belief that the alternative poses an unacceptable threat to their interests. They value the benefits associated with removing lingering uncertainties and the disruption of markets through unresolved disputes. They apparently do not consider respect for AB rulings as incompatible with their sovereign choices. To abandon this formula would mean reverting to power relationships.[3]

There are also formal reasons for the success of the DSU. They are about the procedure for adopting decisions and the fact that appeals are possible. DSU decisions are adopted by consensus. Consensus is defined as being achieved if no WTO Member, present at the meeting when the decision is taken, formally objects to the proposed decision. However, when the DSB establishes panels, when it adopts panel and AB reports and when it authorizes retaliation, decisions must be approved unless there is a consensus not to do so. This special decision-making procedure is commonly referred to as “negative” or “reverse” consensus. The availability of an appeal to the AB is a guarantee that mistakes can be corrected and that legal arguments can be fully canvassed. There is a second round of deliberation.

Consultations remain important. When a WTO Member formally requests consultations to settle a dispute, it is treated as the first stage of settling a “dispute” under DSU procedures. The Members concerned must settle their dispute in a manner that is consistent with the WTO Agreement.[4] Consultations provide the parties with an opportunity to find a satisfactory solution without resorting to litigation. Only after such mandatory consultations have failed to produce a solution (within 60 days) may the complainant request adjudication by a panel.[5] Most WTO disputes have not proceeded beyond consultations.[6]

Mutually agreed solutions are also possible. It could happen through mediation, conciliation and good offices. Good offices entail logistical support to help the parties negotiate under suitable conditions. Conciliation involves the participation of an outside person in discussions between the parties. In mediation the mediator participates in and contribute to the discussions but may propose a solution. The parties are not obliged to accept this proposal.[7]

Inter-state disputes are not the only ones to be settled as part of how international trade is conducted. Private commercial transactions also require dispute settlement mechanisms; for resolving disputes about contractual arrangements. It is frequently easier and cheaper for private companies to resort to Alternative Dispute Resolution (ADR) mechanisms. ADR is a procedure for settling a dispute by means other than litigation, such as arbitration, mediation and conciliation. These procedures differ. Arbitration is a determination of legal rights and leads to a binding determination. A neutral third party serves as a judge and is responsible for resolving the dispute. The goal of mediation is for a neutral third party to help the parties to a dispute to come to a settlement on their own. Conciliation is an alternative dispute resolution process whereby the parties to a dispute use a conciliator, who meets with the parties both separately and together in an attempt to resolve their differences.

Globalization, technological developments, and the nature of modern commercial transactions make informal and more expeditious settlement procedures an attractive option. ADR has gained widespread acceptance among both the general public and the legal profession. It is often employed for domestic dispute settlement purposes. In some jurisdictions ADR procedures may be compulsory for specific kinds of disputes.[8] ADR has become a standard feature of private commercial dispute resolution.[9]

The way forward for establishing a rules-based dispute settlement culture in Africa requires a new outlook on the part of Governments. They have an opportunity now to do so; by accepting the necessity for and the benefits of rules-based trade and of formal dispute settlement. They can do so by actively supporting and using the mechanism which they have adopted a few months ago.

[1] Egypt and south Africa are the two exceptions as far as formal trade remedy regimes are concerned.

[2] Art 8 AfCFTA Agreement.

[3] See the tralacBlog, The Crisis in WTO Dispute Settlement, which discusses the consequences of the United States’ refusal to support the appointment of new AB members.

[4] Art 3.7 of the DSU.

[5] Art 4.7 of the DSU.

[6] https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s2p1_e.htm#consultations_request

[7] https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c8s1p2_e.htm

[8] The European Mediation Directive of 2008 provides for “compulsory” mediation; this means that attendance is compulsory, not that a settlement must be reached through mediation.

[9] http://ccbjournal.com/articles/11783/alternative-dispute-resolution-international-business-transactions

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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