Discussions
The EAC Court’s jurisdiction over investment matters and what it means for the Community’s legal instruments
William Mwanza, tralac Researcher, discusses the extension of the EAC Court of Justice’s jurisdiction to include investment matters
The 16th Summit of Heads of State and Government of the East African Community (EAC) was held on 20 February 2015, in Nairobi, Kenya. The Summit was held under the theme “Deepening and accelerating integration: towards Political Federation.”
The region has made significant strides in furthering its regional integration agenda. This is seen, for example, by its level of intra-regional trade of 20%, which is quite higher than the average of 12% on the African continent. The Summit considered progress on a number of issues of strategic importance in taking forward the region’s integration agenda. Of importance to this discussion were those that relate to the legal and institutional framework of the EAC – particularly the extended jurisdiction of the EAC Court of Justice, and what it signals for progressive development of the region’s legal system.
The EAC Court of Justice is established by Article 9 (1) (e) of the EAC Treaty. As the judicial organ of the grouping, it is responsible for ensuring “the adherence to law in the interpretation and application of and compliance with [the EAC Treaty]”. For the Court to consider substantive issues in cases brought before it, it has to deem that it has jurisdiction to hear the matter at hand. Such jurisdiction springs from the founding instrument of the grouping itself, namely the EAC Treaty. It is provided for in Article 27 (1) which states that “the Court shall initially have jurisdiction over interpretation and application of [the EAC] Treaty” [emphasis added]. The Court has actively carried out its adjudicative function by hearing a significant number of cases over recent years on the basis of this Article.
The Court’s jurisdiction to preside over some of these cases has been heavily contested in those relating to human rights abuses. This is mainly because of the structure Article 27 of the Treaty, which in addition to the subsection highlighted above, further provides in Article 27 (2) that “the Court shall have such other original, appellate, human rights and other jurisdiction as will be determined … at a suitable subsequent date. To this end, the Partner States shall conclude a protocol to operationalise the extended jurisdiction.” Although the process has taken a considerably long time, this protocol was finally approved and signed by Heads of State at the recent EAC Summit. The Summit directed that the ratification process of this protocol be finalised by 30 November 2015.
The signing of this protocol is a positive development. When this piece of legislation comes into effect, it will further strengthen the Court’s basis for presiding over cases brought before it. How the Court went about exercising its jurisdiction before conclusion of this protocol, and the extent to which the protocol addresses some earlier contentions on the limited nature of the Court’s jurisdiction, are points for thorough and detailed analysis. One aspect that stands out and is worth considering at the outset, however, is that the Court’s jurisdiction has been extended not only to cover trade issues, but also investment matters in the EAC.
Indeed trade and investment interact in a manner that brings dynamic benefits of regional integration arrangements. However, the benefits from such interaction are not automatic, as the two areas are governed differently in the global sphere. While trade is governed by multilateral agreements of the World Trade Organisation (WTO), there currently exists no multilateral framework that governs international investment flows. The latter are mostly governed by bilateral investment treaties between respective Governments, and increasingly through regional agreements as well.
The extension of the Court’s jurisdiction to investment matters signals that the EAC seeks to place greater emphasis on governance of international investment at the regional level, whereby the Court will play an active role in resolving investment disputes. How far the Court can go in doing so depends on what is contained in the legal instruments of the EAC. The grouping does not have a regional investment law, which the Court would ideally interpret and ensure compliance with. It would, therefore, have to first look to the provisions of the EAC Treaty.
Chapter 12 of the EAC Treaty provides the basis for cooperation in investment and industrial development by Partner States. In Article 80 (1) contained within this chapter, the Partner States undertake to “ (e) rationalise investments and the full use of established industries so as to promote efficiency and production”; and “ (f) harmonise and rationalise investment incentives including those relating to taxation of industries particularly those that use local materials and labour with a view to promoting the Community as a single investment area.” How these Treaty provisions would be effected in a manner that ensures the promotion of inclusive and sustainable development is basically what would form the substantive provisions of a regional investment law. Such a law would also have to clearly spell out the policy space that national Governments have in regulating international investment flows within their respective territories, as well as how the Court as an adjudicator of investment disputes would interact with other regional and national institutions involved in the same area.
In the absence of such a regional law, the Court would then look at other secondary legal instruments that contain provisions on investment. The secondary instrument that notably establishes some rights in the field of investment is the Protocol on the establishment of the East African Community Common Market. This Protocol provides for protection of cross-border investments that is normally provided in bilateral investment agreements such as protection and security, non-discrimination, and compensation in the event of expropriation. Such protection is however not guaranteed universally to all foreign investors or investments, but rather only to those from other Partner States of the EAC. Elimination of restrictions to the free movement of capital is restricted to persons that are resident in the Community. Most favoured nation (MFN) and national treatment are guaranteed only for services and service suppliers of other Partner States.
In this regard, although the EAC Court now has extended jurisdiction to preside over investment disputes, such jurisdiction would only be limited to those brought by investors or investments from Partner States, and specifically only to services or service providers where some rights such as MFN and national treatment are concerned. However, maximising competition within the EAC necessitates that such investment rights are not only reserved for this section of players, but are extended to other investors and investments (including those involved in goods production) from other regions on the continent and the rest of the world.
The extension of the Court’s jurisdiction to include investment is a positive step towards more regional governance of investment in the EAC. This process would now be made more effective if some of the provisions of the Common Market Protocol are carefully expanded upon, ideally through the drafting and implementation of a comprehensive regional investment law.