By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*
The African Continental Free Trade Area Agreement (“the AfCFTA”), unveiled in March, 2018 in Kigali, Rwanda, was put in place to establish the African Continental Free Trade Area Agreement, and so far is considered the world’s largest free trade area: 55 countries merging into a single market of 1.2 billion people with a combined GDP of $2.5 trillion. Currently, the African countries trade in terms of blocks, with States forming RECs such as the East African Community (EAC), Economic Community of West African States (ECOWAS) and Southern African Development Community (SADC). All these are geared towards promoting regional markets integration but the AfCFTA is meant to work towards achieving economic integration of major African markets with the smaller markets and enhance competitiveness at the industry and enterprise level by exploiting opportunities for scale production, continental market access and better reallocation of resources.
The African Continental Free Trade Agreement (AfCFTA) main objectives are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union; expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation and instruments across the Regional Economic Communities (RECs) and across Africa in general; and also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.
All these trading and investment activities are expected to come with disputes which, if not well handled, would derail the above listed objectives of AfCFTA. While the Agreement provides for a dispute settlement body and the procedures to be followed, it presents a potential challenge where dealing with an investment dispute that is intercontinental. Normally, when investors and regional unions from out of Africa such as the European Union have disputes, they may prefer to use investment-related dispute settlement mechanisms such as investor-state dispute arbitration, which they may perceive as neutral. Notably, the African Union does not currently have a specialized forum to hear trade related disputes. The Agreement provides that each State Party should promptly publish or make publicly available through accessible mediums its laws, regulations, procedures and administrative rulings of general application as well as any other commitments under an international agreement relating to any trade matter covered by this Agreement.
It is also worth pointing out that AfCFTA provides that laws, regulations, procedures and administrative rulings of general application as well as any other commitments under an international agreement relating to any trade matter covered by this Agreement adopted after the entry into force of this Agreement shall be notified by State Parties in one (1) of the African Union working languages to other State Parties through the Secretariat. AfCFTA however provides that the Agreement should not nullify, modify or revoke rights and obligations under pre-existing trade agreements that State Parties have with Third Parties. This provision raises the question of the place of dealings of two member states that are also bound by international legal instruments especially in dispute settlement. This raises the question whether such countries can freely pick such a foreign mechanism if they both agree to the same.
In the event of any conflict and inconsistency between the afCFTA and any regional agreement, the Agreement provides that its provisions shall prevail to the extent of the specific inconsistency, except as otherwise provided in the Agreement. In addition, notwithstanding the provisions of Paragraph 1 of Article 19, State Parties that are members of other regional economic communities, regional trading arrangements and custom unions, which have attained among themselves higher levels of regional integration than under the Agreement, shall maintain such higher levels among themselves.
Generally, the Agreement is expected to: create a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063; create a liberalized market for goods and services through successive rounds of negotiations; contribute to the movement of capital and natural persons and facilitate investments building on the initiatives and developments in the State Parties and RECs; lay the foundation for the establishment of a Continental Customs Union at a later stage; promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of the State Parties; enhance the competitiveness of the economies of State Parties within the continent and the global market; promote industrial development through diversification and regional value chain development, agricultural development and food security; and resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.
In order to achieve the foregoing general objectives, AfCFTA is expected to specifically achieve the following objectives: progressively eliminate tariffs and non-tariff barriers to trade in goods; progressively liberalise trade in services; cooperate on investment, intellectual property rights and competition policy; cooperate on all trade-related areas; cooperate on customs matters and the implementation of trade facilitation measures; establish a mechanism for the settlement of disputes concerning their rights and obligations; and establish and maintain an institutional framework for the implementation and administration of the AfCFTA. The implementation of AfCFTA is to be governed by the following principles: driven by Member States of the African Union; RECs’ Free Trade Areas (FTAs) as building blocs for the AfCFTA; variable geometry; flexibility and special and differential treatment; transparency and disclosure of information; preservation of the acquis; Most-Favoured-Nation (MFN) Treatment; National Treatment; reciprocity; substantial liberalisation; consensus in decisionmaking; and best practices in the RECs, in the State Parties and International Conventions binding the African Union.
Notably, the scope of AfCFTA shall cover trade in goods, trade in services, investment, intellectual property rights and competition policy. Member States were to enter into Phase II negotiations in the following areas: intellectual property rights; investment; and competition policy, which negotiations were to commence after the adoption of the Agreement by the Assembly and were to be undertaken in successive rounds. The Agreement is designed to work hand in hand with the Protocols on Trade in Goods, Trade in Services, Investment, Intellectual Property Rights, Competition Policy, Rules and Procedures on the Settlement of Disputes and their associated Annexes and Appendices, upon adoption, and shall form an integral part of the Agreement.
The institutional framework for the implementation, administration, facilitation, monitoring and evaluation of the AfCFTA consists of the following: the Assembly; the Council of Ministers; the Committee of Senior Trade Officials; and the Secretariat, with the Assembly, as the highest decision-making organ of the AU, providing oversight and strategic guidance on the AfCFTA, including the Action Plan for Boosting Intra-African Trade (BIAT). Decisions of the AfCFTA institutions (namely the Assembly, the Council of Ministers and the Committee of Senior Trade Officials) on substantive issues are to be taken by consensus. 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. It is worth mentioning that AfCFTA entered into force on 30th May, 2019 after achieving the required minimum number of ratifications, that is, 22 countries ratifying the same. The Agreement is also categorical that no reservations shall be made to the Agreement.
*This article is an extract from the Book: Settling Disputes Through Arbitration in Kenya, 4th Edition, Glenwood Publishers, Nairobi, 2022 by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.
References
See Muigua, K., Settling Disputes Through Arbitration in Kenya, 4th Edition, Glenwood Publishers, Nairobi, 2022, p. 295 to 300.