Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021.

[1]

Introduction 

Transparency and consistency are desirable qualities in any legal system. Inadequate transparency is one of the most common complaints aimed at the investor-State dispute settlement (ISDS) system. Confidentiality of proceedings has been one of the main features of investment arbitrations. Gradually, this confidential nature has become heavily criticised because investment disputes frequently concern public interest such as protection of public health or environment but at the same time offer little or no opportunities for public participation.[2] For these reasons, the general public and interest groups have pressed for access not only to the final awards, but also to proceedings. Demands for more transparent institutions and procedures have recently been raised.[3] Under such circumstances, the trend toward open and participatory investment arbitrations intensified and consensus that the public should have the right to be informed about a notification of a claim, an access to proceedings and a final award was established in the international community.[4] 

On the other hand, consistency engenders predictability, thereby contributing to the system’s credibility and legitimacy. Conversely, a dispute system where comparable cases produce contradictory results is unpredictable, which increases disputes and their associated costs.[5] The debate over the lack of consistency in investment arbitration is not new. Several authors have extensively analysed instances of alleged inconsistency in an attempt to identify its causes and propose solutions.[6] 

Transarency in Investment Arbitration: Manifestations and Prospects of Standardisation 

Critics of investment arbitration have long condemned the lack of transparency at all stages of a dispute. This was because, until recently, treaties and international investment agreements (IIAs) were largely silent as to the degree of transparency which should attach to the arbitral proceedings conducted pursuant to them. Institutional rules also largely left the matter of procedural transparency to arbitral or party discretion.[7] In light of silence in treaties and institutional rules, parties to investment disputes held significant residual discretion to deal with many aspects of transparency by agreement. In the absence of agreement, tribunals were left to decide matters of transparency under the rubric of their general powers to regulate the proceedings. 

Transparency in international investment arbitration refers to the extent to which the public can access arbitral proceedings and information pertaining to those proceedings. In this context, institutional arbitration rules offer different transparency frameworks. The substantive differences between these rules may be owed to the fact that there is no strict consensus as to the appropriate balance between squarely conflicting notions of confidentiality/privacy and transparency in international investment arbitration. On the one hand, compromising confidentiality peels away one main attraction of international arbitration. On the other, maintaining levels of transparency is of significant import in the context of investment arbitration because disputes often involve matters of particular public interest and consequence. In Biwater Gauff Ltd v. Tanzania, the claimant requested provisional measures on confidentiality as a result of the unilateral disclosure of the minutes of a tribunal meeting. The tribunal agreed to the requested measures, stating that the disclosure of some documents should not be allowed in principle since it would jeopardise the procedural integrity of the arbitral process.[8]

In this regard, the standardisation of arbitration rules dealing with privacy and transparency would be a welcome development in international investment arbitration. It has the potential to achieve greater normative uniformity across institutions and boost the subjective acceptance of the regime, altogether increasing the legitimacy of investment arbitration. First, standardisation helps reduce uncertainty as to “how calls for transparency will be resolved in any particular case”.[9] This is beneficial for states and investors alike who can rely on a single body of practice. Second, implementing a more robust set of transparency rules could increase public confidence in investment arbitration by virtue of its openness. Investor-state disputes may be of significant interest to potentially affected communities, such as those involving environmental or human rights concerns, state concessions over natural resources or approvals of the privatisation of public services, and disputes resulting in a state’s liability for which payment may be absorbed by public tax money. In this context, greater demands for transparency are justified and to be expected. In addition, transparency in arbitral decisions contributes to the development and drafting of new treaties and increases the predictability of investment law, consequently leading to greater “participation and confidence in the system particularly of the less knowledgeable investors and host States”.[10] Moreover, increasing access to decisions also enhances the quality of decisions as tribunals and parties learn from the experience of their predecessors. 

b. Amicus Curiae Submissions and Third Party Funding

In addition to increasing the transparency of arbitrations by providing the public with information about the cases, some tribunals have also increased the openness of the proceedings by specifically allowing non-parties to act as “amici curiae” and submit information relevant to the dispute.[11] The 2006 revised ICSID Rules integrate that practice in an explicit provision allowing tribunals to accept amicus briefs. The rules require the tribunal to consult with the parties before deciding whether to allow the non-party submissions, but do not allow either or both parties together to veto the tribunal’s decision on the matter. This is consistent with the very concept of a “friend of the court” that serves to provide useful information to the tribunal, while leaving it up to the tribunal to determine how to use that information. 

The relevant ICSID Rules (Rule 37(2) of the 2006 ICSID Arbitration Rules and Article 41(3) of the 2006 Additional Facility Rules) provide, inter alia, that “After consulting both parties, the tribunal may allow a person or entity that is not a party to the dispute… to file a written submission with the Tribunal regarding a matter within the scope of the dispute”. The 2006 ICSID Rules go on to provide that, when deciding whether to accept an amicus curiae submission, a tribunal must consider a non-exclusive list of three factors: (a) whether the submission will assist the tribunal determine a factual or legal issue by providing a perspective that differs from the parties to the dispute; (b) whether the submission is within the scope of the dispute; and (c) whether the non-party has a significant interest in the proceeding. 

In Biwater Gauff Ltd v. United Republic of Tanzania, amici successfully invoked Amended Rule 37. The tribunal granted five non-governmental organisations the right to make written submissions. The tribunal concluded that the non-disputing parties’ written submissions had a reasonable potential to assist the arbitral tribunal by bringing a perspective, knowledge or insight that was different from that of the disputing parties.[12] 

Similarly, the COMESA Investment Agreement states that the “arbitral tribunal shall be open to the receipt of amicus curiae submissions in accordance with” certain requirements set forth in a separate annex.[13] This annex, in turn, merely: (a) confirms the tribunal’s authority to accept and consider the submissions, (b) sets forth requirements for amicus curiae applicants to make their submissions in certain languages and disclose their identities and the identities of those who provided assistance in making the submission (financial or otherwise), and (c) adds that “submissions may relate to any matter covered by [the COMESA Investment Agreement] that is relevant to the claim before the tribunal”.[14] 

On the other hand, third-party funding is an influential ingredient which, if not disclosed, may impede transparency in investment arbitration. Neither the ICSID nor UNCITRAL Rules provide for an express power to inquire into a third-party funder’s involvement. Although tribunals have relied on their inherent power to order disclosure in cases involving a potential conflict of interest, this is not a settled matter.

In an ICSID decision, the tribunal ordered the claimants to disclose whether they were the recipients of third-party funding, and to divulge the names and details of the funder and some terms upon which the funding had been provided. On 12 June 2015, the ICSID tribunal in Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd Sti v. Turkmenistan ordered the claimants, two Turkish construction companies, to disclose whether their claims in the arbitration are being funded by a third party.[15] In another PCA case under the UNCITRAL Rules, South American Silver Limited v. Bolivia, the tribunal ordered the claimant to disclose the identity of the third-party funder that granted financing to the claimant in the arbitration.[16] Tribunals have also considered the presence of third-party funding in whether to grant security for costs. In RSM v. Saint Lucia, the tribunal granted RSM’s request for security stating that the presence of third-party funder “supports the Tribunal’s concern that Claimant will not comply with a costs award rendered against it”.[17] More recently, in Eskosol v. Italy, the tribunal rejected Italy’s request for security for costs on the grounds Eskosol, with the assistance of a third-party funder, obtained an insurance policy from which costs could be paid.[18] Conversely, it has been reported that in Luis García Armas v. Bolivarian Republic of Venezuela, the ICSID tribunal ordered the claimants to provide guarantee for Venezuela’s costs in defending the investment arbitration on the basis that claimants’ third-party funding agreement provides that the funder is not liable for any adverse cost orders and claimants have not established that they have the resources to pay an adverse costs order themselves.[19] 

It should be noted here that funding agreements may affect important procedural issues such as conflict of interests and requests for security for costs. Third-party funding may give rise to conflicts of interests in several ways with respect to the arbitrator’s independence, for instance if the arbitrator has a relationship with the third-party funder. However, conflicts of interests are not necessarily limited to arbitrators. Many third-party funders are well-known and large institutions, which are inevitably involved in other claims. Accordingly, the risk of non-disclosure in the context of conflict of interests is relatively high. A refusal would increase the chances of a challenge based on the arbitrator’s lack of impartiality and independence, including at the time of the enforcement of an arbitral award before national courts.

Consistency and Coherence of ISDS: What Is It About and What Lies Beyond? 

A legal system is consistent when it produces coherent solutions, treats identical or similar situations in the same way, and gives equal treatment to the participants in the system. Nonetheless, many States have expressed their concerns regarding the predictability and consistency of the ISDS regime. 

On the importance of consistency and coherence for the system’s legitimacy, Mauritius explained in the meetings of the UNCITRAL Working Groups that “this question of coherence and consistency is absolutely key. It is the major concern. There is an utter lack of predictability and therefore legitimacy in the framework as it exists today. There is no appeal; there is no harmonization system and for that reason and contrary to other views that have been expressed we say it is absolutely a problem of the system because ISDS is by its very nature fragmented and incapable of harmonization in its current form”.[20] Meanwhile, Egypt stated that “the problem of inconsistency and unpredictability will remain as long as there is this large part of overlapping treaties of international and investment treaties especially the old generations of bilateral investment treaties which involve inaccurate drafting, uncontrolled drafting and indefinite drafting of the rules of the protection of investment”.[21] 

Certain features of investment law explain why it may be perceived as being more prone to inconsistent decisions than other areas of law. Specifically, its reliance on broad legal concepts and its decentralisation may foster inconsistent decisions, whereas other aspects, such as factual commonality and public availability of awards, may make the pre-existing inconsistencies more visible to observers. 

a. Catalysts and Magnifiers of Inconsistency 

The legal issues addressed in investment arbitration generally involve legal concepts that are designed to be applied to a broad range of situations, and, therefore, are open to criticism and different interpretations (e.g. fair and equitable treatment (FET), full protection and security (FPS), transparency, and arbitrary and discriminatory treatment).[22] Further, the decentralised nature of dispute resolution under investment treaties contributes to its inconsistency. Treaties provide for arbitration in the context of different arbitral institutions, each with its own set of differing rules. In addition, the mere nature of arbitration, where parties have a determining influence over the composition of the tribunal, allows for inconsistent results. Each dispute is decided by tribunals consisting of different arbitrators chosen by the parties, sometimes with opposing views on the relevant matters. Finally, international investment law only emerged in its current form in 1959, when Germany and Pakistan adopted a bilateral agreement, which entered into force in 1962.[23] The ICSID was not established until 1965, and significant case law in international investment law did not begin to take shape until the early 1990s with the end of the Cold War. While it may appear that investment law offers less certainty than many areas of domestic law, this is, in part, a product of the fact that many – if not most – areas of investment law are in the process of being formed. 

In addition, different cases with similar factual patterns are common. In fact, it is not unusual for different cases to challenge a single state measure or group of measures affecting several investors. Occasionally, the common facts are not limited to the challenged measures, but also extend to the investment itself, which is sometimes jointly owned by different investors filing separate claims. The fact that different arbitration tribunals address similar facts contributes to the risk of inconsistent arbitral decisions. Besides, investment arbitration cases and decisions are often publicly available and regularly attract attention as they deal with state policies and matters of public interest. Although transparency may be seen generally as a factor that increases consistency – because it allows arbitral tribunals and practitioners to have access to previous decisions – it also highlights contradictions among decisions by different tribunals. Scholars and practitioners closely scrutinise decisions focusing on contradictions and thereby increase the perception of inconsistency.[24] 

b. Tackling Parallel Proceedings: Adverse Consequences and Potential Mitigators 

Parallel proceedings may threaten the credibility of investment arbitration as a public form of adjudication because they can run against the principle of legal certainty and undermine arbitration as a credible method of dispute settlement.[25] It is often in the context of parallel proceedings that inconsistency in investment arbitration arises. One paradigmatic example is the case of Ampal-American Israel Corporation and others v. Arab Republic of Egypt, in which Ampal-American Israel Corp and other companies brought an investment arbitration under the ICSID Convention and two BITs, as well as four other related arbitrations; three commercial and one additional investment arbitration under UNCITRAL Rules.[26] The Ampal tribunal drew the line at claims in parallel arbitrations that are “double pursuit of the same claim in respect to the same interest”, reasoning that it would be an abuse of process to pursue this kind of parallel proceeding once the jurisdiction of one of the fora is confirmed. Thus, the tribunal held that Ampal had to “cure the abuse” and submit the claim to the exclusive jurisdiction of one tribunal, relinquishing the other. 

Hence, parallel proceedings may have negative consequences that undermine the advantages of arbitration including the risk of inconsistent awards, in particular when contradictory decisions are made, and a party tries to enforce the judgment or the award. Further, double recovery may occur where a company, shareholder or another company within the same group brings a treaty claim and a claim for breach of contract and prevail in both proceedings for the same wrong. 

Indeed, some commentators have argued that “arbitration fulfils its function only if it finally settles the dispute underlying the claims of the parties. This means that the end of arbitration proceedings shall coincide, from a substantial point of view, with the end of the dispute between the parties. If, when a claim is judged, another substantially identical claim is pending in another arbitration (or can be started again before another tribunal), arbitration has failed in fulfilling that function”[27] by undermining the fundamental legal principles of legal certainty and procedural fairness. Parallel proceedings may also result in the increase in legal costs and in logistical issues because the parties need to present their arguments before multiple fora sometimes in different jurisdictions. 

By and large, preventing parallel proceedings has not usually been a key concern for drafters of bilateral or multilateral investment arbitration treaties. Some treaties, however, include procedural mechanisms, which some consider may prevent parallel proceedings. For instance, fork-in-the-road clause gives parties a choice between seeking relief via either litigation in the host-state’s domestic courts, or international arbitration. Once the decision is made, the party waives its right to seek relief through the unchosen fora. While this does prevent the same entity from bringing claims in both litigation and arbitration, its effect is limited to that specific party. 

Courts and tribunals may also resort to some doctrines in addressing parallel proceedings. Res judicata is one legal principle according to which courts and tribunals are bound by the earlier judgments or findings of another court or tribunal as to a dispute before them.[28] The principle is grounded in the desire to ensure finality in the resolution of a dispute and to eliminate the harassment of respondents. However, the effect of this principle is limited. It only comes into play after a proceeding is complete, where there is a triple identity of object, cause, and parties, and it applies only to successive, but not simultaneous, parallel proceedings. Besides, Lis pendens is used by an adjudicator to stay or suspend a proceeding until the conclusion of a parallel proceeding before another adjudicator.[29] This doctrine is applicable when parallel proceedings involve the same parties (persona), cause of action (causa petendi) and claims (petitum).[30] Some commentators have suggested that this triple identity test should be relaxed, the persona requirement – in particular – to include identical claims brought by shareholders, locally incorporated companies and companies within the same chain of ownership.[31] 

In addition, arbitrators’ competence to rule on their own jurisdiction, the principle of competence-competence, provides tribunals with the means to stay proceedings before them for reasons that include the mitigation of adverse impacts of parallel proceedings. Although rules that govern investment arbitration are silent as to a tribunal’s power to stay proceedings, it is generally accepted that it falls within their inherent powers to conduct them in the manner they consider appropriate. Moreover, consolidation may be an option for parallel proceedings, in particular, when one or more of the arbitrators appointed in the various and related cases are identical. However, consent of all the parties involved is required, either expressly or by accepting the rules of the institution administering the arbitration or by explicit consent of the parties. Consolidation as a mechanism to increase the likelihood of consistent awards has been included on ICSID’s agenda for the amendment of its arbitration rules.[32] 

c. Tools to Ensure Consistency in Investment Arbitration 

Where regionalism is especially ascendant, some states have attempted to create tools to exercise control over their treaties and ensure that the obligations they have undertaken are interpreted consistently across their overlapping investment agreements. A review of some of the multilateral treaties negotiated in recent years, offer insight into how states may be responding to concerns regarding overlap and inconsistency in ISDS awards. States may use these tools to ensure that tribunals provide consistent interpretations of the obligations they have undertaken to avoid conflicts between different legal regimes and instruments. The first and most obvious tool could be drafting substantive provisions in the text that will guide interpretation. Another tool states have at their disposal in several regional IIAs is the ability to issue joint interpretations of their treaties. Nonetheless, while these provisions are becoming more commonplace, it is unclear whether they are a practical means of achieving consistency across awards, especially in large multilateral treaties. Furthermore, joint interpretations may impact consistency in instances where the statement effectively “amends” rather than “clarifies” the treaty. Moreover, it has been disputed whether joint interpretations and notes of interpretation are binding on investors.[33] 

Perhaps the most underused tool is the non-disputing party submission procedure.[34] These submissions are non-binding persuasive pronouncements by a single state on the meaning of certain provisions. Most commentators and tribunals have recognised that State treaty-members’ “common, concordant, and consistent statements” of their intent with respect to a treaty provision provide the best evidence of its meaning.[35] Non-disputing party submissions are not as frequent as one might expect, however, especially considering that all member states, including non-parties to the dispute, have a right to submit statements on treaty interpretation, even without prior tribunal approval or party consent. 

Conclusion

Transparency and consistency are undeniable features of any credible method of dispute settlement. Increased transparency of arbitration proceedings benefits the goal of consistency. Significant steps have been taken in this regard, notably the 2006 ICSID rules amendments requiring publication of awards or excerpts of awards, the 2014 UNCITRAL Rules on Transparency in Investment Arbitration and the Mauritius Convention. While a number of challenges still exist within the ISDS system, increasing its transparency and consistency fosters its legitimacy. Many of the criticisms levelled at ISDS can in fact be addressed through comprehensive, disciplined and collective efforts to attain those objectives.

_______________________ 

* Mohamed H. Negm is State Counsel, Arbitration and International Dispute Resolution, Egyptian State Lawsuits Authority – Ministry of Justice. He represents the interests of Egypt before international courts and arbitral tribunals in international investment arbitrations. He is currently representing the State of Egypt in 9 investment arbitrations before the ICSID. He has handled many complex, high value, commercial institutional and ad hoc arbitral proceedings involving parties from the Middle East, Europe, Asia, and the United States under the rules of leading arbitral institutions such as the ICC, CRCICA, UNCITRAL, LCIA, and DIAC. Mr. Negm has been appointed by the African Union as an Expert Consultant on the Pan African Investment Code (PAIC). He was recently selected by the Association of Young Arbitrators (AYA) as one of Africa's 50 Most Promising Arbitration Practitioners in 2020. He is the Institute for Transnational Arbitration Reporter for Egypt and OHADA. Mr. Negm lectures on Arbitration Law and International Dispute Resolution in the American Bar Association Rule of Law Initiative. He was the regional representative of LCIA-YIAG for the Middle East and North Africa. Mr. Negm publishes regularly in international journals on issues of international law, international investment and commercial arbitration. 

[2]   Gus Van Harten, Reforming the System of International Investment Dispute Settlement. In: LIM, Ching L. (ed.), Alternative Visions of the International Law on Foreign Investment. Cambridge: Cambridge University Press, 2016, p. 111.

[3]     Anna Peters, The Transparency Turn of International Law. The Chinese Journal of Global Governance, 2015, Vol. 1, No. 1, p. 4.

[4]    Marcos A. Orellana, The Right of Access to Information and Investment Arbitration. ICSID Review, 2011, Vol. 26, No. 2, p. 85.

[5]     Samaa A. Haridi and Reza Mohtashami QC, Consistency, Efficiency and Transparency in Investment Treaty Arbitration, Report of the IBA Subcommittee on Investment Treaty Arbitration (2018).

[6]  See e.g., Gabrielle Kaufmann-Kohler, Is Consistency a Myth? in Emmanuel Gaillard and Yas Banifatemi (eds), Int’l Arbitration Inst, Precedent in International Arbitration (Juris Publishing, Inc. 2008), pp. 137–148; Susan D Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions (2005) 73 Fordham L Rev 1521; Charles N Brower, Charles H Brower II and Jeremy K Sharpe, The Coming Crisis in the Global Adjudication System (2003) 19 Arb Intl 415.

[7]  D. Euler, UNCITRAL Working Group II Standards in Treaty Based Investor-State Arbitration: How Do They Relate to Existing International Investment Treaties? 12 Asper Review of International Business and Trade Law (2012), 139, 143; J.A. Maupin, Transparency in International Investment Law: The Good, the Bad, and the Murky, Transparency in International Law (2013); C. Knahr & A. Reinisch, Transparency Versus Confidentiality in International Investment Arbitration – The Biwater Gauff Compromise, 6 The Law and Practice of International Courts and Tribunals (2007) 1, 97, 116. 

[8]      Biwater Gauff Ltd v. United Republic of Tanzania, Procedural Order No. 5, para. 55 (ICSID Case No ARB/05/22), February 2007.

[9]     Nathalie Bernasconi-Osterwalder and Lise Johnson, Transparency in the Dispute Settlement Process: Country best practices, Bulletin No. 2, Best Practices Series, International Institute for Sustainable Development, February 2011.

[10]   Federico Ortino, External Transparency of Investment Awards, Society of International Economic Law Inaugural Conference, Geneva (2008).

[11]      Nathalie Bernasconi-Osterwalder and Lise Johnson, Transparency in the Dispute Settlement Process: Country best practices, Bulletin No. 2, Best Practices Series, International Institute for Sustainable Development, February 2011.

[12]      Biwater Gauff Ltd v. United Republic of Tanzania, Procedural Order No. 5, para. 55 (ICSID Case No. ARB/05/22), February 2007, (“The arbitral tribunal grants the Petitioners the opportunity to file a written submission in these arbitral proceedings, pursuant to Rule 37(2)”).

[13]      Art. 28(8); See also Annex A, Art. 8.

[14]      Annex A, Art. 8.

[15]   See Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd Sti v. Turkmenistan, Procedural Order No. 3, ICSID Case No ARB/12/6.

[16]   South American Silver Limited v. Bolivia, PCA Case No. 2013-15, Procedural Order No. 10 dated 11 January 2016.

[17]      RSM Production Corporation v. Saint Lucia, Decision on Saint Lucia’s Request for Security for Costs of 13 August 2014, para. 83.

[18]    Eskosol SpA in Liquidazione v. St Italian Republic, ICSID Case No ARB/15/50, Procedural Order No. 3 of 12 April 2017, para. 37.

[19]       Luis García Armas v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/16/1, Procedural Order No. 8 of 20 June 2018.

[20]        Anthea Roberts and Zeineb Bouraoui, UNCITRAL and ISDS Reforms: Concerns about Consistency, Predictability and Correctness, June 2018

[21]        Ibid.

[22]    Christoph Schreuer, Coherence and Consistency in International Investment Law, in Robert Echandi and Pierre Sauvé (eds), World Trade Forum: Prospects in International Investment Law and Policy (Cambridge University Press 2013).

[23]     Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd ed., Oxford University Press 2012), p. 6.

[24]      Samaa A. Haridi and Reza Mohtashami QC, Consistency, Efficiency and Transparency in Investment Treaty Arbitration, Report of the IBA Subcommittee on Investment Treaty Arbitration (2018), p. 7.

[25]      See Giovanni Zarra, Parallel Proceedings in Investment Arbitration (Giappichelli Editore 2016).

[26]    This parallel investment treaty arbitration against Egypt was initiated under the 2013 UNCITRAL Arbitration Rules (“UNCITRAL Rules”) and Egypt’s investment treaty with Poland. In that proceeding, the claimants were Polish-Israeli national Yousef Maiman and three companies of the Merhav group of companies that he allegedly controls, including Ampal’s subsidiary, Merhav Ampal Group Ltd.

[27]  Giovanni Zarra, Parallel Proceedings in Investment Arbitration XV (2017).

[28] See Denis Bensaude, The International Law Association’s Recommendations on Res Judicata and Lis Pendens in International Commercial Arbitration (2007) 24 JIA 415; see also Bernardo M Cremades and Ignacio I Madalena, Parallel Proceedings in International Arbitration (2008) 24 AI 507, 519.

[29]  Gary B Born, International Commercial Arbitration, Vol III: International Arbitral Awards (Wolters Kluwer 2014) 3792.

[30]    Denice Forstén, Parallel Proceedings and the Doctrine of Lis Pendens in International Commercial Arbitration: A Comparative Study between the Common Law and Civil Law Traditions (Uppsala University 2015). See also www.diva-portal.org/smash/get/diva2:813565/FULLTEXT01.pdf accessed 15 December 2017.

[31]  See Christoph Schreuer, Shareholder Protection in International Investment Law (2005) 3 TDM 1, 14; Silja Schaffstein, The Doctrine of Res Judicata Before International Arbitral Tribunals (PhD Thesis, University of Geneva and University of London, 2011, paras. 713–715.

[32]    See IAReporter, ICSID Identifies Sixteen Topics that Have Emerged from Rules Amendment Consultation, and Turns to Study and Drafting, IA Rep (Santa Monica, 8 May 2017).

[33] David Gaukrodger, The Legal Framework Applicable to Joint Interpretive Agreements of Investment treaties, OECD Working Papers on International Investment, No. 2016/01, OECD Publishing, Paris; Eleni Methymaki and Antonios Tzanakopoulos, Masters of Puppets? Reassertion of Control Through Joint Investment Treaty Interpretation, in Andreas Kulick (ed.) Reassertion of Control Over the Investment Treaty Regime (Cambridge University Press 2017), pp. 155–181.

[34]    United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (2015) 54 ILM 747 (the “Mauritius Convention”).

[35]    Gerald Fitzmaurice, The Law and Procedure of the International Court of Justice 1951-4: Treaty Interpretation and Other Points (1957) 33 Brit Y B Int’l L 203, p. 223; See Anthea Roberts, Power and Persuasion in Investment Treaty Interpretation: The Dual Roles of States (2010) 104 AJIL 179, 200. 

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

Summary

The  African Continental Free Trade Agreement (AfCFTA) is acknowledged as  one of the flagship projects for Africa’s developmental policies as established by the African Union.  The Agreement establishing the AfCFTA which entered into force on 30th May 2019 has six (6) protocols including the investment protocol which is the subject of this article.

Introduction

The  Investment Protocol presents  a unique opportunity  for African states to disentangle a complex , often- overlapping and fractured  system of African related international investment agreements (IIAs). This includes the various investment related agreements developed by regional groups such as ECOWAS, COMESA and SADC ,  intra-African Bilateral Investment Treaties (BITs) and BITs between African countries and countries outside the continent. Over the past decade there have been strong efforts at both the national and regional level towards achieving    harmonised investment regulatory framework(s) in relation to foreign direct investment.

The most recent attempt towards the development of a harmonised model document relating to investment was the Pan African Investment Code  (PAIC) .  The object of the  PAIC as stated in the document is to ‘...promote, facilitate and protect investments that foster the sustainable development of each Member State...’[2] .  The PAIC  is  non-binding on African member states [3] however the document acknowledges under Article 3.2 that  the Code may be reviewed at a future date to  become a binding instrument.

The opportunity to ‘escalate’ the PAIC from a non-binding document   into a consolidated investment  instrument  to be  adopted and utilised by African governments in negotiating IIAs is highly significant.  Though there has been loud criticism from many quarters on the PAIC as being overly protectionist or narrowly focused  as  a model investment treaty document, it reflects consensus from African countries that investment on the continent must be focussed on sustainable development.

As negotiations on the Investment Protocol progress it is recommended that the following are taken into consideration by the  countries involved in the negotiations:

There is no time like the present

As mentioned earlier one of the key criticisms of the PAIC was that it was ‘over-protectionist’  and veered towards  promoting the rights of host states against the well established  rights of foreign investors. The global COVID-19 pandemic which started spreading worldwide in  the 1st quarter of 2020  placed into startling relief  the necessity of governments around the world to  take bold and rapid action to mitigate the adverse effects of the pandemic threatening to cripple their respective economies.  UNCTAD[4] lists some of these actions as the  tightening of foreign investment screening mechanisms,  mandatory production and export bans of health related products and services, and  the nationalisation of  certain  companies adversely affected by the pandemic. These actions which often went against the commercial interests of  international investors is slowly emerging as a possible fertile ground for investor state disputes.  The International Institute of Sustainable Development (IISD)[5]  posited  that hundreds of foreign investors could potentially bring claims to challenge the COVID 19 pandemic measures taken by host governments. These claims could conceivably be supported by third party funders looking forward to  huge payouts on  their investment arbitration portfolios. 

The advocacy for reform of the IIA framework to ensure the rights of host states  to regulate in the public interest whilst maintaining appropriate levels of investor protections which has been promoted by institutions such as UNCTAD and IISD has received an unexpected boost due to the effects of the COVID 19 pandemic on the economies of countries . The silver lining as it were of the pandemic  is that there is arguably a greater level of acceptance  and understanding now more than ever before in Africa and around the world,  for the state’s  right to regulate in the event of a crisis to public health, public safety, environment, security, finance etc. 

The negotiators of the AfCFTA Investment Protocol must therefore seize the opportunity presented by the increased awareness and understanding of the state’s right to regulate, to actively promote within the Protocol provisions to preserve the rights of African governments to regulate in the public interest,  the maintenance of  a reasonable balance in the respective rights of investors and host countries as well as the obligation for investment to be driven by the sustainable development goals.  Needless to say it is important that the host states' right to regulate is exercised in a transparent, non-discriminatory and good faith manner. 

Leap-frog over the mire

Over the past decade African countries at a national  and regional levels have taken strenuous efforts to reform the IIA framework[6].  Approaches have included  a partial or complete opt out of ISDS, termination of IIAs and the crafting of new IIA models Though well-intentioned  these efforts have often resulted in a lack of unified purposefulness in the direction of reform across the continent. The AFCFTA Investment Protocol provides an unrivalled opportunity for African states to come to a consensus (as far as practicable) on the core principles of international investment law that should be reflected in the document on matters such as most favoured nation treatment, national treatment, pre-establishment, right to regulate and dispute settlement mechanisms.  It is noted that during the negotiations of the PAIC  a lot of effort was put into defining these concepts and setting out their respective scopes of application.

The following  are recommended for consideration:

• Clear and as far as practicable unambiguous language  on definitions and scope of concepts utilised in the Investment Protocol. There should be carefully drafted exceptions to the applications of the Protocol to  specific policy areas and measures such as public health and safety,  and sensitive industries & economic sectors.

• Provision of detailed guidance  on the interpretation of relevant provisions in the Protocol. This would avoid the application of wide discretion by courts, arbitral panels and other dispute resolution bodies in the interpretation and application of the Investment Protocol.

• Innovative approaches to investor state dispute settlement including the  exhaustion of domestic remedies and resort by parties to reputable regional arbitration or mediation institutions on the continent.

• Insertion of investor obligations particularly in relation to sustainable development.  

The PAIC it is argued should be the base document  for the negotiators , the key reference document as it were. In an effort not to reinvent the wheel, best practice examples of similar continental investment agreements should be studied particularly those entered into by developing countries.  

Building the blocks of consensus

Negotiators of the AFCFTA Investment Protocol have the herculean but not unsurmountable task ahead of achieving a consensus on all the relevant provisions of the document. African countries  its humbly proposed,  should take the following into consideration:

a.     Inbuilt flexibility

African countries  are economically vastly different from each other, from behemoths in size, population and GDP to small island nations  and least developed countries. Obviously then agreement on  thorny issues such as definitions of key terms, pre-establishment, performance requirements, right to regulate and international arbitration would not be readily obtained.  Instead there should be some level of flexibility in limited circumstances for countries based on factors including their state of economic growth and developmental priorities to have a phased in/out approach to the provisions of the Protocol. Also to be considered would be the use of carefully crafted reservations to be utilised on  a case by case basis by a  contracting party. 

b.     Unratified IIAs

It is a curious fact that a significant number of African IIAs (whether with African/non-African countries) remain unratified. There are by conservative estimates almost a thousand IIAs signed by African countries of which less than two hundred are between African countries.  The Republic of Ghana for instance has executed 25 BITs and ratified 7. A likely rationale is that these African IIAs were entered into as a demonstration of strong bilateral political ties rather than as a driver for international investment.  With  the AFCFTA framework firmly settled , and negotiations for an AFCFTA Investment Protocol ongoing, there is a distinct possibility of increased  pressure on  African countries to ratify these BITs which may date back over a decade and reflect first generation style IIAs. There must be a general understanding to halt the ratification of IIAs executed by African states, particularly those which do not reflect sustainable development and have a poor balance between the rights of states and foreign investors.

c.      Negotiation of IIAs

Though the COVID -19 pandemic put a chill on many IIA negotiations it is a distinct possibility that some non-African countries may be desirous of ‘locking in’ African states into IIAs prior to a possibly less ‘liberal’/ pro-investor IIA document under the Investment Protocol. African countries should proceed with current or prospective IIA negotiations  with much caution. This will prevent challenges from acceding to an AFCFTA  Investment protocol which is inconsistent with recently executed or ratified IIAs. 

d.     Manage expectations

A lot of expectations are riding on the Protocol as the mechanism which would most likely resolve the complicated and often contrary  framework of IIAs on the continent.  This would in turn increase trade and investment. It  is  however  a trite fact that the existence of IIAs does not necessarily  translate into increased FDI. The negotiators of the  Protocol must also take note of the barriers to FDI entry in Africa such as lack of transparency, excessive bureaucracy , corruption, and lack of harmonisation of investment legislation. Investment facilitation provisions in the Protocol may be most helpful to practically guide African governments in attracting investment towards sustainable development. 

e.     Scope of the Investment Protocol 

It is unclear at present whether the Protocol will apply only to intra-African IIAs or also to IIAs between African and non-African states.  As majority of IIAs entered into by African states are with non-African states  as well as a majority of investment disputes arise between African states and non-African foreign investors, it would be imprudent to limit the scope of application of the Protocol to only intra-African IIAs. It would be useful for clarity on this matter to be established as early as practicable on the negotiations. 

f.       Capacity Building 

The over fifty countries on the African continent have very varying experiences in the promotion of foreign direct investment , investment regulation and the management of investment related disputes. Therefore there will be very experienced country negotiators who have been involved in the negotiation of IIAs and investment dispute settlement. Conversely there will be representatives of other countries who will not have the benefit of such experiences. It will therefore be helpful for the AfCFTA Secretariat to provide opportunities for  country representatives/negotiators to increase their knowledge and exposures in issues relevant to the Investment Protocol.

Conclusion

The first meeting of experts on the investment protocol has taken place  within the 1st half of 2021. There is a lot of enthusiasm among African countries on the possibilities that the Protocol presents in increasing investment across the continent. With commitment and good faith of all the relevant parties it is clear that the Protocol once completed and acceded to by African states will be a key instrument in enhancing the framework to increase intra-African investment and set a more uniform playing field for investment agreements  between Africa and the world. 

* Head of Legal Division, Ghana Investment Promotion Centre.  The views expressed in this Article are that of the author and do not represent the position or views of any particular government or  party in the Investment Protocol negotiations

[2] Article 1 of the Draft PAIC

[3] Article 2.1 of the Draft PAIC

[4] UNCTAD Investment Policy Monitor May 2020, Special Issue No. 4,  Investment Policy Responses to the COVID 19 Pandemic

[5]  IISD -Protecting Against Investor–State Claims Amidst COVID-19: A call to action for government. April 2020

[6] UNCTAD June 2017 Issue 2; IIA Note discusses in further detail the approaches taken by various African countries to reform the IIA network.

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

ABSTRACT

In late 2017, the OHADA Council of Minister modified and revised the Uniform Act on Arbitration and CCJA Arbitration rules which are the two rules governing arbitration within the OHADA area. The substantive point of the reform was the insertion of investment arbitration provisions in these two instruments governing arbitration in the OHADA area; this insertion thus expanded the scope of OHADA. Henceforth an arbitration under an instrument regarding investment such as an investment code or a bilateral or multilateral treaty is in the most natural way possible within the OHADA area. 

The expansion of OHADA arbitration to investment arbitration constitutes therefore an undeniable innovation. However, this paper goes further and a bit “against the flow” will discuss the new OHADA approach toward investment arbitration, more specifically the impact of the reform to date in the OHADA landscape. 

INTRODUCTION 

On 23 and 24 November 2017, the OHADA Council of Minister modified and revised the two laws governing arbitration in the OHADA area: The Uniform Act on Arbitration[1] (UAA), and the CCJA Arbitration Rules. The new laws came into force on 15 March 2018. One of the substantive modifications of the OHADA reform on arbitration was the insertion of investment arbitration provisions in the UAA and the CCJA Arbitration Rules. Initially, OHADA Arbitration laws turned to commercial arbitration even though it had often dealt with disputes resulting from investment arbitration.[2] Following 2017’s revised provisions, the UAA and CCJA’s arbitration rules moved from commercial arbitration to expressly include investment arbitration.[3] By introducing these new provisions on investment, arbitration broadens the scope of OHADA arbitration. 

OHADA is a regional organization with Seventeen-member states.[4] These member states are also members of one of the two regional economic and monetary organizations: The Economic Community of Central African States (ECCAS) and the Economic Community of West African States (ECOWAS). Therefore, OHADA arbitration has a regional investment policy impact. 

The investment arbitration provisions were necessary due to the growing demand. For instance, the CCJA Arbitration Centre heard investor-State disputes based on an arbitration agreement in several instances, despite the absence of related investment provisions.[5] 

A lot has been said about the OHADA arbitration reform especially about the expansion of the scope of its application following the introduction of the investment arbitration provisions.[6] 

The aim of this paper is not to remake an in-depth presentation of the aforementioned provisions.  Without compromising the positive contribution of the reform in particular as regard the introduction of provisions dealing with investment, this paper a bit “against the flow” will discuss the new OHADA approach toward investment arbitration, more specifically the impact of the reform to date. Have the new investment arbitration provisions appeared as a real innovation within the OHADA member States' investment landscape? Has OHADA investment arbitration evolved since the revised UAA and CCJA arbitration rules came into force? Can innovation be evidenced in the OHADA investment landscape? 

This paper provides answers to the following questions.

I.       OHADA investment arbitration provisions: a real innovation for resolving investment disputes within the OHADA Member States?  

OHADA arbitration in itself has its roots in the OHADA Treaty. Hence, OHADA investment arbitration provisions must comply with the OHADA Treaty (A). Therefore, one can only expect the revised law to comply with the trend of investment arbitration laws (B). 

A.    The trend of the OHADA Treaty  

Both the UAA and the CCJA arbitration rules are based on the OHADA Treaty. As per the OHADA Treaty,[7] “Pursuant to an arbitration clause or submission agreement, any party to a contract may submit a contractual dispute to arbitration as provided for in this part, where one of the parties is domiciled or has his usual place of residence in the territory of a State Party, or where the contract is performed or will be performed wholly or partly in the territory of one or more States Parties…”

The UAA provides that “An arbitration may be based on an arbitration agreement or on an instrument regarding an investment, in particular an investment code or a bilateral or multilateral investment treaty” and the CCJA revised Arbitration rules provide that “The mandate of the Court shall be the administration, in accordance with these Rules, of arbitral proceedings when a contractual dispute, pursuant to an arbitration agreement, is referred to it by any party to a contract, either where one of the parties is a resident or has its usual place of residence in the territory of one or more of the Member States, or where the contract is performed or to be performed, in whole or in part, in the territory of one or more Member States. The Court may also administer arbitral proceedings based on an instrument related to an investment, in particular, an investment code or a bilateral or multilateral investment treaty”.

Article 21 of the OHADA Treaty seems to limit OHADA arbitration to disputes arising from a contract and states also that one of the parties must be domiciled or has his usual place of residence in the territory of a State or that the contract shall be performed wholly or partly in the territory of one or more State Parties. 

Thus, two conditions form the basis of OHADA Arbitration: A dispute arising from a contract and the domiciliation or place of residence in the territory of a Member State or the performance of the contract in one or more State parties.  

If one looks especially at article 2.1 of the CCJA Arbitration Rules[8], it is clear that the first part of article 21 of the OHADA Treaty has been maintained. However, unlike the first part of article 21, there is no indication in the second part of article 2.1 dealing with investment arbitration, particularly whether one of the parties to the investment disputes must be domiciled or has his usual place of residence in the territory of a state party, or whether the investment is to be performed wholly or partly in the territory of one or more States Parties. 

Besides, article 21 of the OHADA Treaty remains in its current wording, limited to disputes arising from a contract while articles 3 of the UAA and 2.1 of the CCJA arbitration rules open OHADA arbitration to disputes arising from an investment based on an international investment instrument such as an investment code or a bilateral or multilateral investment treaty.[9] 

The new provisions in the UAA and the CCJA Arbitration rules disconnect with the OHADA Treaty as it fails to consider the state or the residence of the parties or the place of performance of the investment[10]. Once the international instrument has designed CCJA as the forum where the dispute must be settled, the CCJA has jurisdiction regardless the state, place of residence of the Parties or the performance of the investment within the OHADA area. Thus, the current wording does not comply with the current requirements of OHADA arbitration and has to be clarified or completed. 

Discussing compliance between the new OHADA provisions on investment arbitration, some authors have argued that the actual reform of OHADA arbitration will be achieved with the OHADA Treaty reform.[11]

Even if the practitioners, especially arbitral tribunal who will be dealing with these provisions as they are written will have to interpret them broadly, in favour of disputes relating to investment arising from international investment instruments in the OHADA area, there should be a rationale to revise the OHADA Treaty to expressly include investment arbitration. There is also a rationale to review the OHADA arbitration provisions on investment that have been added so that the conditions relating to domiciliation and performance of the investment in one of the many OHADA States appear clearly. 

In any event, some adjustments are still needed to complete the OHADA reform on arbitration. 

The same remark applies when one looks at investment requirements that should underlie legislation dealing with investment arbitration. 

B.    The trend of the investment arbitration requirements and its policy 

The development noted in OHADA arbitration legislation concerning investment arbitration has been marked by an "inclusion" policy. In other words, despite the substantive changesets observed, the OHADA legislator has chosen not to disrupt the structure of the texts as they existed. This choice was justified by the desire not to disturb the practitioners who were already familiar with the existing system of the OHADA arbitration texts. 

If this choice not to encumber the existing texts is not in itself subject to criticism, since substantive modifications can be emphasized,[12] the legislator left out some essential requirements, especially dealing with investment arbitration. In other words, they are few added considerations regarding investment arbitration in the OHADA provisions related to investment arbitrations.  

One of the requirements of investment arbitration is Transparency. As a matter of fact, investment disputes imply States or one of its entities and therefore public interest such as protection of public health or environment is a concern. Thus, Transparency in investment arbitration implies access of the general public and interest groups such as various non-governmental organizations to the final awards and proceedings[13] and information resulting from those proceedings.

The need for Transparency in investment arbitration mushroomed through the participation of amicus curiae in arbitral proceedings. Amicus curiae's involvement in investment arbitration responds to continuing public pressure and criticism of the ISDS system. Allowing third parties such as NGOs and civil society groups to intervene in arbitral proceedings contributes to the ISDS system.[14] 

One of the questions raised when looking at the OHADA arbitration texts as revised is whether amicus curiae intervention can be allowed in case of investment disputes involving an OHADA State Party against an investor. Neither the UAA, nor the CCJA rules have considered that extremely topical subject. Article 8-2 of the CCJA's arbitration rules on voluntary intervention is the solution because it is written in general terms[15]and can be used to allow intervention of third parties, but this intervention is submitted to publicity of the proceedings and the consent of the parties.[16] However, it appears that the principle within OHADA arbitration is still confidentiality of the proceedings.[17] Access to information and documents related to an arbitration proceeding under the OHADA arbitration rules is subject to the consent of all the parties and to their will to publicize their dispute. [18] 

Upstream the trend in investment arbitration, the OHADA rules have not taken directly into account the requirement of Transparency in investment while: 

• The new OHADA legislation on arbitration has been enacted after the adoption and entry into force of the Mauritius Convention on Transparency ; [19] Some OHADA State Members have signed and ratified the Convention.[20] Thus, Article 3 of the said convention Rules of Transparency apply to their BITs; 

• BITs signed between some OHADA member States and Canada expressly referred to the application of UNCITRAL arbitration rules.[21] Since these BITs have been concluded after 1st April 2014, UNCITRAL Rules on Transparency applied to them. OHADA member States are open to the application of UNCITRAL rules on Transparency. Therefore, with the expansion of the scope of application of OHADA arbitration rules to investment arbitration, it is necessary to align with UNCITRAL rules on Transparency to avoid any doubt in the application of provisions relating to Transparency on investment arbitration proceedings within the OHADA area;[22]

• Many other arbitration institutions have adopted rules on Transparency. See, for example, The Investment Arbitration Rules of the Singapore International Arbitration Centre (SIAC IA),[23] the China International Economic and Trade Arbitration Commission (CIETAC) “Arbitration Rules on investment disputes” [24] or more recently in 2019, the ICC who provided new rules on Transparency foreseeing the possibility for the arbitral tribunal, after consulting of the parties, to adopt measures to allow oral or written submissions by amici curiae and non-disputing parties.[25] These ICC rules on Transparency have been confirmed in the 2021 note to parties and arbitral tribunal on the conduct of the arbitration under the ICC rules of arbitration.[26] 

The structure of OHADA texts on arbitration is still primarily designed for commercial arbitration than investment arbitration, despite expanding the scope of application to investment arbitration. An authoritative doctrine has raised some critical issues revealing a nature inclined towards commercial arbitration.[27] However, these criticisms do not intend to undermine the significant step taken by the OHADA legislator in expanding OHADA arbitration to investment arbitration. They are seeking to improve the existing texts. 

Since the name of the legislation has not changed and can lead to confusion, the solution could be to develop a separate corpus of rules mainly dedicated to investment arbitration within the OHADA area.[28] Such a separation will have the advantage of clarity. 

Broadly, one might have expected the OHADA reform on investment arbitration with a firm policy towards investment in the OHADA Member States, especially because the OHADA reform on arbitration coincides with the discussion about the ISDS reform at UNCITRAL, which started in late 2017.[29]  

There has been an increase in attendance of African states between the first session in late 2017 and the last in-person session in January 2020°. It is also true that an Africa intersession commission has been put in place to discuss the ISDS reform from an African perspective.[30] This African intersession Commission comprises some OHADA Members states, the African Legal Support Facility, Francophonie and other NGOs; nevertheless, there is no precise position arising from these meetings on the policy these countries want to implement for their investment laws and international investment instruments at a regional level, for instance.

It is unfortunate that within the OHADA area, there are still isolated positions on such a sensitive topic. Some OHADA Member States have expressed their standpoint towards the ISDS ongoing reform at UNCITRAL, Burkina Faso in 2020[31] and Mali in 2019[32]. A single voice carried by the whole Organisation on behalf of all the Member States could have been more constructive. What is the position of OHADA Members states towards ISDS? Would the OHADA Member States want to terminate the existing BITs and renegotiate them? On what criteria? 

The OHADA Organisation has not seized the opportunity to express its opinion on how its perceived investment policies should be. 

II.             OHADA investment arbitration provisions: a real influence on investment policies of OHADA Member States? 

For consistency, this section should also lead the reader to two considerations related to changesets observed in primary texts referring to investment within the OHADA area, if any (A) and in newly BITs concluded by OHADA Member States after the reform (B). 

A.    An influence on primary texts referring to investment within the OHADA Area? 

As stated in the introduction, OHADA Member states are also members of the Economic Community of Central African States (ECCAS) and the Economic Community of West African States (ECOWAS). Some instruments of these regional organizations are aimed at investment regulation. Albeit non-exhaustive, this includes the CEMAC Common Convention on Investments in the States of the Customs and Economic Union of Central Africa, the CEMAC charter of Investments or the Economic Community of the West African States Supplementary Act.[33] 

Part V of the CEMAC Common Convention on investments in the States of the Customs and Economic Union of Central Africa is dedicated to the settlement of disputes with chapter III dealing with arbitration. 

The preamble of the Charter of investment of CEMAC states that Member States adhere to international main mechanisms guaranteeing investments including those relating to international arbitral courts proceedings and to the recognition and enforcement of arbitral awards. Article 4 paragraph 2 of the said investment Charter stipulates that all Member States of CEMAC adhere to the OHADA Treaty and article 5 paragraph 2 states that CEMAC Member States encourage recourse to arbitration and ensure the enforcement of arbitral awards. 

The ECOWAS Supplementary Act was signed in 2008 and entered into force in 2009 to harmonize national laws and create a single Community investment Code. It provides for ISDS but only through arbitration at national courts or national investment arbitration centres.[34]

One might observe that the OHADA arbitration reform did not lead, at least for now, to modification on the primary texts referring to investments within the OHADA area, although some of them are obsolete[35].

The Charter of investment of CEMAC already encourages arbitration; however, with the expansion of OHADA arbitration scope, an express reference can be directly made to OHADA arbitration under the UAA or CCJA arbitration rules.

There is a need to reform or adapt these existing legislations with the investment policy the OHADA Member States would like to implement, which have been reflected in opening OHADA arbitration expressly to disputes arising from investments.

The idea behind this is that the existing primary texts within ECCAS and ECOWAS must encourage OHADA arbitration. This remark also applies to BITs concluded by OHADA Member States. 

B.    An influence in  newly concluded BITs by OHADA Member States after the reform?

Most of the OHADA States, if not all, are host countries for investments. They are, therefore, signatories of many BITs aimed to protect foreign investors. To date, OHADA Member States have signed about 220 BITs with developed countries and other African countries .[36] 

A handful of OHADA countries have signed new BITs after enacting new OHADA texts on arbitration that expand the scope of OHADA arbitration to investment disputes. These BITs include; Burkina -Faso – Turkey BIT[37], Congo- Morocco BIT 2018[38], Côte d’Ivoire-Japan BIT 2020[39], or Mali -UAE and Mali-Turkey BIT 2018.[40] 

BITs give foreign investors the possibility of choosing from many arbitration options, the one the investor would like to sue the host state. In a large majority of BIT’s signed by OHADA member States, there is an option for international arbitration institutions such as ICSID, UNCITRAL or ICC.[41] Some references to OHADA arbitration exist but are still not systematic.[42] 

It has been noted for example in BITs signed in 2014 by some OHADA Member States and CANADA for example, that only ICSID and UNCITRAL are mentioned as possible arbitration institutions before which an investor can sue the host state.[43] 

The situation is not fundamentally different in the new BITs signed after the OHADA arbitration reform. Most of these BITs provide for ICSID, UNCITRAL or ICC arbitration.[44] This is the case even in BITs signed between an OHADA Member State and another African country.[45]

One of the exciting BITs of this series is the Burkina Faso – Turkey BIT signed in 2019, which provides an option for one arbitral institution within the OHADA area, the Ouagadougou Arbitration, Mediation and Conciliation Centre (CAMCO).[46] An interesting trend observed in that BIT and some others like the Côte d'Ivoire – Japan BIT is the parties' possibility to submit their dispute to "any other arbitral institution or arbitration rule".[47] Hence, one might expect that parties agree to submit their disputes to CCJA arbitration rules or an ad hoc arbitration under the UAA. 

OHADA governments must show interest in their arbitration system by including OHADA arbitration as a possible forum of settlement of disputes between one Contracting Party and the investors of other contracting parties in the framework of the BITs they signed. This has to be the case, mainly when investment is performed in one OHADA country. To this effect, an author stated: “The credibility of an arbitration center is measured by the confidence it inspires in those who created it, manifested by its designation in arbitration clauses, national and international provisions”.[48] 

CONCLUSION 

The inclusion of investment arbitration in the UAA and the CCJA Arbitration Rules is an innovation in the OHADA investment dispute resolution landscape. However this inclusion has to date a limited impact deemed unachieved. Furthermore, these investment provisions need to comply with the OHADA Treaty and include investment requirements in the law. As of now, the expansion of OHADA arbitration to investment arbitration has no real impact on the investment framework. It's relevant to note that BITs concluded after the OHADA arbitration contain few references to OHADA arbitration.

Furthermore, the investment arbitration policy within the OHADA Member States is not consistent. Do these States intend to terminate the former BITs and negotiate new ones on a more protective basis? Or do they continue to impose the provisions of investment agreements they signed? The OHADA organization is silent on the ISDS reform initiated by UNCITRAL, reform currently at its ends. 

The criticisms addressed above do not mean that the OHADA system of arbitration is not ready for investment arbitration. A strong foundation has been built before it, as it was possible to settle investment disputes within the OHADA arbitration framework. The current structure has to be completed, or rather, it would be better to have legislation dedicated especially to investment arbitration to avoid confusion or room for numerous interpretations. 

Practitioners appointed or chosen as arbitrators should use the current texts and interpret them to ensure adherence to investment requirements. Parties also have a significant role to play. 

It is also up to the Courts and CCJA to adopt an extensive favour arbitri interpretation of the current provisions when dealing with investment arbitration. Some OHADA Member States have signed the Mauritius Convention on Transparency and its application cannot be contrary to the public order in these countries if there is a need to apply provisions on transparency. 

OHADA member states government shall continue improving their investment arbitration mechanisms and trust them.

____________________________

*Research Officer APAA, Co-founder & Partner HBE AVOCATS 

[1] The First OHADA arbitration texts were adopted in 1999.

[2] Prior to the OHADA reform on arbitration, the CCJA was often used as an investment arbitration tribunal. Some BITs for instance have referenced the CCJA as a possible arbitration institution in case a dispute arises.

[3] Art.3 UAA, Art 2.1 CCJA Arbitration rules.

[4] BENIN, BURKINA FASO, CAMEROON, CENTRAL AFRICAN REPUBLIC, CHAD, COMOROS, CONGO, DEMOCRATIC REPUBLIC OF CONGO, EQUATORIAL GUINEA, GABON, GUINEA, GUINEA – BISSAU, IVORY COAST, MALI, NIGER, SENEGAL, TOGO.

[5] M.Kebe, « The attractiveness of the new OHADA arbitration Act”, https://www.lexology.com/library/detail.aspx?g=680f77e3-1b8c-4327-87c1-183a7abc45f4

[6] See for example, T. Kendra, OHADA Arbitration: Reforms adopted to keep the system modern, https://www.lexology.com/library/detail.aspx?g=c0f818a3-0aa7-4d0b-9a34-afea60ee8b00

R. Ziade, C. Fouchard, 30 march 2018, New OHADA Arbitration Text Enters into Force, http://arbitrationblog.kluwerarbitration.com/2018/03/30/new-ohada-arbitration-text-enters-into-force/

L. Franc-Menget, M.Papadhopulli , OHADA Arbitration Reform – Publication of the New Uniform Act Arbitration and the Revised CCJA Arbitration Rules, https://hsfnotes.com/arbitration/2017/12/22/ohada-arbitration-reform-publication-of-the-new-uniform-act-on-arbitration-and-the-revised-ccja-arbitration-rules/
 F. Bernauer,  V. Bénézech, G. Mezache The reform of OHADA's arbitration: a promise of greater efficiency?, https://iclg.com/alb/8370-the-reform-of-ohadas-arbitration-a-promise-of-greater-efficiency
P. Mabiala, Reforms to OHADA Arbitration Law, 2 November 2018, https://thearbitrationbrief.com/2018/11/02/reforms-to-ohada-arbitration-law/
G. Kenfack Douajni “Recent Developments in OHADA Arbitration, 11 April 2019 https://globalarbitrationreview.com/review/the-middle-eastern-and-african-arbitration-review/2019/article/recent-developments-in-ohada-arbitration.

M. Kebe, Geni & Kebe SCP , The attractiveness of the new OHADA Arbitration Act, https://www.lexology.com/library/detail.aspx?g=680f77e3-1b8c-4327-87c1-183a7abc45f4

[7] Art 21 OHADA Treaty

[8] CCJA Arbitration is directly based on article 21 of the OHADA Treaty.

[9] For more development on the compliance between the compliance between new OHADA arbitration provisions on investment and OHADA Treaty see for example, W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”in A. Ngwanza (ed), Vingt ans d’arbitrage OHADA: bilan et perspectives, LexisNexis, 2019, pages  285-301, sp. 292- 293.

[10] W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”, op.cit, p. 295.

[11] See for example, G. Kenfack Douajni, in “Le nouveau droit de l’arbitrage OHADA”, Rev. Camerounaise Arb, special volume, May 2018, p.59

[12] OHADA arbitration reform is aimed at more efficiency and transparency of arbitral proceedings. See for e.g Parties’s duty of loyalty and efficiency, arts 14 UAA, 16 CCJA arbitration rules, duty of impartiality and independence, prompt recognition of Arbitral awards art. 31 UAA, 30 CCJA Arbitration rules. For a summary on efficiency and transparency of the OHADA reform on arbitration R. Ziade, C. Fouchard, 30 march 2018, New OHADA Arbitration Text Enters into Force, http://arbitrationblog.kluwerarbitration.com/2018/03/30/new-ohada-arbitration-text-enters-into-force/.

[13] O. Svoboda, “Current state of Transparency in investment arbitration: progress made but not enough”, Cofola international 2017, Conference proceedings, p. 26; A. Kouyate “ La transparence dans l’arbitrage CCJA”, in A. Ngwanza (ed), Vingt ans d’arbitrage OHADA: bilan et perspectives, LexisNexis, 2019, pages  303-321, sp.314.

[14] L.Y. Fortier  and R. Thériault “La transparence de l’arbitrage  international à l’ère des différends États-investisseurs : du mythe à la réalité”, in mélanges en l’honneur de Alain Prujiner, Ed. Yvon Blais, 2011, p.67, sp.p.98.

[15] Art. 8-2 “No voluntary intervention shall be admissible before the constitution of the arbitral tribunal.

After the constitution of the arbitral tribunal, any voluntary intervention to an arbitral proceedings shall be subject to approval by the parties and the arbitral tribunal”.

[16] W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”, op.cit. p. 298-299.

[17] Art. 14 CCJA Arbitration Rules : “Arbitral proceedings shall be confidential. The work of the Court relating to conduct of arbitral proceedings shall be subject to this rule of confidentiality, as well as any meeting of the Court held for the purpose of administering the arbitration. Confidentiality shall also apply to documents submitted to the latter or drafted by it in the course of the administered proceedings.

Unless otherwise agreed by all parties, the latter and their counsel, the arbitrators, the experts and any person involved in arbitral proceedings shall be bound by the duty to respect the confidentiality of the information and of the documents produced during the said proceedings. Confidentiality shall extend under the same conditions to arbitral awards.

The Secretary General may publish extracts from arbitral awards without mentioning elements which would enable the parties to be identified.

[18] On that question see W. Ben Hamida “L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA ”, op.cit. p.299.

[19] https://uncitral.un.org/en/texts/arbitration/conventions/transparency

[20] https://uncitral.un.org/en/texts/arbitration/conventions/transparency/status.

[21] Burkina Faso, Cameroon, Côte d’Ivoire, Guinea, Mali and Senegal have signed BITs with CANADA in 2014 and 2015. Most of them refer to the application of UNCITRAL Arbitration rules. All these BITs are available on https://investmentpolicy.unctad.org/international-investment-agreements.

[22] A. Kouyate, « La transparence dans l’arbitrage CCJA », op.cit, p. 314-315.

[23] https://www.siac.org.sg/images/stories/articles/rules/IA/SIAC%20Investment%20Rules%202017.pdf

[24] China International Economic and Trade Arbitration Commission (CIETAC) “Arbitration Rules on investment disputes.

[25] W. Ben Hamida « L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA », op.cit p.298/

Also ,https://cdn.iccwbo.org/content/uploads/sites/3/2017/03/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration.pdf § 139-143.

[26]https://iccwbo.org/content/uploads/sites/3/2020/12/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration-english-2021.pdf § 173-178

[27] W. Ben Hamida « L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA », demonstrates that despite the expansion to investment arbitration most of the provisions, if not all refer to arbitration agreement ignoring investment arbitration see for example the following articles of CCJA Arbitration Rules : 8 on forced intervention, 9 on the control prima facie of the tribunal jurisdiction, 10 on party autonomy… the same critics are addressed to the UAA.

[28] W. Ben Hamida « L’arbitrage d’investissement d’après le nouveau Règlement de la CCJA », op.cit, p. 301.

[29] The first meeting of the  UNCITRAL Working Group ISDS Reform took place from the 27 November – 1 December 2017. More details on ISDS Reform on  https://uncitral.un.org/en/working_groups/3/investor-state

[30] http://undocs.org/en/A/CN.9/WG.III/WP.183

[31] http://undocs.org/en/A/CN.9/WG.III/WP.199

[32] http://undocs.org/en/A/CN.9/WG.III/WP.181

[33] Common Convention on Investments in the States of the Customs and Economic Union of Central Africa (adopted 14 December 1965, entered into force 1 April 1966). The CEMAC Charter of investments was signed in December 1999, Economic Community of West African States Supplementary Act A/Sa.3/12/08 Adopting Community Rules on Investment and the Modalities for Their Implementation with ECOWAS (signed 19 December 2008, entered into force 19 January 2009).

[34] M. Freedomm Qumba, “Assessing African Regional Investment Instruments and Investor- State Dispute Settlement”,  British Institute of International and Comparative Law 2020, Pages 197 - 232 , see  especially p. 201

[35] See for example the Common Convention on Investments in the States of the Customs and Economic Union of Central Africa, adopted 14 December 1965, entered into force 1 April 1966.

[36] https://investmentpolicy.unctad.org/international-investment-agreements/

[37] https://investmentpolicy.unctad.org/international-investment-agreements/countries/31/burkina-faso

[38] https://investmentpolicy.unctad.org/international-investment-agreements/countries/47/congo

[39] https://investmentpolicy.unctad.org/international-investment-agreements/countries/50/c-te-d-ivoire

[40] https://investmentpolicy.unctad.org/international-investment-agreements/countries/129/mali

[41] See for example  the new generation of BIT’s signed between seven  OHADA Member States (Benin, Burkina Faso, Cameroon, Côte d’Ivoire, Guinea, Mali and Senegal) and Canada in 2014 and 2015.

[42] See for example Benin – Burkina Faso, Benin - Chad BITs 2001, France – Senegal BIT 2007 containing references to OHADA Arbitration. The reference to OHADA arbitration can be found also in some investment law. See for example the Charter of investment of the Central African Republic (2001), Mali investment Code (2005) Congo investment Code (2003) or the Togo investment Code (2012). It’s important to note, however, that wording used in these different instruments to make reference to OHADA arbitration as an option to settle investment disputes can sometimes lead to confusion or have to be subject to interpretation.

[43] See note 27 and 37 above.

[44] See Art. 9 Congo-Morocco BIT 2018, Arts 10 and 11 Mali -UAE , Mali-TURKEY BITs, Art 23 Côte d’Ivoire – Japan BIT.

[45] For example Congo- Morocco BIT 2018. One might expect to have at least a reference to an African arbitration option such as OHADA arbitration or a Morocco arbitration institution.

[46] See Art 10 If after a period of six (6) months :from the date of the written notification referred to in paragraph 2, the consultations and negotiations have not made it possible to settle such disputes, they may be submitted, as the investor may choose, to:

(a) to the competent court of the Contracting Party in whose territory the investment was made;

(b) or, subject to the condition set out in paragraph 5 of this Article, to

(i) the International Centre for the Settlement of Investment Disputes (ICSID) established by the "Convention on the Settlement of Investment Disputes between States and Nationals of Other States" in the event that both Contracting Parties are Parties to this Convention;

(ii) an Ad Hoc Arbitral Tribunal established under the Rules of Arbitration Procedure of the United Nations Commission on International Trade Law (UNCITRAL), approved by the United Nations General Assembly on 15 December 1976, as revised in 2010;

(iii) the Istanbul Arbitration Centre;

(iv) the Ouagadougou Arbitration, Meditation and Conciliation Centre (CAMCO);

(v) any other arbitral institution or arbitration rule, if the parties in the dispute agree.

[47] Arts. 10 Burkina-Faso – Turkey BIT, 23 Côte d’Ivoire- Japan BIT

[48] J-C Ngnintedem, « Le juge OHADA et l’investissement international », RDAI 2015-1, P.105, sp. p.106.

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

[1]

Introduction

The COVID-19 Pandemic (the “Pandemic”) accelerated the process of mainstreaming technology in arbitration and reshaping the way we perceive legal practice. With lockdowns in place, travel restrictions, and imposed social distancing measures, arbitral institutions, parties, and tribunals are required to adapt to this unprecedented situation. After all, “in times of crisis, whether actual, foreseeable or pending, time and money are of the essence, […] hence the need for innovation and tailored solutions”.[2]  Life, businesses, and disputes must go on as usual. New cost and time efficient solutions must be implemented to ensure the smooth conduct of ongoing and future arbitral proceedings, especially as one year into the Pandemic, it does not seem that life will be back to normal anytime soon. This article provides a brief outline of the risks of high-tech in international arbitration, raising issues that need to be addressed to ensure arbitrations can proceed seamlessly during the Pandemic and beyond.

I- High-Tech in International Arbitration: The Risks

The use of technology in international arbitration is not immune to risks or challenges some of which are technical in nature (A) whereas the others relate to procedural matters and due process concerns (B).

A- Technical Risks

1.     Technological illiteracy and unequal access to the internet

Most readers would remember the lawyer shouting “I am not a cat” as he mistakenly used a filter during a court hearing on Zoom. This video[3] that went viral revealed the technological illiteracy that many arbitrators, counsels, witnesses, or experts suffer from due to their failure to catch up with technology. The Pandemic took us all by surprise, and so did our need to become tech savvy. With other professional and family obligations, one wonders when practitioners will have the time to educate themselves in the use of technology. The pressure is on as failure to do so will negatively impact their chances of being appointed as counsel and arbitrators. More importantly, however, incidents such as the cat filter are disruptive to say the least and can delay if not obstruct the resolution of multi-million-dollar disputes, thus defeating the purpose of resorting to technology in the first place.

The use of high tech in arbitration also raises the issue of unequal access to the internet. With interruptions being common in the developing world, causing delays and disruptions to the online hearings,[4] it is unclear how international commercial or investor-State arbitrations involving counsel from areas with unreliable internet access will be managed without interruption. Unless this issue is addressed, the existing preference for hiring counsel and arbitrators from the developed world will continue, perpetuating a phenomenon that lawyers from the developing world are working hard to change.

2.     Cyber-Security

Confidentiality is one of the most attractive benefits of arbitration and is an issue that various arbitration institutions emphasize in their procedural rules.[5] That said, the confidentiality of the proceedings can be easily compromised in the context of virtual hearings. A survey conducted in 2018 by Bryan Cave Leighton Paisner found  that among the 105 surveyed practitioners (arbitrators, experts, counsels, etc.) from all regions of the world, 11% experienced a security breach (i.e., an unauthorized third party was able to obtain access to electronic documents or other information).[6] Moreover, in 2017, LogicForce, a cybersecurity consulting firm, surveyed 200 law firms and found that all firms were subject to hacking attempts and that 40% of these firms were unaware of such hacking until the study was conducted.[7] It is worth noting that these surveys were conducted before the Pandemic and the proliferation of virtual hearings. With the increase in virtual hearings (and the hackers’ knowledge of such increase), one expects a surge in cyber-attacks.

Hackers may be inclined to gain unauthorized access to videoconferencing apps or online platforms in the hope of accessing any confidential information such as trade secrets (notably in intellectual property and pharma disputes, among others). This is not limited to commercial disputes as hacking can also take place in State to State or investor-State arbitration, leaving intelligence information vulnerable to unauthorized access. For example, it is reported that in 2015, hackers successfully breached the website of the Permanent Court of Arbitration in the Hague, the Philippines’ Department of Justice and the law firm representing the Philippines during the Philippines-China territorial dispute in the South China Sea;[8] and in Libananco v. Turkey (ICSID Case ARB/06/08), Turkey managed to intercept correspondence between Claimant’s counsel and third parties.[9] Now, with the Pandemic ravaging the world and many arbitrations being conducted via Zoom, it is worth mentioning that this app was under scrutiny for a flaw in the system, allowing for anyone with access to the link to view (and potentially record) the video call.[10]

3.     Data protection

The protection of personal information must also be guaranteed especially considering the increased promulgation of data protection laws in various jurisdictions. Personal data is broadly defined as “any information relating to an identified or identifiable natural person” (e.g., name, email, address, credit card and banking information, civil and marital status, etc.)[11] It follows that the consequences of this information being known to unauthorised persons can be devastating as it may lead to identity theft, compromising the personal security of arbitrators, witnesses, and experts, threats to family, extorsion, and other forms of abuse.

Given the importance of protecting personal information, the ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration provides that participants in arbitration “are aware and accept that their personal data may have to be collected, transferred, published and archived for purposes of the arbitration, and (ii) that applicable data protection regulations, including the GDPR, are complied with”. [Emphasis added]

Documents and pleadings are typically stored on a cloud platform, and while cloud service providers generally indicate in their privacy policies that they take all the necessary physical and technological measures to safeguard information they are entrusted with, such measures are not “bulletproof”, leaving personal information vulnerable to security breaches. For example, it is reported that (i) in 2012, more than 68 million Dropbox user accounts on Dropbox; (ii) in 2016, LinkedIn was hacked, and the hackers posted and sold 167 million emails and passwords online; and (iii) Yahoo was hacked in 2013, compromising more than a billion user accounts.[12]

B- Legal Risks

Following the Pandemic, parties and institutions were faced with the difficult decision of needing to either stay ongoing proceedings until further notice or opting for virtual hearings. While the decision is easy when the parties are aligned, since all the tribunal needs to do is comply with the Parties’ wishes, things become more complicated when either or both parties object to conducting virtual hearings. Since arbitration procedures largely depend on the lex loci arbitri, [13] should the law of the seat not be sufficiently flexible or welcoming of virtual hearings, issues of annulment will arise.

Sadly, not all legal systems are tech-friendly; and since we are still exploring the effects of virtual hearings throughout the world, one expects courts dealing with annulment claims to possibly re-interpret applicable law. One such example is the Egyptian Court of Cassation which, in a recent judgment, acknowledged the possibility of conducting hearings outside of Egypt (or even virtually) while deeming the arbitration to be seated in in Egypt.[14] For virtual hearings to be acceptable worldwide, courts in other jurisdictions should follow suit.[15]

II- High-Tech in International Arbitration: The Remedies

While the use of technology in international arbitration has its challenges, it is also an efficient and convenient way to conduct proceedings during lockdowns and imposed social distancing measures. This prompted the arbitration community to come up with a list of possible technical remeidies: (A) and procedural remedies (B) that should allow tribunals to conduct arbitrations smoothly.

A- Technical remedies

Cybersecurity and data protection issues should be raised as early as possible, i.e., during the first case management conference.[16] Raising cybersecurity and data protection concerns at the outset of the arbitration allows the parties and the tribunal to assess all possible risks that might occur during the proceedings and to agree on solutions to prevent external disruptions of the proceedings.

Parties and tribunals are encouraged to agree on a cyber security and privacy protocol that lays out the manner in which the virtual hearing will be conducted, thus ensuring the confidentiality of the proceedings as recommended by the Africa Arbitration Academy Protocol on Virtual Hearings in Africa (the “AAA Protocol”) and other organizations and arbitral institutions (e.g., the ICC Guidance Note  on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic and the ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration).

To prevent security breaches, parties and institutions must use secured digital platforms and videoconferencing applications with end-to-end encryption for both data storage and virtual hearings.[17] This is highly recommended by the ICC and the Africa Arbitration Academy.[18]

Furthermore, parties and tribunals must restrict access to the arbitration proceedings to a limited number of people authorized to participate in the proceedings (e.g., parties, counsel, tribunal members, tribunal secretary, witnesses, experts, etc.). This can be achieved with the installment of a two-factor authentication mechanism, which “provides an additional layer of security so that only authorized individuals are accessing sensitive information”.[19] The two-factor authentication mechanism will ensure that all participants feel secure about the confidentiality of the information they disclose in a virtual hearing or through a database.[20]

The question of data protection must be considered at every phase of the arbitration proceedings, starting from the request for arbitration and ending with the issuance of the award and subsequent retention and deletion of the personal data, which must comply with applicable law.[21] Each phase must comply with the common principles of fair and lawful processing, proportionality, data minimization, purpose limitation, accuracy, data security, and transparency,[22] all while giving the data subjects the opportunity to exercise their rights under applicable law.[23]

In order to comply with the general principles of personal data processing, data encryption must be resorted to as it is an effective way of ensuring the confidentiality of information collected. The ICC Guidance Note also requires that the parties and arbitral tribunals envisage the “minimum requirements of encryption to safeguard the integrity and security of the virtual hearing against any hacking, illicit access, etc.”[24]

The foregoing measures aim to maximize the confidentiality and security of virtual hearings, communication between the parties and/or tribunals, as well as the security of the documents shared online.

B- Legal remedies

Issues of fairness and due process related to the use of technology in arbitration proceedings can be remedied by ensuring the transparency of the hearings, where each party is given the opportunity to defend its position even if not physically present at the venue of the hearing.  

During witness or expert examination, the video conferencing system must allow maximum visibility so that witnesses or experts could be seen, and the tribunal could confirm that no unauthorized person is present with them. To this end, online proctoring software and cameras can be installed after clearing privacy risks and securing the concerned parties’ informed consent.

Tribunals must also exercise their right to postpone a virtual hearing if it will result in unfairness to a particular party, (e.g., a party with poor internet connection) until the issue is addressed. Failure to do so can expose subsequent awards to annulment.

Conclusion

The use of technology in arbitration is “now progressively becoming the new normal”.[25] More so, the Pandemic has shown how flexible arbitration can be,[26] and the extent to which it can adapt to changing circumstances.

A year into the Pandemic, the number of virtual arbitral proceedings increased tremendously (virtual hearings are reported to be eleven times more common after 15 March 2020 than before),[27] and introduced technical and legal challenges, which may be overcome with a bit of creativity and eagerness to adapt. The Pandemic has shown us that the traditional methods of conducting arbitration (e.g., submission of hard copies, in-person hearings, etc.) may need to change and that there are more cost and time-efficient ways of doing things. Unfortunate as it may be, it took a Pandemic to push us to adapt to the requirements of the twenty-first century. As some would say, better late than never!

* Partner, Shahid Law Firm, Cairo, Egypt. The author wishes to thank Shahid Law Firm Associate, Hoda El-Beheiry for her contribution to this article.

[2] Mohamed S. Abdel Wahab, “Dispute Prevention, Management and Resolution in Times of Crisis Between Tradition and Innovation: The COVID-19 Catalytic Crisis”, in International Arbitration and the COVID-19 Revolution, edited by Maxi Scherer, Niuscha Bassiri and Mohamed S. Abdel Wahab, Wolters Kluwer, 2020.

[3] https://www.youtube.com/watch?v=9f9eDBpnkaU.

[4] Jiyoon Hong and Jong Ho Hwang, “Safeguarding the Future Arbitration: Seoul Protocol Tackles the Risks of Videoconferencing”, Kluwer Arbitration Blog, 6 April 2020.

[5] Article 28 (3) of the UNCITRAL Arbitration Rules states that hearings should be conducted in private unless otherwise agreed by the parties. Article 30 (1) of the LCIA Rules provides that “The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority. The parties shall seek the same undertaking of confidentiality from all those that it involves in the arbitration, including but not limited to any authorised representative, witness of fact, expert or service provider”. Furthermore, Article 22(3) of the ICC Rules provide that “upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information”.

[6] Bryan Cave Leighton Paisner, “International Arbitration Survey: Cybersecurity in International Arbitration”, 2018. https://www.bclplaw.com/images/content/1/6/v2/160089/Bryan-Cave-Leighton-Paisner-Arbitration-Survey-Report-2018.pdf 

[7] Claire Morel de Westgaver, “Cybersecurity in International Arbitration – A Necessity and an Opportunity for Arbitral Institutions”, Kluwer Arbitration Blog, 6 October 2017.

[8] David Turner and Gulshan Gill, “Addressing emerging cyber risks: reflections on the ICCA Cybersecurity Protocol for International Arbitration”, Practical Law Arbitration Blog, Thomson Reuters, 17 May 2019. http://arbitrationblog.practicallaw.com/addressing-emerging-cyber-risks-reflections-on-the-icca-cybersecurity-protocol-for-international-arbitration/

[9] Claire Morel de Westgaver, “Cybersecurity in International Arbitration – A Necessity and an Opportunity for Arbitral Institutions”, Kluwer Arbitration Blog, 6 October 2017.

[10] Jiyoon Hong and Jong Ho Hwang, “Safeguarding the Future Arbitration: Seoul Protocol Tackles the Risks of Videoconferencing”, Kluwer Arbitration Blog, 6 April 2020.

[11] General Data Protection Regulation (“GDPR”), Article 4 (1).

[12] Contel Bradford, “7 Most Infamous Cloud Security Breaches”, https://blog.storagecraft.com/7-infamous-cloud-security-breaches/.

[13] Mohamed S. Abdel Wahab, “Dispute Prevention, Management and Resolution in Times of Crisis Between Tradition and Innovation: The COVID-19 Catalytic Crisis”, in International Arbitration and the COVID-19 Revolution, edited by Maxi Scherer, Niuscha Bassiri and Mohamed S. Abdel Wahab, Wolters Kluwer, 2020.

[14] Court of Cassation, Case No. 18309/89JY, judgment dated 27 October 2020, “with the 1958 New York Convention, arbitration gradually moved away from the idea of localization, namely, the close association of arbitration with a particular geographical territory. In the context of the globalization of the legal profession, it has become common to rely on foreign lawyers to represent the parties in arbitration proceedings with their seat of arbitration in Egypt, without requiring any arbitration hearings to be held within the Egyptian territory, since the concept of the seat of arbitration as an abstract idea is not linked/related to the actual venue of arbitration hearings, especially with the increasing demand for arbitration hearings by virtual means of communication”.

[15] See Landesbank Baden-Wurttemberg et. al v. Spain (ICSID Case No. ARB/15/45).

[16] ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration, 2020. https://cdn.arbitration-icca.org/s3fs-public/document/media_document/icca-nyc_bar-cpr_cybersecurity_protocol_for_international_arbitration_-_electronic_version.pdf?mc_cid=23ce363898&mc_eid=6e9a9290a8.

[17] Kun Fan, “The Impact of COVID-19 on the Administration of Justice”, Kluwer Arbitration Blog, 10 July 2020.

[18] ICC Guidance Note, para 32; AAA Protocol, para 5.2.

[19] Wendy G. Lozano and Naimeh Masumy, “Online Dispute Resolution Platforms: Cybersecurity Champions in the COVID-19 Era? Time for Arbitral Institutions to Embrace ODRs”, Kluwer Arbitration Blog, 25 September 2020.

[20] Kun Fan, “The Impact of COVID-19 on the Administration of Justice”, Kluwer Arbitration Blog, 10 July 2020.

[21] Wendy G. Lozano and Naimeh Masumy, “Online Dispute Resolution Platforms: Cybersecurity Champions in the COVID-19 Era? Time for Arbitral Institutions to Embrace ODRs”, Kluwer Arbitration Blog, 25 September 2020.

[22] GDPR, Article 5; Data Protection Law, Article 3.

[23] GDPR, Articles 12 to 22; Data Protection Law, Article 2.

[24] ICC Guidance Note, Annex I, C (iii).

[25] Joint Statement of 13 Arbitration Institutions relating to “Arbitration and COVID-19”, 16 April 2020. https://sccinstitute.com/media/1658123/covid-19-joint-statement.pdf.

[26] Troutman Pepper, “Virtual International Arbitration and the COVID-19 Pandemic: One Institution's Approach”, Lexology, 15 April 2020. https://www.lexology.com/library/detail.aspx?g=759b1c2a-bbed-4527-982d-fcedc6dc3bc5.

[27] Gary Born, “Empirical Study of Experiences with Remote Hearings: A Survey of Users’ Views” in International Arbitration and the COVID-19 Revolution, edited by Maxi Scherer, Niuscha Bassiri and Mohamed S. Abdel Wahab, Wolters Kluwer, 2020.

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021

Executive Summary

The Belt and Road Initiative represents great opportunities in Africa, however projects are reportedly under strain and criticism for a lack of transparency in selection of sub-contractors, delayed execution, lack of capacity building, and unwieldy debt burdens.  External events in the last few years – in particular the US-China trade war and the spread of the COVID-19 virus have caused significant disruption for infrastructure projects and supply chains.  This article explores those developments as they relate to Belt and Road projects in Africa, and comments upon the potential dispute and arbitration trends which may arise as a result. 

I.               Introduction

The Belt and Road Initiative (“BRI”) has resulted in incredible amount of Chinese investment into a wide array of infrastructure projects around the world.   Specifically in Africa, Chinese investment since 2000 has totalled more than $153 billion.[2] Significantly, a sizable portion of that capital has reached into a multitude of projects across sub-Saharan Africa.[3]

However, as BRI projects have reached full stride, many have been repeatedly hampered by delays, budget overruns and a lack of transparency. During the last three years, those fissures have been greatly exacerbated due to an array of geopolitical developments. The United States and China have been engaged in a trade war since early 2018 – one which shows no sign of abating under the new U.S. administration.  Beginning in 2019, China downshifted to a less-expansive BRI policy and has massively curtailed its BRI lending, putting at risk not only new projects, but the continued funding of projects already underway. Finally, the onset of the global pandemic in early 2020 wreaked the same havoc on BRI initiatives that it did to infrastructure initiatives elsewhere, bringing disrupted supply chains, government lockdowns, border closures and operational difficulties due to staff absences, social distancing measures and procurement of PPE equipment. 

This collision of forces has the potential to greatly increase the risk of projects becoming derailed—and of the contractual disputes that follow. This paper reviews those forces and how they set the stage for a possible growth in arbitration cases.

II.            The US-China Trade War

Imposition of Tariffs and Redirected Supply Chains

The origins of today’s US-China trade have their roots in the mid-1980s, when the United States began its increased reliance on Chinese imports, leading to the ballooning of the US trade deficit.[4] Donald Trump, elected president in 2016 on an “America First” platform, became particularly focused on reducing or eliminating this trade deficit with China, while also voicing concerns over inadequate protection of intellectual property rights in China.  This latter concern stemmed in part from reported systems in place within China which allegedly forced US companies to manufacture goods within China (rather than in the US) and, in the process, transfer valuable technologies to Chinese entities.[5]

From January 2018 onwards, tariffs were imposed by the US government – initially on limited categories of goods, such as solar panels and residential washing machines.[6]  However, in the course of 2018 and 2019, more tariffs were applied by both the US and China to hundreds of billions worth of goods across hundreds of categories of goods. 

One of the immediate impacts of the tariffs was trade diversion, as each of the US and China looked to other countries for the import of goods that they would normally get from each other.  In the case of the US, that meant products like electronics, electrical machinery and furniture were sourced from elsewhere, including Vietnam, Korea, Malaysia and Mexico.  In the case of China, that meant mostly soybeans and grains were imported from countries like Chile, Malaysia and Argentina.[7]  The data on this trade diversion does not show that either the US or China were getting significantly more goods or services from Africa.  

A Short-Lived Truce 

Despite the ongoing trade war, the US and Chinese governments continued a dialogue and in January 2020 reached the so-called Phase One Trade Deal.[8]  Under that agreement, Beijing committed to import an additional $200 billion worth of American goods and services over the course of 2020 to 2022 (going some way towards addressing the trade deficit, which in 2017 prior to the trade war stood at US $375 billion for that year), together with making commitments towards more robust protections for intellectual property rights. 

However, that deal, signed in the waning days of the Trump administration, ultimately represented only a temporary thaw in US-China relations. The election of President Joe Biden has brought no large-scale change to the tension between the two countries, as seen at the high-level meeting between US and Chinese officials held in Alaska in March 2021.[9]  Indeed, merely days after that gathering, the US Department of the Treasury’s Office of Foreign Assets Control imposed sanctions on two additional Chinese government officials,[10] while China imposed its own sanctions on US individuals.[11]  Furthermore, while pre-imposed tariffs remain in place, a series of further trade measures have been imposed by the US government against China, including export controls, enhancing scrutiny of Chinese foreign investment and the implementation of a series of prohibitions on Chinese military companies.[12]  

III.          China-Africa Trade and Investment 

Collateral Damage of the US-China Trade War 

While the US and China use tariffs to target goods imported from one to the other, the ramifications of such a trade war reach countries far removed from the line of fire. 

In October 2018, the IMF estimated that trade tensions and tariffs imposed between the US and China could entail a cumulative loss of GDP in sub-Saharan Africa of up to 1.5% of GDP during 2018-2021, with much of that impact on commodity-exporting countries and those countries that are more integrated in global markets.[13] 

As noted above, the trade war resulted in the redirection of supply chains, and some countries benefited by filling gaps arising from reduced US imports from China or reduced Chinese imports from the US.  However, the extent to which African countries particularly benefited from these redirected supply chains has not been clear. What is clear, however, is that a decreased US demand for Chinese manufacturing export has led to decreased Chinese demands for the industrial metals and other commodities for China’s manufacturing processes. 

As illustrative of this decreased Chinese demand for industrial metals and other commodities, oil and industrial metal prices fell following implementation of US tariffs on Chinese imports in June 2018.[14]  However, China’s recovery from the pandemic from mid-2020 onwards has boosted some commodity prices (noting that it is estimated that China represents an estimated half or more of demand for many commodities globally).  For example, copper slumped to $4,600 per tonne in March 2020 before then hitting an all-time high of $8,000 per tonne as of end 2020.[15]  

These price swings and the decreased Chinese demand for raw materials (as a knock-on effect of the US-China trade war) have certainly affected commodity-exporting African nations.  One of the clearest examples is the drop in the export of cobalt from the Democratic Republic of Congo to China, from approximately $4 billion worth of cobalt export in 2018, to only $2 billion in 2019.[16] 

However, even with examples of drops in commodity export from Africa to China (as a knock-on effect of the US-China trade war), it might be that the ultimate impact of the US-China trade war on China-Africa trade as a whole has not been that severe.  According to China’s Ministry of Commerce, China-Africa trade value decreased only marginally between 2018 and 2019, from $204 billion to $200 billion.[17] 

A Changed Policy Environment

While the effect of the US-China trade war on China-Africa trade, and thus on BRI, is a topic for debate,[18] it is clear that since 2019 the Chinese government has implemented significant policy changes regarding BRI. In addition, there have been indications that Chinese banks are increasingly concerned as to the potential for the trade war to negatively impact the credit quality of Chinese companies that sponsor a given BRI project or perform a key role in the relevant supply chain.  One Beijing-based banker was quoted as of July 2019 stating: “We’re considering rejecting funding for some Belt and Road projects after analysing the potential impact the trade war might have on the sponsor”.[19]

The policy change by the Chinese government from approximately 2019 onwards has meant consolidation of investments abroad rather than continued rapid expansion.  As stated by Wang Huiyao, an advisor to China’s state council and president of the Center for China and Globalisation: “China is consolidating, absorbing and digesting the investments made in the past”.[20]

This consolidation with respect to the BRI is most immediately evident in the significant reduction of funding by China’s two major policy banks (the China Development Bank and the Export Import Bank of China).  Those two banks lent an estimated $75 billion in 2016.  In 2019, that number stood at only $4 billion.[21] 

Similarly, according to Chinese government data, China’s overseas investment growth declined from 49.3% year-on-year growth in 2016, down to 23% in 2017, 13.6% in 2018, and a mere 0.1% in the first half of 2019.  Moody’s, the international credit rating agency, has predicted that this downward trend will continue.[22]

It is harder to trace the immediate impact of this reduction in funding on BRI projects in Africa – indeed, there is some suggestion that China’s policy has been to increase its efforts in Africa and elsewhere in order to reduce its dependency on the US.[23]  However the undoubted result is that in the case of at least some projects, if no alternative financing can be identified, projects will be abandoned or curtailed, and the lack of financing will expose underlying problems with a project such as cost overruns and delays by sub-contractors.  These developments will undoubtedly lead to disputes and, potentially, arbitration.

IV.           The COVID-19 Pandemic

In January 2020, in the midst of the US-China trade war and in the same month that the US and Chinese governments reached a short-lived truce as described above, an article published in the international medical journal The Lancet described a study of the first 41 cases of a novel coronavirus which had emerged in Wuhan, China at the very end of 2019.[24]  In the course of 2020 (and still in 2021), the virus spread around the world with devastating effect, and governments worldwide took a range of drastic measures to try to contain and manage the spread of the virus. 

From a commercial perspective, government measures including lockdowns and restricted movement have had a significant negative impact on businesses worldwide.  Businesses have had to grapple with unpredictable supply chains, staff shortages, significantly altered customer demand (depending on sector) and innumerable knock-on effects of the pandemic. 

As of April 2021, governments are still grappling with finding the right combination of lockdown measures, access to healthcare, vaccine roll-out and economic stimulus.  There may be an end in sight, but much depends on globally-coordinated vaccine deployment, economic recoveries and future reactions of the scientific community and governments worldwide to new strains as they develop.  In the meantime, the economic effect on Africa has been significant, with the continent’s GDP dropping 2.1% in 2020, leading to Africa’s first recession in 50 years.[25]  The pandemic is reported to have had different effects on different African economies – with tourism-dependent economies the worst hit, followed by non-oil resource intensive economies, followed by oil-exporting countries.[26]  Non-resource-intensive and non-tourism focused economies faired the best, with only a 0.9% GDP decline in 2020.[27] 

The impact of COVID on BRI projects is similar to the impact of COVID on supply chains and construction projects worldwide.  Constantly changing government lockdown measures differing from country to country, staff shortages at ports and border crossings, and related delays all accumulate to create significant delays in global supply chains and ultimately at a relevant construction site.  Supply chain delays have been exacerbated even further by the current global shortage of shipping containers.[28]

Indeed, in June 2020, an official from China’s Ministry of Foreign Affairs admitted that about 20% of Belt and Road projects had been “seriously affected” by COVID, citing restrictions on travel, government lockdowns and similar.[29]

The Beginnings of a BRI Reassessment

There are also signs that, during the pandemic, various African governments have taken steps to re-assess certain BRI projects.  In spring 2020, the Egyptian government postponed the construction of what would have been the world’s second-largest coal-fired power plant at Hamrawein.[30]  In April 2020, the President of Tanzania announced the cancellation (or at least postponement) of the $10 billion port project at Bagamoyo.[31]  In May 2020, Nigerian legislators voted for a review of all of China’s loans for all Chinese projects in Nigeria, in order to assess the terms of those loans.[32]  In March 2021, it was announced that Kenya Railways had terminated the contract with the Chinese state-owned operator of the Mombasa to Naivashi Standard Gauge Railway and would be taking over operation of that railway line, with an intent on reducing costs of operation.[33]

All of these developments may have happened anyway, despite the pandemic, but the severe disruption caused by pandemic no doubt exacerbated existing problems in projects and provided African governments an opportunity to reassess their commitments and the terms of deals previously struck with regard to BRI projects.

The future of BRI projects is unclear, as economies worldwide still make their way through the pandemic.  China’s economy recovered earlier than others, from approximately the second quarter of 2020 onwards.[34]  BRI projects remain afoot, and many will continue forward to completion.  However, the lasting impact of COVID-19 may have negative impacts on debt repayment to Chinese lenders and may lead to debt restructuring in projects which are already under financial strain. 

V.             Potential Dispute and Arbitration Trends

The combination of reduced financing from Chinese lenders, together with the delay and disruption caused by COVID-19, are likely to create problems or exacerbate any existing problems with BRI projects. This may at least lead to friction between relevant contractual counterparties, and may in some cases lead to formal dispute proceedings including arbitration.

Force Majeure, Material Adverse Change, Frustration, Hardship, Termination

The clearest example of dispute, and one which has already arisen in innumerable contractual relationships worldwide (including non-BRI contracts) as a result of the pandemic, are disputes as to whether or not the pandemic and associated government measures constitute an event of force majeure, or any similar claim such as material adverse change, hardship or frustration of contract.  Parties might also seek to simply terminate the relevant contract(s).  The question of whether any such claims are viable will be highly specific to the facts of the case and the terms of the relevant contract or other legal instrument. 

In the case of claims of force majeure, for example, the focus in any given case is likely to be whether the pandemic or specific government measures cited have actually prevented the complaining party from performing its contractual obligations, or whether the pandemic or specific government measures presented only limited disruption which did not wholly prevent the complaining party from performing its contractual obligations.  Depending upon the applicable law, the complaining party may also be under scrutiny as to the extent to which they have mitigated their actions and sought alternative ways of performing their obligations.

Price Adjustment and Renegotiation

As with any significant market disruption, parties to long term contracts might seek to trigger price adjustment clauses due to a change in circumstances (such as the disruption caused by COVID, or COVID-related legislation, or a drop in funding from Chinese lenders).  This may be particularly the case in long-term contracts containing price adjustment or renegotiation clauses, such as oil and gas pipeline utilisation contracts and large-scale utility supply agreements.  Whether or not price adjustment clauses have in fact been triggered may be another source of disputes between Chinese and African contractual counterparties.

Overspend and Delay Exposed By Reduced Financing

To the extent Chinese lenders are indeed rejecting and reducing financing for BRI projects, any cut in financing or lack of availability of top-up financing will expose overspend and delays in ongoing projects.  This may well lead to disputes between contractors on any given project as to who is to foot the bill.  To the extent any locally owned entities hold a participating interest in a project, even a minority participating interest, this may also mean direct disputes with Chinese State-owned contractual counterparties holding a majority interest.

Debt Default and Restructuring

The Africa Development Bank has predicted that, as a result of the pandemic’s economic shock (with its associated increased government spending and contraction of fiscal revenues), the average debt-to-GDP ratio for Africa is expected to climb by 10 to 15 percentage points in the short to medium term.[35]  This could lead to defaults and associated protracted debt resolutions.  That said, it has also been reported by independent researchers that Chinese lenders have granted an estimated $10.7 billion in global debt relief in 2020 and 2021 i.e. in the era of COVID 19.  This has included debt relief pursuant to the Debt Service Suspension Initiative, a G20 effort, cancellation of loans under the Forum on China Africa Cooperation, and further ad hoc debt relief.[36]

Whether, in the context of any future debt default, Chinese lenders actually enforce against security held remains to be seen.  However, it is a real concern – such that just weeks ago the Chinese embassy in South Sudan was prompted to issue a denial of intent to take control of the Juba International Airport following debt repayment difficulties for that project.[37]

Struggles with meeting debt obligations might also mean that further phases of projects do not go forward, placing partially completed projects under added strain.  For example, Exim Bank of China had originally loaned SH162 billion (US $1.482 billion) to complete the Nairobi-Naivisha standard gauge railway (SGR) line.  That loan was originally dispersed in December 2015, the railway line opened in October 2019, and repayments would commence from January 2021.  However, due to reduced travel as a result of the pandemic, the revenues generated from passenger and cargo services on this railway line have not been enough to meet operation costs.[38]  Whether linked to this or not, it was reported in December 2020 that funding from Chinese lenders will not be forthcoming for the second intended phase of that SGR line, extending from Naivisha to the border with Uganda.[39]

Further Sources of Dispute

There are other potential sources of dispute, further to those described above.  These include any disputes arising from the period of low commodity prices in 2020 in particular (although many commodities have since recovered).  Other sources of dispute may also include arbitrations commenced under investment treaties, to the extent host governments cancel projects, seek to renegotiate terms of contracts or else implement legislation to curtail or redirect any planned projects (whether under the guise of the changed circumstances caused by the pandemic or otherwise).  A lot will be determined by the latter stages of the pandemic and government responses in 2021, together with how recovery from the pandemic is handled in 2021 and beyond. 

VI.           Conclusion

The US-China trade war and COVID 19 pandemic have caused strain and disruption to supply chains and projects worldwide, and a corresponding disruption to existing contractual relationships.  Belt and Road projects are not immune from these disruptions, and while many efforts might be made to get projects back on track or to otherwise resolve disputes, it is likely to be the case that certain disputes remain incapable of resolution.  In those limited cases, international arbitration is likely to provide a useful, neutral forum for the fair, thorough and enforceable resolution of disputes.   Experienced arbitrators will be knowledgeable at navigating the complexities of delays in major construction projects together with any geopolitical elements to a case.  Expert witnesses can provide valuable input as to impacts of COVID or other external events in a given sector.  A strong legal team versed in the relevant applicable law(s) and in international arbitration procedure and strategy will be able to put forward a strong case and see it through to completion.  Finally, once an award is reached, the New York Convention (i.e. the Convention on the Recognition and Enforcement of Foreign Arbitral Awards) provides a robust system for the international enforcement of arbitral awards worldwide.  For observers and participants alike, there may be a significant suite of arbitrations arising out of Belt and Road projects in Africa post-pandemic, and international arbitration may be one of the critical frontiers where delays and problems caused by reduced financing and the COVID-19 pandemic are resolved.

_____________________ 

*Partner, Winston & Strawn London LLP.  The views expressed herein are those of the author and not any organisation with which they are affiliated.  The author would like to thank international trade specialists Cari Stinebower, Mariana Pendás and Ade Johnson of Winston & Strawn LLP, and Leonnie Gilpin of Winston & Strawn London LLP, for their thoughtful comments, research and input for this paper.  This paper has been produced following the Africa Arbitration Association’s Second Annual Conference in April 2021, and the presentation of the titled topic by the author on a panel discussion of Belt and Road projects in Africa.

[2] China Africa Research Initiative, Acker K and Brautigam D, “Twenty Years of Data on China’s Africa Lending”, Briefing Paper No. 4, 2021. <Hyperlink, accessed 25 April 2021>

[3] (1) Ray, Rebecca, Kevin P. Gallagher, William Kring, Joshua Pitts, and B. Alexander Simmons. “Geolocated Dataset of Chinese Overseas Development Finance.” Manuscript submitted for publication. (2) Ray, Rebecca, Kevin P. Gallagher, William Kring, Joshua Pitts, and B. Alexander Simmons. “Geolocated Dataset of Chinese Overseas Development Finance.” Boston, MA: Boston University Global Development Policy Center. Online database. doi: 10.17605/OSF.IO/7WUXV.  <Hyperlink, accessed on 2 April 2021>:

[4] United States Census web-page, setting out “Trade in Goods with China” from 1985 to 2021.  <Hyperlink, accessed 31 March 2021>

[5] Office of the United States Trade Representative, Executive Office of the President, “Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 Of The Trade Act of 1974”, 22 March 2018, <Hyperlink, accessed 31 March 2021>

[6] Office of the United States Trade Representative, “President Trump Approves Relief for US Washing Machine and Solar Cell Manufacturers”, 22 January 2018.  <Hyperlink, accessed 31 March 2021>

[7] Nomura study summary, June 2019.  <Hyperlink, accessed 31 March 2021>

[8] Office of the United States Trade Representative, “Economic and Trade Agreement Between the Government of the United States and the Government of the People’s Republic of China”, 15 January 2020.   <Hyperlink, accessed 31 March 2021>

[9] U.S. State Department Press Release, “Secretary Antony J. Blinken, National Security Advisor Jake Sullivan, Director Yang And State Councilor Wang At the Top of Their Meeting”, 18 March 2021, available at: <Hyperlink, accessed 31 March 2021>

[10] U.S. Department of Treasury’s Office of Foreign Assets Control’s press release, “Treasury Sanctions Chinese Government Officials in Connection with Serious Human Rights Abuse in Xinjiang”.  <Hyperlink, accessed 31 March 2021>

[11] Financial Times, “China places sanctions on US and Canadian citizens”, 28 March 2021, <Hyperlink, accessed 31 March 2021>

[12] Exec. Order 13959 of Nov. 12, 2020, “Addressing the Threat From Securities Investments That Finance Communist Chinese Military Companies”. <Hyperlink, accessed 31 March 2021>  The U.S. government stated that it based these decisions on its concerns (1) about China’s military civil fusion policies, (2) about human-rights abuses in the Xinjiang region, (3) with these companies’ relationships with the Chinese military–industrial complex, (4) about those companies’ perceived efforts to acquire U.S.-origin items for the Chinese military, and (5) about Chinese activities in the South China Sea.

[13] IMF Regional Economic Outlook, October 2018, page 9 and Figure 1.17.

[14] CSIS Briefs, “Innocent Bystanders: Why the US-China Trade War Hurts African Economies”, April 2019.

[15] Financial Times, “Commodity Boom: Supercycle Me”, 16 February 2021, available at: <Hyperlink, accessed 31 March 2021>

[16] Cobalt being a key material used in the manufacture of (among other things) semiconductors, smartphone batteries and rechargeable batteries in electric vehicles. 

[17] Global Times (China), “China-Africa agriculture, infrastructure cooperation to be strengthened: experts”, 5 January 2021, citing China’s Ministry of Commerce.  <Hyperlink, accessed 31 March 2021>

[18] For example, Yu Jie, a senior research fellow on China at Chatham House, a UK think-tank, has commented that: “Volatile Sino-US relations and more restrictive access to overseas markets for Chinese companies have prompted a fundamental rethink of growth drivers by Beijing’s top economic planners”.  Cited in Financial Times, “China pulls back from the world: rethinking Xi’s ‘project of the century’”, 11 December 2020.  <Hyperlink, accessed 31 March 2021>

[19] Reuters, “Trade war hits BRI financings”, 8 July 2019. <Hyperlink, accessed 25 March 2021>.

[20] Cited in Financial Times, “China pulls back from the world: rethinking Xi’s ‘project of the century’”, 11 December 2020 <Hyperlink, accessed 25 March 2021>

[21] Financial Times, “China curtails overseas lending in face of geopolitical backlash”, dated 8 December 2020 <Hyperlink, accessed 31 March 2021>, citing the database compiled by researchers at Boston University’s Global Development Policy Center, database titled: “China’s Overseas Development Finance: Geospatial Data for Analysis of Biodiversity and Indigenous Lands”, <Hyperlink, accessed 31 March 2021).  Some analysts have observed that the drop in financing may not be that severe, because the above study does not take into account commercial lending by other Chinese banks (i.e. other than the official policy banks).  See Rhodium Group, “China’s Belt and Road: Down but not out”, 4 January 2021 <Hyperlink, accessed 31 March 2021>.  However at least some drop in financing and investment in Africa has occurred.  According to a Chinese-government produced Statistical Bulletin of China’s Outward Foreign Direct Investment, foreign direct investment by Chinese investors in Africa did decrease significantly in 2019, from $5.4 billion in 2018 to $2.7 billion in 2019. See data compiled by John Hopkins China Africa Research Initiative, itself sourced from the Statistical Bulletin of China’s Outward Foreign Direct Investment: <Hyperlink, accessed 2 April 2021>

[22] Forbes, “Is China’s Belt and Road Already in Retreat”, 30 January 2020, <Hyperlink, accessed 25 March 2021>.

[23] Devermont J and Chiang C, Center for Strategic & International Studies, “Innocent Bystanders, Why the US Trade War Hurts African Economies”, April 2019.

[24] Wang C, Horby P, Hayden F and Gao G, “A novel coronavirus outbreak of global health concern”, 24 January 2020.  <Hyperlink, accessed 31 March 2021>

[25] Africa Development Bank, Economic Outlook 2021, page 4.  This was at least at the ‘better case scenario’ of the predictions published by the World Bank and Africa development Bank in April 2020, predicting GDP contraction between 2.1% and 5.1% in 2020.  Africa Development Bank, “East Africa Economic Outlook 2020: Coping with the COVID-19 Pandemic”, citing World Bank’s Africa’s Pulse (April 2020).

[26] Tourism-dependent economies suffered an 11.5% decline in GDP in 2020; oil-exporting countries experienced a 1.5% decline in GDP in 2020, other resource-intensive economies suffered from a 4.7% decline in GDP in 2020.  Africa Development Bank, Economic Outlook 2021, page 20.

[27] Africa Development Bank, Economic Outlook 2021, page 20.

[28] Bloomberg, “Shortage of New Shipping Containers Adds to Global Trade Turmoil”, 16 March 2021, <Hyperlink, accessed 2 April 2021>.  See also: Hillebrand, “Where are all the containers?  The global shortage explained”. <Hyperlink, accessed 2 April 2021>

[29] Reuters, “China says one-fifth of Belt and Road projects 'seriously affected' by pandemic”, June 2020.  <Hyperlink, accessed 25 March 2021>

[30] The Economist, “The pandemic is hurting China’s Belt and Road Initiative”, dated 6June 2020 <Hyperlink, accessed 25 March 2021>.  See also Institute for Energy Economics and Financial Analysis, “Plans for second-largest coal-fired plant on planet postponed indefinitely”, 16 April 2020.  <Hyperlink, accessed 2 April 2021> However, this particular project postponement may have been due to overcapacity (resulting in part from reduced power demand due to the COVID-19 pandemic), together with the growing trend towards renewables: Business Day, “Fate of Egypt’s coal-fired project a sign of greener times”, dated 16 April 2020,  <Hyperlink, accessed 31 March 2021>.

[31] The Economist, “The pandemic is hurting China’s Belt and Road Initiative”, dated 6June 2020. <Hyperlink, accessed 25 March 2021>. 

[32] The Guardian, “Why House of Representaitves resolved to probe Chinese loans”, 25 May 2020, <Hyperlink, accessed 31 March 2020>  See also The Economist, “The pandemic is hurting China’s Belt and Road Initiative”, dated 6June 2020.  <Hyperlink, accessed 25 March 2021>

[33] International Railway Journal, “Kenya Railways to end SGR contract with Afristar”, 12 March 2021.  <Hyperlink, accessed on 10 April 2021>

[34] Real GDP contracted by 6.8% in Q1 of 2020, before rebounding to 3.2% in 2020 Q2, and 4.9% and 6.5% in Q3 and Q4 respectively; meaning that real GDP grew by 2.3% in 2020.  Source: IMF Data Mapper, available: <Hyperlink, accessed 31 March 2021>

[35] Africa Development Bank, Economic Outlook 2021, page 4.

[36] China Africa Research Initiative, “Global Debt Relief Dashboard”.  <Hyperlink, accessed 2 April 2021>

[37] Construction Review Online, “China negates alleged takeover of Juba Internatoinal Airport, South Sudan”, 26 March 2021, <Hyperlink, accessed 2 April 2021>

[38] Business Daily, “Debt pain as payment of Sh162bn Naivasha SGER loan starts”, 5 January 2021 <Hyperlink, accessed 2 April 2021>

[39] South China Morning Post, “Africa railways feel pinch of China’s belt and road funding squeeze”, 19 December 2020. <Hyperlink, accessed 2 April 2021>

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021.

1         Introduction

The Pan-African Investment Code (PAIC) is the first continent-wide African model investment treaty elaborated under the auspices of the African Union.[1] The PAIC has been drafted from the perspective of developing and least-developed countries with a view to promote sustainable development. The instrument contains a number of Africa-specific and innovative features of which some are yet unique in investment treaty practice. Likewise, the PAIC solidifies a trend towards greater harmonization of approaches across the continent and fosters Africa as an investment rule maker globally. 

The PAIC contains many innovative features and makes sustainable development its overarching objective. It reformulates traditional investment treaty language by inserting, for instance, exceptions to many of the standards of protection such as MFN and national treatment. It also introduces new provisions such as clauses on obligations for investors in relation to human rights, corporate social responsibility, use of natural re-sources, and land-grabbing. In addition, the PAIC omits certain investment standards which have been interpreted by investment tribunals in broad and unpredictable ways, such as fair and equitable (FET). The PAIC spells out horizontal obligations on how state contracts and public-private partnerships should be designed; how African states should adapt their labour policies and resource development; and how investors can help to promote technology transfer, clean technologies and environmental protection. Lastly, the PAIC gives countries the discretion to implement ISDS. Moreover, the PAIC has, since its adoption in March 2016, influenced the drafting of subsequent bilateral and regional investment instruments in Africa as well as national investment laws of certain African countries. To some extent the objective of sustainable development has already found its way into the AfCFTA Investment Protocol since the title of the Protocol has, reportedly, been changed to AfCFTA Protocol on Sustainable Investment. Now to what extent the Protocol will adopt similar approaches and provisions needs to be seen throughout the course of the upcoming negotiations.

2         The Elaboration and Negotiations of the PAIC

At the continental level, it is the African Union (AU)[2] that is mandated by its Member States to enhance the political and socio-economic integration of the continent and to promote sustainable development.[3] The most important integration endeavours currently undertaken by the AU are the establishment of the African Economic Community by the year 2034 as well as the establishment and finalisation of a continent-wide Free Trade Area.[4]

With the aim of enhancing economic integration, African Ministers responsible for continental integration decided in 2008 to initiate the work on a comprehensive investment code for Africa. The declared aim of the initiative was to attract greater flows of investments into Africa and to facilitate intra-African cross-border investments. Thus, the elaboration of the PAIC had started. From the beginning, it was the intention of the AU and its Member States to elaborate a text that would address Africa-specific needs. African independent experts drafted the text over several years. The groups of experts were composed of representatives coming from the different African regional economic communities (RECs), from academia as well as the private sector. 

The process of elaboration can roughly be divided into three phases. In its first phase, the group of experts compiled African best practices in the field and elaborated a first draft. The next and decisive phase was during the year 2015, when the PAIC text was discussed at expert level. Two meetings of independent experts, all from Africa, were held in May 2015 in Tunisia and another one in September 2015 in Mauritius. Experts of AU Member States then reviewed the work of the independent experts during a continent-wide meeting in Uganda that took place in December 2015. The third phase started in the year 2016. At a ministerial meeting in Addis Ababa in March 2016, the competent African ministers approved the work of the PAIC. At the last meeting in Nairobi in November 2016, finally, governmental representatives agreed to adopt the PAIC as a non-binding model investment treaty.

3         Building Common Ground for the Regulation of Foreign Investment in Africa 

The negotiations of the PAIC have highlighted that there are subject-matters and approaches for which a majority of African countries seem to agree. Three aspects that have been uncontroversial in the course of the negotiations. First, the need to have sustainable development as the overarching objective of the instrument and to integrate sustainable development concerns throughout the substantive and procedural provisions of the PAIC. Second, and by the same token, delegates negotiating the PAIC agreed on having investor obligations in the text, which are directly addressed to the investors. Third, another feature of the PAIC which was less controversial was the limitation of the scope of the instrument to post-establishment commitments.

3.1        The Objective of Sustainable Development

Preambles have a primary significance as to how an IIA will be interpreted in the event of a dispute between the parties or between an investor and a State.[5] Today, new and broader investment treaty objectives have become more and more relevant, one of which is certainly the objective of sustainable development.[6] In the African context, sustainable development goals are crucial given the important economic, social and environmental challenges the continent is still facing. 

The Preamble of the PAIC recognizes that the promotion of sustainable development requires investments (para. 7). Yet, these investments should have positive spill-over effects such as to facilitate job creation, promote technology transfer, support long-term economic growth and contribute effectively to the fight against poverty.[7] The Preamble specifically refers to the right of AU Member States to regulate all aspects relating to investments within their territories with a view to promote sustainable development objectives.[8] The drafters of the PAIC did not intend to disregard the protection of investors and investments, but stressed the need to achieve an overall balance of the rights and obligations among AU Member States and the investors under the PAIC (para. 11). The Preamble emphasizes also the need to promote corruption free investment and improved laws and regulations that promote transparency and accountability in governance (para. 9). The PAIC in fact seeks to promote responsible investments. 

To be consistent with the sustainable development objectives as inscribed in the Preamble, the PAIC starts off with a first article addressing its primary objective:

“The objective of this Code is to promote, facilitate and protect investments that foster the sustainable development of each Member State, and in particular, the Member State where the investment is located”.[9]

The objective statement is yet another clear link between investments and sustainable development is made.[10]

3.2        Investor Obligations 

Balancing the rights and obligations has become a mainstream reform approach of most countries. And the most common way to do so is the reaffirmation of the right to regulate of the host state to regulate matters of public interest. The PAIC is no different in this respect. However, the more innovative and noteworthy aspect in the PAIC is the incorporation of investors’ obligations in the corpus of rules applicable to investors and investments. These obligations directly imposed upon investors. In other words, they are direct obligations. Such investor obligations go beyond mere questions of compliance with national laws and involve how foreign investors should actively contribute to achieve development goals of host states. In contrast, several IIAs contain indirect investor obligations, which are obligations that require the contracting parties – so States and not investors - to adopt measures aimed at regulating the behaviour of foreign investors. In contrast hereto stand direct investor obligations, which are obligations directly addressed to foreign investors. Direct obligations can mostly be found in African investment instruments. Otherwise, they have not yet gained widespread recognition in international investment treaty practice. The PAIC and also many other African instruments include comprehensive provisions relating to many sustainable development issues, such as environmental protection, socio-political obligations, anti-corruption, respect for human and labour rights, technology transfer and education. 

As outlined above, the PAIC is intended to be a balanced legal instrument. In this respect, it contains a specific chapter on the direct obligations of investors,[11] counterbalancing the chapter on the guarantees of treatment for investors and investments. The chapter on investors’ obligations contains six provisions entitled: (1) framework for corporate governance, (2) socio-political obligations, (3) bribery, (4) corporate social responsibility (CSR), (5) obligations as to the use of natural resources and (6) business ethics and human rights. Under the PAIC, an investor has to comply with national and international standards of corporate governance for the sector concerned. The investor is required to comply in particular with transparency and accounting standards.[12] 

There is likelihood that the Protocol will continue this trend as next to the PAIC, several other African instruments, such as the ECOWIC, SADC Model, EAC Model, Morocco-Nigeria BIT, all contain what has been called direct investor obligations. Lastly, including investor obligations always comes with the caveat of how to enforce them effectively. The PAIC is the express possibility for a State to file a claim against an investor in an investor-State arbitration, a so-called counterclaim. It is noteworthy that the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention) accepts counterclaims under certain conditions.[13] However, in practice, tribunals often enough deny jurisdiction on counterclaims due to the absence of a clear treaty provision expressly allowing for such claims by the State.[14] The inclusion of an express reference to counterclaims thus clarifies any doubt that investors do consent to the tribunal’s jurisdiction over these claims. Yet, there are very few examples of treaties that contain an express reference to counterclaims. the PAIC provision dealing with counterclaims reads as follows:

“Where an investor or its investment is alleged by a Member State party in a dispute settlement proceeding under this Code to have failed to comply with its obligations under this Code or other relevant rules and principles of domestic and international law, the competent body hearing such a dispute shall consider whether this breach, if proven, is materially relevant to the issues before it, and if so, what mitigating or off-setting effects this may have on the merits of a claim or on any damages awarded in the event of such award”.[15]

The inclusion of a provision allowing counterclaims by States will ensure the enforceability of investor obligations contained in the PAIC.[16] This means that a State can invoke any violation of any relevant international treaty protecting the environment, human rights and labour standards under the PAIC’s provision on counterclaims. If the AfCFTA Protocol includes direct investor obligation, a provision should point out how the obligations will be enforced.[17]

3.3        Pre-establishment commitments 

The majority of existing IIAs only guarantee standards of treatment of foreign investment regarding the post-establishment phase, but there is a growing number of treaties that include commitments with respect to the pre-establishment phase. This is in particular the case with comprehensive FTAs.[18] Recent practice shows that besides the United States and Canada, the EU also has sought to include pre-entry commitments in its treaties.[19] Pre-establishment obligations are formulated by including references to MFN treatment as well as national treatment.[20] 

The drafters of the PAIC have been aware of current treaty practice, but considered that in the context of African countries such provisions may preclude a State from altering domestic law if circumstances so warrant in light of national sustainable development goals. To this effect, the PAIC’s MFN and national treatment provisions do not contain any reference to establishment, acquisition and expansion. In fact, the PAIC not only has a clear objective provision, it also explicitly excludes pre-establishment commitments. As Article 4.4 provides “for avoidance of doubt, establishment, acquisition and expansion under this Code only apply to the post-establishment phase”. It is an important policy choice to decide whether to extend the Protocol’s coverage to pre-establishment matters and, if so, to find the right balance between binding international commitments and domestic policy flexibility to keep strategic sectors of their economy closed to foreign investment. 

It will be important to consider this choice in relation to the definition of an investor. If the definition of an investor is limited to African investors, pre-establishment commitments might be a suitable option; why? Because it could foster intra-African cross-border investment and lastly, African economic integration. For instance, the under the COMESA (2017) coverage is limited to African investors. According to Art. 3(2) “this Agreement shall cover investments of COMESA investors made in the territory of Member States in accordance with their laws”. If the Protocol covers third country investors, pre-establishment obligations can significantly restrain the host state’s ability in accepting or refusing foreign investment based on economic development considerations (e.g., the development of infant industries). This is the approach in the PAIC (Art. 4(5) extends the scope to investors of third countries) but the PAIC does not cover pre-establishment phase of an investment.

4         The remaining controversial parts 

While the negotiations of the PAIC served as an excellent opportunity for exchange and consensus building, it also revealed that there are several aspects of international investment law, which remain controversial and for which it seems to be unlikely to find common ground in the near future.

4.1        Investor-State dispute settlement

Over the last years, ISDS became extremely controversial and probably constitutes the most controversial issue in today’s investment reform debate. The increase in the number of ISDS cases, the often very high sum of compensation and costs of arbitration as well as unexpected and inconsistent interpretations of IIAs by arbitral tribunals have resulted in rising criticism of the existing system. 

There are two general alternative ways discussed on how to reform ISDS: either to keep and reform it as some countries have done,[21] or to abandon and replace it with national courts or with by setting up an ombudsman system as some countries have done.[22] The global debate is perfectly mirrored in Africa, and ISDS did not fail to be the most controversial aspect during the elaboration of the PAIC. In fact, the provisions dealing with ISDS are the only ones in the PAIC on which no agreement between the drafters could be found. It is well known that South Africa, for instance, has a clear policy against ISDS. The country recently reviewed all of its IIAs and terminated most of them. The law that will be applicable to foreign investors in South Africa is the 2015 Promotion and Protection of Investment Bill, which does not contain ISDS.[23] During the PAIC experts’ meetings, South Africa, together with a couple of other countries, argued for the exclusion of ISDS.[24] In fact, all SADC Member States are meanwhile opposed to ISDS as is evidenced by the amendments of August 2016 to the SADC Protocol on Finance and Investment.[25] The amended version no longer contains any reference to ISDS and only provides for State-State dispute resolution.[26] 

However, many African countries still see a need for having ISDS in the PAIC in order to render their countries attractive for foreign investors. It is arguably true that foreign investors have poor trust in African judicial systems. Hence the need for ISDS seems, at least for the time being, inevitable. Among the countries in favour of ISDS was a consensus to shape provisions on ISDS in a manner so as to avoid the shortcomings of this mechanism and to address some of the criticism. Consequently, the ISDS provisions of the PAIC include a couple of important reform approaches, such as the exhaustion of local remedies. The traditional approach of IIAs is to provide for direct access to international arbitration for a foreign investor, usually after a ‘cooling-off period’.[27] It was for a long time considered that in many countries an independent judiciary cannot be taken for granted and that the defending State might influence the outcome of investor-State disputes in its own courts.[28] However, some authors argue that today the situation in most countries, including African countries, has changed; consequently the exhaustion of local remedies could and should revive.[29] 

According to UNCTAD, the requirement of dispute resolution before the domestic courts of the host country has several advantages, and not least might foster sound and well-working legal and judicial institutions in the host States.[30] SADC as well as IISD also consider this approach to be beneficial for host States, since notably the exhaustion of local remedies can prevent frivolous claims and avoid the considerable costs of international arbitration.[31] Recent treaty practice shows that the requirement of the exhaustion of local remedies remains quite rare with the exception of the Indian Model BIT.[32] The drafters of the PAIC decided to include the requirement for foreign investors to first exhaust local remedies in the Member State where their investment is located before a request for arbitration can be submitted.[33] In this way, investor-State arbitration becomes a remedy of last resort under the PAIC. 

In addition, the current version of the PAIC contains an important limitation to the investors’ access to ISDS. The State’s consent for arbitration is given on a case-by-case basis or on the basis of national law. ‘[T]he dispute may be resolved through arbitration, subject to the applicable laws of the host State and/or the mutual agreement of the disputing parties.’[34] This rather peculiar provision implies that if the host State’s law do not allow for ISDS, such as in the case of the South African Investment Bill,[35] ISDS cannot take place. And even if the host State’s law provides for ISDS, the investor would still need the agreement of the host State to initiate ISDS proceedings. Lastly, even in case of silence in the host State’s law, ISDS can only take place upon the mutual agreement of the disputing parties. In sum, the dispute settlement provisions of the PAIC thus seek in particular to avoid certain shortcomings of the existing ISDS system. 

4.2        The fate of existing African investment agreements 

The issue of the relationship with other investment agreements is addressed in the PAIC. The latter states as follows: “Member States may agree that this Code replaces the intra-African bilateral investment treaties (BITs) or investment chapters in intra-African trade agreements after a period of time determined by the Member States or after the termination period as set in the existing BITs and investment chapters in the trade agreements”[36]. This provision understands African integration in the long run and takes into account that continental integration demands a certain transitional period. The PAIC further clarifies that: “Member States may agree that in the case of a conflict between this Code and any intra-African BIT, investment chapter in any intra-African trade agreement, or regional investment arrangements, this Code shall take precedence”[37]. This provision would be crucial if the PAIC was adopted as a binding instrument as it clarifies the relationship with other investment agreements. In such a setting, the PAIC could ensure continent-wide coherence and legal certainty.  However, the provision is written in soft language and highlights that African countries could not agree to have the continent-wide instrument prevailing over regional and bilateral investment agreements. 

The Investment Protocol can be an excellent opportunity to terminate old intra-African BITs that reflect content-wise the model of European countries/the OECD. 

Especially for Africa, UNCTAD has stressed the challenges relating to existing intra-African BITs: “The fate of these first-generation treaties re-mains uncertain. If the new regional (and continental) IIAs under negotiation do not entail the replacement of older BITs, the result will be an undesirable multiplication of treaty layers. On the other hand, replacing existing BITs with new regional initiatives would contribute to the consolidation and harmonization of the international investment policy framework in Africa.” 

The Investment Protocol can replace existing old-fashioned BITs between AU member states. The EU with all its recent IIAs, has replaced old BITs that its member states had with the partner country in question. The EU is doing this through all its recent IIAs (see, EU-Canada CETA, Annex 30-A, EU-Vietnam Investment Protection Agreement, Annex 6) 

5         Conclusion 

The drafters of the PAIC were inspired by the current international reform discussion. Thus, several of the ideas that can be found in the PAIC text are what can be called common approaches in the international discussion on reforming the investment law regime as a whole. Such ideas mainly concern the reformulation of certain treaty standards, the inclusion of societal concerns as well as the rethinking of the ISDS system. Africa, unlike Brazil, is not making a fundamental contestation of the system of IIAs. The PAIC is rather an African tuning or recalibration of an IIA. It reflects the development that new IIAs are no longer based on either the North American or European models, but that other regions also engage in shaping IIAs according to their level of economic development and social needs. 

The elaboration of the PAIC has permitted African countries to deliberate on their vision of the future shape of IIAs and to build awareness amongst them of the broader implications of foreign investment for their sustainable development. The PAIC thus reflects the broad consensus of all AU Member States on precise provisions over foreign investment regulation and endows Africa with a voice in the international debate on the future and reform of the international investment regime. In particular, the strong emphasis on sustainable development goals in the PAIC will serve as benchmark for the drafting and shaping of the future Investment Protocol to the AfCTA. The AfCTA represents an opportunity to foster trade integration in Africa but it also represents a crucial momentum for development-oriented regulation of investment and corporate activity in Africa. Investor-State relations should be based on a ‘win-win’ scenario and the PAIC has shown that investment law can provide for such an approach by better integrating investment facilitation and protection with the sustainable development objectives of African States.

____________________

* Postdoctoral Research Fellow, National University of Singapore 

[1] Together with Professor Makane Moïse Mbengue, the author has been involved in the elaboration process from 2014-2015. Professor Mbengue has been the lead expert and negotiator. The views of the author do not necessarily reflect the views of the African Union or of other negotiators involved in the negotiation and drafting of the PAIC. Some of the information contained in this article is based on the experience of the author. The PAIC text (dated March 2016) is available at <http://repository.uneca.org/handle/10855/23009>.

[2] The African Union (AU) is a continental organization consisting of 55 African States. The AU was created in 2000 and established in 2001. Its headquarters are located in Addis Ababa, Ethiopia.

[3] Constitutive Act of the African Union (signed on 11 July 2000 and entered in 26 May 2001), Art.3 <www.achpr.org/instruments/au-constitutive-act/>.

[4] The Agreement establishing the AfCFTA, see <https://au.int/en/treaties/agreement-establishing-african-continental-free-trade-area>.

[5] Rudolf Dolzer and Margete Stevens, Bilateral Investment Treaties (Martinus Nijhoff, 1995), p. 20.

[6] UNCTAD, ‘Investment Policy Framework for Sustainable Development’ (2015) <http://unctad.org/fr/PublicationsLibrary/diaepcb2012d5_en.pdf> (hereafter: IPFSD). The term sustainable development is understood here as development, which relates to economic development, social development and the protection of the environment. See further also the contributions in Stephan W Schill et al (eds), International Investment Law and Development: Bridging the Gap (Edward Elgar 2015).

[7] PAIC, preamble, para 8.

[8] Ibid., para 10.

[9] PAIC, Art 1.

[10] See in the same sense, Art 2.2 of the SADC Protocol on Finance and Investment (signed on 18 August 2006), <http://investmentpolicyhub.unctad.org/Download/TreatyFile/2730>; In August 2016, SADC Member States have adopted an amended version of the Protocol on Finance and Investment.

[11] PAIC, chapter 4.

[12] Ibid.,, Art.19.1.

[13] ICSID Convention, Art. 46; see also Rule 40 ICSID Arbitration Rules. Yet Article 46 of the ICSID Convention does not, by itself, vest a tribunal with competence over counterclaims, the requirements of Article 25 of the ICSID Convention as well as of the applicable investment treaty must also be satisfied. See Urbaser v Argentina, ICSID Case No ARB/07/26, Award (8 December 2016),  para 1117.

[14] See Spyridon Roussalis v Romania, ICSID Case No ARB/06/1, Award (7 December 2011), paras 859-877 and Saluka Investments BV v The Czech Republic, UNCITRAL, Decision on Jurisdiction over the Czech Republic’s Counterclaim (7 May 2004).

[15] PAIC, Art. 43.1.

[16] There are other ways of enforcement of investors’ obligations, such as by creating a monetary liability in domestic courts of the host State for a breach of the treaty obligations by an investor, SADC Model BIT, Commentary 39.

[17] Next to counterclaims, other options are Such as civil action for liability in national courts of the investors’ home state (Morocco-Nigeria BIT, Art. 20; SADC Model BIT (2012), Art. 17; EAC Model, Art. 11); or conditioning IIA protection and access to ISDS to the respect of the investor obligations (See a European example, Investments made through corruption are excluded from the dispute settlement mechanism under EU IIAs, see e.g., CETA, Art. 8.18(3)).

[18] Starting with North American Free Trade Agreement (NAFTA) (signed 17 December 1992, entered into force 1 January 1994) arts 1102 and 1103 <http://investmentpolicyhub.unctad.org/Download/TreatyFile/2413>; see also TPP, Art.9.4.

[19] CETA arts 8.6 and 8.7; EU-Vietnam Free Trade Agreement (2018) <http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437>, arts 8.3 et ff. This is interesting to note since traditional BITs of EU Member States do not cover commitments relating to the pre-establishment phase.

[20] See NAFTA, Art.1103; US Model BIT, Art.4; CPTPP, Art.9.4.

[21] Such as the establishment of a permanent investment court system in EU treaties see CETA, arts. 8.18 ff; see also EU-Vietnam Investment Protection Agreement <http://trade.ec.europa.eu/doclib/docs/2018/september/tradoc_157394.pdf> 3.1 ff. The Indian Model BIT, Art.14 prohibits investors to threaten the State to use ISDS in order to obtain benefices, limits the scope of claim, and foresees the exhaustion of local remedies.

[22] Such as South Africa and Brazil. See for the ombudsman system, Brazil-Malawi CIFA, arts 4 and 13.

[23] Promotion and Protection of Investment Bill of South Africa.

[24] SADC recommends the exclusion of ISDS, see 2012 SADC Model BIT, Art. 29.

[25] Agreement Amending Annex 1 (Co-operation on Investment) of the Protocol on Finance and Investment (signed 17 May 2017, not yet entered into force) (Agreement Amending Annex 1) <http://www.sadc.int/files/7114/9500/6315/Agreement_Amending_Annex_1_-_Cooperation_on_investment_-_on_the_Protocol_on_Finance__Investment_-_English_-_2016.pdf>. The instrument will be further discussed under Section 6.1.

[26] ibid.

[27] A number of IIAs require pursuing local remedies for a period of time, see eg Agreement between the Belgium-Luxembourg Economic Union and the Republic of Botswana on the Reciprocal Promotion and Protection of Investments (signed 7 June 2006, not yet in force), Art.12.2 <http://investmentpolicyhub.unctad.org/Download/TreatyFile/331>; Agreement between the Republic of Korea and the Government of the Republic of Argentina on the Promotion and Protection of Investments (signed 17 May 1994, entered into force 24 September 1996), Art.8.3(a) <http://investmentpolicyhub.unctad.org/Download/TreatyFile/102>.

[28] Dolzer and Schreuer, 235.

[29] See Sornarajah, 190.

[30] UNCTAD, IPFSD.

[31] IISD Model, Art.45; 2012 SADC Model BIT, Art.29.4(b).

[32] Indian Model BIT, Art. 14.3.

[33] PAIC, Art. 42.1(c)

[34] Ibid.

[35] Promotion and Protection of Investment Bill of South Africa, Art.13.

[36] Art. 3.2 PAIC.

[37] Art. 3.4 PAIC.

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021.

Executive Summary

The Belt and Road Initiative (BRI) is arguably a one-of-a-kind investment initiative, with many features separating it from past international trade or investment efforts.  However, a comparative analysis of disputes arising out of the BRI or relating to BRI projects with disputes arising in connection with these past initiatives reveals significant similarities, in particular in relation to the type of dispute resolution mechanisms used to resolve them.  Yet, these significant similarities do not overcome the specificities of BRI disputes, which are highly political and often resolved out of court through negotiations.  Knowing and taking into account such specificities allows disputing parties to make the most of dispute resolution mechanisms to achieve greater bargaining powers during these negotiations.  The below article presents a short description of similarities and crucial differences pertaining to BRI disputes, while drawing conclusions with respect to the attitude parties must adopt to resolve these disputes efficiently and with success.

Introduction

The Belt and Road Initiative (BRI), since its formal launch in 2013 has attracted a large amount of media and political attention from relevant public and private stakeholders.  That attention has been prompted by the perceived difficulty for non-Chinese parties to systematize the BRI, to understand its scope and workings, and to define the requirements to secure their involvement in this “one of a kind” investment initiative.

That the People’s Republic of China (PRC) has portrayed the BRI as a century defining, extraordinary initiative is no surprise (although some have depicted it as just a simple attempt to revive millenary old trade routes).[1]  But, the PRC’s portrayal admittedly also accords with an objective, even cursory, review of the BRI.

First, from an economics standpoint, the BRI is an extraordinary investment initiative, which cannot be considered equally to other trade and investment initiatives.  The amount of capital invested by the PRC led financial institutions, such as the Asian Infrastructure Investment Bank (AIIB) and the Export-Import Bank of China (China EXIM Bank), is unmatched by other past investment initiatives, including those initiated for reconstruction purposes.[2]

Second, the BRI’s geographical scope is also unmatched by other past investment initiatives.  The BRI currently involved projects on four of the six continents (Africa, Asia, America and Europe).[3]

Last, from a political standpoint, the BRI arguably distances itself from comparable past investment initiative by the debate it has stirred between political forces supporting and opposing it.  This debate has given rise to various levels of misinformation, in the context of growing trade and political tensions, mainly involving the US and the PRC.  

But, what about disputes relating to BRI projects? Do these disputes differ in type, scope, nature or any other relevant aspect from disputes relating to other past investment initiatives?

Given the type and size of the projects involved in the BRI, disputes have arisen and will continue to arise, with their resolution a key element determining the outcome of the initiative as a whole, i.e. either they are resolved efficiently and they do not signal the end of the relevant project when they arise; or they are not resolved efficiently and they result in the stalling/abandonment of the project, on top of creating unwanted bad publicity for the initiative as a whole (with damaging effects to the reputation of both the investing and the host States).

Analyzing the specific features of the BRI disputes gives an appearance of déjà-vu to many arbitration lawyers (Section 1).  However, differences exist and identifying these peculiarities conditions the efficient resolution of BRI disputes, whether inside or outside of the courtroom (Sections 2 and 3).

1       BRI disputes Appear no different from other disputes relating to past trade/investment initiatives

According to recent International Chamber of Commerce (ICC) statistics and upon review of their inherent characteristics, BRI disputes appear no different from disputes that have traditionally arisen in relation to past trade initiatives.  The sectors, nationality of the Parties or types of disputes relevant to BRI projects are those which have been traditionally handled through ICC Arbitration (Section 1.1).  Likewise, disputes involving loan defaults at a State level have been common throughout history, and the BRI is not immune to such controversies (Section 1.2).

1.1         Commercial disputes relating to the BRI appear no different from traditional commercial disputes

According to ICC statistics, sectors which have been frequent users of ICC commercial arbitration are unsurprisingly also those most involved in BRI commercial disputes.  ICC statistics show that the “Energy” and “Construction” sectors amounted to around 27 % of the ICC Court of Arbitration total caseload in 2018 (most recent year such statistics were compiled), and around 35 % of the ICC ADR Centre caseload.[4]

Likewise, parties often involved in ICC arbitration disputes are located in prominent BRI countries.  Out of a total of 2282 parties involved in ICC arbitration cases in 2018, 1044 parties were incorporated in one of the 93 “Belt and Road” countries.  Hence, approximately 46% of all parties involved in ICC Arbitration cases that year were from BRI countries.

In 2018, the top five most active BRI countries in ICC arbitration cases were Italy (with 87 cases involving Italian parties) followed by the United Arab Emirates (69 cases), Turkey (62 cases), the PRC (59 cases) and South Korea (54).

Likewise, large and complex construction projects are frequent users of ADR mechanisms (often using as dispute resolution mechanisms a combination of dispute boards, mediation and arbitration).  These types of projects are the most frequent in relation to the BRI, and the underlying contracts at issue often include a combination of these sophisticated mechanisms.  As a result, the disputes relating to these projects also are handled through frequently used dispute resolution mechanisms.  Hence, the resolution of such disputes benefits from past dispute resolution practices developed and refined over many years.

1.2       BRI disputes over State to State loans and sovereign debt are no different from those arising from past trade/investment initiatives

BRI projects, as is well known, are driven by State initiative and financing.  Most of the projects that have been labelled as BRI are financed through loans extended by the PRC Government through the AIIB or the China EXIM Bank.  While the terms and scope of these loans is difficult to ascertain, they are negotiated at State level, following the signature of Memorandum of Understandings (MoU) between the PRC and the Host State.[5]

Incidents relating to the repayment of these loans have already led to tensions between the PRC and borrowing States.  But it is unknown whether these disputes have resulted in court or arbitration disputes.  None are currently in the public domain, which suggests they are rather resolved through direct State to State negotiations.  In this respect, these disputes are no different from those which have arisen in the past in relation to State to State loans or to loans extended by multilateral lending institutions such as the International Monetary Fund (IMF) or the Asian Development Bank (ADB).

Within the context of the BRI, the PRC appears to be playing the diplomatic negotiation game as well as and along the same lines as other occidental States or multilateral lending institutions that have been involved in such kinds of disputes in the past.  In other words, it appears to be willing to negotiate restructuring or delays in repayment of loans against various types of considerations, just like other traditional international lenders have done in the past in relation to their own loans.[6]

While using interstate negotiations are nothing new in these circumstances, the solutions yielded by these BRI specific negotiations have differed from those adopted in the past.  The most striking example of this difference has also been one of the most criticized BRI-related events so far.  It involves the port of Hambantota, which was famously leased to a Chinese State-Owned Entity (SOE) for 99 years, after Sri Lanka defaulted on loans which had been extended by the PRC to finance the project.[7]  Likewise, the fact that the PRC has recently simply chosen to discontinue previously granted loans reveals a new strategy to deal with payment incidents at State level. 

2       BRI Disputes are different because of the State element

The main aspect that differentiates BRI disputes from those that have arisen in the past seems to be the omnipresence of a State element, notably even in relation to commercial disputes (Section 2.1).  That particularity must be taken into account by parties involved in these commercial disputes, and it reinforces the need to include solid dispute resolution mechanisms in their contracts.

2.1         BRI projects involve a large element of State intervention

The BRI is a highly politicized and much discussed investment initiative, partly because its main driver is the PRC.  The PRC has every incentive to ensure that the BRI proceeds in a timely manner and presents an attractive investment opportunity for both host and investing countries.  At the other end of the spectrum, critics of the initiative, such as the US, challenge the feasibility of the BRI or question the legitimacy of its apparent and underlying motives.

As a result of that global attention, the States themselves, particularly the PRC so far, have been involved at all levels of the BRI projects, either directly or indirectly.  Directly, diplomatic negotiations have taken place between the PRC, as the main lender, and State borrowers, on the terms of the loans, the performance of each party’s obligations, and the consideration given in return for these loans.  Indirectly, Chinese SOEs are heavily involved in the actual implementation of the BRI projects, their involvement being often a condition precedent for the relevant BRI project to be implemented.  Many BRI projects have been funded by the PRC on the condition that they be implemented by Chinese SOEs (whether it be as main contractor or subcontractor), with a predominantly Chinese workforce, and using Chinese material.  As a result, the Chinese State has eyes and ears on the ground and is able to monitor every detail of the implementation of a project and get involved to resolve an issue.

The consequence of State involvement in BRI projects is that whenever issues threatening the timely or actual completion of a project arise, Chinese SOEs (and the PRC by ricochet) will be made aware rapidly.  Hence, PRC authorities will seek to find a solution quickly.  In practice, this highlights the importance of out of court negotiations.

2.2         BRI disputes often are resolved in parallel to the courtroom

Examples of BRI disputes being arbitrated and litigated have recently surfaced more frequently, thereby putting the emphasis on the need for parties to BRI contracts to adopt robust dispute resolution mechanisms.  These examples have also shown the tendency by parties to these contracts (whether they be public, quasi-public or private) to seek the resolution of their dispute through negotiations parallel to any arbitration or court case.  That preference for settling disputes amicably (through negotiation or mediation) will come as no surprise to professionals experienced in dealing with Asian parties and disputes.  However, this preference needs to be understood and considered by all parties involved in BRI contracts and disputes.

Non-Chinese parties also need to consider that, although their bargaining power might appear lower, they can gain leverage in negotiations by demonstrating their ability to enforce their contractual rights efficiently through a robust, independent and binding dispute resolution mechanism.  Such mechanism can be a combination of dispute boards, mediation and arbitration, administered by a reputable dispute resolution institution.  The end objective is to demonstrate to the counterparties involved that, if need be, the parties will have to go through a neutral process, where unequal bargaining powers or appearances thereof will not matter, and which will yield a result (whether it be a dispute board’s decision or arbitral award) enforceable efficiently and quickly against assets located all over the globe.  The sole demonstration of one party’s ability to assert rights efficiently will often be enough to enhance its negotiating stance significantly, thereby levelling the negotiating playing field.

In this regard, it is worth noting that several arbitral institutions, including on the African continent, fit the bill and provide adequate options to parties during contract negotiations.  In other words, while Chinese counterparts may be willing to push a non-negotiable contractual package (which would include their preferred dispute resolution clause), non-Chinese parties have many options to propose during negotiations to achieve the simple objective of being able to enforce their contractual rights before a neutral, efficient and experienced forum.

3       BRI disputes’ additional differences

3.1         Lack of Dedicated ISDS mechanism

The second notable difference between BRI related disputes and disputes arising out of past trade/investment initiatives is the current lack of a dedicated investor state dispute settlement (ISDS) mechanism covering BRI investments.  There currently exists an ISDS mechanism, based on a network of International Investment Agreements (IIAs), and arbitration institutions specialized in administering these disputes, the most prominent being the International Centre for Settlement of Investment Disputes (ICSID).  ICSID, which forms part of the World Bank Group, was created following the signature of the 1965 Washington Convention (ICSID Convention).[8]  That generalist ISDS mechanism does not cover specific types of investment disputes and instead can be used by all types of investors, if they and their “investments” meet the requirements enounced in the relevant IIA and the ICSID Convention.

So far, no ISDS system specific to the BRI, let alone to BRI investments in Africa, has been created.  In other words, BRI investors have had to resort to the general system to settle their dispute with host states.  As an example, a Chinese investor, Beijing Everyway Traffic and Lighting Tech Co Ltd. recently launched an ad hoc arbitration against Ghana on the basis of the China-Ghana BIT.  That arbitration, although not strictly related to a BRI project, includes features that will likely resemble those of future BRI investment arbitration disputes.  Yet, in the absence of a BRI specific ISDS forum, these disputes and the related parties, run the risk of falling within the general system, when their interest may be to provide for another type of ISDS system, or to adapt protections afforded to foreign investors to their involvement with a BRI project.  In this regard, the initiative to create the China-Africa Joint Arbitration Centre (CAJAC) does not appear to cover all potential types of BRI disputes, in particular those arising between foreign investors and host states.

3.2         Impact of Environmental and social issues

The third major difference is the role of environmental and social issues in the disputes relating to the BRI.  These considerations have hardly been discussed in relation to other past trade/investment initiatives, while they now often are at the centre of disputes, including those relating to the BRI. 

Indeed, the first sign of the importance of such issue is the Chinese President’s 2016 declaration to the Uzbek parliament that the BRI would be “green, healthy, intelligent and peaceful”.[9]  Guidelines have even been issued to ensure the green implementation of BRI projects.[10] 

Environmental issues raised in relation to BRI disputes result in the relevance of environmental laws and regulations, either domestic or international, being enhanced.  It will also result in the larger involvement of environmental NGOs and actors, either local or international, into the dispute resolution process, through the possibility to file lawsuits in local courts against BRI actors, or to act as amici curiae before local or international tribunals ruling on BRI disputes. 

Social issues, notably those relating to the social legitimacy of BRI projects, will prompt similar actions by NGOs or social groups, or local communities.  These aspects will have to be carefully considered by litigants in order to fully understand their impact on questions of liability of States or on issues of causation between a State measure, and the alleged damage suffered by a private investor.[11]

________________________

* Associate, LALIVE

[1] See the BRI official website at https://www.beltroad-initiative.com/belt-and-road/

[2] Compare the estimated USD 13 billion of investment pertaining to the Marshall Plan to the estimated USD 8 trillions of the BRI.

[3] See interactive map from Boston University at https://www.bu.edu/gdp/chinas-overseas-development-finance/

[4] See ICC ADR Centre Rules at https://iccwbo.org/dispute-resolution-services/mediation/icc-international-centre-for-adr/

[5] See for example the Memorandum of Understanding signed between the PRC and the Democratic Republic of Congo (DRC) on 6 January 2021 at https://news.cgtn.com/news/2021-01-07/China-and-DRC-sign-MoU-on-Belt-and-Road-cooperation-WQDfnIxRq8/index.html.

[6] See about the growing demand for restructing of BRI loans at https://tfipost.com/2020/08/china-gave-away-billions-of-dollars-as-bri-loans-to-different-countries-now-they-are-not-coming-back/ and on the specific demand for restructuring by Zambia at https://www.scmp.com/news/china/diplomacy/article/3122836/chinas-top-diplomat-holds-debt-talks-zambia-after-appeal

[7] See explanation of Sri Lanka situation at https://foreignpolicy.com/2021/03/02/sri-lanka-china-bri-investment-debt-trap/

[8] See ICSID website at https://icsid.worldbank.org/resources/rules-and-regulations/convention/overview.

[9] See report on President’s Xi’s speech at https://www.globaltimes.cn/content/989967.shtml

[10] See Green Development Guidance for BRI Projects Baseline Study Report, released in December 2020 by the BRI International Green Development Coalition.

[11] See Jus Mundi Wiki Note, Social License to Operate, by Baptiste Rigaudeau and Emilie McConaughey.

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021. 

A.          Introduction

1. Arbitral institutions have adopted new measures so that they can continue to manage arbitration proceedings during the COVID-19 Pandemic. Several leading arbitral institutions have since adopted electronic filings only and encourage the use of video conferencing for all hearings.

2. While these measures have been welcomed as allowing dispute resolution to carry on “business as usual,” arbitrators and parties must ensure that these measures do not negatively affect parties’ rights to due process. If due process is compromised, the finality of arbitration awards could be jeopardised.

B.          The Framework 

3. The use of technology in international arbitration is not new. As early as 2004 an ICC Task Force was commissioned for an IT Report which was subsequently revisited in April 2017. The latter, ICC Commission Report, outlined that the benefits of IT in international arbitration would outweigh the risks. It highlighted in particular that briefs with embedded electronic links to cited exhibits, testimony and legal authorities could help the tribunal better understand and evaluate cases, but caveated that it may also be time-consuming and expensive for parties to prepare.

4. In general, it suggested that the benefits of greater IT in international arbitration largely outweighed any risks and the report argued that many widely-available IT solutions were not used to save time and costs as effectively as they could be. Videoconferencing, which some tribunals and parties remained reluctant to use even for minor witnesses, was considered as a good example of an IT solution that could easily cut time and costs in international arbitration. It is undeniable that the onset of the COVID 19 Pandemic has fast-forwarded implementation of these recommendations by many years, to the arbitration community’s advantage. 

C.       The Benefits

Logistics 

5. The advantages of remote arbitration hearings are numerous. While lengthy testimony does not translate as well in an online format, this promotes more time-efficient, focused hearings, which will result in cost reductions for parties. The novelty of an online format also allows for a more flexible dispute resolution process where parties can tailor the proceedings according to their requirements. Arbitration, particularly international arbitration, often involves significant travel and presents scheduling challenges which can delay the expeditious hearing of proceedings.

6. A remote forum allows proceedings to be scheduled in a timelier manner and avoids the costs associated with travel and accommodation. In addition to the cost and time efficiencies that can be realised through a remote forum, some participants may feel that their experience is enhanced as they are able to participate on equal terms with the tribunal and the counsel team, rather than only engaging from the back row of a hearing room. 

7. Moreover, the availability of virtual hearings allows for a more diverse and greater array of options where the choice of Adjudicator is concerned. The ‘new’ system can facilitate arbitrators from Africa hearing disputes in Hong Kong, all with a simple internet connection. This will hopefully assist with enhancing the diversity problems which routinely plague the panels of various arbitral institutions from across the globe. 

Reduced hearing length 

8. In the main one of the perceived advantages of virtual hearings is a more focussed approach to the issues in dispute during oral submissions. This has also been identified in by the ICC in its recent ‘Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic’, where it suggested that parties should identify “whether the entirety of the dispute or discrete issues may be resolved on the basis of documents only, with no evidentiary hearing”. Reliance on written submissions, while not ideal, or even possible in all situations, is consistent with arbitration’s emphasis on efficiency.

Global Legal Teams

9. The implementation of digital trends in arbitration also allows legal teams or clients to have greater scope for constructing a truly global and cohesive legal team to defend their interests. This means that legal teams can harness the benefits and skill sets from different jurisdictions and specialisms from around the worked without the need to be in person or have exorbitant travel expenses. 

Costs of the Arbitration 

10. It is also undeniable that digital hearings severely reduce the costs of the arbitration. From hearing rooms to arbitrator’s travel expenses, the implementation of digitally administered dispute resolution makes arbitration a more attractive prospect to parties who are looking for a speedy resolution to their dispute. 

D.      The Challenge 

11. That being said, the move to online hearings demonstrates the adaptability of arbitral institutions and the arbitration proceedings themselves. However, these same measures, if abused, could present new challenges for due process and equal treatment between the parties. 

12. Under Article V (1) of the New York Convention, an arbitral award may be challenged if “a party against whom the award is invoked . . . was otherwise unable to present his case” or where “the arbitral procedure was not in accordance with the agreement of the parties, or failing such agreement, was not in agreement with the law of the country where the arbitration took place.” 

13. The integrity of the arbitral award stems from a fair process based on party autonomy and a party’s reasonable opportunity to present its case. It is therefore unsurprising that emerging guidance such as The Seoul Protocol on Video Conferencing in International Arbitration emphasises that virtual proceedings must be fair to all parties in the dispute.

 E.      Discussion

14. Arbitral institutions have an important role to play in developing practices and protocols to coordinate this digital move. Most institutional rules grant the tribunal the power to direct the procedure as it wishes; and the onus will now likely be on the party raising an objection to a virtual hearing to explain why it would be untenable under pressing circumstances such those we currently face 

15. Beyond this, there are a host of refinements and adjustments to be made to tailor traditional procedural safeguards to the virtual hearing setting. How will we address the concern for real-time witness coaching? Will the debate echo traditional discussions of the standards for witness preparation? Will we need to adjust the typical daily hearing schedule now that participants can expect to sit for long periods in front of their monitors? What should be done in the event of technical failures? These are among the practical issues that the international arbitration community will be considering and on which the proactive contributions of arbitral institutions will be welcome. 

16. In developing new approaches, a number of existing soft law instruments will assist. Although they do not deal directly with virtual hearings, they offer helpful guidance on examining witnesses by videoconference. For example, the Hague Conference Draft Guide provides an exhaustive discussion of best practice in relation to video-link witness evidence. It considers factors such as time differences and operating outside regular business hours; introducing documentary evidence via video link; a protocol for speaking and interruptions, where there is a delay between the picture and the sound; and advice on room layout, access, acoustics and lighting. The ICC Commission Report provides a sample wording for a pre-hearing order for testimony to be given via videoconference that could be adapted to virtual hearings and issues of technological breakdown.

F.        Conclusion

17. The Covid-19 pandemic has required us all to adapt rapidly and in unprecedented ways to a new reality – one in which has developed virtual hearings as the means for our disputes to continue to be resolved. The genius of arbitration and the international arbitration community is that of innovation. We must all work together to advance the technologies and develop the protocols needed to meet the challenges ahead. 

_______________

* Barrister & Arbitrator, Five Paper

Presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021 on the Protection of Human Rights through Arbitration[1]  

As a prologue to the written adaptation of the presentation I delivered at the AfAA Conference, it is worth recapping on some truisms.  That is to say the continent of Africa continues to be endowed with a very sizeable amount of the world’s most precious and strategically important natural resources; and moreover, she is often regarded as the final frontier in which new extraction and market opportunities can be formed in order to maintain the growth story that symbolises the industrial / post-industrial ages.  As we passage through the so-called 4th industrial revolution, it may be prudent for us on the continent of Africa to ponder as to whether we have seen this before; and as such, what might it all mean for our futures? A question that naturally follows is what are we doing to develop the real-life narratives that we wish to unfold? The AfCFTA and the unified approach to the continent’s affairs that this could garner, is potentially a massive step forward that may answer the last question posed. The devil of course shall be in the detail and importantly, the instruments we devise, deploy, and implement to secure equitable outcomes, shall be critical. 

In considering the global attempts at addressing and furthering Human and Peoples Rights (HPRs), the historical African context, in so far as the last 500 years are concerned, are germane; these include slavery, colonialism, the struggle for independence, neo-colonialism and Africa’s attempts to unify, and ought to be imprinted on the global consciousness. A priori, any discussion and/or development of HPRs discourse and practices, must place the experiences of African states as central points of reference. 

The Hague Rules, within the context mentioned and in light of broader contemporary developments, where issues of racial justice and equity have gained prominence, provide a supporting opportunity to the continent in the arbitration sphere.  That is to say, the Hague Rules provide a powerful symbol and trajectory toward inculcating practices that go hand in hand with the centrality of human dignity, equity and justice, with its corresponding call to global corporate business to become firmly rooted within this endeavor. 

The Hague Rules are a mechanism for balancing commercial goals and the impact on HPRs, in response to what we have seen over history: namely, a continued trend where the practices of business, including within their supply chain operations, and particularly those of large multinational corporations, have led to the abuse of HPRs. 

The journey towards building an internationally workable framework to hold businesses accountable is relatively recent, and there have been attempts to reach these goals that have experienced varying degrees of success and failure. Such noteworthy attempts can be seen in the form of the UN Global Compact launched in 2000, and thereafter, the U.N. Sub-Commission on Human Rights, with its attempt at establishing binding, treaty-based HPRs obligations.[2]  These developments are seen as key moments that paved the way for subsequent evaluations, comprising wider stakeholder involvement, and which ultimately culminated in the establishment of a broadly accepted set of standards in the form of the influential, though non-binding, UN Guiding Principles on BHR. The enumerated principles are founded on the pillars that are articulated within the document itself, namely: to protect, respect, remedy. Building out from the ‘Remedy’ pillar is where the Hague Rules become relevant, in facilitating access to an effective remedy to alleged HPRs violations.

The Hague Rules are based on the UNCITRAL Rules and create a broad basis on which parties can resolve their dispute.  Their mission is to remove barriers to addressing breaches (e.g. competence of domestic courts, standing in national courts, prohibitive costs of litigation, excessive influence of states in judicial processes). The aim of the Rules is not to demonise businesses but to provide them with a framework within which to address the question of HPRs within their operations. They provide an avenue for individuals (as well as investors) to frame the mechanism for resolving disputes and/or to bring a claim, on the basis that:

i.      Party autonomy is sacrosanct.

ii.     Article 6 tackles inequality of arms and balance of power issues that are often prohibitive in arbitration.

iii.  Article 5 addresses potential barriers to access, requiring effective opportunity to present a case, which is clearly a circle back to the UN Guiding Principles.

Other rules are BHR-specific, for example Article 32 provides for more flexible rules around evidence that are rights compatible and take into account fairness, and particular sensitivities of parties (e.g. scope, burden of proof, adverse inferences) and Article 11 regarding selection of arbitrators. Remedies are also adapted to be BHR-relevant, including non-monetary relief like specific performance and the power of tribunals to make additional orders (which are culturally appropriate).

In the final analysis, when one considers the issues of efficacy and uptake, the optional quality of the rules perhaps speaks for itself and as such we may not see significant usage of the rules for some time.  It is in this light therefore, that the symbolism and evolutionary status of the Rules, as a living instrument, becomes all important, influencing expectations and other substantive methods by which HPRs may be protected, for example, at the treaty and contractual levels. That said, HPRs protection within the arbitration sphere provides added impetus to what appears to be a fast-developing trend running alongside public opinion, which asserts that there are certain foundational issues of our human existence (HPRs falling into this category) that can never be bypassed, dispute resolution fora included.  How this plays out in the arbitration space remains to be seen.

_________________________ 

* Founder & Managing Director Hosted in Africa

[1] Main References:  United Nations Guiding Principles on Business and Human Rights; Hague Rules on Business And Human Rights Arbitration; IBA Consultation response to OCHR Accountability and Remedy Project III; New Kid on the Bloc: An Introduction to the Hague Rules on Business And Human Rights Arbitration (Bhavya Mahajan) Cardozo J. Of Conflict Resolution [Vol. 22:221] 

[2] 2003 Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021.

Discussions on possible reforms of the investor-state dispute settlement system are in progress under the auspices of UNCITRAL Working Group III. Two potential reforms under consideration are the creation of a permanent multilateral investment court or appellate mechanism. This paper examines some of the features of the appellate mechanism and court that are being discussed, based on the reports of the Working Group and submissions by states’ delegations to UNCITRAL. For instance, it examines the standard, scope of review and effects of an appeal at the appellate mechanism, and the potential means of appointment of adjudicators to the multilateral investment court. The paper concludes by enumerating some of the ways through which African governments can increasingly contribute to the reform debate.

1.           Introduction

This paper was prepared for presentation at the 2nd annual international arbitration conference of the African Arbitration Association (AfAA). The paper considers two of the proposed reforms of the investor-state disputes settlement (ISDS) system, that is, (i) establishment of a stand-alone review or appellate mechanism and (ii) establishment of a standing multilateral first instance and appellate investment court (MIC). The paper is based on the ongoing discussions of the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WG).[1] It addresses (a) some features of the proposed appellate/review mechanism and MIC; (b) some perceived advantages and disadvantages of the mechanisms according to the views of states’ delegations; and (c) how African governments can contribute to the ISDS reform debate.

The issues highlighted in this paper represent some of the options currently being considered by the WG and they remain open to debate within the WG itself. The current work plan of the WG foresees completion of the discussions by 2025, thus, it is too early to tell which form the reforms will eventually take.

The author notes that the Permanent Court of Arbitration (PCA), with which she is affiliated, is very active in administering ISDS. Since the WG started its work, the PCA has been commenting on the work of the WG as an observer. The PCA itself does not take any view on the desirability or lack thereof of these reforms. The PCA consists of a diverse group of 122 Contracting Parties,[2] some of which are for or against some of the reforms. The PCA remains available to support states and parties in ISDS, regardless of the outcome of the reform debate.

2.          Proposed Mechanisms

At its 38th to 40th sessions, the WG considered various ISDS reform options, based on proposals from various governments, including African countries such as Morocco[3] and South Africa.[4] The WG considered, inter alia, the proposed (i) stand-alone review or appellate mechanism and (ii) MIC.

2.1.   A Stand-Alone Review or Appellate Mechanism

Some delegations propose that a stand-alone review or appellate mechanism could be set up as a separate appellate body – with the current ISDS regime maintaining most of its basic features and being complemented with a standing or at least semi-permanent appellate body. Some view that it could also function as a second instance of a MIC if one were to be set up.[5] Further, some states hold the view that the appellate body should be a single, multilateral standing body affiliated with a United Nations body.[6]

The appellate mechanism would be tasked with substantive review of decisions. It could also implement a system of binding precedent – there are views for and against this.[7]

The key features of the appellate mechanism currently being considered include:

2.1.1        Scope and standard of review

(a)   Errors of law and “manifest” errors of facts: It is viewed that there should be some limit to the grounds of appeal so as to make the appellate mechanism relatively streamlined and faster, and the caseload easier to manage. The suggestion by some states is thus to limit the grounds to errors in the interpretation or application of law and on findings of relevant facts only[8] or “manifest” errors of facts (some states have however expressed the view that manifest errors of facts should not be reviewable). The Note by the UNCITRAL Secretariat for the 40th WG session contains suggested draft provisions on what would constitute an error of law or “manifest” error of fact.[9] With regard to an error of law, it could be an error that is “material and prejudicial” or any “errors in the application or interpretation of applicable law” (common standards in BITs). At the WG’s most recent session, the 40th session, views were leaning more towards the latter.[10] With regard to errors of facts, options exist between “determinations of fact that are clearly erroneous” and “manifest errors in the appreciation of facts”. The WG, during its 40th session, leaned more towards the latter, noting that it is a higher standard that ensures appropriate deference to the first-tier tribunal.[11]

Some pending questions include whether reference to “domestic law” falls in the category of legal or factual error; whether an error in the assessment of damages would constitute an error of fact, and whether there are issues that should be subject to de novo review at the appellate level.[12]

(b)   Treatment of the existing grounds for review: Some delegations propose that the grounds for annulment under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and grounds for refusal of recognition and enforcement under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) should be subsumed under the grounds for appeal.[13] They note that since the grounds for appeal could be said to encompass the narrower grounds for annulment and setting aside, the existence of an appeal could be seen as making the current annulment or setting aside procedures redundant. Further, keeping the annulment or set-aside remedies might de facto create a three-tier dispute settlement system, which might run contrary to the objectives of finality and efficiency (including the time and cost-efficiency).[14] A key question raised by the WG at the 40th session was the functionality of the approach of eliminating the current grounds for review, that is, whether domestic courts would be willing to defer their authority to an international body.[15]

2.1.2        Appealable Decisions

(a)   Decisions on merit and procedure: Some delegations propose that only final decisions on both merits and procedural matters should be subject to appeal because it is preferable that an appellate tribunal be presented with the full record of the case before rendering its decision.[16]

(b)  Interim measures and challenges: Divergent views have been expressed on whether decisions on interim measures would be subject to appeal. Some delegations propose that decisions on interim measures should not be subject to appeal in light of the negative impact on time and cost that this would have on the cost and duration of the proceedings. They are also often specific to a case, temporary in nature and could be reversed by the tribunal ordering them.[17]

(c) Decisions on jurisdiction: In this regard, the question raised by some delegations is whether decisions on jurisdiction should be included in the scope of appeal, and whether, if included, the appeal should be made while the proceedings are ongoing or be stayed. The time at which an appeal on jurisdiction could be made would have an impact on the efficiency of the appellate mechanism. On the one hand, it might be preferable that an appellate tribunal be presented with the full record of the case before rendering its decision. On this reasoning, an appeal should be made possible only after the final decision on the merits. On the other hand, appeal of a decision on jurisdiction at an earlier stage of the proceedings might save cost and time.[18] There are strong views that a challenge to a decision on jurisdiction should be made during the proceedings and not at the stage of the final decision, but views are divergent on whether the first-tier tribunal should stay or continue its proceedings while a decision on jurisdiction is pending in the appellate mechanism. Further, there is still a question whether the appellate mechanism could rule on the issue of jurisdiction when the final award on the merits is the subject of appeal, and whether the appellate body could overturn a decision by the first-tier tribunal stating that it did not have the competence to rule on the case.[19]

(d)   Decisions arising out of investment treaties: There are diverging views on whether the appellate process should be limited to decisions rendered from treaty based ISDS disputes or whether the scope should include appeal of decisions arising from contracts or national investment laws.[20]

2.1.3        Effects of an appeal

(a)   Suspension of the first-tier decision: Some delegations view that an appeal should temporarily suspend the effect of the first-tier decision (pending a decision by the appellate tribunal) and that such a decision should not be enforceable, nor subject to a set-aside procedure.[21]

(b)   Affirm, reverse or modify decisions: With regard to the powers of an appellate tribunal, some delegations propose that it should be able to affirm, reverse or modify the decision of the first-tier tribunal and to render a final decision based on the issues before it.[22]

(c)   Remand authority: There are differing views regarding remand authority due to concerns about cost and duration of proceedings. Some delegations propose that there may be remand authority, in limited circumstances, where the appellate tribunal is not able to complete the legal analysis based on the facts available before it.[23] Concerns remain as to how to re-establish the first-tier tribunal and in regard to the appertaining additional costs.[24]

(d)   Binding nature of appellate decision: Some delegations express the view that a decision rendered by an appellate tribunal should bind only the disputing parties, and in case of remand, the first-tier tribunal. A diverging view is that the appellate body decision should have a broader effect to ensure consistency, particularly in cases where the tribunals would be interpreting the same provisions of an investment treaty or similar text. Decisions rendered through a permanent appellate mechanism, even though they might not be binding on other ad hoc first-tier tribunals, could have a persuasive influence on those tribunals when interpreting identical or similar treaty provisions. At the same time, it is noted that the interpretative impact that a decision of an appellate tribunal could have on treaties with identical or similar language (in particular, when the relevant state party was not a party to the appellate mechanism) would need to be further examined to take into account both how to manage the interpretative impact for future disputes and in light of existing interpretation of such provisions, among other implications.[25]

2.1.4        Enforcement

(a)   Enforcement in participating states: Some delegations take the view that the possible application of the existing enforcement mechanisms to decisions rendered by a permanent body would depend on how such a body would be set up, in particular the extent to which its decisions could qualify as arbitral awards. In states participating in the MIC or appellate mechanism, an internal enforcement mechanism could be included in the founding convention, and hence questions as to the qualification of a decision as an “international arbitration award” or “ICSID award” would not arise. According to some delegations, an enforcement model which preserves the role of domestic courts possibly based on the NYC would be preferable to the ICSID model because it would avoid the situation where a domestic court would be required to enforce decisions that were contrary to the public policy of the state where enforcement was sought.[26]

(b)  Enforcement under the NYC: Some delegations view that in non-participating states, the NYC could provide sufficient flexibility to apply to decisions rendered by a permanent body. Article 1(2) of the NYC refers to awards “made by permanent arbitral bodies to which the parties have submitted”. A question arises as to whether a permanent body could qualify as a “permanent arbitral body” under that Article.[27]

(c)  Enforcement under the ICSID Convention: Article 53 of the ICSID Convention provides that ICSID awards “shall not be subject to any appeal or to any other remedy except those provided for in the Convention”. Given that the amendment of the Convention would be difficult to implement as it would require acceptance of all existing parties, according to some delegations, a possible avenue to explore would be an inter se modification of the ICSID Convention among the states establishing an appellate mechanism. This would be implemented following the procedure of Article 41 of the Vienna Convention on the Law of Treaties, whereby contracting parties may modify a treaty “as between themselves alone”.[28]

2.2.   Multilateral Investment Court

According a delegation, the MIC (whose desirability and feasibility is yet to be decided upon by the WG) would have full-time adjudicators and two levels of adjudication.[29] The proposal to establish a MIC is based on the view that the concerns identified by the WG are intertwined and systemic, and that addressing specific concerns in a piecemeal approach would leave some concerns unaddressed.[30] It has been posited that the main purpose of the MIC would be to address concerns regarding inconsistency and incorrectness of decisions made by ISDS tribunals, as well as concerns regarding ethical requirements and appointment mechanisms for arbitrators and decision makers.[31] The stated rationale, according to a Note by the UNCITRAL Secretariat, is that by sitting permanently and deciding cases over time, judges could deliver more consistent decisions.[32]

It has been suggested by some delegations that the MIC could have a two-tier system, with a first instance layer, followed by an appeal or review on limited grounds by a different body. The system could be an add-on to the current ISDS regime or be established independently from any existing mechanism or institution.[33]

The key features of the MIC would be:

(a)   Two levels of adjudication: There would be a first instance tribunal to hear disputes, as currently done by arbitral tribunals. An appellate tribunal would hear appeals from the tribunal of first instance.[34]

(b)   Adjudicators and appointment: Some delegations proposed that the adjudicators be employed full-time, with no other activities. The number of adjudicators would be based on the projections of the workload of the MIC. They would be paid salaries comparable to those paid to adjudicators in other international courts. Independence from governments would be ensured through a long-term non-renewable term of office, combined with a transparent appointment process.[35] The main concern of some delegations is that the role of investors in the appointment of adjudicators would be diminished, if not eliminated, which would pose serious concerns about the legitimacy of the system.[36]

(c)    Nomination of candidates: Different options for nominating candidates have been suggested by delegations, including: (i) by participating states; (ii) by an independent entity established within the permanent body; (iii) by individuals themselves; or (iv) a combination thereof.[37]

(d)   Selection and appointment process: The proposed options for selection and appointment include the following: (i) direct appointment by each state; (ii) appointment by a vote of the contracting states; or (iii) appointment by an independent commission.[38]

(e)    Neutrality: It is proposed by several delegations that any process of establishing a MIC should be fair and neutral, and that the court should have a detailed and transparent set of rules of procedure.[39]

(f)    Structure and financing: Some states have so far expressed a clear preference for a system where all costs are borne by contracting parties of the MIC statute, while other states lean towards user-pays principle.[40] Cost concerns surround the remuneration of the adjudicators; financing the registrar and secretariat; case administration costs and operating costs.[41]

3.   Perceived advantages and drawbacks of the proposed mechanisms

3.1.   Perceived Advantages

(a)   A delegation has expressed the view that the appellate mechanism would contribute to improving the consistency, predictability and legal correctness of investment awards.[42]

(b)  According to another delegation, an appellate mechanism could enhance the legitimacy of ISDS and act as an important factor in promoting application of the rule of law to the settlement of disputes between investors and states.[43]

(c)   According to a delegation, if the establishment of the court is done in a fair and neutral manner, the MIC has the potential to create an independent and legitimate system of ISDS.[44]

3.2.   Perceived Drawbacks

(a)   According to some delegations’ views, the appeal mechanism may create lengthier and costlier proceedings.[45]

(b)   Some delegations view that since states would be free to choose whether to adopt the appeal option, an appellate mechanism would add to the existing lack of coherence or consistency.[46]

(c)     With regard to the appeal mechanism, a concern has been raised that if appeal is an option, it could soon become the rule. States and investors who have lost a case may not be willing to forego a chance to file an appeal, be it only for reasons of internal accountability.[47]

(d)   It has also been suggested that permanent mechanisms would lead to loss of flexibility, expert decision-making and that the confidence-inducing benefits of party-appointment of arbitrators would be lost.[48]

4.        Participation by African countries

Numerous African states are taking part in the WG sessions. During the last session (40th session) held in February 2021, 11 out of the 54 states attending the session were African states.  Additionally, six African countries participated as observer states. Several African states have also consistently submitted comments on the ISDS reform process.[49]

Governments and specialists in African countries may continue to take part in the ISDS reform debate through:

(a)  Participating actively in the WG sessions, either as members of UNCITRAL through the existing representation system or as observers to the WG (who routinely contribute to the debates and whose remarks form part of the official record).

(b)   Submitting comments, position papers and proposals to the UNCITRAL Secretariat on ISDS reforms.

(c)   Providing feedback and direction to and through the African Union Office of Legal Counsel.

(d)   Ensuring participation in international conferences and in international organisations such as United Nations Conference on Trade and Development. 

(e)  Participating at regional meetings, such as the third intersessional regional meeting held in Conakry in September 2019 to familiarize representatives of African states with the WG’s current areas of work.

*      Legal Counsel, Permanent Court of Arbitration.

[1]   Working Group III: Investor-State Dispute Settlement Reform, available at:  https://uncitral.un.org/en/working_groups/3/investor-state.

[2]      Permanent Court of Arbitration website, available at: https://pca-cpa.org/en/about/introduction/contracting-parties/.

[3]      A/CN.9/WG.III/WP.161, Submission from the Government of Morocco, available at:  https://undocs.org/A/CN.9/WG.III/WP.161.

[4]   A/CN.9/WG.III/WP.176, Submission from the Government of South Africa, available at: https://undocs.org/A/CN.9/WG.III/WP.176.

[5]  A/CN.9/WG.III/WP.149, Possible reform of investor-State dispute settlement (ISDS) – Note by the Secretariat, para. 42, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V18/064/96/PDF/V1806496.pdf?OpenElement.

[6]      A/CN.9/WG.III/WP.195, Submission from the Government of Morocco, p. 3, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V20/011/62/PDF/V2001162.pdf?OpenElement.

[7]    A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, para 60, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf; Possible reform of investor-State dispute settlement (ISDS), Note by the Secretariat, para. 40, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V18/064/96/PDF/V1806496.pdf?OpenElement.

[8]   A/CN.9/1004/Add.1, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session, paras 26-28, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/007/33/PDF/V2000733.pdf?OpenElement.

[9]   A/CN.9/WG.III/WP.202, Possible reform of investor-State dispute settlement (ISDS): Appellate mechanism and enforcement issues – Note by the Secretariat, para 59, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V20/065/39/PDF/V2006539.pdf?OpenElement.

[10]     A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, para 66, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[11]     Ibid. para. 67.

[12]     Ibid. paras 68-75.

[13]     Ibid. para. 30.

[14]  A/CN.9/WG.III/WP.202, Possible reform of investor-State dispute settlement (ISDS): Appellate mechanism and enforcement issues – Note by the Secretariat, para. 8, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V20/065/39/PDF/V2006539.pdf?OpenElement.

[15]   A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, para 77, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[16]   A/CN.9/1004/Add.1, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session, paras 33-34, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/007/33/PDF/V2000733.pdf?OpenElement; A/CN.9/WG.III/WP.195, Submission from the Government of Morocco, p. 4, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V20/011/62/PDF/V2001162.pdf?OpenElement.

[17]     Ibid. A/CN.9/1004/Add.1, para. 34; A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, para 87, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[18]   A/CN.9/WG.III/WP.202, Possible reform of investor-State dispute settlement (ISDS): Appellate mechanism and enforcement issues – Note by the Secretariat, para 21, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V20/065/39/PDF/V2006539.pdf?OpenElement. 

[19]   Ibid. para. 34; A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, para. 87, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[20]     Ibid. A/CN.9/1050, para. 87.

[21]     Ibid. para. 95.

[22]  A/CN.9/1004/Add.1, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session, para. 40, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/007/33/PDF/V2000733.pdf?OpenElement; A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, paras 97-100, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[23]     Ibid. A/CN.9/1004/Add.1, para. 41; Ibid. A/CN.9/1050, paras 101-102.

[24]     Ibid. A/CN.9/1004/Add.1, para. 42.

[25]     Ibid. paras 43-45.

[26]  A/CN.9/WG.III/WP.202, Possible reform of investor-State dispute settlement (ISDS): Appellate mechanism and enforcement issues – Note by the Secretariat, para. 67, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V20/065/39/PDF/V2006539.pdf?OpenElement.

[27]     Ibid. para. 70.

[28]  A/CN.9/1004/Add.1, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session, para. 78, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/007/33/PDF/V2000733.pdf?OpenElement.

[29]     A/CN.9/WG.III/WP.159/Add.1, Submission from the European Union and its Member States, para. 13, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/004/19/PDF/V1900419.pdf?OpenElement.

[30]   A/CN.9/WG.III/WP.185, Possible reform of investor-State dispute settlement (ISDS): Appellate and multilateral court mechanisms – Note by the Secretariat, para. 51, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/113/57/PDF/V1911357.pdf?OpenElement.

[31]     A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, para. 18, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[32]   A/CN.9/WG.III/WP.149, Possible reform of investor-State dispute settlement (ISDS) – Note by the Secretariat, para. 44, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V18/064/96/PDF/V1806496.pdf?OpenElement.

[33]   A/CN.9/WG.III/WP.185, Possible reform of investor-State dispute settlement (ISDS): Appellate and multilateral court mechanisms – Note by the Secretariat, paras 62-64, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/113/57/PDF/V1911357.pdf?OpenElement.

[34]    A/CN.9/WG.III/WP.159/Add.1, Submission from the European Union and its Member States, para. 14, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/004/19/PDF/V1900419.pdf?OpenElement.

[35]  A/CN.9/WG.III/WP.185, Possible reform of investor-State dispute settlement (ISDS): Appellate and multilateral court mechanisms – Note by the Secretariat, para. 55, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/113/57/PDF/V1911357.pdf?OpenElement.

[36]   A/CN.9/1050, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its fortieth session, paras 18-21, available at: https://uncitral.un.org/sites/uncitral.un.org/files/report_40th_wg_iii_17_march.pdf.

[37]     Ibid. para. 30.

[38]     Ibid. para. 32.

[39]   A/CN.9/WG.III/WP.176, Submission from the Government of South Africa, para. 96, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/072/51/PDF/V1907251.pdf?OpenElement.

[40]  Similar views have been expressed in regard to the appellate mechanism.

[41]  A/CN.9/1004/Add.1, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session, para. 84, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/007/33/PDF/V2000733.pdf?OpenElement. 

[42]    A/CN.9/WG.III/WP.161, Submission from the Government of Morocco, para. 34, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/012/95/PDF/V1901295.pdf?OpenElement ; A/CN.9/WG.III/WP.185, Possible reform of investor-State dispute settlement (ISDS): Appellate and multilateral court mechanisms – Note by the Secretariat, para. 7, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/113/57/PDF/V1911357.pdf?OpenElement.

[43]     Ibid., A/CN.9/WG.III/WP.185, para. 8.

[44]   A/CN.9/WG.III/WP.176, Comments from the Government of South Africa, para. 78, available at: https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/072/51/PDF/V1907251.pdf?OpenElement.

[45]  A/CN.9/WG.III/WP.185, Possible reform of investor-State dispute settlement (ISDS): Appellate and multilateral court mechanisms – Note by the Secretariat, para. 9, available at, https://documents-dds-ny.un.org/doc/UNDOC/LTD/V19/113/57/PDF/V1911357.pdf?OpenElement ; A/CN.9/1004/Add.1, Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session, para. 22, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/007/33/PDF/V2000733.pdf?OpenElement.

[46]     Ibid. A/CN.9/1004/Add.1, para. 21.

[47]    Gabrielle Kaufmann-Kohler and Michele Potestà, ‘Can the Mauritius Convention serve as a model for the reform of investor-State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism?’, para. 32 (2016).

[48]     Ibid. para. 31 (2016).

[49]   Ahead of the 39th session held in October 2020, the following African governments submitted their comments on the reforms: Morocco, South Africa, Mali, Guinea, and Burkina Faso.