Introduction
Regional trade agreements often encounter some legal uncertainties due to unpredictability, non-compliance, non-transparency and lack of remedies in instances of breaches. Private investors and traders are the most likely to be negatively affected and this sometimes makes investors more pensive and doubtful about the markets if it is not certain that they will enjoy adequate protection of the law.
At the 2012 AU Summit, African leaders adopted a Decision (Assembly/AU/Dec.394 (XVIII)) on the Establishment of a Continental Free Trade Area (CFTA) by the indicative date of 2017 and endorsed the Action Plan on Boosting Intra-Africa Trade, which identifies seven areas of cooperation namely: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. In June 2015, at the twenty-fifth (25th) Summit of the African Union, held in South Africa, African leaders agreed to launch negotiations on the creation of the CFTA by 2017 through negotiations on the liberalization of trade in goods and services.
On March 21st, 2018, at the end of the 10th extraordinary session of the Assembly of Heads of State and Government of the African Union in Kigali, Rwanda, forty-four out of the fifty-five member states of the Union signed the Treaty establishing the African Continental Free Trade Area(AfCFTA). Parties to the Agreement, further agreed on some protocols, namely: 1. Protocol on Trade in Goods, 2. Protocol on Trade in Services, and 3. Protocol on the Rules and Procedures on the Settlement of Disputes were agreed.
By Article 23 (1) of the AfCFTA, the Agreement and the Protocols on Trade in Goods, Trade in Services, and Protocol on Rules and Procedures on the Settlement of Disputes were to enter into force thirty (30) days after the deposit of the twenty second (22nd) instrument of ratification. The trade agreement became operational on 30th May, 2019, a month after the required number of endorsements was deposited at the office of AU chairperson. In April, 2019, Gambia became the 22nd nation to ratify the agreement, helping it achieve the minimum threshold required to approve the deal among the 55 member states of the African Union. Nigeria and the Republic of Benin were the last to sign the agreement on 7th July, 2019 bringing the number of signatories to fifty four (54), while twenty seven (27) countries have ratified and deposited their instruments.
The significance of the AfCFTA cannot be overemphasized. By removing tariff and non-tariff barriers on goods and services, member states intend to: facilitate intra-African trade; promote regional value chains to foster the integration of the African continent into the global economy; boost industrialization, competitiveness and innovation, ultimately contributing to Africa’s economic development and social progress. It has been estimated that under a successfully implemented AfCFTA, Africa will have a market size expected to include 1.7 billion people with over USD$ 6.7 trillion of cumulative consumer and business spending by year 2030.8 The AfCFTA will create the world’s largest free trade area since the establishment of the World Trade Organization (WTO) in 1994.9
Much work remains to be done, as some critical parts of the agreement are yet to be completed including countries’ schedules of tariff concessions and services commitments, rules of origin, investment, intellectual property, competition, and a possible protocol on e-commerce.10 This article will however consider one of the agreed Protocols and that is the Rules and Procedures on the Settlement of Disputes and how it affects non-state entities (private entities).
Rules and Procedures on the Settlement of Disputes
There must be an effective and efficient dispute resolution regime to provide a conducive environment for the free movement of market and people across Africa which remains a fundamental aim of the agreement. This is why Article 20 of the AfCFTA provides for a Dispute Settlement Mechanism (DSM), the Protocol on Rules and Procedures on the Settlement of Disputes and the establishment of a Dispute Settlement Body (DSB) for resolving disputes among member states. The AfCFTA provides a mechanism for the settlement of disputes between its member states in particular and not by private commercial interests. It goes without saying that the direct beneficiaries and actors in the Agreement are these private entities who will engage in the actual trade in goods, services, movement and investments across the continent. With interests comes disputes and one needs no crystal ball to foresee the possibility of disputes in the future of these interactions across international borders, not just between private entities but also between private entities and member states on the terms of the AfCFTA. It is therefore necessary to study the Protocol on Rules and Procedures on the Settlement of Disputes (RPSD) under the Agreement vis-à-vis the interest of private entities that will aim to take advantage of the promises of Africa as a Free Trade Area.
The DSM adopted by the AfCFTA is clearly a facsimile of the World Trade Organization (WTO) model. The RPSD gives the DSB the power to establish Dispute Settlement Panels and an Appellate Body. Like under the WTO, “the priority is to settle disputes, through consultations if possible”, thus the first tool in the Multi-Tiered DSM is Consultation14 in order to encourage amicable resolution of disputes between state parties. If this does not yield desired results, the next step is to use Good Offices, Conciliation and Mediation. This will be handled by a Panel of experts with experience in law, international trade, other matters covered by the Agreement or the resolution of disputes arising under international trade agreements constituted by the DSB. The Panel shall consult with the Parties to a dispute and give them an adequate opportunity to develop a mutually satisfactory solution. A party not satisfied with the conclusions of the Panel has the right to appeal to the Appellate Body only on issues of law covered in the Panel report and legal interpretations adopted by the Panel.
The RPSD sets out specific length of time a dispute should take from reference to the DSB to its resolution. This is done by creating a detailed timetable for every stage of the procedure, with a bit of flexibility allowed for the deadlines at each stage. Notwithstanding the specific timelines and detailed deadlines, private investors will have concerns when it appears that their grievance can only be addressed when their country deems it fit to act on their behalf. This is so because the first person affected by the imposition of a tariff or non-tariff measures and any such breach or perceived breach of the provisions of the AfCFTA, leading to a dispute are the private entities.
Private Parties’ Interests in AfCFTA Dispute Settlement Mechanism
Article 1 of the AfCFTA RPSD defines “dispute” as “a disagreement between State Parties regarding the interpretation and/or application of the Agreement in relation to their rights and obligations.” Article 3 of the Protocol provides that the “…Protocol shall apply to disputes arising between State Parties concerning their rights and obligations under the provisions of the Agreement.” These provisions among others make it clear that like the WTO DSM the AfCFTA RPSD only apply to Member States and not private non-state entities. It affects public law issues like tariffs and other relevant issues that borders on eliminating barriers to, and the facilitating trade in goods and services, and investments within the African continent. On the other hand, private non-state actors; the primary beneficiaries of the Agreement have no locus (in their personal capacity) before the DSB.
The United Nations Commission on Trade and Development (UNCTAD) in its publication, ‘African Continental Free Trade Area: Policy and Negotiation Options for Trade in Goods’ of 2016 raised some concerns on Dispute Settlement as it affects Free Trade Areas as follows:
- Recognizing that the negotiation of the Continental Free Trade Area (CFTA) will require mammoth effort on the part of African States, it would be a sad situation if implementation disputes would hinder fuller implementation of the agreement. Free Trade Area implementation disputes are known to be, as with most transnational disputes, both costly and long-winded, and can produce uncertainty for businesses, both trading and investment. It is imperative, therefore, that the CFTA incorporate adequate mechanisms to prevent and resolve disagreements in an expeditious manner, such as through consultation, mediation or arbitration, avoiding duplication with the WTO dispute settlement mechanism where appropriate. These mechanisms should be easy to use, inexpensive (compared to WTO mechanisms), and quick in their response to the parties. Above all, AU member States will be required to make important contributions in terms of legal frameworks (both legislative and operational), as well as to instill a sense and culture of good governance and rule of law in their operators. [Emphasis supplied]
Also, Onyema, Emilia raised some salient issues as follows:
- The question that therefore arises is whether the African state whose citizen has suffered loss as a result of such measures can espouse the claims of its citizen. Jurisprudence from the WTO DSM does not technically preclude such espousal, which can also be on the basis of diplomatic protection. The primary question is whether it will be desirable for states to use the DSM provided under the AfCFTA to espouse the claims of their citizens. In some situations, it may be preferable that a state or group of states pursue redress for their citizens via the DSM against another state or group of states. But in the vast majority of cases, the dispute will fall within the commercial contract between the transacting parties.
The aptness of the DSM in limiting its use to member states is that while indeed private actors including state owned entities will be the direct beneficiary and most affected by the AfCFTA, in fact and law, all the reciprocal benefits and obligations are controlled by the member states. Issues bordering on tariffs and other relevant issues that borders on eliminating barriers to, and the facilitating trade in goods and services, and investments are controlled by the sovereign states thus it would appear that private entities may not have locus standi because they are stricto senso not parties to AfCFTA.
Also, giving every private entity access to the DSM may lead to a ridiculous level of multiplicity of disputes.21 For example, since Southern African Development Community (SADC) came into existence in 1980, disputes between member States were never brought to its tribunal till it was suspended in 2010 after controversial disputes between State and private parties. Negotiations for a new protocol for a new SADC Tribunal took away the locus standi of private parties. Conversely, one should be concerned that in 30 years, member states of SADC never registered a single dispute before the tribunal. Can it be said that all member states complied completely with the regional agreement? This only shows that states involved in African economic integration do not typically engage in vigorous dispute resolution practices where member states litigate/arbitrate against each other about issues pertaining to their duties and obligations under such regional agreements and they do not act on behalf of their aggrieved private actors. While there are those advocating for granting private entities direct access to the DSM, this writer submits that it should be done with caution to avoid abuse.
It is observed that the DSM hopes to be able to settle disputes as much as possible in a non-contentious manner.24 The reality is that for private actors whose interest, money and “blood” are probably at stake, there may be some contentions and such person is not likely to always want to wait for some state orchestrated bureaucratic ceremony before its interest is protected.
For the first time, in 2012, a private company25 based in Mauritius once took the bull by the horn when it instituted a case before the Common Market for Eastern and Southern Africa (COMESA) Court of Justice against Mauritius as a state, requesting the Court to give effect to a tariff liberalisation obligation under the COMESA, to which Mauritius was a party. Mauritius had initially complied with this obligation, but suddenly introduced a 40% customs duties on some products imported from Egypt because there was an upsurge of imports from Egypt. This was after the company had tried domestically through the Ministry of Finance of Mauritius to remove the duty and by instituting a case before Mauritius court, which both failed to yield any result. The Ministry did not act, and the Supreme Court of Mauritius held that it could not recognise the provisions of COMESA Treaty that are not incorporated into the national law of Mauritius.
At the COMESA Court of Justice, the Government of Mauritius objected to the locus standi of the company to bring a case before the Court under COMESA Treaty. The Court rejected the objection and found that it had jurisdiction to entertain the case under Articles 23 and 26 of the COMESA Treaty. The company’s actions yielded good result but this writer believes that access to DSM under AfCFTA should be even simpler.
Recommendations
It is not enough to identify the problems without suggesting some possible solutions to them. The European Union (EU) adopts what is called the Preliminary Ruling Procedure which allows every EU citizens to approach national courts and the courts are supported by the EU DSM. This allows uniform application of EU law throughout the member states and ensures that harmonisation of EU law is achieved not only by the legislature and executive but also through the judiciary.27 This writer however believes that this is a long shot as it took the EU several years of negotiations to get where it is and that notwithstanding the procedure is hardly used.
A simple, cost effective and efficient procedure is what is needed to accommodate the private sector in the AfCFTA DSM and what better way to do this than to harness the internet and IT in general. This is nothing novel as it is already being used by the SADC at least before the Tribunal was suspended in 2010. The SADC started a complaint mechanism in 2004. It provides for a complaints procedure and for certain information to be supplied when lodging a complaint. Once a complaint is lodged, a notification is sent to the country of origin of the economic operator or trader who lodged the complaint and at the same time, notification would be sent to the country the complaint is against. If no response is received from the country the complaint is against within two weeks, the country of origin of the economic operator or trader who lodged the complaint would need to notify the secretariat accordingly. The secretariat would then follow up. SADC also has a tripartite online mechanism for reporting any breach of the treaty experienced by private entities.
There are platforms with on-line dispute resolution mechanisms and this writer suggests that a structured efficient online platform that gives private actors an opportunity to trigger the DSM (at a minimal fee) to act will suffice. This will be done by creating a complaints procedure and for certain information to be supplied when lodging a complaint. The platform should be such that all parties involved are notified in one sweep akin to copying relevant people in an email and parties are expected to respond within a limited number of days. The secretariat then carries out a sort of Early Neutral Evaluation to determine the veracity of the complaint and decide if a process of consultation is to begin or a Panel of the DSM is required to get involved. Since a breach by a member state is likely to affect more than one player in such sector, this mechanism can also be used to join every complainant with similar issue against the same defaulter in one proceeding to avoid multiple proceedings on same or similar issues.
Through this systematic approach, private entities can trigger the process of dispute resolution but in a manner regulated by the secretariat and the process is prevented from abuse by giving the secretariat an opportunity to first evaluate if there is a real issue in dispute or not. By saving private actors the bureaucratic horrors that can sometimes render going through the state impossible, the DSB through the secretariat is given the opportunity to monitor compliance by member states.
With the internet and help of IT, the above process can be simplified and cost effective giving private actors an opportunity to be a major part of the dispute resolution process. This will only work with a deep commitment from member states of the AfCFTA for it to succeed. In the same vein however, the successes of the AfCFTA will be driven by the private sector thus it is only right to facilitate the possibility by opening the doors to the DSM to them.