Building capacity to help Africa trade better

Dispute Settlement in the African Continental Free Trade Area


Dispute Settlement in the African Continental Free Trade Area

Dispute Settlement in the African Continental Free Trade Area

When national Parliaments received reports from the Executive about the outcomes of the African Continental Free Trade Area (AfCFTA) negotiations and why this Agreement should be ratified, they were informed that this trade arrangement will be rules-based and that it will be possible to file disputes against State Parties violating their obligations. Will this happen? In terms of what rules and procedures?

One of the objectives in the AfCFTA Agreement is indeed to “establish a mechanism for the settlement of disputes concerning… rights and obligations”.[1] The Protocol on Dispute Settlement (DS Protocol) was adopted and signed in Kigali on 21 March 2018, when the AfCFTA was launched. It proclaims dispute settlement to be “a central element in providing security and predictability to the regional trading system”.

A dispute is defined as “a disagreement between State Parties regarding the interpretation and/or application of the Agreement in relation to their rights and obligations.[2] The “Agreement” includes the “Agreement Establishing the African Continental Free Trade Area and its Protocols, Annexes and Appendices which shall form an integral part thereof”.[3] The AfCFTA legal instruments shall be interpreted in accordance with the customary rules of interpretation of public international law, including the Vienna Convention on the Law of Treaties of 1969.[4]

A detailed institutional arrangement for the settlement of AfCFTA-related disputes is foreseen. It is modelled on the World Trade Organization (WTO) example and consists of a Dispute Settlement Body (DSB) and an Appellate Body (AB). Applications will first be heard by Panels, appointed for each case. The DSB is composed of representatives of the State Parties. It will administer the provisions of the DS Protocol.[5] The AB is a permanent institution composed of 7 members.[6] It shall hear appeals against Panel reports. The DSB establishes Panels, adopts Panel and Appellate Body reports, and maintains surveillance of the implementation of rulings and recommendations.[7]

Parties to a dispute must first enter into consultations, with a view to finding an amicable resolution.[8] They may at any time use good offices, conciliation, or mediation; which shall be confidential.[9] Parties to a dispute may, in addition, resort to arbitration.[10] Disputes about compliance with final DSB rulings are also justiciable.

The adoption of Panel Reports will be undertaken in terms of Art 19(4) of the DS Protocol:

Within sixty (60) days from the date the final Panel report is circulated to the State Parties, the report shall be considered, adopted and signed at a meeting of the DSB convened for that purpose, unless a Party to the dispute formally notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the report.

Article 22(9) provides for the same approach to reports of the Appellate Body:

An AB report shall be adopted by the DSB and unconditionally accepted by the Parties to the dispute unless the DSB decides by consensus not to adopt the AB report within thirty (30) days following its circulation to the State Parties.

These provisions provide for the principle of “reversed consensus”. This is an important development and repeats a feature of the WTO dispute settlement process. It prevents defendants from blocking the initiation of formal dispute settlement proceedings or the adoption of binding judgments. In the WTO this special decision-making procedure is known as “negative” or “reverse” consensus. “At the three mentioned important stages of the dispute settlement process (establishment, adoption and retaliation), the DSB must automatically decide to take the action ahead, unless there is a consensus not to do so.[11]

What remedies can be provided? Article 23 of the DS Protocol provides: Where the Panel or the AB concludes that a measure is inconsistent with the Agreement, it shall recommend that the State Party concerned bring the measure into conformity with the Agreement. In addition to its recommendations, the Panel or the AB may suggest ways in which the State Party concerned could implement the recommendations. State Parties must fully implement the recommendations and rulings of the DSB. Compensation and the suspension of concessions or other obligations are temporary measures available to the aggrieved Party in the event that the accepted recommendations and rulings of the DSB are not implemented within a reasonable period of time.[12]

The Secretariat of the AfCFTA must assist Panels and provide them with secretarial support.[13] It must also “keep the DSB informed of the status of the implementation of decisions made under this Protocol”.[14]

Only State Parties have access to dispute settlement under this Protocol.[15] However, most trade transactions involve private entities. Their rights need to be protected to ensure certainty and predictability. The approach adopted here (again replicating the WTO) means that private parties will only be protected if a State Party, able to show that its rights have been violated, would bring a claim. Governments of WTO members frequently do so. Whether African Governments will also do this, needs to be seen. They do not sue each other under the legal instruments of the Regional Economic Communities (RECs). And there is an alternative option in Art 10(2) of the AfCFTA Agreement: The Assembly shall have the exclusive authority to adopt interpretations of this Agreement on the recommendation of the Council of Ministers. The decision to adopt an interpretation shall be taken by consensus.

It might be different with regard to the AfCFTA Protocol on Investment, which is still to be negotiated. It will probably contain a special arrangement for the protection of investors and investments.

It is often claimed that lack of technical expertise prevents African States from declaring trade disputes. What will the AfCFTA do about this? The AfCFTA Secretariat may provide legal advice and assistance in respect of dispute settlement, in a manner that will not undermine its impartiality. It may also organise special training courses.[16] Much more will be needed to address this concern. Academic and professional training will be necessary.

Most international trade disputes involve trade remedies and safeguards; when goods are dumped in foreign markets at prices below cost, when exported goods are subsidized, or when new trade liberalization obligations result in an upsurge of imported goods and domestic industries are injured. The AfCFTA has an Annex on Trade Remedies and Safeguards in which WTO principles are employed for trade remedy disputes under the AfCFTA. Such disputes may involve difficult technical rules and proof via trade data. Good governance is part of the future answer.

Disputes about trade in services should not be ignored. They will become increasingly important. African domestic courts often hear cases involving national regulators responsible for telecommunication, the energy and financial sectors. In these cases, rules about due process (administrative fairness), constitutional rights (e.g. against discrimination) and statutory interpretation figure prominently. They involve familiar disciplines. Disputes about trade in services should actually be familiar terrain, provided the applicable national laws are well drafted and reflect the relevant AfCFTA principles.

If the AfCFTA succeeds in changing Governments’ attitude towards trade dispute settlement proceedings and helps to develop technical skills (also for those who will argue and hear these disputes), it will make a very real contribution to better trade governance in Africa. Trade with the rest of the world will also benefit. If this does not happen, a handful of African nations (with the technical capacity) will dominate this aspect of the AfCFTA’s implementation, or there will (again) be no action on this front.

[1] Art 4 pdf Agreement Establishing the African Continental Free Trade Area (4.67 MB)

[2] Art 1  pdf Protocol on Rules and Procedures on the Settlement of Disputes (4.67 MB)

[3] Art 1 AfCFTA Agreement.

[4] Art 30 DS Protocol.

[5] Art 5 DS Protocol.

[6] Art 20 DS Protocol.

[7]Art 5 DS Protocol.

[8] Art 6 DS Protocol.

[9] Art 8 DS Protocol.

[10] Art 27 DS Protocol.

[11] https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c3s1p1_e.htm

[12] Art 25 DS Protocol.

[13] Art 29 DS Protocol.

[14] Art 24(5) DS Protocol.

[15] Arts 1 and 3 DS Protocol.

[16] Art 28 DS Protocol.

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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