International investment agreements (IIAs) are international legal instruments that address issues relevant to cross-border investments, usually for the purpose of protecting, promoting, and liberalizing investments. The State Parties accept legal obligations to adhere to specific standards on the treatment of foreign investments within their territory.

Most IIAs cover foreign direct investment (FDI) and portfolio investment, but some exclude the latter. IIAs further define procedures for the resolution of disputes should these commitments not be met. The most common types of IIAs are Bilateral Investment Treaties (BITs) and Preferential Trade and Investment Agreements. International taxation agreements deal primarily with the issue of double taxation in international financial activities (e.g., regulating taxes on income, assets, or financial transactions). They are commonly concluded bilaterally, though some agreements also involve a larger number of countries.

Investment facilitation has become part of new IIAs. This important aspect refers to the governance side of attracting and regulating investments and the activities of investors. This must be done in a manner that will provide for legal certainty and for remedies where needed. Due process rules must be respected. This development flows from a growing consensus that host governments need the domestic laws and procedures to ensure legitimate public interest goals are advanced and protected. Investment facilitation includes measures necessary to deal with sustainable development, the protection of the environment and of labour standards. Hopefully the AfCFTA Investment Protocol will not neglect this important aspect; in particular since it is likely to be primarily a cooperation instrument.

Ultimately IIAs are about advancing the joint efforts of the State Parties to promote welfare, development, and prosperity at home and within the regional trade arrangements to which they belong. How will the AfCFTA Investment Protocol promote this important aspect?

The Investment Protocol of the AfCFTA will be an IIA of a specific kind. It will have unique features and will be implemented in the manner foreseen under the broader AfCFTA design. The first aspect to mention is that this will be a cooperation agreement.^[1] It means the State Parties will decide on the domestic enforcement (this Protocol will not be self-executing) and they will retain national regulatory powers. This is a prominent feature of the AfCFTA. The AfCFTA Protocol on Services, for example, confirms “the right of State Parties to regulate in pursuit of national policy objectives, and to introduce new regulations, on the supply of services, within their territories, in order to meet legitimate national policy objectives, including competitiveness, consumer protection and overall sustainable development….”^[2]

Under the AfCFTA design only the State Parties (AU member States that have ratified the AfCFTA Agreement and for whom it has entered into force) will have rights and duties and only they will be able to bring disputes under the AfCFTA Dispute Settlement Protocol when provisions in this Protocol are violated. Since most investments will come from private investors in third countries, there will have to be provisions on how individual State Parties shall protect the rights of such investors under their national legal systems.   

Another important indication of how the AfCFTA will work, has to do with the fact that the Regional Economic Communities (RECs) will remain in existence; they are the building blocks of the AfCFTA.^[3] And they will continue to implement and advance their individual integration policies. Article 8 of the AfCFTA Agreement is quite explicit: “…. State Parties that are members of other RECs, which have attained among themselves higher levels of elimination of customs duties and trade barriers than those provided for in this Protocol, shall maintain, and where possible improve upon, those higher levels of trade liberalisation among themselves.” This will presumably include the investment agreement that the RECs have in place.^[4] The AfCFTA Agreement also says that the existing acquis shall be preserved and that the RECs are building blocks of the AfCFTA.^[5] In any case, the legal obligations in REC instruments will not be replaced by any AfCFTA instruments.

All the AfCFTA State Parties need resources and must attract FDI. The AfCFTA Investment Protocol will not change the fact that individual Governments will continue to compete for FDI and will offer different kinds of investment incentives. The AfCFTA is a member-driven arrangement and will not have supra-national institutions.^[6] The State Parties will retain their national investment laws and institutions and will determine the rules on domestic incorporation of foreign firms and investors. It is likely that the definition of an “investor” will refer to enterprises governed by the laws of individual State Parties, as is typically done.

And there will be additional investment agreements. Many of the AfCFTA State Parties have concluded investment treaties with third parties. Some are contemplating new ones. In 2020 Kenya announced that it will negotiate bilateral trade deals the United States and the United Kingdom, in which investment will be an important component.^[7]

The AfCFTA State Parties will belong to different types of investment treaties with different partners within and outside Africa. They will continue to implement their national investment laws too. This multi-layer of investment-related obligations should not pose too much of a theoretical problem when it comes to implementation. However, the practicalities will be more challenging. Investors will have to do their homework.

The AfCFTA Investment Protocol will not constitute one single regime for the African continent and investors will not be able to make all their investment decisions under the rules of this Protocol. Investment decisions are sector specific. Decisions about investing in mining operations are very different from investing in banking or the production of automobiles. Investors will be guided by market access opportunities, the level of regional integration and membership profiles of host countries (to what other RECs do they belong?) and by what exists elsewhere in terms of commercial opportunities.

The AfCFTA Investment Protocol may have one specific new effect: All the State Parties will in future share at least one common investment instrument. Whether this will result in attracting investments to more sectors and countries will depend on what this Protocol will provide for. If it is predominantly about how national investment regimes will continue and how State Parties will cooperate (or not cooperate) about investment issues, the AfCFTA Investment Protocol cannot be a gamechanger.

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^[1] Art 4(c) AfCFTA Agreement.

^[2] Preamble, AfCFTA Protocol on Trade in Services.

^[3] Art 5 AfCFTA Agreement.

^[4] The Southern African Development Community (SADC) has its own Finance and Investment Protocol (FIP).

^[5] Art 5 AfCFTA Agreement.

^[6] Art 5 AfCFTA Agreement.

^[7] Kenya’s announcements met with criticism at home and in the EAC region but has not resulted in that initiative being dropped. Kenya has also concluded an Economic Partnership Agreement (EPA) with the UK, to roll over preferential market access benefits from the pre-Brexit period when the UK was still an EU member.