AfCFTA and its Dispute Settlement Regime: A Faulty Design?

This article by Dr Bayo Adaralegbe discusses the Africa Continental Free Trade Area (AfCFTA) which came into force in 2019 vis-à-vis its dispute settlement regime and its implications, tracing the history of international trade dispute settlement from the time when under international customary law only State actors could sue each other; to the advent of non-State actors now being able to bring their claims/disputes against State actors before international tribunals. Unfortunately, however, the modern day innovations in international dispute resolution, do not seem to have been reflected in AfCFTA’s dispute resolution mechanism

Introduction 

Compared to trade within the European continent, Asia or North America, trading activities within Africa has been abysmally very poor.  With the coming into force of the African Continental Free Trade Area (AfCFTA) in 2019, this is expected to change. The overarching objective of AfCFTA is the creation of a single market on the African Continent for goods and services through the easy movement of people. The AfCFTA was inspired by other continental and regional arrangements that have effectively used the treaty system as a tool to enhance cross border trade and investment. It is expected that AfCFTA will cover a market of 1.3 billion people and a GDP of $3.7 trillion across the 55 member states of Africa. AfCFTA has a number of provisions that help ensure this. For instance, Article 5 of the treaty states that “A State Party shall accord to products imported from other State Parties treatment no less favourable than that accorded to like domestic products of national origin, after the imported products have been cleared by customs”. In other words, it is no longer acceptable for African countries to develop policies or laws that protect their local markets, to the detriment of imported products from other African countries.

History of Dispute Settlement Under International Customary Law

Article 1(e) of the Protocol on Rules and Proceedings on the Settlement of Disputes defines a 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(1) of the Protocol stipulates that “This Protocol shall apply to disputes arising between State Parties concerning their rights and obligations under the provisions of the Agreement.” In essence, the dispute settlement regime created under AfCFTA is strictly between the 55 member States. The obligations that member States commit to under the AfCFTA are to other member States, and not to legal and natural persons that are the conveyors of cross-border business activities that is expected to cause the single African market. Such persons do not have any primary rights (that can be violated), or secondary rights (that can be enforced)  under AfCFTA. Thus, if a Nigerian trader is discriminated against in South Africa, it is the Nigerian Government, not the Nigerian trader, whose rights are violated, and who can bring a claim against South Africa before the Dispute Settlement Panel of AfCFTA. 

At first blush, this appears to be perfectly normal. Historically, before the advent of legal/artificial  persons, while foreigners were protected within their host States under customary international law, they did not have secondary rights to bring claims against their sovereign host nations in international law. They were considered objects, and not subjects of international law, originally known as the “Law of Nations,” i.e., the law regulating the relationship of sovereign States to the exclusion of non-State actors.  It was the home States of these non-State actors, that made erring sovereign States accountable on behalf of their nationals. This was originally by declaring wars against these erring States. Ultimately, this evolved into what came to be known as ‘gun boat diplomacy’ in international law. It was this classical international law that informed the International Court of Justice model that did not recognise the standing of non-State actors as parties, and before it, Permanent Court of International Justice. The case of Ahmadou Sadio Diallo Case (Republic of Guinea v Democratic Republic of Congo), is a very good example of this traditional model. Diallo was a businessman of Guinean nationality, who had lived in Congo for about 30 years. At a time that he was pursuing a debt in Congo, he was arrested, stripped of his assets and expelled from Congo. Because he lacked standing before the ICJ, it fell on his home country, Guinea, to bring a claim on his behalf against Congo before the ICJ. The World Trade Organisation dispute settlement system follows this traditional model, and non-State actors are unable to bring claims before it. This is understandable considering that the WTO system was developed to support the General Agreement on Tariff and Trade (GATT), established in 1947 at a time that traditional international law prevailed.   

However, following the advent of legal persons, and ultimately, multinationals, some of which are known to be more economically prosperous than Nation States, and following the spate of expropriation of their investments in host countries, a shift in public international law began to emerge. Today, non-State actors are allowed to bring claims against sovereign States before international tribunals. Rich examples exist in the International human rights regime where non-State actors are allowed to bring claims against sovereign States before an international tribunal, and the Investor-State Treaty Arbitration system, where foreign investors are allowed to bring claims against their host States before an international tribunal. In these two examples, States make commitments under treaties that non-State actors are not party to, but in respect of which non-State actors enjoy secondary rights to bring claims against States before an international tribunal.

AfCFTA Dispute Settlement Regime and its Implications   

A careful examination of AfCFTA, makes clear that it is modelled after the WTO system. The same way non-State actors and businesses are not allowed to bring claims under the WTO system, is exactly what obtains under AfCFTA. In that sense the AfCFTA settlement regime, is a throw-back to traditional international legal order where it is up to the home State of an injured non-State actor whether to pursue a claim against another sovereign State, and if successfully pursued, it is the home State that is the beneficiary of the claim, not the non-State actor. Home States are typically reluctant to bring claims against other States, on behalf of their nationals. The considerations for bringing a claim against a State, are as diverse as they are complex. Thus, the fact that South Africa has violated an AfCFTA obligation against a Nigerian trader, does not exactly mean that Nigeria would be willing to pursue a claim against South Africa before AfCFTA Dispute Settlement Panel.  

The European Union actually started the idea of a single continental market in the late 50s with the European Community Treaty. Just before AfCFTA came into force, intra-trade in EU approximated 70% compared to Africa’s abysmal 14%. It is important to note that the EC Treaty that inspired AfCFTA single market agenda in fact allows non-state actors to bring claims against EU countries before the Court of Justice of the European Union based in Luxembourg, created under the treaty. Is there a correlation between EU’s successful single market and its dispute settlement design? What is clear is that the African continent appears to have an aversion for the standing of non-State actors before international tribunals. The African Charter on Peoples and Human Rights of 1981, was inspired by the European Convention for the Protection of Human Rights and Fundamental Freedom of 1950.  Despite the fact that the European version created the ECtHR, based in Strasbourg, that allows non-State actors to bring claims against sovereign States, this secondary right is only available conditional on each African State accepting this in its ratifying instrument under the 1998 Protocol establishing the African Court on Human and Peoples Rights by its Article 34(6).

In the end, AfCFTA followed the WTO model that responded to traditional international law, that did not recognise the standing of non-State actors, and whose objective is the promotion of cross-border trade over the more recent European Community Treaty, that recognises non-State actors, and whose objective is identical to AfCTA’s- integration of a single continental market.

Conclusion

The failure of AfCFTA to create a permanent international tribunal like the CJEU or ECtHR and allow businesses standing before it, denies those businesses the opportunity to directly hold States accountable for commitments they have made under AfCFTA. As it is, businesses can only bring claims in the national courts of their host States. Apart from not possessing any primary rights that protect them against protectionists tendencies that favour local markets (that, as we have seen, exists under the AfCFTA), the serious challenges that exist across national courts in Africa (compared to their counterparts in Europe or North America) are well documented. We will have to wait and see if this settlement design, will not impede the single market integration objective of AfCFTA. 

This settlement design is a draw back for another reason. There are at least four separate permanent international tribunals located on the European Continent alone – ICJ; ECtHR, CJEU, and the International Tribunal on the Law of the Sea (ITLOS). Surely, this keeps the European Lawyer busy, and improves his competence in international law. When international law was being developed by so-called civilised nations, African countries were mostly under colonial rule and did not have the opportunity to contribute. It is not a coincidence that  in respect of the Cameroun v Nigeria land and maritime boundary case, it was an Australian, late Professor James Crawford, then Whewell Professor of Public International Law, Cambridge University (who subsequently became an ICJ Judge) that addressed the ICJ on behalf of Nigeria. In that sense, this settlement design denies African Lawyers the opportunity to develop competences in international law, an area we consider arcane on the Continent.

This article is dedicated to the memory of foremost German Professor of International Economic Law, Professor Thomas Walde. Professor Walde did a lot in his lifetime to encourage a deep understanding of natural resources and international investment law for students from developing countries. He died suddenly in a freak domestic accident in France, while supervising my PhD Thesis.

Dr Bayo Adaralegbe, LLM Petroleum Law and Policy, PhD; Adjunct Professor of Law, CPEEL, University of Ibadan; Partner, Babalakin & Co.