ROCHELLE MAPHOTO: Dispute resolution system based on law is crucial to AfCFTA

The African Continental Free Trade Area (AfCFTA), which brings together 55 AU member states and eight regional economic communities, is the largest free trade area in the world with the potential to expand Africa’s economy to $29-trillion by 2050.

As with any such arrangement, there are bound to be disputes, and with the advent of the AfCFTA, the Southern African Development Community (Sadc) will eventually lose regulatory authority over foreign investments as the AfCFTA is expected to have a protocol on investment.

A draft of the Protocol on Investment to the AfCFTA agreement has been developed, and negotiations between state and non-state parties are in full swing. A cost-effective, less bureaucratic and inefficiency-resistant dispute resolution system that is transparent and based on the rule of law is crucial to serve as the bedrock to advancing Africa’s development agenda.

The main risk to circumvent when designing dispute resolution systems and forums is to try to avoid politicisation of investor-state related disputes. The objective is to find a fit-for-purpose system of adjudication that is equitable and inclusive. Historically, since investor-state dispute resolution has been severely criticised for lacking legitimacy mainly owing to its origins, and procedurally since local remedies must first be exhausted within the legal framework of host states using domestic courts before venturing to offshore arbitral forums.

The AU generally advocates for the development of local courts of host states to handle complex commercial and investment-related disputes between investors and states. Agenda 2063 envisaged that by 2023, 70% of the population of AU member states must perceive their judiciaries to be independent.

However, litigation should generally be a last resort. A system needs to be developed that is likely to withstand abuse such as what is currently causing the paralysis of the World Trade Organisation (WTO) appellate body. Ideally, the Brazilian model, the agreement on Co-operation and Facilitation of Investment (ACFI) is exemplary and should be emulated, with amendments in as far as it provides for two structures that are central to the process prior to litigation.

Of cardinal importance is that Brazil’s ACFI proposes first that “a host state and home state may resolve an investor-state dispute”, which means it established a platform for bilateral engagements prior to litigation, which is admirable in that it sets a tone for co-operation. It further provides for a joint committee comprising representatives of each state, ideally representatives designated by their respective governments. Its primary role would be monitoring the ACFI, including discussing and sharing investment opportunities as well as resolving teething disputes between investors and host states.

Another significant structure is the establishment of ombudsmen in both respective states, to operate under the guidance of the joint committee. Ideally, an investor would lodge a complaint about any issue it wishes to address with the host state, and thereafter the joint committee and ombudsmen of the respective states would deliberate on the issue through consultation, negotiation and bilateral meetings. If all of those failed, state parties may, of their own volition, begin with state-to-state arbitration.

The only necessary amendment to the current ACFI is that it must emphasise that an investor must first exhaust local remedies before embarking on state-state arbitration. The Brazilian model presents an alternative to the options of using local courts or investor-state dispute resolution.

It is critical that AU member states ensure their domestic courts can deliver judgments at the scale and pace required to dispense justice in a fair and timely manner, and that the rule of law is entrenched.

• Maphoto is an assistant director with the directorate for strategic institutional partnerships in the department of agriculture, land reform and rural development.