How can the AfCFTA Investment Protocol advance the realisation of the AfCFTA objectives?
The AfCFTA Agreement will include a protocol on investment – to be negotiated in phase II. Meanwhile, the technical issues on investment are under consideration, and the draft legal text is expected to be ready for adoption by the January 2021. Thereafter, the AfCFTA Investment Protocol will form an integral part of the AfCFTA Agreement and enter into force 30 days after the deposit of the 22nd instrument of ratification (Art. 23(3)). How can the Investment Protocol advance the broader objectives of the AfCFTA?
Will the AfCFTA Investment Protocol contain binding commitments?
Art. 4(c) of the AfCFTA Agreement prescribes that State parties shall cooperate on investment. One would wonder whether the Protocol will include binding commitments and how will binding commitments on cooperation on investment be captured. This is possible as we see in the SADC Protocol Finance and Investment (FIP). The SADC FIP includes an Annex 1 titled Cooperation on Investment which has binding commitments on investment and a dispute settlement mechanism. The AfCFTA Investment Protocol could follow the same approach.
What should be objectives the AfCFTA Investment Protocol?
The Investment Protocol should attempt to advance the general objectives of the AfCFTA, particularly the movement of capital and natural persons and facilitate investments building on the initiatives and developments in the State Parties and RECs ... promote and attain sustainable and inclusive socio-economic development ... and structural transformation of the State Parties; enhance the competitiveness of the economies of State Parties within the continent and the global market; promote industrial development through diversification and regional value chain development, agricultural development and food security .
That is, the Protocol should establish an investment governance framework to facilitate intra-Africa investment, that would promote sustainable socio-economic and industrial development as well as enhance the competitiveness of the African countries. Indeed, Africa countries need FDI to promote economic growth and development, create jobs and alleviate poverty.
How can the Protocol ensure that investment contribute to development?
African countries have received increasing FDI in the past years yet have struggled to achieve economic and industrial development, fight growing unemployment and extreme poverty. Increased FDI flows do not automatically create economic growth and development and employment or eliminate poverty in the host economy. It is not the quantity but quality of FDI that matters. The AfCFTA Investment Protocol should facilitate quality FDI that would support the developmental needs of the African countries and continent at large.
The Protocol should give States policy space (or regulatory freedom) to determine the right kind of FDI, in accordance with their development goals. For instance, FDI that supports productive capacity, SME development, infrastructure development, up-stream and down-stream linkages. Annex 1 of the SADC Finance and Investment Protocol (FIP) provides good guidance in this respect.
The Protocol could also include legal obligations demanding responsible business conduct. The COMESA Investment Agreement, SADC Model BIT and Pan-African Investment Code (PAIC) may be helpful in this regard. They require investors to promote sustainable development, comply with corporate social responsibility, protect, manage and improve the environment, and respect human rights in the host states. The COMESA Investment Agreement and PAIC even allow host governments to sue investors for breaching such treaty obligations. Investor obligations would be necessary for the AfCFTA Investment Protocol to ensure that foreign investors act responsibly and contribute to the development of the African countries.
How can the AfCFTA Investment Protocol increase and facilitate intra-Africa investment?
Although the AfCFTA Investment Protocol will cover intra-Africa FDI/investment, some of the provisions (e.g. MFN) may well be beneficial for investment from outside the continent. FDI will not increase by the mere existence of the AfCFTA Investment Protocol. Economic conditions (e.g. access to markets or natural resources) of the host economy are important determinants of investment location decisions. Investment treaties reduce perceived risks, guarantee legal protection and boost investor confidence. Investment treaties may increase FDI flows through creating an investor-friendly environment and removing barriers to cross-border movements of capital/investments.
The flow of investment in Africa is hindered by, inter alia: unnecessary/excessive bureaucracy; lack of transparency and disclosure of investment-related information; inefficiency and corruption; lack of harmonisation of investment laws, regulations or policies at national and regional levels; and lack of coordination and cooperation of relevant institutions / authorities. The AfCFTA Investment Protocol could tackle these barriers to FDI-entry by including investment facilitation provisions. Such provisions should focus on cutting red tape, simplifying personnel entry, easing investment permits and enhancing institutional cooperation and coordination, among others.
Existing intra-Africa treaties do not address investment facilitation concerns. Most African countries are pursuing investment facilitation through unilateral (national) measures. These measures are important but not enough. Investment facilitation under the AfCFTA Investment Protocol could serve many purposes. It would create a continent-wide investment facilitation governance structure and help States to tackle barriers to FDI entry. It would also enhance institutional cooperation and coordination on investment facilitation at the continental level.
Implementation of investment facilitation measures, however, can be complex and costly. AU member states could opt for non-binding commitments on investment facilitation, but such commitments may be problematic with respect to compliance, enforceability and implementation. We can opt for binding yet flexible approach to investment facilitation. The AfCFTA Investment Protocol should thus adopt binding yet flexible commitments on investment facilitation. Binding commitments would enhance rules-based investment governance and promote certainty and predictability. Special and differential treatment (SDT) may be needed considering African countries different levels of development. The SDT approach should allow members to self-assess and determine their capacity and time to implement investment facilitation commitments. Technical and financial assistance would also be needed to help States implement investment facilitation measures. The WTO Trade Facilitation Agreement may provide guidance in this regard.
Building on existing African investment initiatives and developments
AfCFTA Investment Protocol would be expected to build on the initiatives and developments in the State Parties and RECs. This is in line with the preservation of the acquis principle enshrined in Art. 5 of the AfCFTA Agreement. Among the 8 RECs designated building blocs by the AU, AMU, SADC, COMESA, ECOWAS and EAC have comprehensive regional investment instruments. At national levels, most States have adopted investment-related policies / legislations.
Apart from these initiatives, other investment legal instruments across the continent exist and are worth considering – notably, investment agreements of regional blocs (not designated building blocs); and intra-African BITs. These instruments should not be overlooked when negotiating the AfCFTA Investment Protocol because they provide multiple, inconsistent and overlapping investment protection standards. Inconsistencies and overlaps are common in the definitions of investments and investors, expropriation compensation, treatment standards and dispute settlement. If not addressed, this could pose a difficulty on the regulation of investment (for example, multiple, overlapping and inconsistent obligations, treaty or forum shopping). It may jeopardise investment and integration efforts as well as the AfCFTA Investment Protocol s ability to create a coherent continent-wide investment regulatory framework.
The Protocol should include a provision about its relationship with other existing intra-Africa investment legal instruments. For example, that the Protocol could take precedence in any inconsistencies with the existing investment legal instruments.
Investment dispute settlement
An important matter is what dispute resolution mechanism AU member States will adopt under the AfCFTA Investment Protocol. Such mechanism should be acceptable to both investors and host States.
Existing legal instruments often provide for investment dispute resolution through consultations / negotiations, local remedies (domestic courts, judicial and administrative tribunals), and investor-state dispute settlement (ISDS) international arbitration and inter-state dispute settlement. Other regional instruments (of, for example, COMESA and ECOWAS) provide for the use of regional courts in investment dispute resolution. Present signals indicate that States are anti-ISDS and pro-inter-State dispute settlement or the use of local remedies.
ISDS would be attractive to investors as they would, in their own right, pursue treaty breaches before tribunals. Yet, African States are concerned with ISDS – criticising, among other things, ISDS arbitral tribunals bias towards investors, as well as inconsistent, erroneous and costly awards. As a result of this ISDS backlash, some African countries have terminated BITs (e.g. South Africa and Tanzania) or amended/negotiated investment treaties to limit or exclude ISDS (e.g. COMESA and SADC countries, respectively).
From the AfCFTA Dispute Settlement Protocol experience, governments appear to be in favour of inter-State dispute settlement. SADC countries might be in favour of this since the regional bloc amended the SADC FIP to provide for inter-State investment dispute resolution. SADC has also adopted the new SADC Tribunal Protocol which will revive the SADC Tribunal with jurisdiction over inter-State disputes only. Private parties will not have standing before the SADC Tribunal. However, inter-State dispute settlement may not provide investors with assurance especially when African countries have a record of not litigating against each other in commercial-related disputes.
Other States may favour the settlement of disputes through domestic courts of the host governments. In this instance, investors may need to be convinced of African national courts expertise to effectively adjudicate investment disputes, and their independence from the host governments.
Dispute settlement is critical for rules-based investment governance. Hence the AfCFTA Investment Protocol should aim to provide an effective dispute settlement regime. An effective dispute settlement mechanism protects the interests of States and investors and, in doing so, ensures legal certainty and predictability, and boosts investor-confidence.
 Para 13 (ii) of the pdf Decision on the African Continental Free Trade Area (419 KB) , Doc. Assembly/AU/4(XXXII).
 Art. 3 of the pdf AfCFTA Agreement (4.67 MB) .
 See Chidede T, pdf Investment Facilitation in Africa: Problems and Recommendations (512 KB) . Poster presentation: tralac Annual Conference 2019.
 For example, the Common Convention in Investments in the States of the Customs and Economic Union of Central Africa, the Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organisation of the Islamic Conference, and the Agreement on Investment and Free Movement of Arab Capital Among Arab Countries.
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